Based on a Hotelling-type model, this paper analyzes a differential game where two firms engage in quality-enhancing research and development (R&D). The analysis is formulated in terms of open-loop and feedback solutions. We find that the open-loop stationary levels of R&D and quality are...

Experimental evidence and economic examples like Basu's (1984) taxi-driver problem illustrate that many people are honest (or good) even when beyond the reach of the law, and without repeated interactions or reputation effects. We provide game-theoretic underpinnings of the level of goodness in...

Professional sports leagues have witnessed the appearance of sugar daddies - people who invest enormous amounts of money in clubs and become their owners. This paper presents a contest model of a professional sports league that incorporates this phenomenon. We analyze how the appearance of a...

This paper considers a two-stage oligopoly model with downstream retailers and two types of transaction costs (in contracting retailers and in direct retailing). Our analysis shows how transaction costs affect vertical integration in a strategic model of oligopoly, and it relates transaction...

We conduct experiments testing the relationship between excess capacity and pricing in repeated Bertrand-Edgeworth duopolies and triopolies. We systematically vary the experimental markets between low excess capacity (suggesting monopoly) and no capacity constraints (suggesting perfect...

Labor law limits the freedom of individual firms and agents to deviate from the clauses prescribed by collective wage agreements. We show that employers´ associations and unions may exploit this legal framework to stabilize product market cartels. This new view on the institution of collective...

This paper investigates a long-run equilibrium of the Tullock contest using an evolutionary game-theoretic approach. The finite-population evolutionarily stable strategy (ESS) yields overdissipation of rent when there are increasing returns to expenditure. However, imitative behavior, considered...

In markets for credence goods, such as doctor visits, customers sample a firm for a few periods, before deciding whether to retain or fire that firm. In our model, customers have endogenously determined patience in tolerating bad outcomes from credence-good providers. The more competitive the...

We propose evolutionary dynamics to show how rules converge into norms. Individuals play a game of upholding or rejecting a rule, and the more they uphold the rule, the more it becomes established as a norm. We find that when individuals are rational, the initial state determines whether the...

This paper investigates the evolutionary equilibria of a clash of cultures game where conflict results from failures to share social power in individual pairings. Members of a general subpopulation are matched with those of a fundamentalist subpopulation, the latter being more cohesive and...