A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition with Large Fixed Costs
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The Three Types of Collusion: Fixing Prices, Rivals, and Rules Robert H
University of Baltimore Law ScholarWorks@University of Baltimore School of Law All Faculty Scholarship Faculty Scholarship 2000 The Three Types of Collusion: Fixing Prices, Rivals, and Rules Robert H. Lande University of Baltimore School of Law, [email protected] Howard P. Marvel Ohio State University, [email protected] Follow this and additional works at: http://scholarworks.law.ubalt.edu/all_fac Part of the Antitrust and Trade Regulation Commons, and the Law and Economics Commons Recommended Citation The Three Types of Collusion: Fixing Prices, Rivals, and Rules, 2000 Wis. L. Rev. 941 (2000) This Article is brought to you for free and open access by the Faculty Scholarship at ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion in All Faculty Scholarship by an authorized administrator of ScholarWorks@University of Baltimore School of Law. For more information, please contact [email protected]. ARTICLES THE THREE TYPES OF COLLUSION: FIXING PRICES, RIVALS, AND RULES ROBERTH. LANDE * & HOWARDP. MARVEL** Antitrust law has long held collusion to be paramount among the offenses that it is charged with prohibiting. The reason for this prohibition is simple----collusion typically leads to monopoly-like outcomes, including monopoly profits that are shared by the colluding parties. Most collusion cases can be classified into two established general categories.) Classic, or "Type I" collusion involves collective action to raise price directly? Firms can also collude to disadvantage rivals in a manner that causes the rivals' output to diminish or causes their behavior to become chastened. This "Type 11" collusion in turn allows the colluding firms to raise prices.3 Many important collusion cases, however, do not fit into either of these categories. -
Collusion Constrained Equilibrium
Theoretical Economics 13 (2018), 307–340 1555-7561/20180307 Collusion constrained equilibrium Rohan Dutta Department of Economics, McGill University David K. Levine Department of Economics, European University Institute and Department of Economics, Washington University in Saint Louis Salvatore Modica Department of Economics, Università di Palermo We study collusion within groups in noncooperative games. The primitives are the preferences of the players, their assignment to nonoverlapping groups, and the goals of the groups. Our notion of collusion is that a group coordinates the play of its members among different incentive compatible plans to best achieve its goals. Unfortunately, equilibria that meet this requirement need not exist. We instead introduce the weaker notion of collusion constrained equilibrium. This al- lows groups to put positive probability on alternatives that are suboptimal for the group in certain razor’s edge cases where the set of incentive compatible plans changes discontinuously. These collusion constrained equilibria exist and are a subset of the correlated equilibria of the underlying game. We examine four per- turbations of the underlying game. In each case,we show that equilibria in which groups choose the best alternative exist and that limits of these equilibria lead to collusion constrained equilibria. We also show that for a sufficiently broad class of perturbations, every collusion constrained equilibrium arises as such a limit. We give an application to a voter participation game that shows how collusion constraints may be socially costly. Keywords. Collusion, organization, group. JEL classification. C72, D70. 1. Introduction As the literature on collective action (for example, Olson 1965) emphasizes, groups often behave collusively while the preferences of individual group members limit the possi- Rohan Dutta: [email protected] David K. -
Competitive Supply of Money in a New Monetarist Model
Munich Personal RePEc Archive Competitive Supply of Money in a New Monetarist Model Waknis, Parag 11 September 2017 Online at https://mpra.ub.uni-muenchen.de/75401/ MPRA Paper No. 75401, posted 23 Sep 2017 10:12 UTC Competitive Supply of Money in a New Monetarist Model Parag Waknis∗ September 11, 2017 Abstract Whether currency can be efficiently provided by private competitive money suppliers is arguably one of the fundamental questions in monetary theory. It is also one with practical relevance because of the emergence of multiple competing financial assets as well as competing cryptocurrencies as means of payments in certain class of transactions. In this paper, a dual currency version of Lagos and Wright (2005) money search model is used to explore the answer to this question. The centralized market sub-period is modeled as infinitely repeated game between two long lived players (money suppliers) and a short lived player (a continuum of agents), where longetivity of the players refers to the ability to influence aggregate outcomes. There are multiple equilibria, however we show that equilibrium featuring lowest inflation tax is weakly renegotiation proof, suggesting that better inflation outcome is possible in an environment with currency competition. JEL Codes: E52, E61. Keywords: currency competition, repeated games, long lived- short lived players, inflation tax, money search, weakly renegotiation proof. ∗The paper is based on my PhD dissertation completed at the University of Connecticut (UConn). I thank Christian Zimmermann (Major Advisor, St.Louis Fed), Ricardo Lagos (Associate Advisor, NYU) and Vicki Knoblauch (Associate Advisor, UConn) for their guidance and support. I thank participants at various conferences and the anonymous refer- ees at Economic Inquiry for their helpful comments and suggestions. -
Some Unpleasant Monetarist Arithmetic Thomas Sargent, ,, ^ Neil Wallace (P
Federal Reserve Bank of Minneapolis Quarterly Review Some Unpleasant Monetarist Arithmetic Thomas Sargent, ,, ^ Neil Wallace (p. 1) District Conditions (p.18) Federal Reserve Bank of Minneapolis Quarterly Review vol. 5, no 3 This publication primarily presents economic research aimed at improving policymaking by the Federal Reserve System and other governmental authorities. Produced in the Research Department. Edited by Arthur J. Rolnick, Richard M. Todd, Kathleen S. Rolfe, and Alan Struthers, Jr. Graphic design and charts drawn by Phil Swenson, Graphic Services Department. Address requests for additional copies to the Research Department. Federal Reserve Bank, Minneapolis, Minnesota 55480. Articles may be reprinted if the source is credited and the Research Department is provided with copies of reprints. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. Federal Reserve Bank of Minneapolis Quarterly Review/Fall 1981 Some Unpleasant Monetarist Arithmetic Thomas J. Sargent Neil Wallace Advisers Research Department Federal Reserve Bank of Minneapolis and Professors of Economics University of Minnesota In his presidential address to the American Economic in at least two ways. (For simplicity, we will refer to Association (AEA), Milton Friedman (1968) warned publicly held interest-bearing government debt as govern- not to expect too much from monetary policy. In ment bonds.) One way the public's demand for bonds particular, Friedman argued that monetary policy could constrains the government is by setting an upper limit on not permanently influence the levels of real output, the real stock of government bonds relative to the size of unemployment, or real rates of return on securities. -
Interim Correlated Rationalizability
Interim Correlated Rationalizability The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters Citation Dekel, Eddie, Drew Fudenberg, and Stephen Morris. 2007. Interim correlated rationalizability. Theoretical Economics 2, no. 1: 15-40. Published Version http://econtheory.org/ojs/index.php/te/article/view/20070015 Citable link http://nrs.harvard.edu/urn-3:HUL.InstRepos:3196333 Terms of Use This article was downloaded from Harvard University’s DASH repository, and is made available under the terms and conditions applicable to Other Posted Material, as set forth at http:// nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of- use#LAA Theoretical Economics 2 (2007), 15–40 1555-7561/20070015 Interim correlated rationalizability EDDIE DEKEL Department of Economics, Northwestern University, and School of Economics, Tel Aviv University DREW FUDENBERG Department of Economics, Harvard University STEPHEN MORRIS Department of Economics, Princeton University This paper proposes the solution concept of interim correlated rationalizability, and shows that all types that have the same hierarchies of beliefs have the same set of interim-correlated-rationalizable outcomes. This solution concept charac- terizes common certainty of rationality in the universal type space. KEYWORDS. Rationalizability, incomplete information, common certainty, com- mon knowledge, universal type space. JEL CLASSIFICATION. C70, C72. 1. INTRODUCTION Harsanyi (1967–68) proposes solving games of incomplete -
A Brief Appraisal of Behavioral Economists' Plea for Light Paternalism
Brazilian Journal of Political Economy, vol 32, nº 3 (128), pp 445-458, July-September/2012 Freedom of choice and bounded rationality: a brief appraisal of behavioral economists’ plea for light paternalism ROBERTA MURAMATSU PATRÍCIA FONSECA* Behavioral economics has addressed interesting positive and normative ques- tions underlying the standard rational choice theory. More recently, it suggests that, in a real world of boundedly rational agents, economists could help people to im- prove the quality of their choices without any harm to autonomy and freedom of choice. This paper aims to scrutinize available arguments for and against current proposals of light paternalistic interventions mainly in the domain of intertemporal choice. It argues that incorporating the notion of bounded rationality in economic analysis and empirical findings of cognitive biases and self-control problems cannot make an indisputable case for paternalism. Keywords: freedom; choice; bounded rationality; paternalism; behavioral eco- nomics. JEL Classification: B40; B41; D11; D91. So the immediate problem in Libertarian Paternalism is the fatuity of its declared motivation Very few libertarians have maintained what Thaler and Sunstein suggest they maintain, and indeed many of the leading theorists have worked with ideas in line with what Thaler and Sunstein have to say about man’s nature Thaler and Sunstein are forcing an open door Daniel Klein, Statist Quo Bias, Economic Journal Watch, 2004 * Professora doutora da Universidade Presbiteriana Mackenzie e do Insper, e-mail: rmuramatsu@uol. com.br; Pesquisadora independente na área de Economia Comportamental e Psicologia Econômica, e-mail [email protected]. Submetido: 23/fevereiro/2011. Aprovado: 12/março/2011. Revista de Economia Política 32 (3), 2012 445 IntrodUCTION There is a long-standing methodological tradition stating that economics is a positive science that remains silent about policy issues and the complex determi- nants of human ends, values and motives. -
Real Business Cycles
Real Business Cycles JesusFernandez-Villaverde University of Pennsylvania 1 Business Cycle U.S. economy uctuates over time. How can we build models to think about it? Do we need di erent models than before to do so? Traditionally the answer was yes. Nowadays the answer is no. We will focus on equilibrium models of the cycle. 2 Business Cycles and Economic Growth How di erent are long-run growth and the business cycle? Changes in Output per Worker Secular Growth Business Cycle Due to changes in capital 1/3 0 Due to changes in labor 0 2/3 Due to changes in productivity 2/3 1/3 We want to use the same models with a slightly di erent focus. 3 Stochastic Neoclassical Growth Model Cass (1965) and Koopmans (1965). Brock and Mirman (1972). Kydland and Prescott (1982). Hansen (1985). King, Plosser, and Rebelo (1988a,b). 4 References King, Plosser, and Rebelo (1988a,b). Chapter by Cooley and Prescott in Cooley's Frontier of Business Cycle Research (in fact, you want to read the whole book). Chapter by King and Rebelo (Resurrection Real Business Cycle Mod- els) in Handbook of Macroeconomics. Chapter 12 in Ljungqvist and Sargent. 5 Preferences Preferences: 1 t t t t E0 (1 + n) u ct s ; lt s tX=0 t t for ct s 0; lt s (0; 1) 2 where n is population growth. Standard technical assumptions (continuity, di erentiability, Inada con- ditions, etc...). However, those still leave many degrees of freedom. Restrictions imposed by economic theory and empirical observation. 6 Restrictions on Preferences Three observations: 1. -
Tacit Collusion in Oligopoly"
Tacit Collusion in Oligopoly Edward J. Green,y Robert C. Marshall,z and Leslie M. Marxx February 12, 2013 Abstract We examine the economics literature on tacit collusion in oligopoly markets and take steps toward clarifying the relation between econo- mists’analysis of tacit collusion and those in the legal literature. We provide examples of when the economic environment might be such that collusive pro…ts can be achieved without communication and, thus, when tacit coordination is su¢ cient to elevate pro…ts versus when com- munication would be required. The authors thank the Human Capital Foundation (http://www.hcfoundation.ru/en/), and especially Andrey Vavilov, for …nancial support. The paper bene…tted from discussions with Roger Blair, Louis Kaplow, Bill Kovacic, Vijay Krishna, Steven Schulenberg, and Danny Sokol. We thank Gustavo Gudiño for valuable research assistance. [email protected], Department of Economics, Penn State University [email protected], Department of Economics, Penn State University [email protected], Fuqua School of Business, Duke University 1 Introduction In this chapter, we examine the economics literature on tacit collusion in oligopoly markets and take steps toward clarifying the relation between tacit collusion in the economics and legal literature. Economists distinguish between tacit and explicit collusion. Lawyers, using a slightly di¤erent vocabulary, distinguish between tacit coordination, tacit agreement, and explicit collusion. In hopes of facilitating clearer communication between economists and lawyers, in this chapter, we attempt to provide a coherent resolution of the vernaculars used in the economics and legal literature regarding collusion.1 Perhaps the easiest place to begin is to de…ne explicit collusion. -
A Primer on Modern Monetary Theory
2021 A Primer on Modern Monetary Theory Steven Globerman fraserinstitute.org Contents Executive Summary / i 1. Introducing Modern Monetary Theory / 1 2. Implementing MMT / 4 3. Has Canada Adopted MMT? / 10 4. Proposed Economic and Social Justifications for MMT / 17 5. MMT and Inflation / 23 Concluding Comments / 27 References / 29 About the author / 33 Acknowledgments / 33 Publishing information / 34 Supporting the Fraser Institute / 35 Purpose, funding, and independence / 35 About the Fraser Institute / 36 Editorial Advisory Board / 37 fraserinstitute.org fraserinstitute.org Executive Summary Modern Monetary Theory (MMT) is a policy model for funding govern- ment spending. While MMT is not new, it has recently received wide- spread attention, particularly as government spending has increased dramatically in response to the ongoing COVID-19 crisis and concerns grow about how to pay for this increased spending. The essential message of MMT is that there is no financial constraint on government spending as long as a country is a sovereign issuer of cur- rency and does not tie the value of its currency to another currency. Both Canada and the US are examples of countries that are sovereign issuers of currency. In principle, being a sovereign issuer of currency endows the government with the ability to borrow money from the country’s cen- tral bank. The central bank can effectively credit the government’s bank account at the central bank for an unlimited amount of money without either charging the government interest or, indeed, demanding repayment of the government bonds the central bank has acquired. In 2020, the cen- tral banks in both Canada and the US bought a disproportionately large share of government bonds compared to previous years, which has led some observers to argue that the governments of Canada and the United States are practicing MMT. -
Imbalanced Collusive Security Games
Imbalanced Collusive Security Games Han-Ching Ou, Milind Tambe, Bistra Dilkina, and Phebe Vayanos Computer Science Department, University of Southern California {hanchino,tambe,dilkina,phebe.vayanos }@usc.edu Abstract. Colluding adversaries is a crucial challenge for defenders in many real-world applications. Previous literature has provided Collusive Security Games (COSG) to model colluding adversaries, and provided models and algorithms to generate defender strategies to counter colluding adversaries, often by devising strategies that inhibit collusion [6]. Unfortunately, this previous work focused exclusively on situations with perfectly matched adversaries, i.e., where their rewards were symmetrically distributed. In the real world, however, defenders often face adversaries where their rewards are asymmetrically distributed. Such inherent asymmetry raises a question as to whether human adversaries would at- tempt to collude in such situations, and whether defender strategies to counter such collusion should focus on inhibiting collusion. To address these open ques- tions, this paper: (i) explores and theoretically analyzes Imbalanced Collusive Security Games (ICOSG) where defenders face adversaries with asymmetrically distributed rewards; (ii) conducts extensive experiments of three different adver- sary models involving 1800 real human subjects and (iii) derives novel analysis of the reason behind why bounded rational attackers models outperform perfectly rational attackers models. The key principle discovered as the result of our -
John Von Neumann Between Physics and Economics: a Methodological Note
Review of Economic Analysis 5 (2013) 177–189 1973-3909/2013177 John von Neumann between Physics and Economics: A methodological note LUCA LAMBERTINI∗y University of Bologna A methodological discussion is proposed, aiming at illustrating an analogy between game theory in particular (and mathematical economics in general) and quantum mechanics. This analogy relies on the equivalence of the two fundamental operators employed in the two fields, namely, the expected value in economics and the density matrix in quantum physics. I conjecture that this coincidence can be traced back to the contributions of von Neumann in both disciplines. Keywords: expected value, density matrix, uncertainty, quantum games JEL Classifications: B25, B41, C70 1 Introduction Over the last twenty years, a growing amount of attention has been devoted to the history of game theory. Among other reasons, this interest can largely be justified on the basis of the Nobel prize to John Nash, John Harsanyi and Reinhard Selten in 1994, to Robert Aumann and Thomas Schelling in 2005 and to Leonid Hurwicz, Eric Maskin and Roger Myerson in 2007 (for mechanism design).1 However, the literature dealing with the history of game theory mainly adopts an inner per- spective, i.e., an angle that allows us to reconstruct the developments of this sub-discipline under the general headings of economics. My aim is different, to the extent that I intend to pro- pose an interpretation of the formal relationships between game theory (and economics) and the hard sciences. Strictly speaking, this view is not new, as the idea that von Neumann’s interest in mathematics, logic and quantum mechanics is critical to our understanding of the genesis of ∗I would like to thank Jurek Konieczny (Editor), an anonymous referee, Corrado Benassi, Ennio Cavaz- zuti, George Leitmann, Massimo Marinacci, Stephen Martin, Manuela Mosca and Arsen Palestini for insightful comments and discussion. -
The Meaning of Competition*
HAYEK The Meaning of Competition* Friedrich A. Hayek LINK TO ABSTRACT I. There are signs of increasing awareness among economists that what they have been discussing in recent years under the name of ‘competition’ is not the same thing as what is thus called in ordinary language. But, although there have been some valiant attempts to bring discussion back to earth and to direct attention to the problems of real life, notably by J. M. Clark and Fritz Machlup,1 the general view seems still to regard the conception of competition currently employed by economists as the significant one and to treat that of the businessman as an abuse. It appears to be generally held that the so-called theory of ‘perfect competition’ provides the appropriate model for judging the effectiveness of competition in real life and that, to the extent that real competition differs from that model, it is undesirable and even harmful. For this attitude there seems to me to exist very little justification. I shall attempt to show that what the theory of perfect competition discusses has little claim to be called ‘competition’ at all and that its conclusions are of little use as guides to policy. The reason for this seems to me to be that this theory throughout assumes that state of affairs already to exist which, according to the truer view of the older theory, the process of competition tends to bring about (or to approxi- mate) and that, if the state of affairs assumed by the theory of perfect competition * This essay reproduces the substance of the Stafford Little Lecture delivered at Princeton University on May 20, 1946.