Cooperative oligopoly games with boundedly rational firms

We analyze cooperative Cournot games with boundedly rational firms. Due to cognitive constraints, the members of a coalition cannot accurately predict the coalitional structure of the non-members. Thus, they compute their value using simple heuristics. In particular, they assign various non-equilibr...

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Bibliographic Details
Published in:Annals of operations research 2014-12, Vol.223 (1), p.255-272
Main Authors: Lekeas, Paraskevas V., Stamatopoulos, Giorgos
Format: Article
Language:English
Subjects:
Associations
Business and Management
Cognitive ability
Collusion
Combinatorics
Construction
Cooperation
Dominance
Economic research
Economists
Equilibrium
Game theory
Games
Heuristic
Markets
Mathematical analysis
Mathematical models
Mathematical research
Oligopolies
Operations research
Operations Research/Decision Theory
Partitions
Rationality
Studies
Theory of Computation
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Summary:We analyze cooperative Cournot games with boundedly rational firms. Due to cognitive constraints, the members of a coalition cannot accurately predict the coalitional structure of the non-members. Thus, they compute their value using simple heuristics. In particular, they assign various non-equilibrium probability distributions over the outsiders’ set of partitions. We construct the characteristic function of a coalition in such an environment and we 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, we show that 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 distribution.
ISSN:0254-5330
1572-9338
DOI:10.1007/s10479-014-1580-z