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Endogenous heterogeneity in strategic models: symmetry-breaking via strategic substitutes and nonconcavities

  • AMIR, Rabah
  • GARCIA, Filomena
  • KNAUFF, Malgorzata

This paper is an attempt to develop a uniï¬ed approach to endogenous heterogeneity by constructing general class of two-player symmetric games that always possess only asymmetric pure-strategy Nash equilibria. These classes of games are characterized in some abstract sense by two general properties: payoff non-concavities and some form of strategic substitutability. We provide a detailed discussion of the relationship of this work with Matsuyama’s symmetry breaking framework and with business strategy literature. Our framework generalizes a number of models dealing with two-stage games, with long term investment decisions in the ï¬rst stage and product market competition in the second stage. We present the main examples that motivate this study to illustrate the generality of our approach.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006008.

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Date of creation: 00 Feb 2006
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Handle: RePEc:cor:louvco:2006008
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