Coexistence of Small and Dominant Firms in Bertrand Competition: Judo Economics in the Lab

Cracau, Daniel; Sadrieh, Abdolkarim

doi:10.1628/093245616x14616712130561

Cited by 2 publications

(2 citation statements)

References 21 publications

(31 reference statements)

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“…Second, in centipede games, an early deviation eliminates both players' potential future earnings, whereas in our games it only affects the victim's. Our game also bears some resemblance to deterministic contests such as all-pay contests (Siegel 2009) and Bertrand competitions (Dufwenberg and Gneezy 2000;Abbink and Brandts 2008;Boone et al 2012;Cracau and Sadrieh 2016), though payoff and equilibrium, again, are very different. In particular, the tension of conflict in our game is not driven by potential material benefit (in fact it is costly to strike), but is hypothesized to be driven by fear and perceived need for selfdefense.…”

Section: Introductionmentioning

confidence: 89%

Arms Races and Conflict: Experimental Evidence

Abbink

Dong

Huang

2020

The Economic Journal

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We study escalation and aggression in an experimental first-strike game in which two participants play multiple rounds of a money-earning task. In each round, both players can spend money to accumulate weapons. The player with more weapons can spend money to strike against the other player, which almost totally eliminates the victim's earnings potential and removes their capacity to strike. Weapons can serve as a means of deterrence. In four treatments, we find that deterrence is strengthened if weapon stocking cannot be observed, that a balance of power is effective in maintaining peace, and that mutually beneficial trade decreases the risk of confrontation, but not necessarily the likelihood of costly arms races.

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Section: Introductionmentioning

confidence: 89%

Arms Races and Conflict: Experimental Evidence

Abbink

Dong

Huang

2020

The Economic Journal

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“…Thomas [2] finds empirical evidence for successful Judo-type entrants in various branches. Using a controlled laboratory experiment, Cracau and Sadrieh [3] show that Judo limitation is a powerful tool for entrants in different market environments including multiple incumbents and a cost advantage for the entrant. Theoretical work has elaborated the original setting and introduced dynamics [4], an altered sequence of capacity and pricing decisions [5], or asymmetric firms [6].…”

Section: Introductionmentioning

confidence: 99%

Judo Economics in Markets with Multiple Firms

Cracau

Franz

2014

Journal of Industrial Mathematics

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We study a sequential Bertrand game with one dominant market incumbent and multiple small entrants selling homogeneous products. Whilst the equilibrium for the case of a single entrant is well known from Gelman and Salop (1983), we derive properties of the -firm equilibrium and present an algorithm that can be used to calculate this equilibrium. The algorithm is based on a recursive manipulation of polynomials that derive the optimisation problem that each of the market entrants is facing. Using this algorithm we derive the exact equilibrium for the cases of two and three small entrants. For more than three entrants only approximate results are possible. We use numerical results to gain further understanding of the equilibrium for an increasing number of firms and in particular for the case where diverges to infinity. Similarly to the two-firm Judo equilibrium, we see that a capacity limitation for the small firms is necessary to achieve positive profits.Without this assumption, that is, with a simultaneous price competition between multiple small entrants,

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Coexistence of Small and Dominant Firms in Bertrand Competition: Judo Economics in the Lab

Cited by 2 publications

References 21 publications

Arms Races and Conflict: Experimental Evidence

Arms Races and Conflict: Experimental Evidence

Judo Economics in Markets with Multiple Firms

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