Cooperative oligopoly games with boundedly rational firms

Details Cooperative oligopoly games with boundedly rational firms Cooperative oligopoly games with boundedly rational firms

2012-02-17

arxiv.org/abs/1202.3885v1

Computer Science

Computer Science and Game Theory

arXiv admin note: substantial text overlap with arXiv:1107.3197

Scientific paper

We analyze cooperative Cournot games with externalities. Due to cognitive constraints, the members of a coalition cannot accurately predict the coalitional actions of the non-members. Thus, they compute their value following simple heuristics. In particular, they assign various non-equilibrium probability distributions over the outsiders' set of partitions. We construct the value function of a coalition and analyze the core of the corresponding games. We show that the core is non-empty provided the number of firms in the market is sufficiently large. Moreover, if two distributions over the set of partitions are related via first-order dominance, then the core of the game under the dominated distribution is a subset of the core under the dominant one. Finally, we allow the deviant coalition to act as a Stackelberg leader and show that in this case the corresponding core is empty.

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