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Selective Competition

Author

Listed:
  • Andrei Dubovik

    (Erasmus University Rotterdam)

  • Alexei Parakhonyak

    (Erasmus University Rotterdam)

Abstract

We consider a dynamic (differential) game with three players competing against each other. Each period each player can allocate his resources so as to direct his competition towards particular rivals -- we call such competition selective. The setting can be applied to a wide variety of cases: competition between firms, competition between political parties, warfare. We show that if the players are myopic, the weaker players eventually loose the game to their strongest rival. Vice versa, if the players value their future payoffs high enough, each player concentrates more on fighting his strongest opponent. Consequently, the weaker players grow stronger, the strongest player grows weaker and eventually all the players converge and remain in the game.

Suggested Citation

  • Andrei Dubovik & Alexei Parakhonyak, 2009. "Selective Competition," Tinbergen Institute Discussion Papers 09-072/1, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20090072
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    File URL: https://papers.tinbergen.nl/09072.pdf
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    References listed on IDEAS

    as
    1. Kelvin Lancaster, 1990. "The Economics of Product Variety: A Survey," Marketing Science, INFORMS, vol. 9(3), pages 189-206.
    2. Bailey, Elizabeth E & Friedlaender, Ann F, 1982. "Market Structure and Multiproduct Industries," Journal of Economic Literature, American Economic Association, vol. 20(3), pages 1024-1048, September.
    3. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," Review of Economic Studies, Oxford University Press, vol. 62(1), pages 53-82.
    4. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, July - De.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    selective competition; dynamic oligopolies; differential games;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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