Catalog competition and Nash equilibrium in nonlinear pricing games

Resumo

We model strategic competition in a market with asymmetric information as a noncooperative game in which each seller competes for a buyer of unknown type by offering the buyer a catalog of products and prices. We call this game a catalog game. Our main objective is to show that catalog games have Nash equilibria. The Nash existence problem for catalog games is particularly contentious due to payoff discontinuities caused by tie-breaking. We make three contributions. First, we establish under very mild conditions on primitives that no matter what the tie-breaking rule, catalog games are uniformly payoff secure, and therefore have mixed extensions which are payoff secure. Second, we show that if the tie-breaking rule awards the sale to firms which value it most (i.e., breaks ties in favor of firms which stand to make the highest profit), then firm profits are reciprocally upper semicontinuous (i.e., the mixed catalog game is reciprocally upper semincontinuous). This in turn implies that the mixed catalog game satisfies Reny's condition of better-reply security-a condition sufficient for existence (Reny in Econometrica 67:1029-1056, 1999). Third, we show by example that if the tie-breaking rule does not award the sale to firms which value it most (for example, if ties are broken randomly with equal probability), then the catalog game has no Nash equilibrium.

Ficha do documento

Tipo

Artigo científico

Ano

2008

Instituição

Springer

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso restrito

DOI

10.1007/s00199-006-0196-1

Identificador

oai:repositorio.fgv.br:10438/23085

Temas

Economia

Palavras-chave

Competitive nonlinear pricing gamesDiscontinuous gamesExistence of Nash equilibriumCompetitive contractingUniform payoff securityReciprocal upper semicontinuityBetter-reply securityEconomiaJogos de estratégia (Matemática)Equilíbrio econômico