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on Game Theory |
| By: | Sam Ganzfried |
| Abstract: | There has been significant recent progress in algorithms for approximation of Nash equilibrium in large two-player zero-sum imperfect-information games and exact computation of Nash equilibrium in multiplayer strategic-form games. While counterfactual regret minimization and fictitious play are scalable to large games and have convergence guarantees in two-player zero-sum games, they do not guarantee convergence to Nash equilibrium in multiplayer games. Recently, an approach has been presented for exact computation of Nash equilibrium in multiplayer imperfect-information games that solves a quadratically constrained program based on a nonlinear complementarity problem formulation derived from the sequence-form game representation. This formulation was solved using Gurobi's nonconvex quadratic solver, which employs spatial branch-and-bound to iteratively refine variable bounds by solving convex relaxations of bilinear terms via McCormick envelopes. During presolve, Gurobi introduces auxiliary variables and, in some cases, binary variables, leading to an internal MIQCP reformulation. This approach was demonstrated to outperform prior algorithms from the Gambit software suite and quickly solve three-player Kuhn poker after removal of dominated actions; however, the algorithm was not able to solve the full version of the game within 24 hours. In this paper, we derive finite bounds on slack and multiplier variables in the nonlinear complementarity formulation. These bounds strengthen the convex relaxations used within spatial branch-and-bound and lead to substantial computational improvements. We demonstrate the impact of the proposed bounds on exact Nash equilibrium computation in three-player Kuhn poker. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.25997 |
| By: | Della Lena, Sebastiano; Jansen, Yannick; Zenou, Yves |
| Abstract: | We study how the degree of zero-sumness in a social environment shapes cooperation and network formation. When individual gains partly come at others’ expense, agents face a trade-off between contributing to a public good and extracting rents from their network position. We model this as a public good game on a directed, weighted network with a parameter capturing the intensity of zero-sum conflict. Our Zero-Sum Theorem shows that greater zero-sumness increases contributions while reducing social connectedness: agents sever links to limit exposure to extraction and increase self-provision to compensate for the diminished free-riding opportunities associated with sparser networks. The unique Nash equilibrium has contributions equal to weighted sign-alternating Bonacich centralities, reflecting how network position shapes behavior through alternating spillovers while incorporating extraction incentives. With endogenous links, equilibrium total connectivity is uniform across homogeneous agents, and heterogeneity in extraction incentives generates an inverse relationship between rent-extraction benefits and network centrality. |
| Keywords: | Public goods; Rent extraction; Network formation; Network centrality; Social connectedness |
| JEL: | C72 D62 D85 H41 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21459 |
| By: | Igor Sloev; Gerasimos Lianos |
| Abstract: | We study the strategic implications of the non-invariance of multiplicative Kantian equilibrium (MKE) under monotone transformations of the strategy space. Before interacting with a standard Nash player, a Kantian player publicly selects a smooth increasing scale that determines how proportional deviations are evaluated. Material payoffs and feasible actions remain unchanged, but the chosen scale alters the Kantian first-order condition through endogenous elasticity weights. The representation of actions therefore becomes a commitment device. We characterize the stationary outcomes implementable by a common monotone scale. A sharp dichotomy emerges. Under strategic substitutes, the Kantian player can approach the Nash payoff arbitrarily closely but cannot exceed player 2's Nash benchmark; scaling is defensive and eliminates the payoff loss associated with naive Kantian behavior. Under strategic complements, scaling becomes offensive: the Kantian player can stationary-implement the Stackelberg leader outcome and obtain a payoff strictly above the Nash benchmark. In the canonical Cournot and differentiated Bertrand examples, we explicitly construct scales satisfying the required local elasticity ratios and verify the second-order conditions, so the stationary outcomes are local transformed Nash-Kantian equilibria. Allowing player-specific scales would align the Kantian first-order condition with the Stackelberg condition along the entire reaction curve under complements, but would violate monotonicity under substitutes. This reveals a trade-off between universality and strategic flexibility. The results identify endogenous scaling as a commitment mechanism and connect Kantian optimization to strategic leadership and strategic non-equivalence. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.21967 |
| By: | Esteban Casanelles, Teresa; Gonçalves, Duarte |
| Abstract: | How do incentive levels affect strategic behaviour? We address this question with an experiment that separately identifies own- and opponent-incentive effects in two dominance-solvable games that differ in strategic complexity. Higher own incentives favour more strategically sophisticated actions and increase best responding to stated beliefs. Beliefs shift in a parallel direction and participants expect more sophisticated opponent actions. Furthermore, while higher own incentives increase belief accuracy, opponents with higher incentives are harder to predict. Higher incentives also increase response times, and longer response times are associated with better performance and more sophisticated actions and beliefs. Taken together, the evidence suggests that incentives affect strategic behaviour through two main channels: by reducing payoff-dependent mistakes and by increasing the effort devoted to reasoning, with the returns to that effort shaped by strategic complexity of the environment. |
| Keywords: | Incentives; Belief formation; Behavioural game theory; Response time |
| JEL: | C72 C92 D83 D84 D91 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21338 |
| By: | Mohamed Belhaj (Aix Marseille Univ, CNRS, AMSE, Marseille, France); Frédéric Deroïan (Aix Marseille Univ, CNRS, AMSE, Marseille, France); Mathieu Faure (Aix Marseille Univ, CNRS, AMSE, Marseille, France) |
| Abstract: | A subset of economic agents in a society is aware of the existence of an economic opportunity, and compete to exploit the opportunity. We study incentives to communicate about the existence of this economic opportunity when the exploitation of the opportunity by the winner generates externalities to other agents. We characterize the equilibria of the communication game and identify conditions under which more externalities generate more communication. |
| Keywords: | Opportunity; Strategic Communication; Externalities |
| JEL: | C72 D83 D85 |
| Date: | 2026–02–09 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2605 |
| By: | Eilat, Ran; Eliaz, Kfir |
| Abstract: | We incorporate negative reciprocity into strategic information transmission and study how a receiver’s response to perceived manipulation shapes equilibrium outcomes. We examine both an information-design environment, in which the sender can commit to an information structure, and a cheap-talk environment, in which commitment is not possible. In each setting, the receiver's behavior or preferences shift adversarially against the sender as the sender's strategy becomes less accurate. We analyze and solve these communication games in the presence of negative reciprocity, even when it generates endogenous preferences, and we characterize the novel ways in which classical results are altered. Our findings link information design to behavioral economics highlighting the implications of design-dependent preferences. |
| Keywords: | Strategic communication; Negative reciprocity; Endogenous preferences |
| JEL: | D83 D91 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21360 |
| By: | Furkan Sezer |
| Abstract: | We study a continuous-time stochastic Stackelberg control problem in which a leader steers a system of strategic followers through two non-standard channels - the information structure and a transfer mechanism - rather than through the dynamics directly. The latent environment is a jump-diffusion; the leader commits to a Gaussian public-signaling channel whose belief consequences are tracked by a finite-dimensional projection filter (the exact filter being infinite-dimensional), together with a Groves transfer that aligns the followers' incentives. Under truthful disclosure, efficient behavior is a dominant-strategy best response, and the induced differential game admits saturated and bang-bang Nash feedback. We cast the leader's distributionally robust problem, over a relative-entropy ambiguity neighborhood, as a two-controller Isaacs equation; prove that incentive alignment collapses the bilevel Stackelberg problem to a single robust control problem with an exact first-order condition; and characterize the value function as the unique viscosity solution, with a verification theorem valid for the non-smooth bang-bang feedback and a semiconcavity result that renders the switching set Lebesgue-null. We instantiate the framework on resilient multi-area power-system coordination under extreme weather. Calibrated to the 2021 Winter Storm Uri, an Isaacs solve over ERCOT's near-islanded interconnection (a 0.82 GW tie, under 2% of peak) shows mutual aid removes about 8% of social cost, rising to roughly 30% under the FERC/DOE-recommended interregional transfer capability; a reserve-scheduling experiment shows that public disclosure lowers welfare cost by 37% under autarky and 48% under market coupling, and that information design and market coupling are complements under common (systemic) risk. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.24015 |
| By: | Igor Sloev; Gerasimos Lianos |
| Abstract: | Multiplicative Kantian equilibrium has been proposed as a solution to inefficiency in social dilemmas, yet its emergence and stability are associated with a number of coordination and distributional difficulties. Drawing on a simple model of voluntary public good provision with two agents who differ in their initial endowments and have logarithmic preferences, this paper identifies three barriers that arise sequentially when unequal agents attempt to adopt Kantian cooperation voluntarily. The model compares Nash equilibrium with multiplicative Kantian equilibrium under two different parametrizations: one in which the strategic variable is contributions to the public good, and another in which it is private consumption. First, we show that the transition from Nash equilibrium to contribution space Kantian behavior is not always a Pareto improvement: under sufficiently high inequality, the poor agent may prefer the Nash outcome. This barrier can be mitigated by preliminary redistribution. Second, even when agents are willing to cooperate, the choice of a parametrization of the strategic space becomes a distributional issue: different ways of scaling actions lead to different distributive consequences and create a conflict of interest between agents. Third, if the chosen parametrization admits a continuum of Pareto efficient outcomes, an additional coordination problem arises-agreeing on a specific point on the Pareto frontier. The paper reconstructs these barriers as a three step coordination problem in which expectations about later stages affect willingness of agents to enter Kantian cooperation at the outset. On the basis of the results obtained, a program for further formal research is outlined. The findings contribute to understanding the conditions under which Kantian cooperation can be voluntarily adopted and sustainably maintained. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.21931 |
| By: | John W. E. Cremin (Aix Marseille Univ, CNRS, AMSE, Marseille, France) |
| Abstract: | I study games with self-locating uncertainty in which an agent at a single information set is uncertain of his position evenwithina given information set of a given play of the game. In such games, there is an analogy to be drawn with Newcomb’s problem: in bothsettings, locally rational (thirder) reasoning and globally optimal (planning) reasoning can prescribe different strategies. I call this aNewcomb tension, and present a representation theorem: a Bayesian with commitment power and an uncommitted agent holding incorrect ‘one-boxer’ beliefs are behaviourally equivalent. In the single-agent case, randomisation always resolves the tension but in multi-agent games, in which planning and interim social weights diverge under some conditions, a multi-agent Newcomb tension can survive this randomisation resolution with an asymmetric awakening structure across agents. I consider the implications of this for the duplicating Sleeping Beauty problem, and a duplicating variant of the absent-minded driver. |
| Keywords: | Sleeping Beauty Problem; Newcomb’s Problem; Self-Locating/Indexical Uncertainty; Imperfect Recall; Absent-Minded Driver |
| JEL: | C72 D71 D81 D83 |
| Date: | 2026–04–04 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2611 |
| By: | Olivier Gossner; Rafael Veiel |
| Abstract: | We provide a strategic foundation for information: in any given game with incomplete information we define strategic quotients as information representations that are sufficient for players to compute best-responses to other players. We prove 1/ existence and essential uniqueness of a minimal strategic quotient called the Strategic Type Space (STS) in which a type is given by an interim correlated rationalizability hierarchy and represents a set of beliefs over other players' types and nature that rationalize this hierarchy and 2/ that the minimal STS has a recursive structure that is captured by a finite automaton. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.08297 |
| By: | Eliaz, Kfir; Spiegler, Ran |
| Abstract: | We propose a model of whataboutism — a rhetorical strategy that deflects criticism by invoking analogous, yet internally uncriticized, misconduct on the critic's side — and study its implications for social norms governing offensive speech. In an infinite-horizon psychological game with two rival camps, agents weigh the intrinsic benefit of offensive speech against the risk of effective condemnation. External criticism can be rendered ineffective via an equilibrium-based whataboutism rebuttal. We characterize the unique dynamically stable Psychological Subgame Perfect Equilibrium and show that the availability of whataboutism exacerbates offensive speech, such that civility norms can break down entirely, especially in polarized societies. |
| JEL: | D72 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21395 |
| By: | Diya Abraham (Department of Economics, University of Reading); Ondrej Krcal (Department of Economics, Masaryk University, Brno) |
| Abstract: | Participants’ willingness to give in the dictator game has been found to be very sensitive to extending their choice set so that they can also take from recipients. To reduce this choice-set effect, we make the game less abstract by permitting potential recipients to opt out of it. Across four treatments, we vary whether taking is permitted and whether recipients can opt out of the game. Results suggest that while the choice-set effect is replicated when recipients cannot opt out, it plays less of a role when recipients enter the game voluntarily. We rule out a competing reciprocity-based explanation for this result, and conclude that the modified opt-in dictator game may provide a less sensitive measure of other-regarding preferences. |
| Keywords: | altruism, dictator game, distributional preferences, vulnerability, intentions |
| JEL: | C90 D91 M54 J24 |
| Date: | 2026–06–22 |
| URL: | https://d.repec.org/n?u=RePEc:rdg:emxxdp:em-dp2026-06 |
| By: | Aswin Sivapragassam |
| Abstract: | We revisit the two-candidate, three-alternative election campaign game with strategic ambiguity of Aragones & Postlewaite (2002), in which ambiguity arises in equilibrium when no pure alternative is majority-winning and voters exhibit sufficiently intense preferences. We show that the existence condition for winning strategies of the candidate associated with the Condorcet alternative is not sufficient for the existence of such a strategy. The original derivation evaluates the worst-case opponent strategy only at two extreme points of the feasible set, whereas the relevant bound is attained elsewhere. We provide a counterexample showing that the original condition can be satisfied even though no winning strategy exists, and derive a corrected characterization: winning strategies rely on voters who most prefer the remaining alternative, associated with neither candidate, rather than those who rank the Condorcet alternative second. This mirrors the coalition logic of the non-Condorcet candidate, yielding a structural symmetry between the two candidates’ equilibrium strategies. As a consequence, association with a Condorcet alternative does not confer a systematic strategic advantage, and strategic ambiguity operates as a selective rather than aggregative electoral device. |
| Keywords: | Strategic ambiguity, Condorcet winner, Electoral competition, Coalition structure, Voting |
| JEL: | C72 D71 D72 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2026-13 |
| By: | Ruimeng Hu; Byungdoo Kong |
| Abstract: | We study endogenous reinsurance pricing in a competitive insurance market with one strategic reinsurer and many heterogeneous insurers. The reinsurer acts as a Stackelberg leader by choosing a common premium rate and an investment strategy, while insurers decide how much risk to retain and how to invest, taking into account their own performance, their performance relative to the insurer population, and common insurance-claim and financial-market noise. This creates a feedback loop absent from standard reinsurance models with exogenous premiums: a premium change affects insurers directly through the cost of reinsurance, and indirectly through the population's aggregate exposure to common insurance-claim risk. For a fixed premium, we characterize the insurers' equilibrium retention through a scalar fixed point and establish its monotone premium response. This characterization reveals a spillover mechanism generated by relative performance concerns and leads to a threshold structure in which insurers move from full cession to partial retention and then to full retention as the premium increases. Using this structure, we reduce the reinsurer's premium problem to a one-dimensional optimization over a compact premium interval and characterize Stackelberg equilibria in both finite-player and mean field models. In the finite-player case, we develop an efficient threshold continuation procedure that determines equilibrium premiums without enumerating all retention configurations. We also prove convergence from finite-player equilibria to mean field equilibria without requiring the mean field equilibrium premium to be unique. Numerical illustrations show how relative performance concerns amplify spillover effects and can induce retention even when reinsurance remains actuarially favorable. They also demonstrate that Stackelberg equilibria need not be unique in either setting. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.27150 |
| By: | Philippe Colo (Oeschger Centre for Climate Research, Univ of Bern & ETH Zurich); Guillaume Pommey (DEF, University of Rome "Tor Vergata") |
| Abstract: | This paper studies communication failure regarding risks in the commons. It argues that strategic issues might explain why years of scientific reporting regarding future risks have failed to trigger sufficient climate awareness. We consider a game of contribution to a public bad, where there is uncertainty regarding the damage generated by externalities. Prior to the game, agents receive non-certifiable information regarding the damage from an informed utilitarian expert. We show that in large-scale public good problems information transmission usually fails. We compare this result with the cases of Rawlsian and anti-Rawlsian experts and discuss the implication for climate expert panels. We also investigate the influence of the value of information in our result, which provides us with some insight on the part played by deontology on scientific communication. |
| Keywords: | Public good games, cheap talk, climate change, values in science |
| JEL: | H41 D83 D62 Q54 |
| Date: | 2026–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:624 |
| By: | Fausto Cavalli; Alessandra Mainini; Marina Pireddu |
| Abstract: | We propose a coevolutionary model linking epidemic dynamics to the strategic choices of agents, in response to decisions by a central regulator. The epidemic is represented by a discrete-time SIS model, with the infection rate endogenously determined by agent strategies. In particular, cooperative and non-cooperative behaviors correspond to low and high infection rates, respectively, and the overall rate is a weighted average based on the population shares adopting each strategy. These shares change with time through an evolutionary selection mechanism, whose fitness measure depends on the epidemic trajectory relative to the agent perceived alert threshold, above which the epidemic situation is considered risky by agents. The regulator influences the alert level based on an ideal target number of infections. The resulting model consists in a three-dimensional discrete-time system, describing the evolution of the epidemiological sector, of the share updating rule and of the alert threshold. We study the resulting interplay both from a static perspective, focusing in particular on the nature of the strategic interaction at both endemic and disease-free steady states, as well as in regard to dynamical features, taking into account out-of-equilibrium trajectories and investigating the possible emergence of multistability phenomena. |
| Keywords: | Epidemiological model; Evolutionary game; Stability; Coexistence; Off-equilibrium dynamics. |
| JEL: | I18 C73 D83 C62 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:576 |
| By: | Gaston Llanes; Martin Peitz |
| Abstract: | We study a platform that interacts with a major content provider, a long tail of independent providers, and consumers who allocate attention across competing content. By designing independent-provider compensation, the platform endoge nously shapes its outside option and disciplines the major. This strategic use of long-tail compensation distorts entry relative to the first best. Allowing the platform to steer consumer attention improves entry incentives conditional on compensation, but affects bargaining incentives, and may thus increase or de crease welfare. We then consider regulation, showing that conservative minimum compensation floors robustly improve welfare, while non-discrimination policies have ambiguous welfare effects. |
| Keywords: | streaming platform, Nash bargaining, royalty negotiation, free entry, consumer steering |
| JEL: | L14 L82 L86 D43 D44 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_766 |
| By: | Drugov, Mikhail; Jeon, Doh-Shin |
| Abstract: | This paper studies the incentives of a subscription-funded platform that offers both proprietary and third-party content to bias its recommendations about which content users should consume. Consistent with Netflix’s practice, we consider fixed-fee bargaining between the platform and a content provider, which eliminates any static incentive to bias recommendations. However, our dynamic model identifies two distinct incentives to bias recommendations: improving the platform’s future bargaining position and increasing users’ expected surplus. The former favors first-party content, while the latter favors the ex ante superior content. As a result, biased recommendations may lead to either self-preferencing or third-party preferencing. |
| Keywords: | Platform |
| JEL: | D83 L42 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21451 |
| By: | J.M. Baland; M. Boltz; C. Guirkinger; A. Jolivet; R. Ziparo |
| Abstract: | Non-participation in household decisions is commonly interpreted as weak empowerment. We challenge this interpretation by showing that non-participation can be a strategic choice — a form of delegation — when a spouse expects the decision outcome to be sufficiently close to her preferences regardless of her involvement. We propose a model of imperfect information and derive conditions under which delegation arises in equilibrium: it occurs when the opportunity cost of participation in the decision is large compared to the preference gap between spouses. A key implication is that the spouse who receives authority may achieve lower welfare than the one who delegates. We test these predictions in two incentivized experiments conducted among couples in Belgium/France and Benin, finding strong support across both contexts. Survey evidence further confirms the external validity of the results. Our findings suggest that standard survey measures of intra-household bargaining, by conflating strategic delegation with disempowerment, may incorrectly reflect the distribution of power within households. |
| Keywords: | intra-household decisions, collective model, delegation, household experiment |
| JEL: | D13 O12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2026-21 |
| By: | Azacis, Helmuts (Institute of Economics, Corvinus University of Budapest); Collie, David R. (Cardiff Business School) |
| Abstract: | Most game theory models of international environmental policy have the benefits to a country being a function of a country's emissions whereas the costs are a function of global emissions. Obviously, the result is that the emissions of a country impose a negative externality on the rest of the world, and hence that international cooperation through an International Environmental Agreement (IEA) is necessary to solve the problem of climate policy. Here, international trade is added to the simple general equilibrium model of Azacis and Collie (2025). Since an increase in emissions will increase the output of a country, it will also increase exports thereby worsening the country's terms of trade but improving the terms of trade for the rest of the world. Hence, there will be a positive terms of trade externality in addition to the negative environmental externality with the overall externality turning out to be endogenous depending upon the quantity of emissions from the rest of the world. It is shown that the Nash equilibrium (NE) with environmental policies (tradeable permits or emissions taxes) is Pareto efficient when preferences are identical and there is no home consumption bias. In this case there are no potential gains from international cooperation through an IEA. When preferences are symmetric but with a home consumption bias, the NE with environmental policies will not be Pareto efficient and there will be potential gains from international cooperation through an IEA. |
| Keywords: | emissions taxes; tradeable permits; terms of trade; international trade; externalities |
| JEL: | C72 D62 F18 H23 Q58 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2026/9 |
| By: | Braghieri, Luca |
| Abstract: | How should a benevolent sender communicate private information to a receiver who updates beliefs in a systematically biased way? As an example, consider a hospital that has to communicate a test result to a patient prone to pessimistic inferences. I model this situation as a Bayesian sender observing an exogenous signal about the state of the world and choosing how to coarsen it before transmitting it to a receiver with updating biases. I show two main results: first, paternalistic information design can achieve first-best outcomes if and only if the sender can compress her information into categories that are both safe, meaning that they induce the receiver to take welfare-maximizing actions despite his biased updating, and lossless, meaning that they preserve the first-best value of the underlying information. Second, I show that the same decision problems for which information is most valuable under Bayesian updating are also the ones for which biased updating is hardest to mitigate through optimal information design. Together, these results characterize both the promise and the limits of paternalistic information design. Applications to medical reporting and AI-assisted lending show when coarsening information improves decisions and when it necessarily sacrifices first-best welfare. |
| JEL: | D82 D83 D91 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21484 |
| By: | Raouf Boucekkine (Aix Marseille Univ, CNRS, AMSE, Marseille, France); Rodolphe Desbordes (Université Côte d'Azur); Weihua Ruan (Purdue University [West Lafayette]); Benteng Zou (Université du Luxembourg = University of Luxembourg = Universität Luxemburg) |
| Abstract: | We develop a unified dynamic game-theoretic theory of institutional change that delivers three common equilibrium outcomes as limiting cases: Lipsetian transition to democracy, transition through popular revolution, and permanent autocracy. An impulse-control framework captures both the citizens’ revolutionary option and the elites’ strategic choice of voluntary democratisation, with human capital as the unique endogenousstate and resource windfalls as an exogenous contributor to production and exports. The framework allows us to (1) characterise a reformation frontier, a state-feedbacklocus of minimal concessions that keeps the regime marginally stable as human capital evolves, and (2) identify conditions under which voluntary handover strictly dominates revolution or the status quo, providing a formal stopping rule for elites. We then confront the most distinctive part of the theory, the reformation-frontier mechanism, with data on a panel of 223 autocratic spells between 1970 and 2024. Two empirical signatures of the mechanism are present in the data: the within-spell adjustment of concessions saturates as human capital accumulates, and a cluster of long-lived high-polyarchy autocracies persists on the back of rent revenues. The joint configuration is consistent with our theoryand inconsistent with thin modernisation, rentier-curse, and state-capacity alternatives. |
| Keywords: | Dynamic games; Reformation frontier; Redistribution; Education; Political transition |
| JEL: | D72 D74 C61 C73 |
| Date: | 2026–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2613 |
| By: | Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle |
| Abstract: | We study environmental policy in imperfectly competitive markets where firms differ in their objectives. Alongside standard profit-maximizing firms, we consider welfare-oriented firms that partially or fully internalize environmental externalities but are subject to financial viability constraints. We develop a Cournot model in which production generates emissions and firms may differ in the extent to which they account for environmental damages. We characterize market equilibria and examine the effects of environmental taxes and output subsidies on emissions, output, profits, and welfare. Our analysis shows that standard Pigouvian prescriptions are modified by the presence of market power and by the break-even constraints faced by welfare-oriented firms. While emissions taxes reduce environmental damages, they may also exacerbate underproduction and threaten the viability of socially responsible firms. Conversely, output subsidies may improve welfare despite increasing emissions. The welfare ranking of policy instruments depends critically on the interaction between environmental externalities, imperfect competition, and firms' financial constraints. These findings suggest that environmental policy design should account not only for emissions reduction, but also for the market structure and sustainability of firms with socially oriented objectives. |
| Keywords: | Environmental policy; Pigouvian taxation |
| JEL: | H23 L13 D62 Q58 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21500 |