The Dixit (1980) hypothesis that incumbents use investment in capacity to deter potential entrants has found little empirical support. Bagwell and Ramey (1996) propose a model where, in the unique game-theoretic prediction based on forward induction or iterated elimination of weakly-dominated...

We offer a new explanation of equilibrium rationing. As is well known, a monopolist selling a durable good and not able to commit to a price sequence has an incentive to lower the price once the consumers with the greatest willingness to pay have bought, but this induces consumers to postpone...

We examine the strategic use of Corporate Social Responsibility (CSR) in imperfectly competitive markets. The level of CSR determines the weight a firm puts on consumer surplus in its objective function before it decides upon supply. First, we consider symmetric Cournot competition and show that...

This paper introduces a number of game-theoretic tools to model collusive agreements among firms in vertically differentiated markets. I firstly review some classical literature on collusion between two firms producing goods of exogenous different qualities. I then extend the analysis to a...

The seminal work of Fudenberg and Tirole (1985) on how preemption erodes the value of an option to wait raises general questions about the relation between models in discrete and continuous time and thus about the interpretation of its central result, relying on an "infinitely fine grid". Here...

An experiment is designed to test the equilibria typically studied in the repeated game literature (i.e. those based on Nash reversion and optimal symmetric two-phase punishment strategies). One hundred pairs of subjects repeatedly set prices in a differentiated demand duopoly setting. Unlike...