Indirect Evolution versus Strategic Delegation: A Comparison of Two Approaches to Explaining Economic Institutions
AbstractTwo major methods of explaining economic institutions, namely by strategic choices or through (indirect) evolution, are compared for the case of a homogenous quadratic duopoly market. Sellers either can provide incentives for agents to care for sales, or evolve as sellers who care for sales in addition to profits. The two approaches are conceptually quite different, yet similar in the sense that both allow certain kinds of commitment. We show that when the two models are set up in intuitively comparable ways strategic delegation does not change the market results as compared to the usual duopoly solution, while indirect evolution causes a more competitive behavior. Thus the case at hand underscores the differences between the two approaches in explaining economic institutions.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1998:9.
Length: 19 pages
Date of creation: 06 Mar 1998
Date of revision:
Publication status: Published in European Journal of Political Economy, 1999, pages 281-295.
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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
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More information through EDIRC
Indirect evolution; strategic delgation; commitment; duopoly markets; agency theory;
Other versions of this item:
- Dufwenberg, M. & Güth, W., 1997. "Indirect Evolution Versus Strategic Delegation: A Comparison of Two Approaches to Explaining Economic Institutions," Discussion Paper 1997-12, Tilburg University, Center for Economic Research.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-08-31 (All new papers)
- NEP-CDM-1998-08-31 (Collective Decision-Making)
- NEP-EVO-1998-08-31 (Evolutionary Economics)
- NEP-MIC-1998-08-31 (Microeconomics)
- NEP-PBE-1998-08-31 (Public Economics)
- NEP-POL-1998-08-31 (Positive Political Economics)
- NEP-TID-1998-08-31 (Technology & Industrial Dynamics)
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