Narrow Results

This paper discusses the potential dangers of adversarial debt management in China between central and local authorities. It draws lessons from Germany’s recent mishandling of the Greek debt crisis to illustrate nuances and stresses the wisdom of cooperation and mutual support in restoring balance to local Chinese finance. Inclusive economic theory provides additional insight.

In this paper, we consider a newsvendor system with strategic customers, who are boundedly rational and risk averse in terms of buying during the selling season or waiting for a clearance sale with price discounts. The newsvendor’s decision is to determine the optimal stock quantity. An optimization problem is formulated with the incorporation of competition among strategic customers with private product value information. We embed risk aversion within the quantal response equilibrium to characterize the strategic customer behavior. The influences of the decision biases of strategic customers on the newsvendor’s decision and profit are discussed. We find that the risk aversion considered alone always benefits the newsvendor. However, the bounded rationality considered alone benefits the newsvendor conditionally. Combining the two behavioral factor influences, the decision biases cause the newsvendor to order more and be better off when the critical fractile is high but to order less and be worse off when the critical fractile is low.

The rapid adoption of sensor technology has upgraded the vehicular communication capacity, which enables the drivers to predict the traffic state (e.g. headway variation tendency (HVT)) based on the current traffic information. Meanwhile, in practice, the drivers would exhibit bounded rationality behavior in that they often perceive and respond to acceleration/deceleration only when the headway variation exceeds a certain threshold. The collective effect may greatly affect the driving behavior and traffic flow performance. In this study, we innovatively model the traffic flow macroscopically considering HVT and bounded rationality effect in the context of continuum model. Based on the linear stability theory, the stability condition of the above model is obtained. The KdV-Burgers equation of the model is derived to describe traffic jam propagation mechanism near the neutral stability line by applying the reductive perturbation method in nonlinear stability analysis. Results show that the HVT and bounded rationality behavior have a great impact on the traffic congestion and energy consumption.

This paper examines the optimal decisions of dual-channel game model considering the inputs of retailing service. We analyze how adjustment speed of service inputs affect the system complexity and market performance, and explore the stability of the equilibrium points by parameter basin diagrams. And chaos control is realized by variable feedback method. The numerical simulation shows that complex behavior would trigger the system to become unstable, such as double period bifurcation and chaos. We measure the performances of the model in different periods by analyzing the variation of average profit index. The theoretical results show that the percentage share of the demand and cross-service coefficients have important influence on the stability of the system and its feasible basin of attraction.

This paper investigates the dynamical behaviors of a duopoly model with two content providers (CPs). Competition between two CPs is assumed to take place in terms of their pricing decisions and the credibility of content they offer. According to the CPs’ rationality level, we consider a scenario where both CPs are bounded rational. Each CP in any period uses the marginal profit observed from the previous period to choose its strategies. We compute explicitly the steady states of the dynamical system induced by bounded rationality, and establish a necessary and sufficient condition for stability of its Nash equilibrium (NE). Numerical simulations show that if some parameters of the model are varied, the stability of the NE point is lost and the complex (periodic or chaotic) behavior occurs. The chaotic behavior of the system is stabilized on the NE point by applying control.

In this paper, we study a dual-channel closed-loop supply chain (CLSC) consisting of one manufacturer, one retailer and one third-party firm or platform (3P). The manufacturer wholesales new products through the traditional retail channel and distributes remanufactured products via 3P. We focus on establishing the dynamic Stackelberg game models for nondelayed and delayed cases, respectively. The existence and local stability of Nash equilibrium are examined as well as the complex dynamical behaviors of each model under various scenarios are investigated by numerical simulations, such as stability region, bifurcations, chaos, strange attractors, and so on. Moreover, the impacts of some key parameters on the performance of chain members are analyzed. In addition, the variable feedback control method is utilized to eliminate the system chaos. The results reveal that the high value of the consumer discount perception for remanufactured products and excessively fast price adjustment speed have a destabilization effect on the Nash equilibrium point. In addition, adopting delay decisions by manufacturer does not always make the system more stable because it can exert either positive or negative effect on the system’s stability, while an intermediate delay weight is conducive to the system have a higher chance to stay stable. Furthermore, the manufacturer’s profits will be declined significantly while the profits of retailer and 3P will be elevated to some extent when the system falls into periodic and chaotic motions, so chaos is not always necessarily detrimental to all the decision makers in the dual-channel CLSC.

This paper constructs an e-commerce supply chain (ECSC) that includes one e-commerce platform and one low-carbon manufacturer. Based on bounded rationality, the complexity of pricing, service level, and emission reduction effort decisions in an ECSC is investigated in two scenarios: horizontal Nash (HN) game and long-term platform Stackelberg (LPS) game. Finally, the effects of different adjustment speeds and critical parameters on decision variables, profits, and system stability are analyzed through various numerical simulations. The study revealed that the price adjustment parameters have a more noticeable impact on the stability and profit of ECSC in both scenarios. It is interesting that the chaos caused by the adjustment speed of the platform’s decisions leads to a decrease in the platform’s profits. However, it causes continuous fluctuations in low-carbon manufacturers’ profits. In the HN game, when the increase of critical parameters is beneficial to low-carbon manufacturers, the system’s stability will decrease. In addition, the system’s stability in the LPS game is only affected by the adjustment speed of the platform’s decisions. By comparison, we find that the adjustment of the platform’s price plays a vital role in the ECSC under different power structures. Finally, the adaptive adjustment mechanism is used to control the chaos caused by the price of the platform in the ECSC system.

This paper considers a two-echelon supply chain consisting of one government, one manufacturer and one retailer in the presence of government green subsidies and carbon cap-and-trade policies. The manufacturer adopts eco-friendly technologies to produce green products for curbing carbon emissions, and the retailer is responsible for selling green products to consumers who exhibit low-carbon preferences. Two noncooperative game models, that is, the manufacturer-led Stackelberg model and the vertical Nash model, are developed under static and dynamic settings, respectively. The static analytical solutions of the models are derived by using game theory, and their complex dynamical behaviors are explored via bifurcation and chaos theory. The results indicate that the excessively large adjustment parameters of the players will destabilize the stability of the Nash equilibrium point, leading to more complicated behaviors such as bifurcation and chaos. The higher consumers’ low-carbon preference has a destabilization effect on the system’s stability while the carbon trading price may be a stabilizing or a destabilizing factor for the system under different scenarios. Besides, the influence of the government’s green subsidy rate on the system’s stability is not obvious in most cases. Furthermore, when the system enters into periodic cycles and chaotic motions resulting from the overly fast adjustment speeds, the channel members’ performance may be elevating or declining in different models. Therefore, the chaos in the low-carbon supply system is not always detrimental to the channel members.

Taking into account the nonlinear demand function, we have developed a multi-agent fishery economic model, where a multitude of agents are bounded by rationality. The fishing decisions of these agents are driven by a profit gradient mechanism. To assess the local stability of the system, stability analysis is performed with the Jury criterion. The investigation has revealed the presence of two conventional paths to chaos, namely, the flip bifurcation and the Neimark–Sacker bifurcation. This was achieved by mapping the stability regions and stability curves of the Nash equilibrium. The multistability of the system is further explored on two-dimensional planes on which the influence of joint parameters on the system’s stability is demonstrated. The existence of Arnold’s tongue has demonstrated unparalleled complexity and intricate interactions across different scales of the system. Both critical curves and basins of attraction are illustrated to gain insight into global bifurcations. The chaotic attractor is found to be confined within specific boundaries. The findings clearly show higher maximum instantaneous demand, relatively slower adjustment speed, and lower price sensitivity. Arguably, a controlled cost would lead to sustainable fishing resources. Moreover, the results also suggest that the agents would benefit more from confined conditions.

This paper constructs a nonlinear dynamical model of a mixed ownership market duopoly game for environmental tax collection within the framework of bounded rationality expectations. A stability analysis of the proposed model is conducted, and a Nash equilibrium stability region is estimated using the Jury criterion. The effects of the degree of privatization and environmental tax rate on the stability are investigated through numerical simulations. Subsequently, the comprehensive global analysis is carried out using the composite cell coordinate system method. Two types of crisis phenomena, namely, interior and boundary crises, have been identified. The former is caused by the collision between chaotic or periodic attractors and interior chaotic saddle within the basin of attraction, and the latter is caused by the collision between chaotic attractor and periodic saddle on the basin boundary. Meanwhile, the global dynamic behavior of two private enterprises engaged in synchronized output adjustment is investigated. When the output adjustment speed varies, the structure of the basin of attraction undergoes a transformation as changes are made to the number of coexisting attractors. The sudden disappearance of one attractor is due to the collision of the chaotic attractor with the saddle, on the basin boundary, merging into a larger saddle and resulting in a boundary crisis. The emergence of numerous “holes” can also be observed. It is found that the presence of periodic or chaotic saddles enriches the dynamical phenomena. Finally, the chaotic phenomenon occurring in the mixed ownership market is controlled using the time-delay feedback control method, stabilizing the system in a stable state, which implies a steady-state of total market output. The study of this model can provide theoretical guidance for the decision-making process of enterprises, helping minimize profit losses while stabilizing the market.

In this paper, we detected the fractal/multifractal and asymmetric properties in a simple financial market model which is an analog of the Ising model. We introduced the virtual market with heterogeneous agents characterized by agents with bounded rationality, by which we mean that agents only have local information, and a market maker who is responsible for market liquidity. To investigate the heterogeneity and psychological factors in real financial market, we designed the parameters of individual expectations of agents to this model. Applying fractal/multifractal and Zipf techniques, we conducted many simulations under different scenarios and then analyzed the generated time series of this virtual market. We acquired some nontrivial findings: first, the virtual price returns generated by our model display fractal and multifractal features; secondly, we found that the price have the asymmetric behaviors; finally, our findings have qualitative similarities with many empirical results, which imply that although our toy model is seemingly simple, it can generate complex dynamics and thus can be a useful tool to investigate complex market behaviors and phenomena.

In this paper we study a model of a quantity-setting duopoly market where firms lack knowledge of the market demand. Using a misspecified demand function firms determine their profit-maximizing choices of their corresponding perceived market game. For illustrative purposes we assume that the (true) demand function is linear and that the reaction functions of the players are quadratic. We then investigate the global dynamics of this game and characterize the number of steady states and their welfare properties. We study the basins of attraction of these steady states and present situations in which global bifurcations of their basins occur when model parameters are varied. The economic significance of our result is to show that in situations where players choose their actions based on a misspecified model of the environment, additional self-confirming steady states may emerge, despite the fact that the Nash-equilibrium of the game under perfect knowledge is unique. As a consequence the long run outcome of the game and overall welfare is highly dependent upon initial conditions.

We consider a quantity-setting duopoly market where firms lack perfect knowledge of the market demand function. They use estimated and therefore misspecified demand functions instead and determine their optimal strategies from the corresponding subjective payoff functions. The central issue of this paper is the question under which conditions a firm can learn the true demand function as well as the response behavior of its competitor from repeated estimations of historical market data. As soon as estimation errors are negligible, a firm is able to play best response in the usual game theoretic sense.

Standard models of observational learning in settings of sequential choice have two key features. The first is that players make decisions by using Bayes' rule to update their beliefs about payoffs from a common prior. The second is that each agent's decision rule is common knowledge, so that subsequent players can draw inferences about unobserved private signals from observable actions. In this paper, I relax the first assumption while maintaining the second. In particular, I look at observational learning by players who choose between two actions using nonparametric methods for estimating payoffs. When players are identical and make inferences using the maximum score method, an informational cascade and herd must result. If players of different payoff types use kernel or nearest-neighbor methods, there are cases in which a cascade need not arise. If one does occur, it must be one in which all players, regardless of type, choose the same action. In some situations, these alternative learning rules perform better than Bayesian updating.

We analyze a market game where traders are heterogeneous with respect to their rationality level and have asymmetric information. The market mechanism results into a statistical equilibrium, where traders randomise among their available actions due to their limited rationality. We provide a necessary and sufficient condition for convergence of statistical to strategic equilibria of market games, when traders become more informed and increasingly more rational.

The interaction between a sophisticated player and a fictitious player is analyzed and applied to the problem of optimal enforcement. An adaptive potential offender myopically responds to the history of past enforcement. How can a sophisticated enforcement official take advantage of this behavior? Will compliance with the law be attained? Conditions under which full compliance arises is derived and the optimal cycle of enforcing and not enforcing the law is presented. Welfare is shown to be greater than if the offender was sophisticated as well.

We introduce negative externalities in the form of ill will among the players of the classic two-sided assignment game of Shapley and Shubik, by letting each player's utility be negatively correlated with the payoff of all the players in his group. The new game is very complex, but under a certain assumption of bounded rationality we derive a straightforward notion of stable outcomes as certain conjectural equilibria. We prove that several well-known properties of the set of stable outcomes in the assignment game carry over to this new game.

Two-echelon models describe situations in which there are two differentiated groups of agents. Some examples of these models can be found in supply chain problems, transportation problems or two-sided markets. In this paper, we deal with two-sided transportation problems which can be used to describe a wide variety of logistic and market problems. We approach the problem from the perspective of cooperative games and study some solution concepts closely related to the game theoretical concept of core, but rather than focus specifically on the core of a transportation game, we introduce and study a new solution concept, a core catcher, which can be motivated by a kind of bounded rationality which can arise in these cooperative contexts.

We present a framework populated by limited-skill agents whose cognitive abilities fall short of full rationality in two ways. First, the agents are incapable of considering all of the available actions. Second, they do not perceive the actions directly, but only view traits that are related to the actions’ identities. We define skill in terms of the number of action-trait pairs an agent can consider: agents with higher skill can consider more pairs. Limited-skill agents can be grafted into many contexts. We first discuss trends in how agents select which action-trait pairs to view when maximizing expected payoff. We then present two applications: the relationship between skill and expected payoff and product differentiation.

It is well known that laboratory subjects often do not play mixed strategy equilibria games according to the theoretical predictions. However, little is known about the role of cognition in these strategic settings. We therefore conduct an experiment where subjects play a repeated hide and seek game against a computer opponent. Subjects play with either fewer available cognitive resources (high cognitive load treatment) or with more available cognitive resources (low cognitive load treatment). Surprisingly, we find some evidence that subjects in the high load treatment earn more than subjects in the low treatment. However, we also find that subjects in the low treatment exhibit a greater rate of increase in earnings across rounds, thus suggesting more learning. Our evidence is consistent with subjects in the low load treatment over-experimenting. Further, while we observe that subjects do not mix in the predicted proportions and that their actions exhibit serial correlation, we do not find strong evidence these are related to their available cognitive resources. This suggests that the standard laboratory deviations from the theoretical predictions are not associated with the availability of cognitive resources. Our results shed light on the extent to which cognitive resources affect (and do not affect) behavior in games with mixed strategy equilibria.