A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition with Large Fixed Costs

Maskin, Eric; Tirole, Jean

doi:10.2307/1911700

Cited by 401 publications

(181 citation statements)

References 19 publications

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“…It is well know that when dynamic games are considered, the potential equilibrium outcomes are many, thus there is an equilibrium selection problem. In this paper, we will adopt Markov Perfect Equilibrium (MPE) as our equilibrium concept as in Dube et al (2003) and Doraszelski and Markovich (2004) (see also Maskin and Tirole, 1988;Basar and Oldser, 1982).…”

Section: Model Formulationmentioning

confidence: 99%

Goodwill and dynamic advertising strategies

Doğanoğlu

Klapper

2006

Quant Market Econ

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In this paper, we empirically analyze weekly advertising policies of manufacturing firms in consumer goods markets. We assume firms engage in persuasive advertising, thus policies of firms affect the goodwill of a brand.We introduce a demand and a goodwill production function. A simple transformation of the demand function allows us to identify not only the demand parameters but also the parameters of the goodwill production function. We reconstruct the unobserved goodwill levels using these parameters and past advertising levels. We restrict our attention to Markov Perfect Equilibrium strategies which are functions of payoff relevant state variables. Without imposing further restrictions on the dynamic competitive environment, we investigate the relationship between observed advertising strategies-which are assumed to be MPE-and payoff relevant state variables by means of several reduced form specifications. The most important determinant of advertising intensity turns out to be goodwill. We demonstrate that controlling for an ad campaign significantly improves the explanatory power of the model. JEL Classification: D21, L15,M37.

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Section: Model Formulationmentioning

confidence: 99%

Goodwill and dynamic advertising strategies

Doğanoğlu

Klapper

2006

Quant Market Econ

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“…If we view s as the move by "Nature", the Markovian law of motion for Nature's moves makes it natural to focus on the Markov perfect equilibrium (MPE) concept of Maskin and Tirole 1988. These are subgame perfect Nash equilibria of the game G that are Markovian, i.e.…”

Section: Finite State Markovian Gamesmentioning

confidence: 99%

“…Dynamic games have had a major impact on both economic theory and applied work over the last four decades, much of it inspired by the Markov perfect equilibrium (MPE) solution concept of Maskin and Tirole 1988. While there has been considerable progress in the development of algorithms for computing MPE, including the pioneering work by Pakes and McGuire 1994 and recent progress on homotopy methods for finding multiple equilibria of both static and dynamic games (Borkovsky et.…”

Section: Introductionmentioning

confidence: 99%

Recursive Lexicographical Search: Finding All Markov Perfect Equilibria of Finite State Directional Dynamic Games

Iskhakov¹,

Rust²,

Schjerning³

2015

Review of Economic Studies

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Abstract:We define a class of dynamic Markovian games, directional dynamic games (DDG), where directionality is represented by a strategy-independent partial order on the state space. We show that many games are DDGs, yet none of the existing algorithms are guaranteed to find any Markov perfect equilibrium (MPE) of these games, much less all of them. We propose a fast and robust generalization of backward induction we call state recursion that operates on a decomposition of the overall DDG into a finite number of more tractable stage games, which can be solved recursively. We provide conditions under which state recursion finds at least one MPE of the overall DDG in a finite number of steps. We introduce a recursive lexicographic search (RLS) algorithm that systematically and efficiently uses state recursion to find all MPE of the overall game in a finite number of steps. We apply RLS to find all MPE of a dynamic model of Bertrand price competition with cost reducing investments which we show is a DDG. RLS rapidly finds and enumerates each one of the hundreds of millions of MPE of this game.

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“…postulated in Leeper and Walker (2011). not necessarily with certainty, and only with a delay. 6 This is in contrast to the standard repeated game in which moves are made simultaneously every period, alternating move games of Maskin and Tirole (1988) in which players move every other period, or the Stackelberg leadership in which the revision is immediate. Neither of these existing setups seems realistic in the monetary and …scal policy context.…”

Section: Summary Of the Setup Findings And Policy Implicationsmentioning

confidence: 99%

Monetary exit and fiscal spillovers

Libich

Nguyen

Stehlı́k

2015

European Journal of Political Economy

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The aftermath of the Global …nancial crisis has seen two types of monetary policy concerns. Some economists (e.g. Paul Krugman) worry primarily about possible de‡ation caused by a secular stagnation. In contrast, others (e.g. John Taylor) worry about excessively high in ‡ation caused by quantitative easing and monetization of …scal imbalances. We show that some countries should fear both -de ‡ation in the short term and high in ‡ation in the long term -whereas some countries are unlikely to experience either. This is done in a game theoretic framework with dynamic leadership (stochastic revisions of actions). Such framework enables us to examine strategic monetary-…scal interactions as well as policymakers'incomplete information about the economic recovery (such as during 2010-2014). Our empirical section then quanti…es indices of monetary and …scal leadership for high-income countries to assess their de ‡ationary/in ‡ationary prospects. It is shown, for example, that undesirable departures from price stability, both in the short term and long term, are much more likely in the United States and Japan than in Australia or New Zealand.

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A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition with Large Fixed Costs

Cited by 401 publications

References 19 publications

Goodwill and dynamic advertising strategies

Goodwill and dynamic advertising strategies

Recursive Lexicographical Search: Finding All Markov Perfect Equilibria of Finite State Directional Dynamic Games

Monetary exit and fiscal spillovers

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