/pdf/the-theory-of-industrial-organization-19bejph0ej.pdf

The Theory of Industrial Organization

Learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior. For example, why do people tend to converge on similar behavior? Why is mass behavior prone to error and fads? The authors argue that the theory of observational learning, and particularly of informational cascades, has much to offer economics, business strategy, political science, and the study of criminal behavior.

/pdf/learning-from-the-behavior-of-others-conformity-fads-and-2b6fi36pyc.pdf

Learning from the behavior of others : conformity, fads, and informational cascades

We study a rich class of noncooperative games that includes models of oligopoly competition, macroeconomic coordination failures, arms races, bank runs, technology adoption and diffusion, R&D competition, pretrial bargaining, coordination in teams, and many others. For all these games, the sets of pure strategy Nash equilibria, correlated equilibria, and rationalizable strategies have identical bounds. Also, for a class of models of dynamic adaptive choice behavior that encompasses both best-response dynamics and Bayesian learning, the players' choices lie eventually within the same bounds. These bounds are shown to vary monotonically with certain exogenous parameters. WE STUDY THE CLASS of (noncooperative) supermodular games introduced by Topkis (1979) and further analyzed by Vives (1985, 1989), who also pointed out the importance of these games in industrial economics. Supermodular games are games in which each player's strategy set is partially ordered, the marginal returns to increasing one's strategy rise with increases in the competitors' strategies (so that the game exhibits "strategic complementarity"2) and, if a player's strategies are multidimensional, marginal returns to any one com- ponent of the player's strategy rise with increases in the other components. This class turns out to encompass many of the most important economic applications of noncooperative game theory. In macroeconomics, Diamond's (1982) search model and Bryant's (1983, 1984) rational expectations models can be represented as supermodular games. In each of these models, more activity by some members of the economy raises the returns to increased levels of activity by others. In oligopoly theory, some models of Bertrand oligopoly with differentiated products qualify as supermodu- lar games. In these games, when a firm's competitors raise their prices, the marginal profitability of the firm's own price increase rises. A similar structure is present in games of new technology adoption such as those of Dybvig and Spatt (1983), Farrell and Saloner (1986), and Katz and Shapiro (1986). When more users hook into a communication system or more manufacturers adopt an interface standard, the marginal return to others of doing the same often rises. Similarly, in some specifications of the bank runs model introduced by Diamond and Dybvig (1983), when more depositors withdraw their funds from a bank, it is more worthwhile for other depositors to do the same. In the warrant exercise

http://www.parisschoolofeconomics.eu/docs/guesnerie-roger/milgromroberts90.pdf

Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities

This paper is a review of research in product development, which we define as the transformation of a market opportunity into a product available for sale. Our review is broad, encompassing work in the academic fields of marketing, operations management, and engineering design. The value of this breadth is in conveying the shape of the entire research landscape. We focus on product development projects within a single firm. We also devote our attention to the development of physical goods, although much of the work we describe applies to products of all kinds. We look inside the "black box" of product development at the fundamentaldecisions that are made by intention or default. In doing so, we adopt the perspective of product development as a deliberate business process involving hundreds of decisions, many of which can be usefully supported by knowledge and tools. We contrast this approach to prior reviews of the literature, which tend to examine the importance of environmental and contextual variables, such as market growth rate, the competitive environment, or the level of top-management support.

/pdf/product-development-decisions-a-review-of-the-literature-1jhatri7bn.pdf

Product Development Decisions: A Review of the Literature

We survey recent work on competition in markets in which consumers have costs of switching between competing firms' products, even when all firms' products are functionally identical We address issues in macroeconomics and international trade, as well as industrial organization: In a market with switching costs (or 'brand loyalty'), a firm's current market share is an important determinant of its future profitability We examine how the firm's choice between setting a low price to capture market share, and setting a high price to Harvest profits by exploiting its current locked-in customers, is affected by the threat of new entry interest rates, exchange rate expectations, the state of the business cycle, etc We also discuss the causes of switching costs, explain introductory offers and price wars, and examine industry profits, firms' product choices, and implications for multi-product competition

Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade

In a (first price) all-pay auction, bidders simultaneously submit bids for an item. All players forfeit their bids, and the high bidder receives the item. This auction is widely used in economics to model rent seeking, RD asymmetric equilibria imply higher expected revenues than the symmetric equilibrium.

/pdf/the-all-pay-auction-with-complete-information-2l652gumbi.pdf

The all-pay auction with complete information

In a (first price) all-pay auction, bidders simultaneously submit bids for an item. All players forfeit their bids, and the high bidder receives the item. This auction is widelly used in economics to model rent seeking, RD asymmetric equilibria imply higher expected revenues than the symmetric Equilibrium.

textIn a world where a politician can explicitly auction off a prize to the high bidder, the standard auction literature can be used to analyse political behavior. The justice system, however, precludes politicians from explicitly selling the prize to the highest bidder. Thus politicians cannot let it become public knowledge that they are in the business of selling political favors. An institution has emerged in political markets to overcome this constraint which are termed as lobbying. Lobbyists make implicit payments to the politician through campaign contributions. If these up-front payments were rebated to those failing to receive the prize, it would be clear that the politician was selling favors. This article has examined an interesting principle arising in all-pay auctions. This principle states that a politician wishing to maximize political rents may find it in his best interest to exclude certain lobbyists from participating in the lobbying process, particularly lobbyists valuing most the political prize.

/pdf/rigging-the-lobbying-process-an-application-of-the-all-pay-1mvpqj9txc.pdf

Rigging the lobbying process: An application of the all-pay auction

Many economic, political and social environments can be described as contests in which agents exert costly efforts while competing over the distribution of a scarce resource. These environments have been studied using Tullock contests, all-pay auctions and rank-order tournaments. This survey provides a review of experimental research on these three canonical contests. First, we review studies investigating the basic structure of contests, including the contest success function, number of players and prizes, spillovers and externalities, heterogeneity, and incomplete information. Second, we discuss dynamic contests and multi-battle contests. Then we review research on sabotage, feedback, bias, collusion, alliances, and contests between groups, as well as real-effort and field experiments. Finally, we discuss applications of contests to the study of legal systems, political competition, war, conflict avoidance, sales, and charities, and suggest directions for future research.

/pdf/a-survey-of-experimental-research-on-contests-all-pay-1lqd8ahh9f.pdf

A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments

Many economic, political and social environments can be described as contests in which agents exert costly effort while competing over the distribution of a scarce resource. These environments have been studied using Tullock contests, all-pay auctions and rank-order tournaments. This survey provides a comprehensive review of experimental research on these three canonical contests. First, we review studies investigating the basic structure of contests, including the number of players and prizes, spillovers and externalities, heterogeneity, risk and incomplete information. Second, we discuss dynamic contests and multi-battle contests. Then we review studies examining sabotage, feedback, bias, collusion, alliances, group contests and gender, as well as field experiments. Finally, we discuss applications of contests and suggest directions for future research.

/pdf/a-survey-of-experimental-research-on-contests-all-pay-ajzmx5zmz1.pdf

Dan Kovenock

Papers

The all-pay auction with complete information

The all-pay auction with complete information

Rigging the lobbying process: An application of the all-pay auction

A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments

A survey of experimental research on contests, all-pay auctions and tournaments