We reconsider Stackelberg’s classical critique of the Cournot duopoly, in the framework of endogenous timing for two-player games. For quantity duopoly we provide different sets of minimal conditions, directly on the demand and cost functions, yielding respectively the simultaneous and the two sequential modes of play. While our findings essentially confirm the predominance of the former, they ...

This paper examines the impact of public information in an economy where agents also have diverse private information. Since disclosures by central banks are an important source of public information, we are able to assess how the words of central bankers shape expectations, in addition to their actions. In an otherwise standard macro model, the disproportionate role of public information degra...

A budget-constrained buyer wants to purchase items from a shortlisted set. Items are differentiated by quality and sellers have private reserve prices for their items. Sellers quote prices strategically, inducing a knapsack game. The buyer’s problem is to select a subset of maximal quality. We propose a buying mechanism which can be viewed as a game theoretic extension of Dantzig’s greedy heuri...

Two major methods of explaining economic institutions are compared for the case of a homogenous quadratic duopoly market. In the indirect evolutionary approach, sellers may evolve to care for sales, in addition to profit. In the strategic delegation approach, sellers may design incentives so that their agents care for sales. The two approaches model different phenomena, but both allow certain k...

The arm’s length principle states that the transfer price between two associated enterprises should be the price that would be paid for similar goods in similar circumstances by unrelated parties dealing at arm’s length with each other. This paper examines the effect of the arm’s length principle on dynamic competition in imperfectly competitive markets. It is shown that the arm’s length princi...

This paper studies repeated games with privately observed signals where it is feasible but costly to observe other players’ past actions accurately. At the end of each period, players decide the set of players to monitor by paying the corresponding observation costs. We show that the folk theorem holds for any finite stage game that satisfies the fulldimensionality condition and a minimal disti...

This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand-related markets. We show that cartel prosecution can have a knock-on effect: desisting a cartel in one market reduces profits and cartel stability and leads to the break-up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: desisting a cartel increases carte...

We show that under horizontal differentiation pure symmetric Cournot equilibria exist if firms react to a rise in competitors’ output in such a way that their market price does not rise. This condition is related to strategic complementarity, but not to convexity or differentiability. We rule out multiple equilibria under some additional conditions and discuss stability and regularity of equili...

This paper analyzes a finite horizon, sequential move pricing duopoly, restricting attention to Markov strategies. The solution yields stationary patterns, independent of initial conditions, where the reaction-functions follow cycles of three periods. The market price never settles down, and is at all times strictly above marginal cost. Long-run average industry profits are approximately 5 6 of...

We introduce a simple model of oligopolistic competition where firms first build capacity, and then, after observing the capacity decisions, choose a reservation price at which they are willing to supply their capacities. This model describes many markets more realistically than the model of Kreps and Scheinkman [Kreps, D., Scheinkman, J., 1983. Quantity precommitment and Bertrand competition y...