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Indirect evolution versus strategic delegation: A comparison of two approaches to explaining economic institutions

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  • Dufwenberg, Martin
  • Güth, Werner

Abstract

The two major methods of explaining economic institutions, namely by strategic choices or by (indirect) evolution, are compared for the case of a homogenous quadratic duopoly market. Sellers either can provide incentives for their agents to care for sales (amounts) or evolve as sellers who care for sales in addition to profits. Whereas strategic delegation does not change the market results as compared to the usual duopoly solution, indirect evolution causes a more competitive behavior. Thus the case at hand suffices to demonstrate the difference between the two approaches in explaining economic institutions.

Suggested Citation

  • Dufwenberg, Martin & Güth, Werner, 1997. "Indirect evolution versus strategic delegation: A comparison of two approaches to explaining economic institutions," SFB 373 Discussion Papers 1997,28, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:199728
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    Cited by:

    1. Güth, Werner, 1998. "Sequential versus independent commitment: An indirect evolutionary analysis of bargaining rules," SFB 373 Discussion Papers 1998,5, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    2. Possajennikov, A., 1999. "On Evolutionary Stability of Spiteful Preferences," Other publications TiSEM 9b377234-4758-4b80-8671-5, Tilburg University, School of Economics and Management.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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