Strategy Meets Evolution: Games Suppliers and Producers Play

Brishti Guha ()

No 06-2006, Working Papers from Singapore Management University, School of Economics

Abstract: Final goods producers, who may be intrinsically honest (a behavioral type) or opportunistic (strategic), play a repeated game of imperfect information with suppliers of an input of variable (and non-verifiable) quality. Returns to cheating are increasing in the proportion of intrinsically honest producers. If producers compete for another scarce input, adverse selection reduces this proportion enough to enforce universal honesty, whether at a high or a low quality equilibrium. This mechanism limits the proportion of behavioral types in the population of producers over a wide range of parameters: despite their inability to compete with opportunists, they are not wholly wiped out due to the strategic response of input suppliers. Moreover, in equilibrium, opportunists must replicate the behavioral type’s behavior. Thus competition curtails the presence of the behavioral type but increases the incidence if its behavior. If a labor market, where skilled and unskilled labor coexist, is also endogenized, an honest equilibrium with both high and low quality will generally be reached; however an exclusively high quality equilibrium with unemployment of unskilled labor is also possible.

Keywords: Moral hazard; evolution; strategic response; repeated games; skill. (search for similar items in EconPapers)
JEL-codes: C7 D8 J4 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-02
New Economics Papers: this item is included in nep-cse, nep-evo and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in SMU Economics and Statistics Working Paper Series

Downloads: (external link)
https://mercury.smu.edu.sg/rsrchpubupload/6063/Strategy_meets_Evolution.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Server closed connection without sending any data back

Related works:
Working Paper: Strategy Meets Evolution: Games Suppliers and Producers Play (2006)
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:siu:wpaper:06-2006

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Singapore Management University, School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by QL THor ().