Analytic Preliminaries for Social Acceptability of Legal Norms &

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Analytic Preliminaries for Social Acceptability of Legal Norms &"

Transcription

1 Analytic Preliminaries for Social Acceptability of John Asker February 7, 2013 Yale Law School

2 Roadmap Build on case studies of environments where extra-legal norms are at least as important as formal legal rules and standards. Develop analytic tools that are useful for putting structure on these observations Game Theory Repeated games and the folks theorems The tools will be drawn from economic theory. At least in my view, the point of a theoretical framework is to organize observation so that we can make meaningful inference that maps back into conceptual development and policy. Understanding what phenomena are interesting and informative Assessing the appropriateness of frameworks for answering questions of interest Measurement of magnitudes of interest Theory, observation and measurement go hand-in-hand.

3 Case Studies Ellickson, Robert (1989), A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry Journal of Law, Economics and Organization, 5(1), Property Law Grief, Avner (1993), Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders Coalition American Economic Review, 83(3), Contract Law / Law of Agency

4 Case Studies: Ellickson, Robert (1989), A Hypothesis of Wealth-Maximizing Norms: Evidence from the Whaling Industry Journal of Law, Economics and Organization, 5(1), Issue: Two different approaches to establishing property rights over whales hunted by multiple ships in international waters. Why these approaches (vs. Others)? Why one approach in one market and one approach in another?? Adoption by courts

5 Case Studies: Greif, Avner (1993), Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders Coalition American Economic Review, 83(3), Issue: Diamond wholesale market uses extensive arbitration internal to the community that severely penalizes taking disputes to courts Why this approaches? How does it work? How is it enforced? Capable of being supported by the court system? Why supplanted by the Merchant's Law? see the Milgrom et al paper.

6 Analytic Tools Objective: Acquire tools to develop structures to organize and interrogate this sort of descriptive empiricism. Review of Game Theory Repeated Games (enforcement of norms) Basic Folk Theorems (which norms can be enforced) (if time) Revisit case studies and point out where the framework is helpful and deficient A useful reference for applications of Game Theory is Gibbons (1992) Game Theory for Applied Economists (about $40 on amazon.com)

7 Review of Game Theory Tools I am going to assume you have seen this material in some form before. I am going to avoid mathematical formalism, for the most part.

8 Review of Game Theory Tools What are the elements of a game? Players Rules Strategies Payoffs Example: Normal Form Game Player B L C R T Player A M B Moves are simultaneous. Which moves make sense?

9 Review of Game Theory Tools Solution Concepts I: Strict Dominance Strictly Dominant strategy: payoff is strictly greater than any other strategy regardless of other players strategies. Strictly Dominated strategy: payoff is strictly lower than some other strategy regardless of other players strategies. An equilibrium in strictly dominant strategies is a set of strategies, one for each player such that each strategy is strictly dominant. Example: Normal Form Game Player B L C R T Player A M B 2 3 0

10 Review of Game Theory Tools Solution Concepts II: Weak Dominance Weakly Dominant Strategy: payoff is weakly greater than (i.e. at least as good as) any other strategy regardless of rival s choice, at strictly greater for at least one strategy profile available to other players. An equilibrium in weakly dominant strategies is a set of strategies, one for each player such that each strategy is weakly dominant. Example: Normal Form Game Player B L C R T Player A M B 2 3 0

11 Review of Game Theory Tools Solution Concepts III: Nash Equilibrium Best response set: Given strategies played by other players, the optimal strategies for a player. This need not be a singleton. Nash Equilibrium: A set of strategies, one for each player, such that each player is playing a best response. Example: Normal Form Game Player B L C R T Player A M B 2 3 0

12 Review of Game Theory Tools Canonical Game Forms Prisoners Dilemma: Collectively optimal outcome is different from what is individually rational C Player B D C Player A D 15 0

13 Review of Game Theory Tools Canonical Game Forms Prisoners Dilemma: Collectively optimal outcome is different from what is individually rational Player B H M L H Player A M L

14 Review of Game Theory Tools Canonical Game Forms Coordination Game: Equilibrium outcomes rely on coordination occurring successfully. Think about which side of the road to drive on C Player B D C Player A D 0 10

15 Games where moves occur over time Nash Equilibrium: A set of strategies, one for each player, such that each player is playing a best response. Subgame Perfect Nash Equilibrium: A Nash Equilibrium that every agent is playing optimally at every decision node. More formally, play within any subgame is also a Nash Equilibrium.

16 Player 1 Games where moves occur over time: Bully Leave alone Example: Player 2 5 NE vs. SPNE Hand over lunch Fight

17 Player 1 Games where moves occur over time: Bully Leave alone Example: Player 2 5 NE vs. SPNE Hand over lunch Fight NE: 1. <LA,F> 2. <B,HOL> SPNE: 1. <B,HOL>

18 Repeated Games: outside legal sanctions Basic Insight: If parties interact repeatedly, use future as source of leverage: threaten to punish rival if it behaves non-cooperatively. Recall the following from our case studies: Whaling: There is no finer example in history of communal enterprise than the Nantucket Whale Fishery. The inhabitants were uniquely situated for united effort Through intermarriage they were generally related to one another, and in fact were more like a large family than a civic community Diamonds: Sugden developed a model of exchange that demonstrates how, under certain conditions, a market norm that normally results in cooperation can be a stable, though not unique, equilibrium even when there appear to be incentives for individuals to be free riders and transactors occasionally make mistakes (breach unintentionally). The game is an adaptation of the classic prisoner's dilemma model in which the following conditions hold

19 Repeated Games: outside legal sanctions Stage game: Prisoners Dilemma: Collectively optimal outcome is different from what is individually rational C Player B D C Player A D 15 1 Define π(c,c), π(d,c), π(d,d), π(c,d) In this example these are : 10, 15, 1 and -3 respectively.

20 Repeated Games: outside legal sanctions Game Form: Play the stage game repeatedly, off into some infinite horizon Discount future using discount factor δ Recall that the value of a stream of payments, every period from today into an infinite future is 1/(1-δ) [I will do this on a whiteboard, if you are not familiar with it] Definition of a Strategy: A strategy is a complete contingent plan of action.

21 Repeated Games: outside legal sanctions Claim: in the repeated game, the cooperative outcome (C,C) can be a (Subgame Perfect) Nash equilibrium. Equilibrium strategies that generate this: If all players play C in the past, stick to it. If one player has ever played D, play D. (This punishment is what supports the equilibrium.) This is known a Grim Trigger Strategy. This equilibrium is not unique. If everyone else plays this strategy, what is the incentive to deviate? π(c,c) /(1-δ) ; versus π(d,c) + δπ(d,d) /(1-δ) Thus the necessary and sufficient condition for this to exist is that π(c,c) /(1-δ) > π(d,c) + δπ(d,d) /(1-δ)

22 Repeated Games: outside legal sanctions Observations: Comparative Statics Empirical Relevance Next: Multiplicity: The Folk Theorem

23 Repeated Games: The Folk Theorem Basic Intuition and mechanics: The idea here is that payoffs which are not as good as the socially optimum, but better than the static Nash outcome, can also be supported essentially the mechanics are much the same but showing it is a little more subtle.

24 Repeated Games: The Folk Theorem Feasible payoffs: Payoffs are feasible if they are a weighted average of the payoffs in the normal form game. In the example, feasible payoffs are shaded. -3,15 Player A C D Player B C D Definitions 10,10 1,1 15,-3

25 Repeated Games: The Folk Theorem Average payoff The average payoff of a stream of payments is: (1-δ)Σ t δ t-1 π t Definitions

26 Repeated Games: The Folk Theorem Theorem (a folk theorem): Let G be a finite, static game of complete information. Let (e 1,.,e n ) denote the pay-off to each of n players, from a Nash equilibrium of G, and let (x 1,,x n ) denote any feasible payoff profile from G. If x i >e i for every player and if δ is sufficiently close to one, then there exists a subgame-perfect nash equilibrium of the infinitely repeated game that acheives (x 1,,x n ) as an average payoff.

27 Repeated Games: Theorem (a folk theorem): Let G be a finite, static game of complete information. Let (e 1,.,e n ) denote the pay-off to each of n players, from a Nash equilibrium of G, and let (x 1,,x n ) denote any feasible payoff profile from G. If x i >e i for every player and if δ is sufficiently close to one, then there exists a subgame-perfect nash equilibrium of the infinitely repeated game that achieves (x 1,,x n ) as an average payoff. The Folk Theorem; -3,15 Player B C D What it means 10,10 Player A C D ,1 15,-3 These average payoffs can be supported

28 Repeated Games: The Folk Theorem Sketch of proof Theorem (a folk theorem): Let G be a finite, static game of complete information. Let (e 1,.,e n ) denote the pay-off to each of n players, from a Nash equilibrium of G, and let (x 1,,x n ) denote any feasible payoff profile from G. If x i >e i for every player and if δ is sufficiently close to one, then there exists a subgame-perfect nash equilibrium of the infinitely repeated game that acheives (x 1,,x n ) as an average payoff. The idea is to use a public randomizing device to generate the average payoffs (i.e. a dice decides which action each person plays at the start of a round, and everyone can see this dice roll). Then everyone, does what they are told. Deviations are punished using the grim trigger strategy as worked through before. It s a tiny bit more annoying in terms of notation, but the math is the same. See Gibbons, p What is the observational analog of this? What is the empirical relevance?

29 Repeated Games: Multiplicity, even on the efficient frontier Exercise: Coordinating duopolists Two firms, different marginal costs, who try to coordinate on the monopoly price π 1 (c,c) /(1-δ) > π 1 (d,c) + δπ 1 (d,d) /(1-δ) π 2 (c,c) /(1-δ) > π 2 (d,c) + δπ 2 (d,d) /(1-δ) We will do the boardwork: the point is that there is a range of divisions of the market that are both supportable using grim triggers, that also maximise the joint wealth of our two firms The question, is then on what basis do they choose the way to split the wealth?

30 Implications: Useful insights and unresolved issues Where do norms come from (how are equilibria selected?). How poor can enforcement be? How bad can monitoring be? Does this ignore sociological motivations? (i.e. intrinsic value from a sense of belonging or conformity?) is this observationally distinct? What does the legal system add to this way of coordinating? (Is there a sense in which this is merely the Coase theorem re-expressed?)

CMSC 474, Introduction to Game Theory Analyzing Normal-Form Games

CMSC 474, Introduction to Game Theory Analyzing Normal-Form Games CMSC 474, Introduction to Game Theory Analyzing Normal-Form Games Mohammad T. Hajiaghayi University of Maryland Some Comments about Normal-Form Games Only two kinds of strategies in the normal-form game

More information

MOT Seminar. John Musacchio 4/16/09

MOT Seminar. John Musacchio 4/16/09 Game Theory MOT Seminar John Musacchio johnm@soe.ucsc.edu 4/16/09 1 Who am I? John Musacchio Assistant Professor in ISTM Joined January 2005 PhD from Berkeley in Electrical l Engineering i Research Interests

More information

Collusion. Sotiris Georganas. February Sotiris Georganas () Collusion February / 31

Collusion. Sotiris Georganas. February Sotiris Georganas () Collusion February / 31 Collusion Sotiris Georganas February 2012 Sotiris Georganas () Collusion February 2012 1 / 31 Outline 1 Cartels 2 The incentive for cartel formation The scope for collusion in the Cournot model 3 Game

More information

ECN 3103 INDUSTRIAL ORGANISATION

ECN 3103 INDUSTRIAL ORGANISATION ECN 3103 INDUSTRIAL ORGANISATION 5. Game Theory Mr. Sydney Armstrong Lecturer 1 The University of Guyana 1 Semester 1, 2016 OUR PLAN Analyze Strategic price and Quantity Competition (Noncooperative Oligopolies)

More information

Price-Fixing and. Repeated Games. Collusion and cartels. Recent events. Collusion and cartels 2. Cartels. Recent cartel violations 2

Price-Fixing and. Repeated Games. Collusion and cartels. Recent events. Collusion and cartels 2. Cartels. Recent cartel violations 2 Collusion and cartels Price-Fixing and What is a cartel? attempt to enforce market discipline and reduce competition between a group of suppliers cartel members agree to coordinate their actions prices

More information

Universitat Autònoma de Barcelona Department of Applied Economics

Universitat Autònoma de Barcelona Department of Applied Economics Universitat Autònoma de Barcelona Department of Applied Economics Annual Report Endogenous R&D investment when learning and technological distance affects absorption capacity Author: Jorge Luis Paz Panizo

More information

Chapter 9: Static Games and Cournot Competition

Chapter 9: Static Games and Cournot Competition Chapter 9: Static Games and Cournot Competition Learning Objectives: Students should learn to:. The student will understand the ideas of strategic interdependence and reasoning strategically and be able

More information

Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output.

Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output. Topic 8 Chapter 13 Oligopoly and Monopolistic Competition Econ 203 Topic 8 page 1 Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry

More information

Chapter 13 Outline. Challenge: Intel and AMD s Advertising Strategies. An Overview of Game Theory. An Overview of Game Theory

Chapter 13 Outline. Challenge: Intel and AMD s Advertising Strategies. An Overview of Game Theory. An Overview of Game Theory Chapter 13 Game Theory A camper awakens to the growl of a hungry bear and sees his friend putting on a pair of running shoes. You can t outrun a bear, scoffs the camper. His friend coolly replies, I don

More information

Lecture 7 Rivalry, Strategic Behavior and Game Theory

Lecture 7 Rivalry, Strategic Behavior and Game Theory Lecture 7 Rivalry, Strategic Behavior and Game Theory 1 Overview Game Theory Simultaneous-move, nonrepeated interaction Sequential interactions Repeated strategic interactions Pricing coordination 2 Introduction

More information

Chapter 12. A Game Theoretic Approach to Strategic Behavior

Chapter 12. A Game Theoretic Approach to Strategic Behavior Chapter 12 A Game Theoretic Approach to Strategic Behavior Chapter Outline An Introduction to the Theory of Games Prisoner s Dilemma Nash Equilibrium Maximin Strategy Strategies for Repeated Play Sequential

More information

29/02/2016. Market structure II- Other types of imperfect competition. What Is Monopolistic Competition? OTHER TYPES OF IMPERFECT COMPETITION

29/02/2016. Market structure II- Other types of imperfect competition. What Is Monopolistic Competition? OTHER TYPES OF IMPERFECT COMPETITION Market structure II- Other types of imperfect competition OTHER TYPES OF IMPERFECT COMPETITION Characteristics of Monopolistic Competition Monopolistic competition is a market structure in which many firms

More information

Game Theory. 7 Repeated Games

Game Theory. 7 Repeated Games Game Theory 7 Repeated Games REPEATED GAMES Review of lecture six Definitions of imperfect information Graphical convention for dynamic games Information sets General failure of backwards induction with

More information

Managerial Economics & Business Strategy. Game Theory: Inside Oligopoly

Managerial Economics & Business Strategy. Game Theory: Inside Oligopoly Managerial Economics & Business Strategy Chapter 10 Game Theory: Inside Oligopoly Revised 2/12 by DF McGraw-Hill/Irwin Copyright Copyright 2006 by The 2006 McGraw-Hill by The McGraw-Hill Companies, Inc.

More information

Game Theory Methods in Microgrids

Game Theory Methods in Microgrids Game Theory Methods in Microgrids Petros Aristidou, Aris Dimeas, and Nikos Hatziargyriou School of Electrical and Computer Engineering National Technical University of Athens Zografou Campus 15780 Athens

More information

Games with Time Inconsistent Players

Games with Time Inconsistent Players Games with Time Inconsistent Players Yianis Sarafidis February 22, 2006 PRELIMINARY DRAFT Comments are more than welcome Abstract We embed time inconsistent agents (players) in non-cooperative games. To

More information

Microgrid Modelling and Analysis Using Game Theory Methods

Microgrid Modelling and Analysis Using Game Theory Methods Microgrid Modelling and Analysis Using Game Theory Methods Petros Aristidou, Aris Dimeas, and Nikos Hatziargyriou School of Electrical and Computer Engineering National Technical University of Athens Zografou

More information

Noncooperative Game Theory For Industrial Organization: An Introduction and Overview. by Drew Fudenberg and Jean Tirole Number 445 April 1987

Noncooperative Game Theory For Industrial Organization: An Introduction and Overview. by Drew Fudenberg and Jean Tirole Number 445 April 1987 Noncooperative Game Theory For Industrial Organization: An Introduction and Overview by Drew Fudenberg and Jean Tirole Number 445 April 1987 Digitized by the Internet Archive in 2011 with funding from

More information

Game Theory & Firms. Jacob LaRiviere & Justin Rao April 20, 2016 Econ 404, Spring 2016

Game Theory & Firms. Jacob LaRiviere & Justin Rao April 20, 2016 Econ 404, Spring 2016 Game Theory & Firms Jacob LaRiviere & Justin Rao April 20, 2016 Econ 404, Spring 2016 What is Game Theory? Game Theory Intuitive Definition: Theory of strategic interaction Technical Definition: Account

More information

Note on webpage about sequential ascending auctions

Note on webpage about sequential ascending auctions Econ 805 Advanced Micro Theory I Dan Quint Fall 2007 Lecture 20 Nov 13 2007 Second problem set due next Tuesday SCHEDULING STUDENT PRESENTATIONS Note on webpage about sequential ascending auctions Everything

More information

Microeconomics LESSON 6 ACTIVITY 41

Microeconomics LESSON 6 ACTIVITY 41 Microeconomics LESSON 6 ACTIVITY 41 Game Theory Strategic thinking is the art of outdoing an adversary, knowing that the adversary is trying to do the same to you. Dixit and Nalebuff Game theory is used

More information

Modeling of competition in revenue management Petr Fiala 1

Modeling of competition in revenue management Petr Fiala 1 Modeling of competition in revenue management Petr Fiala 1 Abstract. Revenue management (RM) is the art and science of predicting consumer behavior and optimizing price and product availability to maximize

More information

Analyze different types of non zero sum games. Hawk vs. Dove game. Advertising problem. Problem of companies polluting the environment.

Analyze different types of non zero sum games. Hawk vs. Dove game. Advertising problem. Problem of companies polluting the environment. Unit 3 GME THEORY Lesson 31 Learning Objective: nalyze different types of non zero sum games Hawk vs. game. dvertising problem. Problem of companies polluting the environment. Rationalizability or Iterative

More information

11. Oligopoly. Literature: Pindyck and Rubinfeld, Chapter 12 Varian, Chapter 27

11. Oligopoly. Literature: Pindyck and Rubinfeld, Chapter 12 Varian, Chapter 27 11. Oligopoly Literature: Pindyck and Rubinfeld, Chapter 12 Varian, Chapter 27 04.07.2017 Prof. Dr. Kerstin Schneider Chair of Public Economics and Business Taxation Microeconomics Chapter 11 Slide 1 Chapter

More information

Principles of Economics: Seminar 1 - Game Theory

Principles of Economics: Seminar 1 - Game Theory Principles of Economics: Seminar 1 - Game Theory July 18, 2017 Principles of Economics: Seminar 1 - Game Theory July 18, 2017 1 / 20 What is a game? Definition: A game is any situation involving two or

More information

Oligopolies Part III

Oligopolies Part III Oligopolies Part III It's called an oligopoly. It's not a regular market. It's a market in which they control the prices and they've been doing it for years. Richard Miller The Prisoner s Dilemma Consider

More information

Multilateral negotiations with private side deals: a multiplicity example. Abstract

Multilateral negotiations with private side deals: a multiplicity example. Abstract Multilateral negotiations with private side deals: a multiplicity example Sandeep Baliga Northwestern University and Institute for Advanced Study Roberto Serrano Brown University Abstract We study a multilateral

More information

Best-response functions, best-response curves. Strategic substitutes, strategic complements. Quantity competition, price competition

Best-response functions, best-response curves. Strategic substitutes, strategic complements. Quantity competition, price competition Strategic Competition: An overview The economics of industry studying activities within an industry. Basic concepts from game theory Competition in the short run Best-response functions, best-response

More information

Game theory (Sections )

Game theory (Sections ) Game theory (Sections 17.5-17.6) Game theory Game theory deals with systems of interacting agents where the outcome for an agent depends on the actions of all the other agents Applied in sociology, politics,

More information

Chapter 15 Oligopoly

Chapter 15 Oligopoly Goldwasser AP Microeconomics Chapter 15 Oligopoly BEFORE YOU READ THE CHAPTER Summary This chapter explores oligopoly, a market structure characterized by a few firms producing a product that mayor may

More information

1. INTRODUCTION IS IT POSSIBLE TO MOVE THE COPPER MARKET? MATTI LISKI AND JUAN-PABLO MONTERO *

1. INTRODUCTION IS IT POSSIBLE TO MOVE THE COPPER MARKET? MATTI LISKI AND JUAN-PABLO MONTERO * Cuadernos de Economía, Año 40, Nº 121, pp. 559-565 (diciembre 2003) IS IT POSSIBLE TO MOVE THE COPPER MARKET? MATTI LISKI AND JUAN-PABLO MONTERO * 1. INTRODUCTION In recent years, the question whether

More information

On Collusion and Industry Size

On Collusion and Industry Size ANNALS OF ECONOMICS AND FINANCE 12-1, 31 40 (2011) On Collusion and Industry Size Marc Escrihuela-Villar * Universitat de les Illes Balears E-mail: marc.escrihuela@uib.es and Jorge Guillén ESAN E-mail:

More information

INDUSTRIAL ECONOMICS, WITH APPLICATIONS TO E-COMMERCE An Option for MSc Economics and MSc E-Commerce Autumn Term 2003

INDUSTRIAL ECONOMICS, WITH APPLICATIONS TO E-COMMERCE An Option for MSc Economics and MSc E-Commerce Autumn Term 2003 School of Economics, Mathematics and Statistics INDUSTRIAL ECONOMICS, WITH APPLICATIONS TO E-COMMERCE An Option for MSc Economics and MSc E-Commerce Autumn Term 2003 1. Strategic Interaction and Oligopoly

More information

Game Theory(S4415): Answers to Problem Set 4

Game Theory(S4415): Answers to Problem Set 4 Game Theory(S15): nswers to Problem Set PrajitK.Dutta June22,2001 Chapter 13 1. Write down the extensive form of the game above. How many subgames are there in this game? How many strategies does Coke

More information

Information Acquisition and Price Discrimination

Information Acquisition and Price Discrimination Information Acquisition and Price Discrimination Farshad Fatemi Sharif University of Technology ffatemi@sharif.edu We consider a Hotelling model of price competition where firms may acquire costly information

More information

The Retailers Choices of Profit Strategies in a Cournot Duopoly: Relative Profit and Pure Profit

The Retailers Choices of Profit Strategies in a Cournot Duopoly: Relative Profit and Pure Profit Modern Economy, 07, 8, 99-0 http://www.scirp.org/journal/me ISSN Online: 5-76 ISSN Print: 5-745 The Retailers Choices of Profit Strategies in a Cournot Duopoly: Relative Profit and Pure Profit Feifei Zheng

More information

ECMC02H Intermediate Microeconomics - Topics in Price Theory

ECMC02H Intermediate Microeconomics - Topics in Price Theory 1 ECMC02H Intermediate Microeconomics - Topics in Price Theory Answers to the Term Test June 23, 2010 Version A of the test Your name (Print clearly and underline your last name) Your student number 1.

More information

Collusion. So be deviating Firm 1 s profits are: So for the proposed strategies to form an equilibrium it has to be the case that 1 1

Collusion. So be deviating Firm 1 s profits are: So for the proposed strategies to form an equilibrium it has to be the case that 1 1 Collusion So be deviating Firm 1 s profits are: V = π M So for the proposed strategies to form an equilibrium it has to be the case that 1 1 2 πm 1 δ πm which is equivalent to δ > 1 2 So the question then

More information

Do not open this exam until told to do so. Solution

Do not open this exam until told to do so. Solution Do not open this exam until told to do so. Department of Economics College of Social and Applied Human Sciences K. Annen, Fall 003 Final (Version): Intermediate Microeconomics (ECON30) Solution Final (Version

More information

The Role of Price Floor in a Differentiated Product Retail Market 1

The Role of Price Floor in a Differentiated Product Retail Market 1 The Role of Price Floor in a Differentiated Product Retail Market 1 Barna Bakó 2 Corvinus University of Budapest Hungary 1 I would like to thank the anonymous referee for the valuable comments and suggestions,

More information

Intra-industry trade, environmental policies and innovations: The Porter- Hypothesis revisited

Intra-industry trade, environmental policies and innovations: The Porter- Hypothesis revisited Intra-industry trade, environmental policies and innovations: The Porter- Hypothesis revisited Gerhard Clemenz March 2012 Abstract: According to the Porter Hypothesis (PH) stricter environmental regulations

More information

14.01 Principles of Microeconomics, Fall 2007 Chia-Hui Chen November 7, Lecture 22

14.01 Principles of Microeconomics, Fall 2007 Chia-Hui Chen November 7, Lecture 22 Monopoly. Principles of Microeconomics, Fall Chia-Hui Chen November, Lecture Monopoly Outline. Chap : Monopoly. Chap : Shift in Demand and Effect of Tax Monopoly The monopolist is the single supply-side

More information

Externalities and the Environment

Externalities and the Environment Externalities and the Environment What is an Externality? When a person/firm does something that affects the interests of another person or firm without affecting prices. Examples: Traffic/telephone/internet

More information

Advanced Microeconomics Theory. Chapter 8: Game Theory and Imperfect Competition

Advanced Microeconomics Theory. Chapter 8: Game Theory and Imperfect Competition Advanced Microeconomics Theory Chapter 8: Game Theory and Imperfect Competition Outline Game Theory Tools Bertrand Model of Price Competition Cournot Model of Quantity Competition Product Differentiation

More information

Microeconomics LESSON 6 ACTIVITY 40

Microeconomics LESSON 6 ACTIVITY 40 Microeconomics LESSON 6 ACTIVITY 40 Monopolistic Competition Figure 40.1 Monopolistically Competitive Firm in the Short Run MC COSTS/REVENUE (DOLLARS) E D C B A F H K G ATC D 0 MR L M QUANTITY 1. Use Figure

More information

5 Market Games For Teaching Economics

5 Market Games For Teaching Economics 5 Market Games For Teaching Economics Progression 5 Market Games from website economics-games.com To be played separately or as a sequence: Market Game 1: Sunk costs, monopoly, and introduction to the

More information

Common-Pool Resources (Ch 34) and Public Goods (Ch 36)

Common-Pool Resources (Ch 34) and Public Goods (Ch 36) Common-Pool Resources (Ch 34) and (Ch 36) Final Exam Details 20 hours of OH between now and final Review Session: Saturday, 3/12, 4-6pm, NH 1006 Final exam: Tuesday, March 15, 12-3pm, here Format: 12 15

More information

Thinking strategically: Conflict and Cooperation

Thinking strategically: Conflict and Cooperation Master in International Cooperation and Development (MIC&D) Thinking strategically: Conflict and Cooperation Luigi Curini Università degli Studi di Milano luigi.curini@unimi.it Twitter: @Curini http://www.luigicurini.com

More information

Renting or Selling A Strategic Choice in a Durable Good Market

Renting or Selling A Strategic Choice in a Durable Good Market Renting or Selling A Strategic Choice in a Durable Good Market Manas Paul Indira Gandhi Institute of Development Research Gen. Vaidya Marg Goregaon (East) Bombay 400 065. Sougata Poddar Department of Economics

More information

Damaged Durable Goods: Mitigating the Time Inconsistency Problem

Damaged Durable Goods: Mitigating the Time Inconsistency Problem JEL Codes: D0, L0 1. Introduction World Review of Business Research Vol. 2. No. 6. November 2012. Pp. 84 99 Damaged Durable Goods: Mitigating the Time Inconsistency Problem Xiaojing (Joanne) MA * In this

More information

Preface. Chapter 1 Basic Tools Used in Understanding Microeconomics. 1.1 Economic Models

Preface. Chapter 1 Basic Tools Used in Understanding Microeconomics. 1.1 Economic Models Preface Chapter 1 Basic Tools Used in Understanding Microeconomics 1.1 Economic Models 1.1.1 Positive and Normative Analysis 1.1.2 The Market Economy Model 1.1.3 Types of Economic Problems 1.2 Mathematics

More information

Principles of Microeconomics Assignment 8 (Chapter 10) Answer Sheet. Class Day/Time

Principles of Microeconomics Assignment 8 (Chapter 10) Answer Sheet. Class Day/Time 1 Principles of Microeconomics Assignment 8 (Chapter 10) Answer Sheet Name Class Day/Time Questions of this homework are in the next few pages. Please find the answer of the questions and fill in the blanks

More information

Lecture 11 Imperfect Competition

Lecture 11 Imperfect Competition Lecture 11 Imperfect Competition Business 5017 Managerial Economics Kam Yu Fall 2013 Outline 1 Introduction 2 Monopolistic Competition 3 Oligopoly Modelling Reality The Stackelberg Leadership Model Collusion

More information

EC493f Review Sheet 1

EC493f Review Sheet 1 Econ 493f Law and Economics Spring 2017 1 Identify and/or Define: a. Codex of Hammurabi l. Dominant Strategy b. Marginal Cost m. Nash Equilibrium c. Net Benefit n. Optimal Crime Rate d. Expected Penalty

More information

Welfare Economics. The Edgeworth Box. The Basic Theorem. Some Basic Assumptions

Welfare Economics. The Edgeworth Box. The Basic Theorem. Some Basic Assumptions Welfare Economics The Edgeworth Box The Basic Theorem The basic theorem in welfare economics: A market, exchange, economy will achieve efficient resource allocation. We intend to show the basics of that

More information

First impressions on the Revised US and UK Merger Guidelines

First impressions on the Revised US and UK Merger Guidelines GRC Conference, 29th September, Brussels First impressions on the Revised US and UK Merger Guidelines Damien Neven* Chief Competition Economist DG COMP, European Commission *The views expressed are my

More information

Experiential Learning Through Classroom Experiments David Bowes, Southeastern Louisiana University Jay Johnson, Southeastern Louisiana University

Experiential Learning Through Classroom Experiments David Bowes, Southeastern Louisiana University Jay Johnson, Southeastern Louisiana University Experiential Learning Through Classroom Experiments David Bowes, Southeastern Louisiana University Jay Johnson, Southeastern Louisiana University ABSTRACT This paper describes classroom experiments in

More information

Mergers, Spin-offs, and Employee Incentives

Mergers, Spin-offs, and Employee Incentives Mergers, Spin-offs, and Employee Incentives Paolo Fulghieri University of North Carolina Merih Sevilir University of North Carolina Abstract This paper studies mergers between competing firms and shows

More information

Comparative Price Signaling by a Multiproduct Firm

Comparative Price Signaling by a Multiproduct Firm Comparative Price Signaling by a Multiproduct Firm Michael R. Baye and Rick Harbaugh May, 013 Abstract Existing work on price signaling finds that, in the absence of reputational or other effects, a firm

More information

Tilburg University. The repeated lake game Brock, W.A.; de Zeeuw, Aart. Published in: Economics Letters. Publication date: Link to publication

Tilburg University. The repeated lake game Brock, W.A.; de Zeeuw, Aart. Published in: Economics Letters. Publication date: Link to publication Tilburg University The repeated lake game Brock, W.A.; de Zeeuw, Aart Published in: Economics Letters Publication date: 2002 Link to publication Citation for published version (APA): Brock, W. A., & de

More information

! lecture 7:! competition and collusion!!

! lecture 7:! competition and collusion!! ! lecture 7:! competition and collusion!! the story so far Natural monopoly: Definitions (Ideal) Pricing solutions Regulation in practice Regulation under asymmetric information Competition policy: Introduction

More information

Vertical Integration and Downstream Collusion

Vertical Integration and Downstream Collusion Vertical Integration and Downstream Collusion Sara Biancini and David Ettinger Vertical Integration and Downstream Collusion Sara Biancini, David Ettinger. September 2015 Preliminary Version Abstract We

More information

Notes on Introduction to Contract Theory

Notes on Introduction to Contract Theory Notes on Introduction to Contract Theory John Morgan Haas School of Business and Department of Economics University of California, Berkeley 1 Overview of the Course This is a readings course. The lectures

More information

Efficiency and Robustness of Binary Online Feedback Mechanisms in Trading Environments with Moral Hazard

Efficiency and Robustness of Binary Online Feedback Mechanisms in Trading Environments with Moral Hazard Efficiency and Robustness of Binary Online Feedback Mechanisms in Trading Environments with Moral Hazard Chris Dellarocas MIT Sloan School of Management dell@mit.edu Introduction and Motivation Outline

More information

Industrial Organization- micro : Price discrimination in oligopoly

Industrial Organization- micro : Price discrimination in oligopoly Industrial Organization- micro 3 2018: Price discrimination in oligopoly Price discrimination is a mechanism whereby a monopolist can effectively shift surplus from the consumer sector. With perfect price

More information

Bargaining and Power in Networks

Bargaining and Power in Networks Chapter 12 Bargaining and Power in Networks In our analysis of economic transactions on networks, particularly the model in Chapter 11, we considered how a node s position in a network affects its power

More information

Matching: The Theory. Muriel Niederle Stanford and NBER. October 5, 2011

Matching: The Theory. Muriel Niederle Stanford and NBER. October 5, 2011 Matching: The Theory Muriel Niederle Stanford and NBER October 5, 2011 NRMP match variations: Couples: Submit rank oders over pairs of programs, and must be matched to two positions Applicants who match

More information

Econ 201 Review Notes - Part 3

Econ 201 Review Notes - Part 3 Econ 201 Review Notes - Part 3 This is intended as a supplement to the lectures and section. It is what I would talk about in section if we had more time. After the first three chapters where we talked

More information

Section 10. Akos Lada. Fall Externality and Coasian Bargaining. We will explore this topic through an easy example

Section 10. Akos Lada. Fall Externality and Coasian Bargaining. We will explore this topic through an easy example Section 10 Akos Lada Fall 2012 1. Externalities, Coase Theorem, Coasian Bargaining, social optimum, efficient outcomes, property rights, transaction costs 2. Cournot Competition, Monopoly, Oligopoly 1

More information

Lecture 21: Strategic Interaction and Game Theory

Lecture 21: Strategic Interaction and Game Theory Lecture 2: Strategic Interaction and Game Theory EC DD & EE / Manove Strategic Interaction p What types of firms are most likely to engage in costly rent-seeking? EC DD & EE / Manove Monopoly>Rent Seeking

More information

Abstract. A Dynamic Analysis of Mergers. Gautam Gowrisankaran. The dissertation examines the dynamics of firm behavior using computational

Abstract. A Dynamic Analysis of Mergers. Gautam Gowrisankaran. The dissertation examines the dynamics of firm behavior using computational Abstract A Dynamic Analysis of Mergers Gautam Gowrisankaran 1995 The dissertation examines the dynamics of firm behavior using computational methods, with the goal of modeling mergers more realistically

More information

Analyzing Choice with Revealed Preference: Is Altruism Rational?

Analyzing Choice with Revealed Preference: Is Altruism Rational? Analyzing Choice with Revealed Preference: Is Altruism Rational? by James Andreoni Department of Economics University of Wisconsin Madison, Wisconsin 53706 and John H. Miller Department of Social and Decision

More information

AGEC 3333 Practice Questions for Exam 3 Fall Semester, 2009 Set A: Material From Chapter 10, Pages ,

AGEC 3333 Practice Questions for Exam 3 Fall Semester, 2009 Set A: Material From Chapter 10, Pages , (1) (from page 108) Match each industry description with the proper identification by drawing a line between the description and identification. a market with many buyers and sellers with roughly equal

More information

An Introduction to Game Theory: Applications in Environmental Economics and Public Choice with Mathematical Appendix

An Introduction to Game Theory: Applications in Environmental Economics and Public Choice with Mathematical Appendix Western Kentucky University From the SelectedWorks of Matt Bogard August, 2012 An Introduction to Game Theory: Applications in Environmental Economics and Public Choice with Mathematical Appendix Matt

More information

Applied Welfare Economics

Applied Welfare Economics Economics Monika Köppl - Turyna Department of Economics ISCTE-IUL Summer 2014/2015 Introduction We will have lectures and problem solving sessions (usually one per two lectures) Attendance is generally

More information

Competition and Fraud in Online Advertising Markets

Competition and Fraud in Online Advertising Markets Competition and Fraud in Online Advertising Markets Bob Mungamuru 1 and Stephen Weis 2 1 Stanford University, Stanford, CA, USA 94305 2 Google Inc., Mountain View, CA, USA 94043 Abstract. An economic model

More information

Beliefs, Market Size and Consumer Search

Beliefs, Market Size and Consumer Search Beliefs, Market Size and Consumer Search (PRELIMINARY AND INCOMPLETE) Maarten Janssen and Sandro Shelegia February 15, 2014 Abstract We analyze two unexplored aspects of the Wolinsky model (Wolinsky (1986)

More information

HIERARCHICAL decision making problems arise naturally

HIERARCHICAL decision making problems arise naturally IEEE TRANSACTIONS ON AUTOMATION SCIENCE AND ENGINEERING, VOL. 5, NO. 3, JULY 2008 377 Mechanism Design for Single Leader Stackelberg Problems and Application to Procurement Auction Design Dinesh Garg and

More information

Oligopoly. Quantity Price(per year) 0 $120 2,000 $100 4,000 $80 6,000 $60 8,000 $40 10,000 $20 12,000 $0

Oligopoly. Quantity Price(per year) 0 $120 2,000 $100 4,000 $80 6,000 $60 8,000 $40 10,000 $20 12,000 $0 Oligopoly 1. Markets with only a few sellers, each offering a product similar or identical to the others, are typically referred to as a. monopoly markets. b. perfectly competitive markets. c. monopolistically

More information

Beliefs, Market Size and Consumer Search

Beliefs, Market Size and Consumer Search Beliefs, Market Size and Consumer Search Maarten Janssen and Sandro Shelegia March 30, 2014 Abstract We analyze how the market power of firms in consumer search markets depends on how consumers form beliefs

More information

Strategic behaviour in fisheries management Practical applications. Associate Professor Lone Grønbæk Kronbak University of Southern Denmark

Strategic behaviour in fisheries management Practical applications. Associate Professor Lone Grønbæk Kronbak University of Southern Denmark Strategic behaviour in fisheries management Practical applications Associate Professor Lone Grønbæk Kronbak University of Southern Denmark Outline Baltic Sea cod fishery; Example of application of c-games,

More information

Solutions to Final Exam

Solutions to Final Exam Solutions to Final Exam AEC 504 - Summer 2007 Fundamentals of Economics c 2007 Alexander Barinov 1 Veni, vidi, vici (30 points) Two firms with constant marginal costs serve two markets for two different

More information

Provided for non-commercial research and educational use only. Not for reproduction, distribution or commercial use.

Provided for non-commercial research and educational use only. Not for reproduction, distribution or commercial use. Provided for non-commercial research and educational use only. Not for reproduction, distribution or commercial use. This chapter was originally published in the book Handbook of Experimental Economics

More information

Strategic Reorganizations in Stable Environments

Strategic Reorganizations in Stable Environments Strategic Reorganizations in Stable Environments Marco A. Castaneda Department of Economics Tulane University and Ivan Jeliazkov Department of Economics University of California, Irvine October 25, 2009

More information

Optimal Brand Umbrella Size

Optimal Brand Umbrella Size Optimal Brand Umbrella Size Luís M B Cabral New York University April 2007 Abstract In a framework or repeated-purchase experience goods with seller s moral hazard and imperfect monitoring, umbrella branding

More information

Extensive Games with Imperfect Information

Extensive Games with Imperfect Information Extensive Games with Imperfect Information Jeff Rowley Abstract This document will draw heavily on definitions presented in Osborne; An Introduction to Game Theory and, for later definitions, Jehle & Reny;

More information

Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Mergers

Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Mergers Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Mergers Andrew Sweeting Xuezhen Tao August 2016 Work in Progress - Do Not Cite Abstract Existing theoretical and structural empirical

More information

Mutual Benefits as Incentives for

Mutual Benefits as Incentives for Mutual Benefits as Incentives for Transboundary Water Cooperation? An Analysis of Negative and Positive Externality Problems Ines Dombrowsky / Dept. of Economics London, May 6, 2006 Content (1) The problem

More information

The commons and sustainable development

The commons and sustainable development Principles of Sustainable Development Fourth Topic The commons and sustainable development Simone D Alessandro Department of Economics & Management University of Pisa simone.dalessandro@unipi.it May 3

More information

Bidding for Sponsored Link Advertisements at Internet

Bidding for Sponsored Link Advertisements at Internet Bidding for Sponsored Link Advertisements at Internet Search Engines Benjamin Edelman Portions with Michael Ostrovsky and Michael Schwarz Industrial Organization Student Seminar September 2006 Project

More information

Stackelberg or Cournot Equilibria", Games and Economic Behavior, 2, 29-46, 1990.

Stackelberg or Cournot Equilibria, Games and Economic Behavior, 2, 29-46, 1990. Hamilton, Jonathan H., and Steven M. Slutsky, "Endogenous Timing in Duopoly Games: Stackelberg or Cournot Equilibria", Games and Economic Behavior, 2, 29-46, 1990. Kahana, Nava, "Do Multiplant Labor-Managed

More information

PRICE OF ANARCHY: QUANTIFYING THE INEFFICIENCY OF EQUILIBRIA. Zongxu Mu

PRICE OF ANARCHY: QUANTIFYING THE INEFFICIENCY OF EQUILIBRIA. Zongxu Mu PRICE OF ANARCHY: QUANTIFYING THE INEFFICIENCY OF EQUILIBRIA Zongxu Mu The Invisible Hand Equilibria and Efficiency Central to free market economics The Wealth of Nations (Smith, 1776) led by an invisible

More information

Durable goods with quality differentiation

Durable goods with quality differentiation Available online at www.sciencedirect.com Economics Letters 00 (2008) 73 77 www.elsevier.com/locate/econbase Durable goods with quality differentiation Roman Inderst University of Frankfurt (IMFS), Germany

More information

TOPIC 4. ADVERSE SELECTION, SIGNALING, AND SCREENING

TOPIC 4. ADVERSE SELECTION, SIGNALING, AND SCREENING TOPIC 4. ADVERSE SELECTION, SIGNALING, AND SCREENING In many economic situations, there exists asymmetric information between the di erent agents. Examples are abundant: A seller has better information

More information

Advance Selling, Competition, and Brand Substitutability

Advance Selling, Competition, and Brand Substitutability Advance Selling, Competition, and Brand Substitutability Oksana Loginova October 27, 2016 Abstract This paper studies the impact of competition on the benefits of advance selling. I construct a two-period

More information

Chapter 6. Game Theory Two

Chapter 6. Game Theory Two 6.8 Repeated Games A game that is played only once is called a one-shot game. Repeated games are games that are played over and over again. Repeated Game = A game in which actions are taken and payoffs

More information

The Coordination Value of Monetary Exchange: Experimental Evidence

The Coordination Value of Monetary Exchange: Experimental Evidence Chapman University Chapman University Digital Commons Economics Faculty Articles and Research Economics 2014 The Coordination Value of Monetary Exchange: Experimental Evidence Gabriele Camera Chapman University,

More information

Oligopoly Pricing. EC 202 Lecture IV. Francesco Nava. January London School of Economics. Nava (LSE) EC 202 Lecture IV Jan / 13

Oligopoly Pricing. EC 202 Lecture IV. Francesco Nava. January London School of Economics. Nava (LSE) EC 202 Lecture IV Jan / 13 Oligopoly Pricing EC 202 Lecture IV Francesco Nava London School of Economics January 2011 Nava (LSE) EC 202 Lecture IV Jan 2011 1 / 13 Summary The models of competition presented in MT explored the consequences

More information

Chapter 13. Game Theory. Gaming and Strategic Decisions. Noncooperative v. Cooperative Games

Chapter 13. Game Theory. Gaming and Strategic Decisions. Noncooperative v. Cooperative Games Chapter 13 Game Theory Gaming and Strategic Decisions Game theory tries to determine optimal strategy for each player Strategy is a rule or plan of action for playing the game Optimal strategy for a player

More information

Chapter 28: Monopoly and Monopsony

Chapter 28: Monopoly and Monopsony Chapter 28: Monopoly and Monopsony 28.1: Introduction The previous chapter showed that if the government imposes a tax on some good that there is a loss of surplus. We show a similar result in this chapter

More information