Table of Contents

Competition between Exclusive Religions: The Counter�Reformation as Entry Deterrence

Mario Ferrero, Università degli Studi del Piemonte Orientale

Parallel Trade and Pharmaceutical Prices: A Game�Theoretic Approach and Empirical Evidence from the European Union

Sotiris Vandoros, London School of Economics & Political Science (LSE)
Panos Kanavos, London School of Economics & Political Science (LSE)

Subsidizing to Disrupt a Terrorism Supply Chain - A Four-Player Game

Xiaojun Shan, University at Buffalo
Jun Zhuang, State University of New York (SUNY) at Buffalo - Department of Industrial and Systems Engineering

(Dis)Honest Information Transmission: An Experimental Analysis

Milena Neubert, University of Mainz


"Competition between Exclusive Religions: The Counterâ€?Reformation as Entry Deterrence" Fee Download
Scottish Journal of Political Economy, Vol. 61, Issue 3, pp. 280-303, 2014

MARIO FERRERO, Università degli Studi del Piemonte Orientale

This article sets forth a theory of competition between exclusive religions as an entry deterrence game, in which the incumbent may find it profitable not to accommodate but to deter the competitor's entry by precommitting to sufficient capacity expansion in the event of entry. If entry costs are high enough, deterrence is optimal and the incumbent remains a monopolist, although the entry threat distorts its effort upward. The model is then applied to the Catholic Church's reaction to the Protestant Reformation. It is argued that the model provides a better fit to the historical data of the Counter�Reformation than the price�cutting model proposed by economists Ekelund, Hébert and Tollison ([Ekelund, R. B., 2004], [Ekelund, R. B., 2006]).

"Parallel Trade and Pharmaceutical Prices: A Gameâ€?Theoretic Approach and Empirical Evidence from the European Union" Fee Download
The World Economy, Vol. 37, Issue 6, pp. 856-880, 2014

SOTIRIS VANDOROS, London School of Economics & Political Science (LSE)
PANOS KANAVOS, London School of Economics & Political Science (LSE)

This paper studies whether parallel traded products spark price competition in pharmaceutical markets and whether they are any cheaper than locally sourced products. We follow a game�theoretic approach and employ descriptive statistics and econometric methods to study the effects of parallel trade on competition from a theoretic and empirical perspective. The theoretic approach suggests that there is a unique Nash equilibrium, and the parallel trader sets prices at the same level as the locally sourced product, while the price of the latter remains unaffected by parallel trade. However, there may be deviations from this equilibrium in the presence of particular policies or generic competition, in which case the parallel traded product may be priced at lower levels than the locally sourced product. Empirical analysis confirms the predictions of the theory. Descriptive statistics show that there is no gap between locally sourced and parallel traded products, unless generics or policies encouraging parallel trade are present. Results of the econometric analysis show that parallel trade does not trigger price competition and that the price of the locally sourced product remains unaffected by parallel trade. Therefore, any savings for health insurance occurring as a result of parallel trade are limited.

"Subsidizing to Disrupt a Terrorism Supply Chain - A Four-Player Game" Fee Download
Journal of the Operational Research Society, Vol. 65, Issue 7, pp. 1108-1119, 2014

XIAOJUN SHAN, University at Buffalo
JUN ZHUANG, State University of New York (SUNY) at Buffalo - Department of Industrial and Systems Engineering

Terrorism with weapons of mass destruction (WMDs) is an urgent threat to homeland security. The process of counter-WMD terrorism often involves multiple government and terrorist group players, which is under-studied in the literature. In this paper, first we consider two subgames: a proliferation game between two terrorist groups or cells (where one handling the black market for profits proliferates to the other one to attack, and this is modelled as a terrorism supply chain) and a subsidization game between two governments (where one potential WMD victim government subsidizes the other host government, who can interfere with terrorist activities). Then we integrate these two subgames to study how the victim government can use the strategy of subsidization to induce the host government to disrupt the terrorism supply chain. To our knowledge, this is the first game-theoretic study for modelling and optimally disrupting a terrorism supply chain in a complex four-player scenario. We find that in the integrated game, when proliferation payment is high or low, the practical terrorist group will proliferate and not proliferate, respectively, regardless of government decisions. In contrast, in the subsidization subgame between the two governments, the decision of subsidization depends on its cost. When proliferation payment is medium, the decision of subsidization depends on not only its cost but also the preparation cost and the attacking cost. Findings from our results would assist in government policymaking.

"(Dis)Honest Information Transmission: An Experimental Analysis" Free Download

MILENA NEUBERT, University of Mainz

In this paper, I suggest a new experimental method for measuring (dis)honest information transmission. Subjects play a variant of the dictator game in which the dictator’s decision whether to lie (either to or against his advantage) or whether to be honest, when communicating private information to a game partner, determines the division of payoffs. Using this set-up in analysing deception has some advantages: First, it allows to clearly isolate an individual’s motivation for (dis)honest behaviour from other possible sources of influence. Second, to my best knowledge this is the first experiment which investigates white lies and black lies in one single setting.


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This eJournal distributes working and accepted paper abstracts of empirical and theoretical papers on game theory, defined as the study of the strategic interaction among rational agents in competitive and cooperative environments, and bargaining theory, defined as a situation in which two or more players have a common interest to co-operate, but have conflicting interests over exactly how to co-operate. The topics in this eJournal include all of the subjects in Section C7 of the JEL classification system.

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