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Implementation in Mixed Nash Equilibrium

  • Claudio Mezzetti & Ludovic Renou

We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large ineciencies associated with markups, and (ii) a weak pattern of cross-country comparative advantage in individual sectors. We and strong evidence for both of these ingredients using producer-level data for Taiwanese manufacturing establishments. Parameterizations of the model consistent with this data thus predict large pro-competitive gains from trade, much larger than those in standard Ricardian models. In stark contrast to standard Ricardian models, data on changes in trade volume are not sucient for determining the gains from trade.

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File URL: http://fbe.unimelb.edu.au/__data/assets/pdf_file/0010/784324/1146.pdf
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Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1146.

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Length: 23 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:mlb:wpaper:1146
Contact details of provider: Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.auEmail:


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  1. Eichberger, Jurgen & Kelsey, David, 2000. "Non-Additive Beliefs and Strategic Equilibria," Games and Economic Behavior, Elsevier, vol. 30(2), pages 183-215, February.
  2. M. Sanver, 2006. "Nash implementing non-monotonic social choice rules by awards," Economic Theory, Springer, vol. 28(2), pages 453-460, 06.
  3. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
  4. Eric Maskin & Tomas Sjostrom, 2001. "Implementation Theory," Economics Working Papers 0006, Institute for Advanced Study, School of Social Science.
  5. Dirk Bergemann & Stephen Morris & Olivier Tercieux, 2010. "Rationalizable Implementation," Levine's Working Paper Archive 661465000000000022, David K. Levine.
  6. Roberto Serrano & Antonio Cabrales, 2007. "Implementation in Adaptive Better-Response Dynamics," Working Papers 2007-10, Brown University, Department of Economics.
  7. Benoît, Jean-Pierre & Ok, Efe A., 2008. "Nash implementation without no-veto power," Games and Economic Behavior, Elsevier, vol. 64(1), pages 51-67, September.
  8. Barbera, Salvador & Bogomolnaia, Anna & van der Stel, Hans, 1998. "Strategy-proof probabilistic rules for expected utility maximizers," Mathematical Social Sciences, Elsevier, vol. 35(2), pages 89-103, March.
  9. Roberto Serrano & Rajiv Vohra, 2009. "Multiplicity of mixed equilibria in mechanisms: A unified approach to exact and approximate implementation," Working Papers 2009-08, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  10. Cabrales, Antonio & Serrano, Roberto, 2011. "Implementation in adaptive better-response dynamics: Towards a general theory of bounded rationality in mechanisms," Games and Economic Behavior, Elsevier, vol. 73(2), pages 360-374.
  11. Jackson, Matthew O., 1999. "A Crash Course in Implementation Theory," Working Papers 1076, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Danilov, Vladimir, 1992. "Implementation via Nash Equilibria," Econometrica, Econometric Society, vol. 60(1), pages 43-56, January.
  13. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  14. BOCHET, Olivier & MANIQUET, François, . "Virtual Nash implementation with admissible support," CORE Discussion Papers RP -2228, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Aumann, Robert & Brandenburger, Adam, 1995. "Epistemic Conditions for Nash Equilibrium," Econometrica, Econometric Society, vol. 63(5), pages 1161-80, September.
  16. Abreu, Dilip & Matsushima, Hitoshi, 1992. "A Response [Virtual Implementation in Iteratively Undominated Strategies I: Complete Information]," Econometrica, Econometric Society, vol. 60(6), pages 1439-42, November.
  17. Gibbard, Allan, 1977. "Manipulation of Schemes That Mix Voting with Chance," Econometrica, Econometric Society, vol. 45(3), pages 665-81, April.
  18. Hannu Vartiainen, 2007. "Subgame perfect implementation of voting rules via randomized mechanisms," Social Choice and Welfare, Springer, vol. 29(3), pages 353-367, October.
  19. Jackson, Matthew O, 1991. "Bayesian Implementation," Econometrica, Econometric Society, vol. 59(2), pages 461-77, March.
  20. Abreu, Dilip & Sen, Arunava, 1991. "Virtual Implementation in Nash Equilibrium," Econometrica, Econometric Society, vol. 59(4), pages 997-1021, July.
  21. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June.
  22. Olivier Bochet, 2007. "Nash Implementation with Lottery Mechanisms," Social Choice and Welfare, Springer, vol. 28(1), pages 111-125, January.
  23. Marion Oury & Olivier Tercieux, 2009. "Continuous Implementation," Economics Working Papers 0090, Institute for Advanced Study, School of Social Science.
  24. Palfrey, Thomas R & Srivastava, Sanjay, 1991. "Nash Implementation Using Undominated Strategies," Econometrica, Econometric Society, vol. 59(2), pages 479-501, March.
  25. Saijo, Tatsuyoshi, 1987. "On constant maskin monotonic social choice functions," Journal of Economic Theory, Elsevier, vol. 42(2), pages 382-386, August.
  26. Dutta, Bhaskar & Sen, Arunava, 1991. "A Necessary and Sufficient Condition for Two-Person Nash Implementation," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 121-28, January.
  27. Kim-Sau Chung & Jeffrey C. Ely, 2003. "Implementation with Near-Complete Information," Econometrica, Econometric Society, vol. 71(3), pages 857-871, 05.
  28. Moore, John & Repullo, Rafael, 1990. "Nash Implementation: A Full Characterization," Econometrica, Econometric Society, vol. 58(5), pages 1083-99, September.
  29. Sjostrom, T., 1991. "Implementation in Undominated Nash Equilibria without Integer Games," Papers 491, Stockholm - International Economic Studies.
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