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Endogenous timing in the presence of non‐monotonicities
Author(s) -
Hoffmann Magnus,
RotaGraziosi Grégoire
Publication year - 2020
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/caje.12420
Subject(s) - mathematical economics , stochastic game , monotonic function , economics , nash equilibrium , risk dominance , pareto principle , subgame perfect equilibrium , subgame , epsilon equilibrium , mathematics , best response , mathematical optimization , mathematical analysis
Abstract The aim of this paper is to generalize the endogenous timing game proposed by Hamilton and Slutsky ( Games and Economic Behavior , 1990, 2, pp. 29–46) by allowing the payoff or the marginal payoff of a player to become non‐monotonic with respect to the strategy of the opponent. We propose a taxonomy of the subgame‐perfect Nash equilibria based on the characteristics of the payoff functions proposed by Eaton ( Canadian Journal of Economics , 2004, 37, pp. 805–29). We determine under which conditions of the initial payoff functions commitment has a social value and when the simultaneous‐move Nash equilibrium is commitment robust and discuss its Pareto efficiency.