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Endogenous Heterogeneity in Strategic Models: Symmetry-breaking via Strategic Substitutes and Nonconcavities

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  • Rabah Amir
  • Filomena Garcia
  • Malgorzata Knauff

Abstract

This paper is an attempt to develop a unified approach to endogenous heterogeneity by constructing general class of two-player symmetric games that always possess only asymmetric pure-strategy Nash equilibria. These classes of games are characterized in some abstract sense by two general properties: payo? non-concavities and some form of strategic substitutability. We provide a detailed discussion of the relationship of this work with Matsuyama’s symmetry breaking framework and with business strategy literature. Our framework generalizes a number of models dealing with two-stage games, with long term investment decisions in the first stage and product market competition in the second stage. We present the main examples that motivate this study to illustrate the generality of our approach.

Suggested Citation

  • Rabah Amir & Filomena Garcia & Malgorzata Knauff, 2006. "Endogenous Heterogeneity in Strategic Models: Symmetry-breaking via Strategic Substitutes and Nonconcavities," Working Papers Department of Economics 2006/29, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp292006
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    1. Małgorzata Knauff
      by Metablog Obserwatora Finansowego in Obserwator Finansowy on 2009-12-10 17:59:58

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    More about this item

    Keywords

    firm heterogeneity; submodular games; business strategy; innovation strategies.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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