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Strategic Nonparticipation

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  • Philippe Jehiel
  • Benny Moldovanu

Abstract

We study a model that involves identity-dependent, asymmetric negative external effects. Willingness to pay, which can be computed only in equilibrium, will reflect, besides private valuations, also preemptive incentives stemming from the desire to minimize the negative externalities. We find that the best strategy of some agents is simply not to participate in the market, although they cannot in this way avoid the negative external effects. An illustration is made for the acquisition of patents in oligopolistic markets. Finally, we show that even when we allow full communication and side payments between agents, all coalitional agreements are unstable.

Suggested Citation

  • Philippe Jehiel & Benny Moldovanu, 1996. "Strategic Nonparticipation," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 84-98, Spring.
  • Handle: RePEc:rje:randje:v:27:y:1996:i:spring:p:84-98
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    References listed on IDEAS

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    1. Dirk Bergemann & Juuso Valimaki, 1996. "Market Experimentation and Pricing," Cowles Foundation Discussion Papers 1122, Cowles Foundation for Research in Economics, Yale University.
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    8. Ramon Caminal & Xavier Vives, 1996. "Why Market Shares Matter: An Information-Based Theory," RAND Journal of Economics, The RAND Corporation, pages 221-239.
    9. Harrington Jr. , Joseph E., 1995. "Experimentation and Learning in a Differentiated-Products Duopoly," Journal of Economic Theory, Elsevier, vol. 66(1), pages 275-288, June.
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