Strategic Substitutes or Complements? The Game of Where to Fish

The ‘‘global game with strategic substitutes and complements’’ of Karp et al. (2007) is used to model the decision of where to fish. A complete information game is assumed, but the model is generalized to S \u3e 1 sites. In this game, a fisherman’s payoff depends on fish density in each site and the actions of other fishermen which can lead to congestion or agglomeration effects. Stable and unstable equilibria are characterized, as well as notions of equilibrium dominance. The model is applied to the Alaskan flatfish fishery by specifying a strategic interaction function (response to congestion) that is a non-linear function of the degree of congestion present in a given site. Results suggest that the interaction function may be non-monotonic in congestion

A non-robustness in the order structure of the equilibrium set in lattice games

The order and lattice structure of the equilibrium set in games with strategic complements do not survive a minimal introduction of strategic substitutes: in a lattice game in which all-but-one players exhibit strategic complements (with one player exhibiting strict strategic complements), and the remaining player exhibits strict strategic substitutes, no two equilibria are comparable. More generally, in a lattice game, if either (1) just one player has strict strategic complements and another player has strict strategic substitutes, or (2) just one player has strict strategic substitutes and has singleton-valued best-responses, then without any restrictions on the strategic interaction among the other players, no two equilibria are comparable. In such cases, the equilibrium set is a non-empty, complete lattice, if, and only if, there is a unique equilibrium. Moreover, in such cases, with linearly ordered strategy spaces, the game has at most one symmetric equilibrium. Several examples are presented.Lattice games, strategic complements, strategic substitutes, equilibrium set

Climate Policy, Carbon Leakage and Competitiveness: How Might Border Tax Adjustments Help?

In this paper, analysis is presented relating to the impact of border tax adjustments for climate policy on the international competitiveness of energy-intensive industries, and the related problem of carbon leakage. While many of the economic and legal issues are not particularly new, climate policy does present some possible twists to the analysis of border tax adjustments when vertically-related markets can be characterized as a successive oligopoly. Specifically, an appropriate border tax adjustment will depend on the incidence of a domestic carbon tax, the nature of competition in upstream and downstream sectors, as well as the basis for assessing the trade neutrality of any border tax adjustment. If trade neutrality is defined in terms of market volume, even though carbon leakage is reduced, domestic firm competitiveness cannot be maintained. This compares to defining trade neutrality in terms of market share, which results in domestic competitiveness being maintained and global carbon emissions being reduced.climate policy, carbon leakage, border tax adjustments, imperfect competition, Environmental Economics and Policy, International Relations/Trade, H87, Q38,

Testing Forbearance Experimentally - Duopolistic Competition of Conglomerate Firms

Like Feinberg and Sherman (1985) and Phillips and Mason (1992) we test experimentally whether conglomerate firms, i.e., firms competing on multiple structurally unrelated markets, can effectively limit competition. Our more general analysis assumes differentiated rather than homogeneous products and distinguishes strategic substitutes as well as complements to test this forbearance hypothesis. Rather than only a partners design we also explore a random strangers design to disentangle effects of forbearance and repeated interaction. Surprisingly, conglomerate firms do not limit competition, they rather foster it. More in line with our expectations we find more cooperation in complement markets than in substitute markets and also more cooperation in a partners than in a strangers matching.Experiment, Forbearance, Competition

Competitiveness and environmental policies in strategic environmental policy models

This paper discusses the issue of competitiveness and environmental regulation from the viewpoint of strategic environmental policy models. It demonstrates that the incentive for strategic policies is determined only by the reaction of the opponent. Furthermore, it shows that the conditions under which relatively strict environmental policies may lead to an increase in the profits of the domestic industry are rather artificial. The result depends in a rather complex way on the type of competition and several effects of research and development or environmental quality specification, and on the assumption that a unilateral policy is possible.

Strategic Interaction and Networks

This paper brings a general network analysis to a wide class of economic games. A network, or interaction matrix, tells who directly interacts with whom. A major challenge is determining how network structure shapes overall outcomes. We have a striking result. Equilibrium conditions depend on a single number: the lowest eigenvalue of a network matrix. Combining tools from potential games, optimization, and spectral graph theory, we study games with linear best replies and characterize the Nash and stable equilibria for any graph and for any impact of players’ actions. When the graph is sufficiently absorptive (as measured by this eigenvalue), there is a unique equilibrium. When it is less absorptive, stable equilibria always involve extreme play where some agents take no actions at all. This paper is the first to show the importance of this measure to social and economic outcomes, and we relate it to different network link patterns.Networks, potential games, lowest eigenvalue, stable equilibria, asymmetric equilibria

Strategic Investment and Market Integration

The competitive effect of international market integration in industries with imperfect competition is of great policy interest. This paper focuses on the link between monopolization and market segmentation. It presents a model of multi-market entry deterrence with or without market commitments. We derive sufficient conditions for entry deterrence with productive capacity in the multi-market game. It is shown that to deter entry in the multi-market game, the first-mover installs productions capacity which is strictly larger than the capacity needed to deter entry, if it is possible to assign parts of the capacity to specific markets. Market integration for production capacity may, thus, have a pro-competitive effect in international markets.Entry Deterrence; Multi-Market Competition; Market Integration

Leadership in Public Good Provision: a Timing Game Perspective

We address in this paper the issue of leadership when two governments provide public goods to their constituencies with cross border externalities as both public goods are valued by consumers in both countries. We study a timing game between two different countries: before providing public goods, the two policymakers non-cooperatively decide their preferred sequence of moves. We establish conditions under which a first- or second-mover advantage emerges for each country, highlighting the role of spillovers and the strategic complementarity or substitutability of public goods. As a result we are able to prove that there is no leader when, for both countries, public goods are substitutable. When public goods are complements for both countries, both countries may emerge as the leader in the game. Hence a coordination issue arises. We use the notion of risk-dominance to select the leading government. Lastly, in the mixed case, the government for whom public goods are substitutable becomes the leader.public good, Spillovers, Subgame Perfect Equilibrium, Strategic Complements, Stackelberg, Pareto Dominance, Risk Dominance