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STRATEGIC DIFFERENTIATION AND STRATEGIC EMULATION IN GAMES WITH UNCERTAINTY *
Author(s) -
Dana James D.
Publication year - 2005
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6427.2005.00261.x
Subject(s) - emulation , profit (economics) , strategic complements , sign (mathematics) , variety (cybernetics) , sequential game , face (sociological concept) , microeconomics , economics , mathematical economics , computer science , game theory , mathematics , artificial intelligence , mathematical analysis , social science , sociology , economic growth
When players who choose a common strategy face a common shock, while players who choose different strategies face independent or imperfectly correlated shocks, equilibrium choices exhibit differentiation (respectively emulation) when the sign of the cross‐partial derivative of the firms' profit functions with respect to the realizations of the uncertain variables is negative (respectively positive). I consider a variety of applications, including technology choice, brand investments, and R&D races, many of which can be characterized as two‐stage games. In such games I demonstrate that differentiation is more likely to occur when the second stage game is a game of strategic substitutes.