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A Model Of Tacit Collusion: Nash-2 Equilibrium Concept

Marina Sandomirskaia ()

No WP BRP 70/EC/2014, HSE Working papers from National Research University Higher School of Economics

Abstract: We examine the novel concept for repeated noncooperative games with bounded rationality: \Nash-2" equilibrium, called also \threatening-proof pro le" in [16, Iskakov M., Iskakov A., 2012b]. It is weaker than Nash equilibrium and equilibrium in secure strategies: a player takes into account not only current strategies but also the next-stage responses of the partners to her deviation from the current situation that reduces her relevant choice set. We provide a condition for Nash-2 existence, criteria for a strategy pro le to be the Nash-2 equilibrium in strictly competitive games, apply this concept to Bertrand and Hotelling game and interpret the results as tacit collusion

Keywords: Nash-2 equilibrium; secure deviation; Bertrand paradox; Hotelling model; tacit collusion. (search for similar items in EconPapers)
JEL-codes: C72 D03 D43 D70 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-hpe
Date: 2014
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Published in WP BRP Series: Economics / EC, November 2014, pages 1-20

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