Balance of Power

Jan Boone

No 4733, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper argues that the efficiency distribution of players in a game determines how aggressively these players interact. We formalize the idea of balance of power: players fight very inefficient players but play softly versus equally (or more) efficient players. This theory of conduct predicts that entry by new firms leads to a less aggressive outcome if it creates a balance of power. A balance of power is created if more players get technologies that are close to the most efficient technology. Using a related argument, we show that an increase in entry costs can lead to more aggressive outcomes.

Keywords: Pricing games; Folk theorem; Refinement of predicted outcomes; Supergames; Contestable market (search for similar items in EconPapers)
JEL-codes: C72 D43 L41 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-gth
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://cepr.org/publications/DP4733 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:4733

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP4733

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().