Evolution and market behavior with endogenous investment rules

Endogenous market incompleteness with investment risks

This paper studies a general equilibrium economy in which agents have the ability to invest in a risky technology. The investment risk cannot be fully insured with optimal contracts because shocks are private information. We show that the presence of investment risks lead to under-accumulation of capital relative to an economy where idiosyncratic shocks can be fully insured. We also show that t...

Evolution and Walrasian Behavior in Market Games

We revisit the question of price formation in general equilibrium theory. We explore whether evolutionary forces lead to Walrasian equilibrium in the context of a market game, introduced by Shubik (1972). Market games have Pareto inferior (strict) Nash equilibria, in which some, and possibly all, markets are closed. We introduce a strong version of evolutionary stable strategies (SESS) for fini...

Legislative Bargaining with Endogenous Rules

Investment and market dominance

We analyze a model of oligopolistic competition with ongoing investment. Special cases include incremental investment, patent races, learning by doing, and network externalities. We investigate circumstances under which a firm with low costs or high quality will extend its initial lead through investments. To this end, we derive a new comparative statics result for general games with strategic ...

Market design with endogenous preferences

This paper explores the interdependence between market structure and an important class of extra-rational cognitive biases. Starting with a familiar bilateral monopoly framework, we characterize the endogenous emergence of preference distortions during bargainging which cause negotiators to perceive their private valuations differently than they would outside the adversarial negotiation context...