Perceived Competition

Olivier Bochet (), Mathieu Faure (), Yan Long () and Yves Zenou ()
Additional contact information
Olivier Bochet: New York University [Abu Dhabi] - NYU - NYU System
Mathieu Faure: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Yan Long: HUST - Huazhong University of Science and Technology [Wuhan]
Yves Zenou: Monash university, CEPR - Center for Economic Policy Research

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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: eigenvector centrality; perceived competition rent; ordinal centrality; bounded rationality; exclusionary equilibria; perception-consistent equilibrium; Competition (search for similar items in EconPapers)
Date: 2025-10-02
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