Strategic complements and substitutes, and potential games

We show that games of strategic complements, or substitutes, with aggregation are “pseudo-potential” games. The upshot is that they possess Nash equilibria in pure strategies (NE), even if the strategy sets are not convex; and that various dynamic processes converge to NE. In particular, NE exist in...

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Bibliographic Details
Published in:Games and economic behavior 2006, Vol.54 (1), p.77-94
Main Authors: Dubey, Pradeep, Haimanko, Ori, Zapechelnyuk, Andriy
Format: Article
Language:English
Subjects:
Cournot oligopoly
Dynamic models
Economic theory
Game theory
Games of strategy
Market theory
Microeconomics
Nash equilibrium
Oligopoly
Pseudo-potential games
Strategic complements and substitutes
Studies
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Summary:We show that games of strategic complements, or substitutes, with aggregation are “pseudo-potential” games. The upshot is that they possess Nash equilibria in pure strategies (NE), even if the strategy sets are not convex; and that various dynamic processes converge to NE. In particular, NE exist in Cournot oligopoly with indivisibilities in production. Our notion of aggregation is quite general and enables us to take a unified view of several disparate models.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2004.10.007