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A Model Of Tacit Collusion: Nash-2 Equilibrium Concept

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  • Marina S. Sandomirskaia

    (National Research University Higher School of Economics)

Abstract

We examine the novel concept for repeated noncooperative games with bounded rationality: \Nash-2" equilibrium, called also \threatening-proof pro le" in [16, Iskakov M., Iskakov A., 2012b]. It is weaker than Nash equilibrium and equilibrium in secure strategies: a player takes into account not only current strategies but also the next-stage responses of the partners to her deviation from the current situation that reduces her relevant choice set. We provide a condition for Nash-2 existence, criteria for a strategy pro le to be the Nash-2 equilibrium in strictly competitive games, apply this concept to Bertrand and Hotelling game and interpret the results as tacit collusion

Suggested Citation

  • Marina S. Sandomirskaia, 2014. "A Model Of Tacit Collusion: Nash-2 Equilibrium Concept," HSE Working papers WP BRP 70/EC/2014, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:70/ec/2014
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    Cited by:

    1. Iskakov, M., 2022. "Existence theorems for Nash equilibrium and equilibrium in secure strategies," Journal of the New Economic Association, New Economic Association, vol. 56(4), pages 12-27.
    2. Marina Sandomirskaia, 2019. "Nash-2 Equilibrium: Selective Farsightedness Under Uncertain Response," Group Decision and Negotiation, Springer, vol. 28(2), pages 275-304, April.
    3. Marina S. Sandomirskaia, 2015. "Price-Quantity Competition of Farsighted Firms: Toughness vs. Collusion," HSE Working papers WP BRP 93/EC/2015, National Research University Higher School of Economics.

    More about this item

    Keywords

    Nash-2 equilibrium; secure deviation; Bertrand paradox; Hotelling model; tacit collusion.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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