Monday, January 21, 2013
Posted by D. Daniel Sokol
Marco Marini (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza") and Giorgio Rodano (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza") explore Sequential vs Collusive Payoffs in Symmetric Duopoly Games.
ABSTRACT: In many strategic settings comparing the payoffs obtained by players under full cooperation to those obtainable at a sequential (Stackelberg) equilibrium can be crucial to determine the nal outcome of the game. This happens, for instance, in repeated games in which players can break cooperation by acting sequentially, as well as in merger games in which rms are allowed to sequence their actions. Despite the relevance of these and other applications, no fully-edged comparisons betwen collusive and sequential payo¤s have been performed so far. In this paper we show that even in symmetric duopoly games the ranking of cooperative and sequential payo¤s can be extremely variable, particularly when the consuete linear demand assumption is relaxed. Not surprisingly, the degree of strategic complementarity and substitutability of playersactions (and, hence, the slope of their best-replies) appears decisive to determine the rank! ing of collusive and sequential payoffs. Some applications to endogenous timing are discussed.