Strategy Meets Evolution : Games Suppliers and Producers Play
Final goods producers, who may be intrinsically honest (a behavioral type) or opportunistic (strategic), play a repeated game of imperfect information with suppliers of an input of variable (and non-verifiable) quality. Returns to cheating are increasing in the proportion of intrinsically honest producers. If producers compete for another scarce input, adverse selection reduces this proportion enough to enforce universal honesty, whether at a high or a low quality equilibrium. This mechanism limits the proportion of behavioral types in the population of producers over a wide range of parameters : despite their inability to compete with opportunists, they are not wholly wiped out due to the strategic response of input suppliers. Moreover, in equilibrium, opportunists must replicate the behavioral types behavior. Thus competition curtails the presence of the behavioral type but increases the incidence if its behavior. If a labor market, where skilled and unskilled labor coexist, is also endogenized, an honest equilibrium with both high and low quality will generally be reached; however an exclusively high quality equilibrium with unemployment of unskilled labor is also possible.
|Date of creation:||Jan 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.eaber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sergiu Hart, 2004.
122247000000000471, UCLA Department of Economics.
- Sergiu Hart, 2013. "Adaptive Heuristics," World Scientific Book Chapters, in: Simple Adaptive Strategies From Regret-Matching to Uncoupled Dynamics, chapter 11, pages 253-287 World Scientific Publishing Co. Pte. Ltd..
- Sergiu Hart, 2005. "Adaptive Heuristics," Econometrica, Econometric Society, vol. 73(5), pages 1401-1430, 09.
- Brishti Guha, 2005.
"Games Suppliers and Producers Play : Upstream and Downstream Moral Hazard with Unverifiable Input Quality,"
Microeconomics Working Papers
22427, East Asian Bureau of Economic Research.
- Brishti Guha, 2005. "Games Suppliers and Producers Play : Upstream and Downstream Moral Hazard with Unverifiable Input Quality," Working Papers 17-2005, Singapore Management University, School of Economics.
- Avinash Dixit, 2001.
"On Modes of Economic Governance,"
CESifo Working Paper Series
589, CESifo Group Munich.
- Oliver Hart & Sanford Grossman, 1985.
"The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration,"
372, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
- Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
- Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
- Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June.
When requesting a correction, please mention this item's handle: RePEc:eab:microe:22430. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong)
If references are entirely missing, you can add them using this form.