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PUBLIC LECTURE |
INVITATION |
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R E M I N D E R
The Department of Economics and Finance at the Institute for Advanced Studies cordially invites you to the following Public Lecture
Wednesday, September 23, 2015
Attention – New Address
IHS, Josefstädter Strasse 39 , 1080 Vienna
Lecture Room 201, second floor
5:00 pm
Carlos III
Abstract: We provide a model of dynamic duopoly in which firms take into account the financial constraints of all firms. The study of the equilibria of our dynamic game leads to the concept of Bankruptcy-Free outputs (BF) in
which no firm can drive another firm to bankruptcy without becoming bankrupt itself. We show that, in some cases, Cournot outputs are not a Markovian subgame perfect equilibrium because if these outputs were set, a firm may have incentives to ruin others.
In these cases, standard trigger strategies in which collusion is sustained by infinite reversion to Cournot outputs cannot be used. We show that there is a Markov subgame perfect equilibrium in mixed strategies and study its properties. Predation occurs in
equilibrium with a positive probability. Finally we adapt the folk theorem to our framework and show that it holds when minimax is taken over the BF outputs.
paper jointly with Carmen Bevia and Yosuke Yasuda
We are looking forward to seeing you!
Institute for Advanced Studies
Department of Economics and Finance
Josefstädter Strasse 39, 1080 Vienna, Austria
Tel.: +43 1 599 91 145
e-Mail: economics@ihs.ac.at
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