Optimal Punishments in Supergames With Close Substitutes

Lambertini, Luca ; Sasaki, Dan (1998) Optimal Punishments in Supergames With Close Substitutes. Bologna: Dipartimento di Scienze economiche DSE, p. 15. DOI 10.6092/unibo/amsacta/5004. In: Quaderni - Working Paper DSE (304). ISSN 2282-6483.
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Abstract

We analyse optimal penal codes in both Bertrand and Cournot supergames with product differentiation. We prove that the relationship between optimal punishments and the security level (individually rational discounted profit stream) depends critically on the degree of supermodularity in the stage game, using a linear duopoly supergame with product differentiation. The security level in the punishment phase is reached only under extreme supermodularity, i.e., when products are perfect substitutes and firms are price setters. Finally, we show that Abreu's rule cannot be implemented under Cournot behaviour and strong demand complementarity between products.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Sasaki, Dan
Keywords
penal codes, security level, product differentiation, positivity constraints
Subjects
ISSN
2282-6483
DOI
Deposit date
30 Mar 2016 09:22
Last modified
30 Mar 2016 09:22
URI

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