Complexity and Competition
AbstractExtensive-form market games typically have a large number of noncompetitive equilibria. In this paper, we argue that the complexity of noncompetitive behavior provides a justification for competitive equilibrium in the sense that if rational agents have an aversion to complexity (at the margin), then maximizing behavior will result in simple behavioral rules and hence in a competitive outcome. For this purpose, we use a class of extensive-form dynamic matching and bargaining games with a finite number of agents. In particular, we consider markets with heterogeneous buyers and sellers and deterministic, exogenous, sequential matching rules, although the results can be extended to other matching processes. If the complexity costs of implementing strategies enter players' preferences lexicographically with the standard payoff, then every equilibrium strategy profile induces a competitive outcome. Copyright The Econometric Society 2005.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 73 (2005)
Issue (Month): 3 (05)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Katerina Sherstyuk, 2011. "Complexity and bidder behavior in iterative auctions," Economics Bulletin, AccessEcon, vol. 31(4), pages 2769-2776.
- Bag, Parimal Kanti & Sabourian, Hamid & Winter, Eyal, 2009. "Multi-stage voting, sequential elimination and Condorcet consistency," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1278-1299, May.
- Mark Armstrong & Steffen Huck, 2010.
"Behavioral Economics as Applied to Firms: A Primer,"
Competition Policy International, vol. 6.
- Mark Armstrong & Steffen Huck, 2011. "Behavioral Economics as Applied to Firms: A Primer," Antitrust Chronicle, Competition Policy International, vol. 1.
- Mark Armstrong & Steffen Huck, 2010. "Behavioral Economics as Applied to Firms: A Primer," CESifo Working Paper Series 2937, CESifo Group Munich.
- Armstrong, Mark & Huck, Steffen, 2010. "Behavioral economics as applied to firms: a primer," MPRA Paper 20356, University Library of Munich, Germany.
- Lee, J. & Sabourian, H., 2004. "Complexity and Efficiency in Repeated Games and Negotiation," Cambridge Working Papers in Economics 0419, Faculty of Economics, University of Cambridge.
- Jihong Lee & Hamid Sabourian, 2005. "Efficiency in Negotiation: Complexity and Costly Bargaining," Birkbeck Working Papers in Economics and Finance 0505, Birkbeck, Department of Economics, Mathematics & Statistics.
- Kazuya Kamiya & Takashi Shimizu, 2006. "A Dynamic General Equilibrium Model with Centralized Auction Markets," CIRJE F-Series CIRJE-F-417, CIRJE, Faculty of Economics, University of Tokyo.
- Lee, Jihong & Sabourian, Hamid, 2007. "Coase theorem, complexity and transaction costs," Journal of Economic Theory, Elsevier, vol. 135(1), pages 214-235, July.
- Penta, Antonio, 2011. "Multilateral bargaining and Walrasian equilibrium," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 417-424.
- Hamid Sabourian & Jihong Lee, 2004.
"Complexity and Efficiency in Repeated Games with Negotiation,"
Econometric Society 2004 Far Eastern Meetings
401, Econometric Society.
- Hamid Sabourian & Jihong Lee, 2004. "Complexity and Efficiency in Repeated Games with Negotiation," Econometric Society 2004 North American Summer Meetings 58, Econometric Society.
- Ortoleva, Pietro, 2008. "The Price of Flexibility: Towards a Theory of Thinking Aversion," MPRA Paper 12242, University Library of Munich, Germany.
- Muto, Nozomu, 2014. "Strategic complexity in repeated extensive games," Games and Economic Behavior, Elsevier, vol. 83(C), pages 45-52.
- Theodoros M. Diasakos, 2008.
"Complexity and Bounded Rationality in Individual Decision Problems,"
Carlo Alberto Notebooks
90, Collegio Carlo Alberto.
- Theodoros M. Diasakos, . "Complexity and Bounded Rationality in Individual Decision Problems," Discussion Paper Series, Department of Economics 201314, Department of Economics, University of St. Andrews.
- Hamid Sabourian & Jihong Lee, 2004. "Complexity and Efficiency in the Negotiation Game," Econometric Society 2004 North American Winter Meetings 82, Econometric Society.
- Stephan Lauermann, 2013.
"Dynamic Matching and Bargaining Games: A General Approach,"
American Economic Review,
American Economic Association, vol. 103(2), pages 663-89, April.
- Lauermann, Stephan, 2011. "Dynamic matching and bargaining games: A general approach," MPRA Paper 31717, University Library of Munich, Germany.
- Max Planck Institute & Stephan Lauermann, 2007. "Dynamic Matching and Bargaining Games: A General Approach," 2007 Meeting Papers 269, Society for Economic Dynamics.
- Penta, Antonio, 2007. "Collective Bargaining and Walrasian Equilibrium," MPRA Paper 10260, University Library of Munich, Germany, revised Sep 2007.
- Maria-Augusta Miceli & Federico Cecconi & Giovanni Cerulli, 2013. "Walrasian TatÈnnement by Sequential Pairwise Trading: Convergence and Welfare Implications," Working Papers 161, University of Rome La Sapienza, Department of Public Economics.
- Yasuhiro Shirata, 2011. "Formation of Decentralized Manufacturer-Supplier Networked Market," Global COE Hi-Stat Discussion Paper Series gd11-186, Institute of Economic Research, Hitotsubashi University.
- Eilon Solan & Penélope Hernández, 2014. "Bounded Computational Capacity Equilibrium," Discussion Papers in Economic Behaviour 0314, University of Valencia, ERI-CES.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.