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Payoff-Improving Competition: Games with Negative Externalities

Author

Listed:
  • Petros G. Sekeris

    (Montpellier Business School (MBS))

  • Kevin Siqueira

    (University of Texas at Dallas)

Abstract

We demonstrate that more intense competition in games with production and negative externalities may be payoff-improving, and therefore welcomed by incumbents. In games that feature equilibria with strategic complements, increased competition may give rise to a new equilibrium where aggregate effort is lower, and the resulting reduced levels of externalities ultimately leaves all players better off. This setting applies to models of Cournot oligopoly, of common pool resources, and contests with endogenous prizes.

Suggested Citation

  • Petros G. Sekeris & Kevin Siqueira, 2021. "Payoff-Improving Competition: Games with Negative Externalities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(3), pages 455-474, May.
    • Handle: RePEc:kap:revind:v:58:y:2021:i:3:d:10.1007_s11151-020-09757-z
    DOI: 10.1007/s11151-020-09757-z
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    More about this item

    Keywords

    Negative externalities; Efficiency; Competition; Commons; Contests;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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