Schelling [1969, 1971a, 1971b, 1978] presented a microeconomic model showing how an integrated city could unravel to a rather segregated city, notwithstanding relatively mild assumptions concerning the individual agents' preferences, i.e., no agent preferring the resulting segregation. We examine the robustness of Schelling's model, focusing in particular on its driving force: the individual pr...

This note shows, by means of two simple, three-strategy games, the existence of stable periodic orbits and of multiple, interior steady states in a smooth version of the Best Response Dynamics, the Logit Dynamics. The main finding is that, unlike Replicator Dynamics, generic Hopf bifurcation and thus, stable limit cycles, occur under the Logit Dynamics, even for three strategy games. We also sh...

Previous theoretical researches show that learning from good performers yields intense competition and results in the low profitability of firms. These researchers do not take into account differentiation strategies being referred as a useful strategic tool to mitigate competition. We introduce an evolutionary (learning) game into a duopoly model with product differentiation on the Hotelling li...

This paper shows that cooperation can be sustained until close to the end of a finite-horizon, continuous-time prisoners’ dilemma when there is informational asymmetry in how quickly players can respond. The simulated equilibrium closely replicates recent experimental results (Friedman and Oprea, 2012, AER). The core argument is extended to a class of canonical preemption games with private inf...

Chicken or Checkin’? Rational Learning in Repeated Chess Games We examine rational learning among expert chess players and how they update their beliefs in repeated games with the same opponent. We present a model that explains how equilibrium play is affected when players change their choice of strategy when receiving additional information from each encounter. We employ a large international ...

We investigate whether replicator dynamics justify “survival of the fittest” when players inherit pure strategies, mixed strategies, or rules for choosing strategies. A strategy that never is a best reply can survive replicator dynamics if only pure strategies are heritable, but only rationalizable strategies survive if mixed strategies are heritable. Now suppose agents can inherit the rule of ...

This paper examines the use of switching costs by long-lived strategic buyers to manage dynamic competition between rival suppliers. The analysis reveals how buyers may employ switching costs to their advantage. We show when switching costs are high a buyer may induce suppliers to price more competitively by credibly threatening to replace the incumbent supplier with his rivals. The implication...

We consider a population of buyers who have unit demand for a homogeneous good, and only differ in terms of how soon they need to purchase it. These buyers have access to a stochastic stream of second-price auctions, as well as a retail outlet that can be used at any time. We characterize the equilibrium bidding dynamics, showing that bidders steadily raise their reservation price as they appro...

We study interactions with different durations and termination rules in a (quasi) continuous-time prisoner’s dilemma experiment. We find that cooperation is easier to achieve and sustain with deterministic horizons than with stochastic ones; end-game effects emerge, but subjects postpone them with experience; longer duration helps cooperation. Static theories for continuous-time games cannot si...

We analyze the impact of vertical integration when a monopolistic producer can make a capital commitment before deciding on output. For the vertically separated industry structure, we ̄nd that opportunism resulting from competition between retailers leads to a longrun underinvestment in capital. With vertical integration, the capital investment is e±cient but output is monopolistically restrict...