Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Wednesday, November 2, 2011

(Weak) Correlation and Sunspots in Duopoly

Posted by D. Daniel Sokol

Indrajit Ray, Department of Economics, University of Birmingham and Sonali Sen Gupta, Department of Economics, University of Birmingham describe (Weak) Correlation and Sunspots in Duopoly.

ABSTRACT: For duopoly models, we consider the notion of weak correlation using simple symmetric devices that the players choose to commit to in equilibrium. In a linear duopoly game, we prove that Nashcentric devices involving a sunspot structure are simple symmetric weak correlated equilibria. Any small perturbation from such a structure fails to be an equilibrium.

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