Narrow Results

In this paper, I establish new sufficient conditions for the existence of a unique pure-strategy Nash equilibrium in noncooperative n-person games. I also demonstrate that these conditions are satisfied in the Cournot competition when supply is less elastic than demand.

We look at a Cournot model in which each firm may be unreliable with random capacity, so the total quantity brought into market is uncertain. The Cournot model has a unique pure strategy Nash equilibrium (NE), in which the number of active firms is determined by each firm's production cost and reliability. Our results indicate the following effects of unreliability: the number of active firms in the NE is more than that each firm is completely reliable and the expected total quantity brought into market is less than that each firm is completely reliable. Whether a given firm joins in the game is independent of its reliability, but any given firm always hopes that the less-expensive firms' capacities are random and stochastically smaller.

As most of the supply chains in practice are decentralized, a key issue in supply chain management is to study the coordination of supply chain. The interactions among players are typically of two types, viz. vertical competition and horizontal competition. We use a game theoretic framework to analyze a two-stage supply chain. The supply chain is modeled as a Stackelberg game with a manufacturer as leader and multiple retailers as followers. We consider multiple retailers competing on quantities (Cournot competition) and study its impact on manufacturer's equilibrium decisions and profits. We show that the wholesale price contract does not achieve Nash equilibrium when retailers offer uniform pricing. On the other hand, in case of perfect price discrimination we prove the existence of unique Nash equilibrium in both deterministic and stochastic demand set-up. Under stochastic demand set-up, we consider information asymmetry between the manufacturer and retailers with respect to demand signal. Furthermore, we show the retailers' selling effort boost up the sales. As variance of sales can hurt the manufacturer's production decisions badly, we conjecture that the manufacturer can offer a retailer incentive contract which can manipulate retailers' equilibrium decision.

In cooperative games, due to computational complexity issues, deviant agents are not able to base their behavior on the outsiders' status but have to follow certain beliefs as to how it is in their strategic interest to act. This behavior constitutes the main interest of this paper. To this end, we quantify and characterize the set of coalitional beliefs that support cooperation of such agents. Assuming that they are engaged in a differentiated Cournot competition, for every belief of the deviants we define a TU-game, the solution to which characterizes the set of coalitional beliefs that support core nonemptiness. For this we fix the number of coalitions that deviants S will face to, say, j in number and introduce the notion of j-belief of S as the least number of coalitions into which the outsiders N\S will reorganize. We then define for every j-belief a TU-game and the j-belief core of it. We prove that the worth of S is minimized when the n – s agents split approximately equally among the j coalitions, while the worth of S is maximized when j – 1 agents have one member and one coalition has n – s – (j – 1) members. Given the above, we prove that when goods are substitutes, the j-belief core is nonempty, provided that S believe the N\S will form a sufficiently large number of coalitions, while when goods are complements, the j-belief core is nonempty irrespective of the beliefs of the agents in S. Finally, in the case of homogeneous goods we prove that the j-belief core is nonempty and depends only on the number of the outsider coalitions and not on their size.

The production of natural resource-based commodities is frequently affected by environmental uncertainty and the strategic response of producers to uncertainty. We ask when uncertainty induces cooperation. Using a model of Cournot competition under environmentally induced price uncertainty, we consider the conditions under which cooperation is favored over defection. We find that the probability of cooperation depends on the length of the time period over which production levels are adjusted to price shocks. When uncertainty is low, the probability of cooperation is monotonically increasing in the length of this adjustment period. When uncertainty is high, the probability of cooperation initially increases as the adjustment period lengthens, but beyond some threshold starts to fall. In this case, the expected outcome is defection. We consider the broader implications of these findings.

This paper introduces the maximization of installed capacity instead of profit maximization, as an element that allows for understanding the economic behavior of Informal Social Enterprise (ISE) in the market. The reconsideration of the theoretical framework that explains the competitive behavior of this type of firm, according to the Social Business Type 2 (SB2) Yunus proposal or necessity-driven entrepreneurship, is important because they are recognized as a mechanism to mitigate the poverty effects of recessionary period faults in the distribution of wealth. The results obtained through the contrast between theoretical evidence and the essential assumptions of industrial organization theory suggests that ISEs have a Cournot competition behavior.

We investigate how a firm manipulates its real activities in production to meet the earnings target in product market competition against its product-market rivals. We show that the equilibratory way to reach the earnings target is to set a higher first-period output level, reaching a higher short-term profit level. However, once the expected level of demand uncertainty is high, a firm will exploit this effect on its output choice by taking a mixed strategy and raising its short-term output level. This result suggests that one should consider longer-horizon paths of variables to detect opportunistic real activities manipulation. Based on our results, we further argue that competitive strategy is an omitted variable in real activities manipulation estimation models and recommend that capacity utilization, which is related to a firm’s output competitive decisions, should be included in the first-stage models of normal investment levels in Roychowdhury (2006) and Gunny (2010).