Endogenous Heterogeneity in Strategic Models: Symmetry-Breaking Via Strategic Substitutes and Nonconcavities

CORE Discussion Paper No. 2006/8

47 Pages Posted: 10 Jul 2006

See all articles by Rabah Amir

Rabah Amir

University of Arizona - Department of Economics; University of Arizona

Filomena Garcia

Indiana University; ISEG - Technical University of Lisbon; UECE - Research Unit in Economics and Complexity

Malgorzata Knauff

Warsaw School of Economics (SGH)

Date Written: February 2006

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: payoff 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.

Keywords: inter-firm heterogeneity, submodular games, business strategy, innovation strategies

JEL Classification: C72, C62, L11

Suggested Citation

Amir, Rabah and Garcia, Filomena and Knauff, Malgorzata, Endogenous Heterogeneity in Strategic Models: Symmetry-Breaking Via Strategic Substitutes and Nonconcavities (February 2006). Available at SSRN: https://ssrn.com/abstract=912688 or http://dx.doi.org/10.2139/ssrn.912688

Rabah Amir

University of Arizona - Department of Economics ( email )

Tucson, AZ 85721
United States

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

Filomena Garcia (Contact Author)

Indiana University ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

ISEG - Technical University of Lisbon ( email )

R. Miguel Lupi, 20
Lisbon, 1200
Portugal

UECE - Research Unit in Economics and Complexity ( email )

Rua Miguel Lupi, 20
Lisboa, 1200-781
Portugal

Malgorzata Knauff

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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