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On the Strategic Advantage of Negatively Interdependent Preferences

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Author Info

  • Levent Kockesen

    (New York University)

  • Efe A. Ok

    (New York University)

  • Rajiv Sethi

    (Barnard College, Columbia University)

Abstract

We study certain classes of supermodular and submodular games which are symmetric with respect to material payoffs but in which not all players seek to maximize their material payoffs. Specifically, a subset of players have negatively interdependent preferences and care not only about their own material payoffs but also about their payoffs relative to others. We identify sufficient conditions under which members of the latter group have a strategic advantage in the following sense: at all intragroup symmetric equilibria of the game, they earn strictly higher material payoffs than do players who seek to maximize their material payoffs. We show that these conditions are satisfied by a number of games of economic importance, and discuss the implications of these findings for the evolutionary theory of preference formation and the theory of Cournot competition.

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File URL: http://128.118.178.162/eps/game/papers/9708/9708001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 9708001.

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Length: 34 pages
Date of creation: 04 Aug 1997
Date of revision: 08 Aug 1997
Handle: RePEc:wpa:wuwpga:9708001

Note: Type of Document - Acrobat PDF; prepared on IBM PC ; to print on HP; pages: 34 ; figures: None
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Web page: http://128.118.178.162

Related research

Keywords: Interdependent Preferences; Submodular and Supermodular Games; Relative Profits; Cournot Oligopoly;

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References

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  1. Robson, Arthur J., 1996. "The Evolution of Attitudes to Risk: Lottery Tickets and Relative Wealth," Games and Economic Behavior, Elsevier, vol. 14(2), pages 190-207, June.
  2. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
  3. Levent Kockesen & Efe A. Ok & Rajiv Sethi, 1997. "Interdependent Preference Formation," Game Theory and Information 9708002, EconWPA.
  4. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
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  12. 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.
  13. Bolton, Gary E, 1991. "A Comparative Model of Bargaining: Theory and Evidence," American Economic Review, American Economic Association, vol. 81(5), pages 1096-136, December.
  14. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
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  16. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
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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.

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