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Game theory and industrial organization

In: Handbook of Game Theory with Economic Applications

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  • Bagwell, Kyle
  • Wolinsky, Asher

Abstract

In this article, we consider how important developments in game theory have contributed to the theory of industrial organization. Our goal is not to survey the theory of industrial organization; rather, we consider the contribution of game theory through a careful discussion of a small number of topics within the industrial organization field. We also identify some points in which developments in the theory of industrial organization have contributed to game theory. The topics that we consider are: commitment in two-stage games and the associated theories of strategic-trade policy and entry deterrence; asymmetric-information games and the associated theories of limit pricing and predation; repeated games with public moves and the associated theory of collusion in markets with public demand fluctuations; mixed-strategy equilibria and purification theory and the associated theory of sales; and repeated games with imperfect monitoring and the associated theory of collusion and price wars. We conclude with a general assessment concerning the contribution of game theory to industrial organization.

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This chapter was published in:

  • R.J. Aumann & S. Hart (ed.), 2002. "Handbook of Game Theory with Economic Applications," Handbook of Game Theory with Economic Applications, Elsevier, edition 1, volume 3, number 3, 00.
    This item is provided by Elsevier in its series Handbook of Game Theory with Economic Applications with number 3-49.

    Handle: RePEc:eee:gamchp:3-49

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    Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

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    1. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
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    3. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
    4. In-Koo Cho & David M. Kreps, 1997. "Signaling Games and Stable Equilibria," Levine's Working Paper Archive 896, David K. Levine.
    5. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
    6. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-48, September.
    7. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    8. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
    9. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
    10. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
    11. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
    12. Franco Modigliani, 1958. "New Developments on the Oligopoly Front," Journal of Political Economy, University of Chicago Press, vol. 66, pages 215.
    13. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
    14. Severin Borenstein & Andrea Shepard, 1993. "Dynamic Pricing in Retail Gasoline Markets," NBER Working Papers 4489, National Bureau of Economic Research, Inc.
    15. Paul Milgrom & John Roberts, 1998. "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Levine's Working Paper Archive 245, David K. Levine.
    16. Kyle Bagwell & Robert W. Staiger, 1995. "Collusion Over the Business Cycle," Discussion Papers 1118, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    17. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
    18. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    19. Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
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    21. Harrington, Joseph E, Jr, 1986. "Limit Pricing When the Potential Entrant Is Uncertain of Its Cost Function [Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis]," Econometrica, Econometric Society, vol. 54(2), pages 429-37, March.
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    23. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September.
    24. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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    Cited by:
    1. Joseph E Harrington & Jr Andrzej Skrzypacz, 2004. "Collusion under Monitoring of Sales," Economics Working Paper Archive 509, The Johns Hopkins University,Department of Economics, revised Mar 2005.
    2. Ed Hopkins & Tatiana Kornienko, 2004. "Non-Monotone Comparative Statics in Games of Incomplete Information," ESE Discussion Papers 122, Edinburgh School of Economics, University of Edinburgh.
    3. W. Bentley MacLeod, 2006. "Reputations, relationships and the enforcement of incomplete contracts," Discussion Papers 0506-23, Columbia University, Department of Economics.
    4. Ed Hopkins & Tatiana Kornienko, 2007. "Cross and Double Cross: Comparative Statics in First Price Auctions," Levine's Bibliography 321307000000000831, UCLA Department of Economics.
    5. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-90, March.

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