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Strict Coalition-Proofness in an Oligopoly Difference Game


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  • Milan Horniaček


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    We deal with a strictly coalition-proof Markov perfect equilibrium in an infinite horizon oligopoly with discounting of profits, a discrete set of feasible capacity vectors, and investments into capacities. The definition of a Perfectly Coalition-Proof Nash equilibrium developed by Bernheim, Peleg, and Whinston is the basis for our definition of a strictly coalition-proof Markov perfect equilibrium. We replace their criterion of weak Pareto efficiency of a vector of equilibrium payoffs of coalition’s members by the criterion of its strict Pareto efficiency, require immunity of a coalition’s deviation in any subgame to deviations by its strict subcoalitions (in each subgame) and to its own deviations in other subgames, impose the condition of immunity to coalitions’ deviations satisfying this requirement in each subgame, and restrict attention to Markov strategies. For discount factor close enough to one the analyzed oligopoly game has a strictly coalition-proof Markov perfect equilibrium.

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    Bibliographic Info

    Article provided by The Czech Econometric Society in its journal Bulletin of the Czech Econometric Society.

    Volume (Year): 17 (2010)
    Issue (Month): 27 ()

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    Handle: RePEc:czx:journl:v:17:y:2010:i:27:id:177

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    Keywords: Capacities; coalitions; difference game; infinite horizon oligopoly; strictly coalition-proof Markov perfect equilibrium.;

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