The paper examines an interaction of boundedly rational firms that are able to calculate their gains after reaction of an opponent to their own deviations from the current strategy. We consider an equilibrium concept that we call a Nash-2 equilibrium. We discuss the problem of existence and...

Standard models of collusion require that all firms are forward-looking and strategic. When one firm displays naive behavior—i.e., when it is myopic, memoryless, or non-strategic—typical collusive strategies cannot be supported in equilibrium. Motivated by the increasing adoption of...

This paper studies how reciprocity and inequity aversion influence the behavior of firms in imperfectly competitive markets. The paper shows that if reciprocal firms compete a la Cournot, then they are able to sustain quot;collusivequot; outcomes under a positive reciprocity equilibrium. By...

Student teams role-play as companies to compete. All teams (i.e. the classroom) constitute the entire market. Classroom competition games are initially conducted whereby students only choose prices. Then, student strategy space is relaxed to include more learning content: asymmetric information,...

This paper analyzes exclusionary conduct of platforms in two-sided markets. Motivated by recent antitrust cases against shopping centers introducing radius restrictions on their tenants, we provide a discussion of the likely positive and normative effects of exclusivity clauses, which prevent...

Alternative market structures are distinguishable by the degree of parallel action exhibited by producers. We show that the correlation between output levels varies systematically with the degree of interdependence among firms, and establish an ordering among alternative behavioral hypotheses...

The paper investigates firms’ behavior and outcomes (levels of cost-reducing R&D, output, profit and welfare in equilibrium) in a differentiated duopoly with process innovation. One of the important features in this paper is that spillovers operate in the R&D stage and are tied to the degree...