Indirect Evolution versus Strategic Delegation: A Comparison of Two Approaches to Explaining Economic Institutions

Martin Dufwenberg and Werner Güth ()

No 1998:9, Working Paper Series from Uppsala University, Department of Economics

Abstract: Two major methods of explaining economic institutions, namely by strategic choices or through (indirect) evolution, are compared for the case of a homogenous quadratic duopoly market. Sellers either can provide incentives for agents to care for sales, or evolve as sellers who care for sales in addition to profits. The two approaches are conceptually quite different, yet similar in the sense that both allow certain kinds of commitment. We show that when the two models are set up in intuitively comparable ways strategic delegation does not change the market results as compared to the usual duopoly solution, while indirect evolution causes a more competitive behavior. Thus the case at hand underscores the differences between the two approaches in explaining economic institutions.

Keywords: Indirect evolution; strategic delgation; commitment; duopoly markets; agency theory (search for similar items in EconPapers)
JEL-codes: C72 D21 D43 (search for similar items in EconPapers)
Pages: 19 pages
Date: 1998-03-06
New Economics Papers: this item is included in nep-cdm, nep-evo, nep-mic, nep-pbe, nep-pol and nep-tid
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Published in European Journal of Political Economy, 1999, pages 281-295.

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Related works:
Working Paper: Indirect Evolution versus Strategic Delegation: A Comparison of Two Approaches to Explaining Economic Institutions (1998)
Working Paper: Indirect Evolution Versus Strategic Delegation: A Comparison of Two Approaches to Explaining Economic Institutions (1997)
Working Paper: Indirect Evolution Versus Strategic Delegation: A Comparison of Two Approaches to Explaining Economic Institutions (1997)
Working Paper: Indirect evolution versus strategic delegation: A comparison of two approaches to explaining economic institutions (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:1998_009

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