Journal of Dynamics & Games
April 2016 , Volume 3 , Issue 2
Special issue on UECE Lisbon meetings
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The Journal of Dynamics and Games (JDG) is pleased to publish a series of special issues based on research and survey papers presented in the Annual UECE - Lisbon Meetings - Game Theory and Applications.
These annual meetings in game theory and applications, with the help of the scientific committee that gathers scientists from all around the world, join some of the most notable scientists with young researchers and PhD students at ISEG, University of Lisbon. In these meetings the organization committee promotes an exciting and friendly atmosphere that helps immensely the scientific interaction among the participants.
In these JDG special issues, scientists from all over the world share their latest insights and important results, including the exploration of emerging and current cutting-edge theories and methods in the field.
We are very thankful to the invited editors of this series of special issues, Rabah Amir, Gabrielle Demange, Filomena Garcia, Joana Pais, Frank H. Page, Joana Resende and Myrna Wooders.
For the quadratic Hotelling model, we study the optimal localization and price strategies under incomplete information on the production costs of the firms. We compute explicitly the pure Bayesian-Nash price duopoly equilibrium and we prove that it does not depend upon the distributions of the production costs of the firms, except on their first moments. We find when the maximal differentiation is a local optimum for the localization strategy of both firms.
We study the profit-sharing rule that maximizes the sustainability of cartel agreements when firms can make side-payments. This rule is such that the critical discount factor is the same for all firms (``balanced temptation''). If a cartel applies this rule, contrarily to the typical finding in the literature, asymmetries among firms may increase the sustainability of the cartel. In an illustrating example of a Cournot duopoly with asymmetric production costs, the sustainability of collusion is maximal when firms are extremely asymmetric.
This paper deals with dynamic price competition in markets in which the perception of consumers regarding the value of goods depends on the choices of other consumers in the market. In particular, we consider the case in which consumers exhibit conformist preferences, which leads them to imitate their peers. In the context of a finite horizon model, we show that conformity-based behavior creates new channels of dynamic interaction between firms, changing the nature of price competition. We focus on the case of high network effects for which we obtain V-shaped equilibrium price paths and oscillating trajectories of market shares. We provide also a new rationale for the inversion of fashion trends.
This paper explores the role of the asymmetry in information in business to business (B2B) transactions. In a vertical setting with successive monopolies we present the equivalence that holds under complete information, that is, the profitability of the powerful party does not depend on its position in the industry and we investigate how potential information advantages affect this relationship. We demonstrate that under asymmetric information this equivalence breaks down and a firm that is positioned in the downstream sector reduces more effectively the information rents that it has to sacrifice for a truthful reporting, but the consumers remain indifferent. Under wholesale price contracts consumers prefer the less informed party to be at the downstream level since the excessive pricing distortion is less intense. Moreover, if second degree of price discrimination is not allowed then the principal prefers to be at the upstream level of production and consumers are better off in this case which comes in contrast to our previous results.
We examine the interplay between a person's individual preference and the social influence others exert. We provide a model of network relationships with conflicting preferences, where individuals are better off coordinating with those around them, but where not all have a preference for the same action. We test our model in an experiment, varying the level of conflicting preferences between individuals. Our findings suggest that preferences are more salient than social influence, under conflicting preferences: subjects relate mainly with others who have the same preferences. This leads to two undesirable outcomes: network segregation and social inefficiency. The same force that helps people individually, hurts society.
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