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Sequential vs Collusive Payoffs in Symmetric Duopoly Games

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  • Marco Marini

    ()
    (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")

  • Giorgio Rodano

    ()
    (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")

Abstract

In many strategic settings comparing the payo¤s obtained by players under full cooperation to those obtainable at a sequential (Stackelberg) equilibrium can be crucial to determine the final outcome of the game. This happens, for instance, in repeated games in which players can break cooperation by acting sequentially, as well as in merger games in which rms are allowed to sequence their actions. Despite the relevance of these and other applications, no fully-edged comparisons betwen collusive and sequential payo¤s have been performed so far. In this paper we show that even in symmetric duopoly games the ranking of cooperative and sequential payo¤s can be extremely variable, particularly when the consuete linear demand assumption is relaxed. Not surprisingly, the degree of strategic complementarity and substitutability of players actions (and, hence, the slope of their best-replies) appears decisive to determine the ranking of collusive and sequential payo¤s. Some applications to endogenous timing are discussed.

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File URL: http://www.dis.uniroma1.it/~bibdis/RePEc/aeg/report/2012-06.pdf
File Function: Revised version, 2012
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Bibliographic Info

Paper provided by Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" in its series DIAG Technical Reports with number 2012-06.

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Length: 18 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:aeg:report:2012-06

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Keywords: Sequential Payoffs; Collusion; Duopoly Games;

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References

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  1. Madjid Amir & Rabah Amir & Jim Jin, 1999. "Sequencing R&D Decisions in a Two-period Duopoly with Spillovers," CIE Discussion Papers, University of Copenhagen. Department of Economics. Centre for Industrial Economics 1999-06, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
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  6. Marini, Marco A. & Currarini, Sergio, 2003. "A sequential approach to the characteristic function and the core in games with externalities," MPRA Paper 1689, University Library of Munich, Germany, revised 2003.
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  14. Amir Rabah, 1995. "Endogenous Timing in Two-Player Games: A Counterexample," Games and Economic Behavior, Elsevier, Elsevier, vol. 9(2), pages 234-237, May.
  15. Currarini, Sergio & Marini, Marco, 2002. "A conjectural cooperative equilibrium for strategic form games," MPRA Paper 33381, University Library of Munich, Germany.
  16. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October.
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