Theoretically and experimentally, we generalize the analysis of acquiring a company (Samuelson and Bazerman 1985) by allowing for competition of both buyers and sellers. Näıvety of both is related to the idea that higher prices exclude lower qualities. While competition of näıve buyers increases prices, competition of näıve sellers promotes efficiency enhancing trade. Our predictions are tested...

This paper studies farsighted behavior of firms in an oligopolistic market to form a dominant cartel, which has a power to set and control the price in the market. The von Neumann-Morgenstern stable set is adopted as the solution concept. In contrast to the literature, we do not assume a priori the optimal pricing behavior of the cartel; rather, we show that such behavior arises from the result...

We analyze the Nash equilibria of a standard Bertrand model. We show that in addition to the marginal-cost pricing equilibrium there is a possibility for mixed-strategy equilibria yielding positive profit levels. We characterize these equilibria and find that having unbounded revenues is the necessary and sufficient condition for their existence. Hence, we demonstrate that under realistic assum...

Stackelberg-like games show a situation where there is a clear advantage in moving …rst. In a thought provoking article, Bagwell (1995) shows that this advantage may not be robust against imperfect observations of the …rst move. We explore these ideas in the context of forward induction in three classic games, namely, the outside option game, the game of burning a dollar before the battle of th...

This paper provides a characterization of the set of dynamic models in which symmetric duopolists have incentives to raise a common cost. The advantage of the dynamic analysis over existing static models is that it extends the conditions (restrictive in static models) under which symmetric cost raising is profitable. The model is illustrated by standard examples from industrial organization: qu...

An infinite-horizon, stochastic model of entry and exit with sunk costs and imperfect competition is constructed. A subgame perfect Nash equilibrium for the general dynamic stochastic game is shown to exist as a limit of finite-horizon equilibria. This equilibrium has a relatively simple structure characterized by two numbers per finite history. Under very general conditions, it tends to exhibi...

We analyze the e ects of a legally-binding price oor using Hotelling's model of locational competition. A moderate priceoor destroys the maximal di erentiation equilibrium of d'Aspremont et. al., by allowing rms to compete more aggressively for market share. Minimum di erentiation results, with lower equilibrium prices. A low price oor results in mulitiple equilibria both minimum and maximum di...

We illustrate two di¤erential oligopoly games using, respectively, the capital accumulation dynamics à la Nerlove-Arrow, and the capital accumulation dynamics à la Ramsey. We prove that these games bene...t from the property that closed-loop memoryless solutions degenerate into open-loop solutions, since the best reply of a generic ...rm is independent of the rivals’ state variables, which enta...