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Indirect Evolution Versus Strategic Delegation: A Comparison of Two Approaches to Explaining Economic Institutions

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  • Dufwenberg, M.
  • Güth, W.

    (Tilburg University, Center for Economic Research)

Abstract

The two major methods of explaining economic institutions, namely by strategic choices or by (indirect) evolution, are compared for the case of a homogenous quadratic duopoly market. Sellers either can provide incentives for their agents to care for sales (amounts) or evolve as sellers who care for sales in addition to profits. Whereas strategic delegation does not change the market results as compared to the usual duopoly solution, indirect evolution causes a more competitive behavior. Thus the case at hand suffices to demonstrate the difference between the two approaches in explaining economic institutions.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1997-12.

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Date of creation: 1997
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Handle: RePEc:dgr:kubcen:199712

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Related research

Keywords: noncooperative games; duopoly; organizational behavior;

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References

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  1. Michael L. Katz., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Economics Working Papers 91-172, University of California at Berkeley.
  2. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Werner Güth & Hartmut Kliemt, 1994. "Competition Or Co-Operation: On The Evolutionary Economics Of Trust, Exploitation And Moral Attitudes," Metroeconomica, Wiley Blackwell, vol. 45(2), pages 155-187, 06.
  4. Fershtman, C & Gneezy, U, 1996. "Strategic Delegation : An Experiment," Papers 43-96, Tel Aviv.
  5. Gueth, W. & Kliemt, H., 1993. "Competition or Co-Operation," Discussion Paper 1993-39, Tilburg University, Center for Economic Research.
  6. Guth, Werner, 1995. "An Evolutionary Approach to Explaining Cooperative Behavior by Reciprocal Incentives," International Journal of Game Theory, Springer, vol. 24(4), pages 323-44.
  7. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
  8. Caillaud, Bernard & Jullien, B & Picard, P, 1995. "Competing Vertical Structures: Precommitment and Renegotiation," Econometrica, Econometric Society, vol. 63(3), pages 621-46, May.
  9. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, December.
  10. repec:fth:harver:1502 is not listed on IDEAS
  11. Werner Güth & Steffen Huck, 2005. "On the Evolutionary Stability of Profit Maximization," Homo Oeconomicus, Institute of SocioEconomics, vol. 22, pages 208-230.
  12. Guth, Werner & Huck, Steffen, 1997. "A new justification of monopolistic competition," Economics Letters, Elsevier, vol. 57(2), pages 177-182, December.
  13. Hammerstein, Peter & Selten, Reinhard, 1994. "Game theory and evolutionary biology," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 28, pages 929-993 Elsevier.
  14. Baik, Kyung Hwan & Kim, In-Gyu, 1997. "Delegation in contests," European Journal of Political Economy, Elsevier, vol. 13(2), pages 281-298, May.
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Cited by:
  1. Possajennikov, A., 1999. "On Evolutionary Stability of Spiteful Preferences," Discussion Paper 1999-56, Tilburg University, Center for Economic Research.
  2. Güth, Werner, 1998. "Sequential versus independent commitment: An indirect evolutionary analysis of bargaining rules," SFB 373 Discussion Papers 1998,5, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.

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