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A Bayesian potential game to illustrate heterogeneity in cost/benefit characteristics

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  • Arsen Palestini
  • Ilaria Poggio

Abstract

We employ the theory of Bayesian potential games to characterize pure-strategy equilibria of a Bayesian game with finite type structures, taking into account the cost/benefit features of agents. Building on a standard model of oligopolistic competition also applicable to environmental issues such as profit maximization in presence of an externality affecting all players, we rely on types to describe their heterogeneity. When the damage functions are additively separable, the potential provides necessary and sufficient conditions to ensure monotonicity of pure strategies. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Arsen Palestini & Ilaria Poggio, 2015. "A Bayesian potential game to illustrate heterogeneity in cost/benefit characteristics," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(1), pages 23-39, March.
    • Handle: RePEc:spr:inrvec:v:62:y:2015:i:1:p:23-39
    DOI: 10.1007/s12232-014-0221-9
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    More about this item

    Keywords

    Bayesian game; Potential; Pure-strategy equilibrium; Heterogeneity; Cost/benefit; C70; D82;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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