Equilibrium in secure strategies
AbstractA new concept of equilibrium in secure strategies (EinSS) in non-cooperative games is presented. The EinSS coincides with the Nash-Cournot Equilibrium when Nash-Cournot Equilibrium exists and postulates the incentive of players to maximize their profit under the condition of security against actions of other players. The new concept is illustrated by a number of matrix game examples and compared with other closely related theoretical models. We prove the existence of equilibrium in secure strategies in four classic games that fail to have Nash-Cournot equilibria. On an infinite line we obtain the solution in secure strategies of the classic Hotelling’s price game (1929) with a restricted reservation price and linear transportation costs. New type of monopolistic solution in secure strategies is discovered in the Tullock Contest (1967, 1980) of two players. For the model of insurance market we prove that the contract pair found by Rothschild, Stiglitz and Wilson (1976) is always an equilibrium in secure strategies. We characterize all equilibria in secure prices in the Bertrand-Edgeworth duopoly model with capacity constraints.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2012061.
Date of creation: 31 Dec 2012
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equilibrium in secure strategies; Hotelling model; Tullock contest; insurance market; Bertrand-Edgeworth duopoly;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Baye, M.R. & Kovenock, D. & De Vries, C.G., 1993. "The Solution to the Tullock Rent-Seeking Game when R > 2: Mixed Strategy Equilibria and Mean Dissipation Rates," Papers 10-93-9, Pennsylvania State - Department of Economics.
- Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
- Iskakov, Mikhail & Iskakov, Alexey, 2012. "Solution of the Hotelling’s game in secure strategies," Economics Letters, Elsevier, vol. 117(1), pages 115-118.
- Allen, Beth & Hellwig, Martin, 1986. "Bertrand-Edgeworth Oligopoly in Large Markets," Review of Economic Studies, Wiley Blackwell, vol. 53(2), pages 175-204, April.
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