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This paper investigates the choice of a licensing mechanism by the holder of a patent whose validity is uncertain. We provide sufficient conditions of a general nature under which the licensor prefers to use a per-unit royalty contract. In particular we show that this is the case for the holders of weak patents if the strategic effect of an increase in a potential licensee's unit cost on the equilibrium industry profit is positive. The latter condition is shown to hold in a Cournot (resp. Bertrand) oligopoly with homogeneous (resp. differentiated) products under general assumptions on the demands faced by firms. As a byproduct of our analysis, we contribute to the literature on the cost paradox in oligopoly by offering some new insights of independent interest regarding the effects of cost variations on Cournot and Bertrand equilibria. [ABSTRACT FROM AUTHOR]

This paper applies the framework of endogenous timing in games to mixed quantity duopoly, wherein a private-domestic or foreign-firm competes with a public, welfare-maximizing firm. A central goal of the paper is to present a unified and general treatment of the basic question of what constitutes the appropriate solution concept-Cournot or Stackelberg-in such duopolies. We show that simultaneous play never emerges as a subgame-perfect equilibrium of the extended game, in sharp contrast to private duopoly games. We demonstrate that this result is due to the objective function of the public firm being increasing in the rival's output (instead of decreasing for a private firm). We provide sufficient conditions for the emergence of public and/or private leadership equilibrium. In all cases, private profits and social welfare are higher than under the corresponding Cournot equilibrium. We make extensive use of the basic results from the theory of supermodular games in order to avoid common extraneous assumptions such as concavity, existence and uniqueness of the different equilibria, whenever possible. Some policy implications are drawn, in particular those relating to the merits of privatization. [ABSTRACT FROM AUTHOR]

The paper examines a game-theoretic model of a financial market in which asset prices are determined endogenously in terms of a short-run equilibrium. Investors use general, adaptive strategies (portfolio rules) depending on the exogenous states of the world and the observed history of the game. The main goal is to identify portfolio rules, allowing an investor to 'survive,' i.e., to possess a positive, bounded away from zero, share of market wealth over an infinite time horizon. The model under consideration combines a strategic framework characteristic for stochastic dynamic games with an evolutionary solution concept (survival strategies), thereby linking two fundamental paradigms of game theory. [ABSTRACT FROM AUTHOR]

The paper examines a game-theoretic evolutionary model of an asset market with endogenous equilibrium asset prices. Assets pay dividends that are partially consumed and partially reinvested. The investors use general, adaptive strategies (portfolio rules), distributing their wealth between assets, depending on the exogenous states of the world and the observed history of the game. The main objective of the work is to identify strategies, allowing an investor to 'survive', i.e. to possess a positive, bounded away from zero, share of market wealth over the whole infinite time horizon. This work brings together recent studies on evolutionary finance with the classical topic of non-cooperative market games. [ABSTRACT FROM AUTHOR]

Duopoly firms engaged in a standard two-stage game of R&D and Cournot competition are caught in a prisoner's dilemma for their R&D decisions whenever spillover effects are low. This effect works to the advantage of consumers and society. This result provides an interesting perspective on the well-known wedge between private and social incentives for R&D. The prisoner's dilemma is the key effect behind this wedge under low spillovers. The latter take over when sufficiently high, as is widely recognized. This mutually exclusive nature of the prisoner's dilemma and significant spillovers also serves to explain the incentives to form R&D cartels. [ABSTRACT FROM AUTHOR]

Recent deregulation of the banking sector in the US and in Europe allows commercial banks to hold equity in non-financial firms. We develop a model to investigate the effects of bank equity stakes in firms on credit market competition. The main result is that an equity stake confers a competitive advantage to the holding bank, which in equilibrium results in decreased competition in credit markets and higher interest rates being charged to firms. However, regulatory limits on the size of a bank's stake may, under certain conditions, be counterproductive: they could actually strengthen the equity-owning bank's competitive advantage. Our findings shed new light on the role of equity in lending relationships, and highlight that, in addition to the well-known prudential aspects, there is an antitrust dimension in the separation of banking and commerce. [ABSTRACT FROM AUTHOR]

Abstract: This paper investigates the effects of entry in two-sided markets where buyers and sellers act strategically. Applying new tools from supermodular optimization/games, sufficient conditions for different comparative statics results are obtained. While normality of one good is sufficient for the equilibrium price to be increasing in the number of buyers, normality of both goods is required for equilibrium bids and sellers'' equilibrium utilities to be increasing in the number of buyers. When the economy is replicated, normality of both goods and gross substitutes guarantee that the equilibrium of the strategic market game converges monotonically (in quantities) to the competitive equilibrium. Simple counter-examples are provided to settle other potential conjectures of interest. [Copyright &y& Elsevier]

This paper investigates the general properties of symmetric n-player supermodular games with complete-lattice action spaces. In particular, we examine the extent to which all pure strategy Nash equilibria tend to be symmetric for the general case of multi-dimensional strategy spaces. As asymmetric equilibria are possible even for strictly supermodular games, we investigate whether some symmetric equilibrium would always Pareto dominate all asymmetric equilibria. While this need not hold in general, we identify different sufficient conditions, each of which guarantees that such dominance holds: 2-player games with scalar action sets, uni-signed externalities, identical interests, and superjoin payoffs. Various illustrative examples are provided. Finally, some economic applications are discussed. [ABSTRACT FROM AUTHOR]

Four rankings of economics departments worldwide in terms of graduate education are constructed. The central methodological idea is that the value of a department is the sum of the values of its PhD graduates, as reflected in the values of their current employing departments. Scores are derived as solutions to linear simultaneous equations in the values. The sample includes the top 58 departments, the composition of which is determined endogenously, invoking a criterion requiring more than three placements in the sample. Illuminating the current state and trends of economics PhD education, the conclusions should be of broad interest to PhD candidates, academics, and policymakers. [ABSTRACT FROM AUTHOR]

Abstract: We consider the issue of first- versus second-mover advantage in differentiated-product Bertrand duopoly with general demand and asymmetric linear costs. We generalize existing results for all possible combinations where prices are either strategic substitutes and/or complements, dispensing with common extraneous and restrictive assumptions. We show that a firm with a sufficiently large cost lead over its rival has a first-mover advantage. For the linear version of the model, we invoke a natural endogenous timing scheme coupled with equilibrium selection according to risk dominance. The analysis yields, as the unique equilibrium outcome, sequential play with the low-cost firm as leader. [Copyright &y& Elsevier]

Abstract: While ordinal complementarity is more general than cardinal complementarity, the corresponding global sufficient conditions placed on the primitives of a constrained optimization problem are generally not comparable. We explore this issue in detail for the special case of a Cournot firm. We derive necessary and sufficient conditions for downward-sloping best-responses by imposing the ordinal test only for output levels that are actually reached along a best-response path. Both global tests, cardinal and ordinal, are shown not to be critical sufficient conditions, via a simple counterexample. Finally, we confirm that checking supermodularity of suitably transformed profits can work when the global tests for ordinal and cardinal complementarity both fail. [Copyright &y& Elsevier]

The literature on supermodular optimization and games is surveyed from the perspective of potential users in economics. This methodology provides a new approach for comparative statics based only on critical assumptions, and allows a general analysis of games with strategic complementarities. The results are presented in a simplified yet rigourous manner, without reference to lattice theory, for the special case of one-dimensional parameter and actions sets, with the emphasis being on wide accessibility. Detailed applications are presented for well-known models of consumer behavior, monopoly pass-through, Bertrand and Cournot competition, strategic R&D, search, and matching. Wherever appropriate, useful tricks for applications and comparative comments are inserted. [ABSTRACT FROM AUTHOR]

Studies of optimal second-best environmental regulation of identical polluting agents have invariably ignored potentially welfare-improving asymmetric regulation by imposing equal regulatory treatment of identical firms at the outset. Yet, cost asymmetry between oligopoly firms may well give rise to private as well as social gains. A trade-off is demonstrated for the regulator, between private costs savings and additional social costs when asymmetric treatment is allowed. Asymmetry is indeed optimal for a range of plausible parameter values. Further, it is demonstrated that for a broad class of abatement cost functions, there is scope for increasing welfare while keeping both total output and total emission constant. Some motivating policy issues are discussed in light of the results, including international harmonization and global carbon dioxide reduction. [ABSTRACT FROM AUTHOR]

For Bertrand duopoly with linear costs, we establish via a single (counter-) example that: (i) A new monotone transformation of the firms' profit functions may lead to the supermodularity of transformed profits when the standard log and identity transformations both fail to do so, and (ii) Topkis's notion of critical sufficient condition for monotonicity of a Bertrand firm's best-reply correspondence cannot be extended to rely only on positive unit costs. [ABSTRACT FROM AUTHOR]

This paper deals with a general version of a two-stage model of R&D and product market competition. We provide a thorough generalization of previous results on the comparative performance of noncooperative and cooperative R&D, dispensing in particular with ex-post firm symmetry and linear demand assumptions. We also characterize the structure of profit-maximizing R&D cartels where firms competing in a product market jointly decide R&D expenditure, as well as internal spillover, levels. We establish the firms would essentially always prefer extremal spillovers, and within the context of a standard specification, derive conditions for the optimality of minimal spillover. [Copyright &y& Elsevier]

We consider discounted stochastic games characterized by monotonicity, supermodularity and diagonal dominance assumptions on the reward functions and the transition law. A thorough novel discussion of the scope and limitations of this class of games is provided. Existence of a Markov-stationary equilibrium for the infinite-horizon game, proved by Curtat (1996), is summarized. Uniqueness of Markov equilibrium and dominance solvability of the finite-horizon game are established. In both cases, the equilibrium strategies and the corresponding value functions are nondecreasing Liptschitz-continuous functions of the state vector. Some specific economic applications are discussed. [ABSTRACT FROM AUTHOR]

Compares the performance of monopoly and cartelized research joint venture in the R&D product market competition. Importance of technological innovations; Relationship between market structure and innovation; Inclusion of the costs reduction.

Focuses on the transformation of an industrial organizations. Adoption of game theory; Foundations of game theoretic industrial organization; Presence of market power.

Abstract: We study two-person extensive form games, or “matches,” in which the only possible outcomes (if the game terminates) are that one player or the other is declared the winner. The winner of the match is determined by the winning of points, in “point games.” We call these matches binary Markov games. We show that if a simple monotonicity condition is satisfied, then (a) it is a Nash equilibrium of the match for the players, at each point, to play a Nash equilibrium of the point game; (b) it is a minimax behavior strategy in the match for a player to play minimax in each point game; and (c) when the point games all have unique Nash equilibria, the only Nash equilibrium of the binary Markov game consists of minimax play at each point. An application to tennis is provided. [Copyright &y& Elsevier]