An evasion game model for duopoly competition

Based on the Bertrand and Cournot economic models, we develop an evasion game model for a duopoly market with two players competing on price and quantity. We show that if the total financial strength of first mover is greater than that of the second mover, and the first mover observes the second mover perfectly, our proposed optimal strategy can be followed by the first mover to remain the market leader ahead of all competition

Endogenous Timing in Strategic Environmental Policymaking

In this paper, we endogenize the timing of policymaking in a simple two-country model of strategic environmental policy. We consider a timing game in which two policymakers non-cooperatively decide their preferred sequence of moves before setting emission tax rates. We show that whether the policymakers implement emission tax policies simultaneously or sequentially crucially depends on the magnitude of environmental damages: When the damages are insignificant, the tax rates are strategic substitutes and the simultaneous-move policymaking emerges in equilibrium. In contrast, when the damages are significant, the tax rates are strategic complements and the sequential-move policymaking emerges. In addition, we extend the model by allowing for differences in the vulnerability to environmental damages between countries. When the differences are large, the unique equilibrium of the game is the situation where the less vulnerable country acts as a leader. In the case where multiple equilibrium emerges, the risk dominant equilibrium is also that the less vulnerable country leads.Strategic environmental policy; Endogenous timing; Environmental tax; Duopoly

Endogenous timing game with non-monotonic reaction functions

The aim of this paper is to generalize the endogenous timing game proposed by Hamilton and Slutsky (1990) to cases where the reaction functions are non-motononic, as for instance in the literature on contest. Following the taxonomy of social dilemma provided by Eaton (2004) we consider several pos- sible situations depending on the nature of interactions (plain complementarity or plain substituability and strategic complementarity or strategic substitutability). Under the assumptions of the existence and the uniqueness of the Nash and Stackelberg equilibria, we highlight the presence of a first-mover advantage or a second-mover incentive only depending on the nature of cross-effects in players’ payoff functions and the slopes of their reaction functions at the Nash equilibrium of the static game. These properties allow us to determine rigorously the Subgame Perfect Nash Equilibrium (SPNE) in the ten studied situations. We establish under which conditions on the nature of interactions a leader emerges at the SPNEfirst-mover advantage, endogenous timing game, second-mover incentive, Subgame Perfect Nash Equilibrium

The Cournot outcome as the result of price competition

In a homogeneous product duopoly with concave revenue and convex costs we study a two stage game in which, first, firms engage simultaneously in capacity (production) and, after production levels are made public, there is sequential price competition in the second stage. Randomizing the order of play in the price subgame, we can find: (i) that the Cournot outcome can be sustained as a pure strategy subgame perfect Nash equilibrium (SPNE) of the whole game, (ii) a SPNE in which firms produce strictly more than the Cournot outcome.subgame perfect Nash equilibrium ; price ; quantity ; pure strategies ; Cournot

Leading and losing the tax competition race

In this paper we extend the standard approach of horizontal tax competition by endogenizing the timing of decisions made by the competing jurisdictions. Following the literature on the endogenous timing in duopoly games, we consider a pre-play stage, where jurisdictions commit themselves to move early or late, i.e. to fix their tax rate at a first or second stage. We highlight that at least one jurisdiction experiments a second-mover advantage. We show that the Subgame Perfect Equilibria (SPEs) correspond to the two Stackelberg situations yielding to a coordination problem. In order to solve this issue, we consider a quadratic specification of the production function, and we use two criteria of selection: Pareto-dominance and risk-dominance. We emphasize that at the safer equilibrium the less productive or smaller jurisdiction leads and hence loses the second-mover advantage. If asymmetry among jurisdictions is sufficient, Pareto-dominance reinforces Risk-dominance in selecting the same SPE. Three results may be deduced from our analysis: (i) the race to the bottom is less severe than predicted; (ii) the smaller jurisdiction leads; (iii) the `big-country-higher-tax-rate' rule does not always hold.Endogenous timing, tax competition, first/second-mover advantage, Strategic Complements, Stackelberg, Risk dominance.

Endogenizing leadership in tax competition: a timing game perspective

In this paper we extend the standard approach of horizontal tax competition by endogenizing the timing of decisions made by the competing jurisdictions. Following the literature on the endogenous timing in duopoly games, we consider a pre-play stage, where jurisdictions commit themselves to more early or late, i.e. to fix their tax rate at a first or second stage. We highlight that at least one jurisdiction experiments a second-mover advantage. We show that the Subgame Perfect Equilibria (SPEs) correspond to the two Stackelberg situations yielding to a coordination problem. In order to solve this issue, we consider a quadratic specification of the production function, and we use two criteria of selection: Pareto-dominance and risk-dominance. We emphasize that at the safer equilibrium the less productive or smaller jurisdiction leads and hence loses the second-mover advantage. If asymmetry among jurisdictions is sufficient, Pareto-dominance reinforces risk-domination in selecting the same SPE. Three results may be deduced from our analysis: (i) the downward pressure on tax rates is less severe than predicted; (ii) the smaller jurisdiction leads; (iii) the 'big-country-higher-tax-rate' rule does not always hold. Classification-JEL: H30, H87, C72.Endogenous timing; tax competition; first/second-mover advantage; strategic complements; stackelberg ; risk dominance.

Privatization in oligopoly : the impact of the shadow cost of public funds

The aim of this paper is to investigate the welfare eect of privatization in oligopoly when the government takes into account the distortionary eect of rising funds by taxation (shadow cost of public funds). We analyze the impact of the change in ownership not only on the objective function of the rms, but also on the timing of competition by endogenizing the determination of simultaneous (Nash-Cournot) versus sequential (Stackelberg) games. We show that, absent effciency gains, privatization never increases welfare. Moreover, even when large effciency gains are realized, an ineffcient public rm may be preferred

Eco-Firms and Sequential Adoption of Environmental Corporate Social Responsibility in the Managerial Delegation

This article investigates the strategic environmental corporate social responsibility (ECSR) of polluting firms in the presence of eco-firms. When the firms decide ECSR sequentially within the framework of the managerial incentive design and then face simultaneous price competition, we show that firms will adopt ECSR and purchase abatement goods to mitigate competition if the products are more substitutable, but the late adopter chooses lower ECSR and thus earns higher profit. It can partially explain the current expansive adoption of ECSR as an industry-wide wave