Premium
Oblivious equilibrium for concentrated industries
Author(s) -
Benkard C. Lanier,
Jeziorski Przemyslaw,
Weintraub Gabriel Y.
Publication year - 2015
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12102
Subject(s) - markov perfect equilibrium , set (abstract data type) , markov chain , sequential equilibrium , mathematical economics , computer science , mathematical optimization , economics , equilibrium selection , mathematics , game theory , nash equilibrium , repeated game , machine learning , programming language
This article explores the application of oblivious equilibrium (OE) to highly concentrated markets. We define a natural extended notion of OE, called partially oblivious equilibrium (POE), that allows for there to be a set of strategically important firms (the “dominant” firms), whose firm states are always monitored by every other firm in the market. We perform computational experiments that explore the characteristics of POE, OE, and Markov perfect equilibrium (MPE), and find that POE generally performs well in highly concentrated markets. We also derive error bounds for evaluating the performance of POE for cases where MPE cannot be computed.