Ronald Peeters

We characterise stable market structures under price competition in differentiated markets when multiple cartels may form – this is a marked departure from the predominant assumption in the existing literature that supposes without further justification that at most one cartel may be formed. We find that market structures without cartelisation are never stable and, in stark contrast to the above-mentioned a priori assumption made in the literature, we establish that in markets that are sufficiently differentiated, whenever the formation of multiple cartels is possible (i.e. there are at least four firms in the market), at least one market structure involving multiple small cartels is stable. Furthermore, except for the case where there are only four firms in the market, stable market structures are exclusively characterised by multiple small cartels. Combined with the result that the unique stable market structure under quantity competition is also characterised by multiple small cartels, this underscores the importance of considering the possibility of multiple cartels in competition policy. Comparing stable market structures under price and quantity competition, we find that prices and profits are higher under price competition whenever the market is sufficiently differentiated or sufficiently concentrated.

It is well known that ex-ante social preferences and expected utility are not always compatible. In this note, we introduce a novel framework that naturally separates social preferences from selfish preferences to answer the following question: What specific forms of social preferences can be accommodated within the expected utility paradigm? In a departure from existing frameworks, our framework shows that ex-ante social preferences can be reconciled with expected utility at the level of game utility, provided the corresponding non-expected utility component is absorbed by selfish utility. We also show that when a player’s preferences in both the game (against another player) and the associated decision problem (against Nature) conform to expected utility axioms, the permissible range of social preferences becomes notably restricted. Only under this stronger joint requirement do we reaffirm the existing literature’s key insight regarding the incompatibility of ex-ante inequality aversion with expected utility.

This paper contributes to the literature on pure equilibria in symmetric zero-sum games in two main ways. First, we introduce new sufficient conditions, including interchangeability and weak quasiconcavity, for the existence of such equilibria. Second, we uncover relationships between these newly introduced conditions and existing ones. For instance, we demonstrate that the class of weakly quasiconcave games generalizes the class of quasiconcave games and ordinal potential games. Additionally, we show that exact potential games satisfy the interchangeability condition. However, no logical relationship exists between interchangeability and (weak) quasiconcavity.

We introduce a novel way to elicit individuals’ strength of altruistic motivation in the context of charitable donations, ranging from pure warm glow to pure altruism. Using the giving-type elicitation task of Gangadharan et al. (2018) and assuming that individuals maximise a Cobb–Douglas impure altruism utility function, as is used in Ottoni-Wilhelm et al. (2017), we can uniquely identify the strength of altruistic motivation for impure altruists, which is typically found to be the largest category of donors. We compare the introduced measure to an alternative survey-based elicitation from Carpenter (2021).

We examine the generally accepted hypothesis that directed reciprocity is a powerful driver for cooperation. To do so, we consider a framework where agents situated on a circle network interact with their neighbors and have the choice to be egoistic, altruistic, or partially cooperative. We study the interaction between reciprocity, the likelihood that an agent reproduces value to the neighbor who has recently produced value for the agent, and inertia, the tendency of agents to repeat their previous choices even if other strategies are more successful. On the basis of extensive simulations, we conclude that for high levels of inertia, reciprocity enhances cooperation, while for low levels of inertia reciprocity rather subverts cooperation. For intermediate levels of inertia, we find a U-shaped effect. Reciprocity therefore interacts with the level of inertia in a non-monotonic fashion.

This paper establishes a previously unexplored connection between expected utility theory and potential games. Starting with a decision problem with a complete preference relation over lotteries on a finite set of alternatives, we construct a two-person symmetric game using a payoff function that represents the preference relation, and show that if the preference relation satisfies the von Neumann-Morgenstern expected utility axioms then the constructed game is a potential game. Conversely, starting with a two-player symmetric game, we (uniquely) construct a (complete) preference relation over the lotteries using the first player’s payoffs in the game, and show that if the game is a potential game then the resulting preference relation satisfies the expected utility axioms.