A Model Of Tacit Collusion: Nash-2 Equilibrium Concept

Marina S. Sandomirskaia (National Research University Higher School of Economics) offers A Model Of Tacit Collusion: Nash-2 Equilibrium Concept.

ABSTRACT:  We examine the novel concept for repeated noncooperative games with bounded rationality: \Nash-2" equilibrium, called also \threatening-proof prole" in [16, Iskakov M., Iskakov A., 2012b]. It is weaker than Nash equilibrium and equilibrium in secure strategies: a player takes into account not only current strategies but also the next-stage responses of the partners to her deviation fr! om the current situation that reduces her relevant choice set. We prov ide a condition for Nash-2 existence, criteria for a strategy prole to be the Nash-2 equilibrium in strictly competitive games, apply this concept to Bertrand and Hotelling game and interpret the results as tacit collusion