Long-run equilibria, dominated strategies, and local interactions

The present note revisits a result by Kim and Wong (2010) showing that any strict Nash equilibrium of a coordination game can be supported as a long run equilibrium by properly adding dominated strategies. We show that in the circular city model of local interactions the selection of 1/2 -dominant strategies remains when adding strictly dominated strategies if interaction is decentral". Conversely, if the local interaction structure is central" by adding properly suited dominated strategies any equilibrium strategy of the original game can be supported as long run equilibrium. Classification- JEL: C72, D83

Local Interactions and Switching Costs

We study the impact of switching costs on the long run outcome in 2 x 2 coordination games played in the circular city model of local interactions. For low levels of switching costs the predictions are in line with the previous literature and the risk dominant convention is the unique long run equilibrium. For intermediate levels of switching costs the set of long run equilibria still contains the risk dominant convention but may also contain conventions that are not risk dominant. For high levels of switching costs also non-monomorphic states will be included in the set of long run equilibria. Finally, we reconcile our result with a recent paper by Norman (2009) by considering the case of large interaction neighborhoods in large populations

Local interactions under switching costs

We study the impact of switching costs on the long-run outcome in 2×2 coordination games played in the circular city model of local interactions. For low levels of switching costs, the predictions are in line with the previous literature and the risk-dominant convention is the unique long-run equilibrium. For intermediate levels of switching costs, the set of long-run equilibria still contain the risk-dominant convention but may also contain conventions that are not risk dominant. The set of long-run equilibria may further be non-monotonic in the level of switching costs, i.e., as switching costs increase the prediction that the risk-dominant convention is the unique long-run equilibrium and the prediction that both conventions are long-run equilibria alternate. Finally, for high levels of switching costs, also non-monomorphic states will be included in the set of long-run equilibria

Essays in Evolutionary Game Theory

This thesis contains three essays in evolutionary game theory. In the first chapter, we study the impact of switching costs on the long run outcome in 2X2 coordination games played in the circular city model of local interactions. We find that for low levels of switching costs, the risk dominant convention is the unique long run equilibrium. For intermediate levels of switching costs the set of long run equilibria contains the risk dominant convention but may also contain conventions that are not risk dominant. For high levels of switching costs also nonmonomorphic states will be included in the set of LRE. We study the impact of location heterogeneity on neighborhood segregation in the one-dimensional Schelling residential model in the second chapter. We model location heterogeneity by introducing an advantageous node, in which a player’s utility is impartial to the composition of her neighborhood. We find that when every player interacts with two neighbors, one advantageous node in the circular city will lead to a result that segregation is no longer the unique LRE. When players interact with more neighbors, more advantageous nodes are necessary to obtain the same result. In the third chapter, we consider a model of social coordination and network formation, where players of two groups play a 2X2 coordination game when connected. Players in one group actively decide on whom they play with and on the action in the game, while players in the other group decide on the action in the game only. We find that if either group’s population size is small in comparison to the linking restriction, all players will choose the risk dominant equilibrium, while when both groups are sufficiently large in population, the players of two groups will coordinate on the payoff dominant action

Three essays on cartel agreements

In this thesis, we propose three essays on cartel agreements. Assuming bounded rationality, the first chapter analyses the strategic interaction between firms from an evolutionary game perspective. We introduce new elements to discuss the mechanisms that sustain collusive agreements. In the second chapter, following the economic reasoning of crime, we propose a game-theoretical model to evaluate the stability of illegal cartels. Under this approach, punishment is also illegal. Thus, we offer new insights to antitrust authorities in inhibiting cartels as criminal organizations. Finally, the third chapter dialogues with the previous chapters through an empirical assessment of gasoline cartels in Brazil. To reach our purposes, we combine machine learning techniques with screens based on the statistical moments of the gasoline retail price distribution to correctly classify cartel behavior.Esta tese propõe três ensaios sobre acordos de cartel. Assumindo a racionalidade limitada, o primeiro capítulo analisa a interação estratégica entre empresas a partir de uma perspectiva de jogos evolucionários. Nesse sentido, introduz-se novos elementos para capturar e discutir os mecanismos que garantem a estabilidade dos acordos colusivos. No segundo capítulo, usando as motivações econômicas do crime, desenvolve-se um modelo teórico para avaliar a estabilidade dos cartéis ilegais. Portanto, como o cartel age ilegalmente, a punição também se dá nesse âmbito. Assim, apresentam-se novos insights para as autoridades antitruste na detecção e inibição de cartéis enquanto organizações criminosas. Por fim, o terceiro capítulo dialoga com os capítulos anteriores por meio de uma avaliação empírica da formação de cartéis no mercado varejista de gasolina nas seguintes cidades: Belo Horizonte, Brasília, Caxias do Sul e São Luís. Combinam-se técnicas de aprendizagem de máquina com filtros baseados nos momentos estatísticos da distribuição de preços de varejo da gasolina para classificar o comportamento do cartel.PROQUALI (UFJF

Long-run equilibria, dominated strategies, and local interactions

We revisit a result by Kim and Wong (2010) showing that under global interactions any strict Nash equilibrium of a coordination game can be supported as long run equilibrium by properly adding dominated strategies. We show that in the circular city model of local interactions and in the torus model of local interactions the selection of 12-dominant strategies remains when adding strictly dominated strategies if interaction is sufficiently local. Conversely, if the local interaction structure is "central" in the circular city model any equilibrium strategy of the original game can be supported as long run equilibrium by adding properly suited dominated strategies. © 2012 Elsevier Inc

Long-run equilibria, dominated strategies, and local interactions

The present note revisits a result by Kim and Wong (2010) showing that any strict Nash equilibrium of a coordination game can be supported as a long run equilibrium by properly adding dominated strategies. We show that in the circular city model of local interactions the selection of 1/2 -dominant strategies remains when adding strictly dominated strategies if interaction is decentral". Conversely, if the local interaction structure is central" by adding properly suited dominated strategies any equilibrium strategy of the original game can be supported as long run equilibrium. Classification- JEL: C72, D8