Perceived Competition

Olivier Bochet (), Mathieu Faure (), Yan Long () and Yves Zenou ()
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Olivier Bochet: Division of Social Science, New York University Abu Dhabi; Center for Behavioral Institutional Design (C-BID), New York University Abu Dhabi
Mathieu Faure: Aix-Marseille Univ., CNRS, AMSE, Marseille, France, https://www.amse-aixmarseille.fr/en/members/faure
Yan Long: Huazhong University of Science and Technology, China
Yves Zenou: Monash University, Australia, and CEPR

No 2515, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: In contrast to standard economic models, recent empirical evidence suggests that agents often operate based on subjective and divergent views of the competitive landscape. We develop a novel framework in which such imperfections are explicitly modeled through subjective perception networks, and introduce the concept of perception-consistent equilibrium (PCE), in which agents' actions and conjectures respond to the feedback generated by perceived competition. We establish the existence of equilibrium in broad classes of aggregative games. The model typically yields multiple equilibria, including outcomes that feature patterns of localized exclusion. Remarkably, heterogeneity in beliefs induces perceived competition rents-payoff differentials that arise purely from subjective misperceptions. We further show that PCE actions correspond to ordinal centrality measures, with eigenvector centrality emerging as a behavioral benchmark in separable payoff environments. Finally, a graph-theoretic taxonomy of PCEs reveals a hierarchical structure that ranks perceived competition rents. We also give conditions under which a unique stable equilibrium exists.

Keywords: competition; perception-consistent equilibrium; exclusionary equilibria; bounded rationality; ordinal centrality; eigenvector centrality; perceived competition rent (search for similar items in EconPapers)
JEL-codes: C72 D43 Z13 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2025-10
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