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Preopening and equilibrium selection

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  • Lovo, Stefano
  • Calcagno, Ricardo

Abstract

In this paper, the authors introduce a form of pre-play communication that we call "preopening". During the preopening, players announce their tentative actions to be played in the underlying game. Announcements are made using a posting system which is subject to stochastic failures. Posted actions are publicly observable and players payo¤s only depend on the opening outcome, i.e. the action pro…le that is posted at the end of the preopening phase. We show that when the posting failures hit players idiosyncratically all equilibria of the preopening game lead to the same opening outcome that corresponds to the most "sensible" pure Nash equilibrium of the underlying game. By contrast preopening does not operate an equilibrium selection when posting failure hits players simultaneously.

Suggested Citation

  • Lovo, Stefano & Calcagno, Ricardo, 2010. "Preopening and equilibrium selection," HEC Research Papers Series 927, HEC Paris.
    • Handle: RePEc:ebg:heccah:0927
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    References listed on IDEAS

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    10. Bruno Biais & Christophe Bisière & Sébastien Pouget, 2014. "Equilibrium Discovery and Preopening Mechanisms in an Experimental Market," Management Science, INFORMS, vol. 60(3), pages 753-769, March.
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    Citations

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    Cited by:

    1. , & , & , & ,, 2014. "Asynchronicity and coordination in common and opposing interest games," Theoretical Economics, Econometric Society, vol. 9(2), May.
    2. Roy, Nilanjan, 2017. "Action revision, information and collusion in an experimental duopoly market," MPRA Paper 77033, University Library of Munich, Germany.
    3. Ruben Juarez & Rajnish Kumar, 2013. "Implementing efficient graphs in connection networks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(2), pages 359-403, October.
    4. Selma Boussetta, 2017. "The role of pre-opening mechanisms in fragmented markets," Post-Print hal-02156145, HAL.
    5. Bruno Biais & Christophe Bisière & Sébastien Pouget, 2014. "Equilibrium Discovery and Preopening Mechanisms in an Experimental Market," Management Science, INFORMS, vol. 60(3), pages 753-769, March.
    6. Dutta, Prajit K., 2012. "Coordination need not be a problem," Games and Economic Behavior, Elsevier, vol. 76(2), pages 519-534.
    7. Yevgeny Tsodikovich, 2021. "The worst-case payoff in games with stochastic revision opportunities," Annals of Operations Research, Springer, vol. 300(1), pages 205-224, May.
    8. Roy, Nilanjan, 2023. "Fostering collusion through action revision in duopolies," Journal of Economic Theory, Elsevier, vol. 208(C).
    9. Yuichiro Kamada & Michihiro Kandori, 2020. "Revision Games," Econometrica, Econometric Society, vol. 88(4), pages 1599-1630, July.

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    More about this item

    Keywords

    Preopening; equilibrium selection; bargaining; cheap talk;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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