Single-period Game Research Articles

The optimal quantity decision and complex analysis of duopoly game under low-carbon transformation

This paper explored the equilibrium relationship between technology investment and profit return when the duopoly green transformation. The investment in low-carbon technology can increase profits and provide low-carbon products for society. However, the low-carbon level of products may be reduced simultaneously when both companies undergo a low-carbon transformation. Counterintuitive, by analyzing the feasible region of parameters, it can be found that joint decision-making is not necessarily the best choice. Moreover, we expand the static single-period game to the multi-period game and discuss the complex dynamic behaviors and characteristics.

Customer Knowledge Enabled Innovation: Analyzing Pricing-Promotion Coordination Mechanism

Pricing and promotion are two important decisions during the market launch of new consumer electronics products. Nowadays, the pricing and promotion of consumer electronic products are often not made separately but at the same time. This study focuses on the pricing-promotion coordination mechanism of a secondary supply chain of new consumer electronics products (which consists of a manufacturer and a seller). Price and the degree of promotion together affect the demand for products. Manufacturers give sellers a sales target. Manufacturers and sellers set prices and promotions separately, introduce repurchase penalty joint contracts, and establish supply chain profit models to compare and analyze optimal pricing, promotion efforts, and maximum profit of supply chains under different decision-making situations. We prove that the repurchase penalty joint contract can coordinate the supply chain under the assumptions of a single-period game and a multiperiod repeated game. The results show that under the repurchase penalty joint contract, when manufacturers and sellers choose high prices and high promotions at the same time, the supply chain of new consumer electronics products has the largest profit. Finally, numerical experiments are conducted to study the influence of parameters on optimal decision-making and supply chain profits.

Pricing strategy and coordination of automobile manufacturers based on government intervention and carbon emission reduction

The game model of the duopoly automobile manufacturers established in this paper takes the carbon emission reduction policy constraint as the research background, and discusses how the electric vehicle and the fuel vehicle compete in the performance of the product in the delay pricing decision under the strategic consumer, which is seldom considered in other related studies. The government gives electric vehicle consumers preferential policies on consumption subsidies and exemption from consumption tax. Additionally, he levies consumption tax and sales carbon tax from fuel vehicle consumers and manufacturers, respectively. The government also supports the development of electric vehicles by establishing charging piles. This paper cast light on how different market structures and different adjusting speed of price work on the vehicle manufacturers' operation and the system's stability. At first, we consider a single period game to derive the optimal solutions, finding that government intervention policies can maximize the social welfare. Additionally, the impacts of tax and subsidy on social welfare are different when fuel vehicle manufacturer is leader. Then, we consider a repeated game where players make decision based on bounded rationality. We compare the optimal solutions and give a numerical simulation for the dynamic process. For fuel vehicle manufacturer, too much energy consumption triggers high emission tax and also lowers consumers' surplus. We also find that fuel vehicle manufacturer acting as the leader enables the system to be more stable than the scenario in the current vehicle industry condition, where the electric vehicle manufacturer acts as the leader.

Gratitude, conscience, and reciprocity: Models of supplier motivation when quality is non-contractible

Standard game-theoretic models that apply principal-agent problems to analyse buyer–supplier relations have postulated that in a single-period game, the agent will not choose non-contractible quality. However, evidence exists that suppliers (or service providers) choose costly quality in non-contractible dimensions, even in absence of reputation concern, if they are offered a premium. Such actions violate the axiom of ‘individual rationality’ and are not subgame perfect in standard game theory, wherein only material payoffs are considered. This paper builds three models of supplier behaviour in a single-period Stackelberg-like buyer–supplier game by using the framework of psychological game theory and explains supplier motivations to choose quality on non-contractible dimensions in absence of any reputation effect. If the buyer offers a price higher than the market price, the supplier may be motivated to choose non-contractible quality due to a sense of gratitude, or because of his conscience, or in order to reciprocate kindness. The results show that maximum possible quality is chosen by the supplier only in the presence of a sufficiently strong sense of gratitude or a sufficiently strong conscience. However, the buyer is better-off with a fair supplier who is motivated to reciprocate than a supplier having a very poor sense of gratitude or one having a weak conscience, because the buyer can choose an optimal premium above market price to ensure that a fair and reciprocal supplier chooses an optimal quality.

The use of non-monotonic contracts in a single period game: An experimental investigation

This paper explores whether laboratory students design non-monotonic contracts when they are theoretically optimal in a simple principal-agent context. The principal constructs a contract for three possible outcomes, LOW, MEDIUM, and HIGH, and the agent observes the contract and responds with either an effort level of 0 or 12. Non-monotonic contracts that motivate high effort are optimal for principals because effort only affects the probability of LOW and MEDIUM outcomes. Our experiment has two treatments: one where principals interact with human agents and another with computer agents. Principals only select non-monotonic contracts with a frequency of 15% and 33% in each treatment, respectively. The results are consistent with concerns about equity and agent rationality.

The Price of Liquor is Too Damn High: State Facilitated Collusion and the Implications for Taxes

We study the relative benefits of taxation versus market structure regulations for distilled spirits. One popular regulation, called post and hold, helps wholesalers set collusive prices as the competitive equilibrium of a single period game. Assembling new datasets of wholesale and retail prices, and sales, we show PH leads to average wholesale markups of 30-40%, with higher markups on expensive products. Taxes distort relative prices less than PH. We show Connecticut could increase tax revenue by 350% and improve consumer welfare while holding alcohol consumption fixed. However, we also show our counterfactual policy may be slightly regressive compared to PH.

Corporate environmental claims: a game theory model with empirical results

Purpose– This paper aims to examines whether firms’ eco-friendly advertising claims are supported by environmentally friendly behavior.Design/methodology/approach– The paper develops a game theory model to determine the circumstances under which firms’ environmental claims will be supported by the adoption of best environmental practice. Least squares regression is used to test major theoretical implications.Findings– The theoretical model suggests that the credence good nature of un-monitored environmental claims prohibits consumer validation; firms have an incentive to advertise green but no incentive to adopt best environmental practice. Third-party monitoring transforms the game, making eco-friendly outcomes possible. Empirical models based on North American data suggest that firm profit rates are related to verifiable environmental claims and to easily accessible external ratings of environmental performance.Originality/value– Unlike previous game theoretical models for similar goods, the eco-friendly outcome does not require a repeated game. The importance of the single period game is that continued patronage is not required for the firm to produce goods containing the desired attributes.

Transfers within a three generations family: When the rotten kids turn into altruistic parents

We study exchanges between three overlapping generations with non-dynastic altruism. The middleaged choose informal care provided to their parents and education expenditures for their children. The young enjoy their education, while the old may leave a bequest to their children. Within each period the three generations play a “game” inspired by Becker’s (1974, 1991) rotten kids framework, with the added features that the rotten kids turn into the altruistic parent in the next period and that parents invest in the education of their children. We show that Becker’s rotten kids theorem holds for the single period game in that informal aid is set according to an efficient rule. However, education is distorted upwards. In the stationary equilibrium the levels of both transfers are inefficient: education is too large and informal aid is too low.

Transfers within a Three Generations Family: When the Rotten Kids Turn into Altruistic Parents

We study exchanges between three overlapping generations with non-dynastic altruism. The middleaged choose informal care provided to their parents and education expenditures for their children. The young enjoy their education, while the old may leave a bequest to their children. Within each period the three generations play a “game” inspired by Becker’s (1974, 1991) rotten kids framework, with the added features that the rotten kids turn into the altruistic parent in the next period and that parents invest in the education of their children. We show that Becker’s rotten kids theorem holds for the single period game in that informal aid is set according to an efficient rule. However, education is distorted upwards. In the stationary equilibrium the levels of both transfers are inefficient: education is too large and informal aid is too low.

Pricing and Allotment in a Sea-Cargo Supply Chain with Reference Effect: A Dynamic Game Approach

The contract between the carrier and forwarder is a long-term issue, and the repeated contract business makes the forwarder develop a reference point based on the contract prices, and this reference effect, to a large extent, affects the forwarder’s contract purchasing decisions. Based on that, this paper introduces the reference effect in the sea-cargo supply chain and studies a multiple-period contract problem between the carrier and the forwarder. It is found that when the capacity price in the spot market is less than the forwarder’s willingness-to-pay, the forwarder’s contract purchasing decision is not affected by the reference effect, only by the capacity price in the spot market, and the multiple-period contract problem can be simplified into a single-period game. In addition, the carrier’s optimal contract wholesale price approaches the capacity price in the spot market. Although, the forwarder’s contract purchasing decision depends upon the reference effect, it is difficult to derive the closed-form solution. Moreover, because of the risk in the spot market, the carrier tends to sell his/her capacity in the contract market. Finally, we employ the numerical simulation to study the carrier’s contract pricing decisions and the forwarder’s capacity purchasing decisions in two cases.

A two-period dynamic game for a substitutable product inventory control problem

We consider the equilibrium strategies for substitutable product inventory control systems with a random demand in a two-period stationary environment between two retailers. This stationary scenario can be viewed as a dynamic game in a duopoly setting. We formulate the single period game and extend it to the two-period dynamic game. We investigate the existence and uniqueness of the feedback Nash equilibrium with two periods to go. We also suggest a threshold inventory level with two periods to go below which the usual substitution effect on the equilibrium may not be observed. We prove the uniqueness of the equilibrium by imposing more structure on the density function of the demand.

Research of Supply Quality Control and Optimization Under Multi-Period Dynamic Game

To control quality in supply chain, this paper presents multi-period, dynamic game models in principal-agent theory, which are opposite to static, single period game models. The research comes from industrial practice and the conclusions are more operational and feasible in theory. Finally, the research is applied into two famous companies in different industries and shows good effectiveness.

Operational Investment and Capital Structure Under Asset Based Lending: A One Period Model

We analyze a single-period game of incomplete information between a business owner and a bank to study the relationship between operational investment and capital structure in the context of asset-based lending (ABL). The bank moves first and offers a menu of loans to maximize its expected profit. Each loan offer is characterized by an interest rate and an inventory advance rate, which gives a credit limit that is increasing in the firm’s inventory investment. The owner then decides the inventory level and the mix of debt and equity with which to finance her firm’s operations. Our paper results in several new insights into the optimal solution for the firm, the characteristics of the menu of loan terms offered by the bank, and the sensitivity of the loan terms and equilibrium outcomes with respect to the operational characteristics of the firm. For instance, a leveraged firm stocks more inventory regardless of the interest rate or credit limit. These insights can be tested with data in future research.

Discriminatory Auctions with Seller Discretion: Evidence from German Treasury Auctions

This paper examines the results of 93 discriminatory German Treasury auctions between 1998 and 2002. It documents the seller's use of discretion and its influence on auction outcomes and bidding strategies. The evidence suggests that the seller uses its discretion frequently and substantially. It does not maximize revenues in a single-period game, but moves up in the competitive demand curve to set the auction price close to the market price. Bidders do not make profits in German auctions on average, while their bidding strategies reflect the uncertainty created by the seller's discretion. The paper extends and tests the multi-unit auction model by Lengwiler (1999). The empirical evidence is consistent with the implication that the market-clearing price depends on the seller's marginal cost rather than on the submitted demand.

Discriminatory Auctions in which the Seller has Discretion

This paper examines the results of 93 discriminatory German Treasury auctions between 1998 and 2002. It documents the seller's use of discretion and its influence on auction outcomes and bidding strategies. The evidence suggests that the seller uses its discretion frequently and substantially. It does not maximize revenues in a single-period game, but moves up in the competitive demand curve to set the auction price close to the market price. Bidders do not make profits in German auctions, while their bidding strategies reflect the uncertainty created by the seller's discretion. The paper extends and tests the multi-unit auction model by Lengwiler (1999). This predicts that the market-clearing price should be independent of the bidding strategies and exclusively depend on the seller's marginal cost. The results in this paper broadly support this prediction.

Foreign aid as a discipline on illegal immigration

This paper deals with a sanctions policy toward reducing illegal immigration. Using a single-period game, it shows that by imposing a penalty on each apprehended illegal alien, the host country will increase the motivation of the source country to expend money for preventing illegal immigration. It is also shown that although the sanctions are allowed to go only one way, by increasing the efficiency of catching illegal aliens, both parties will be motivated to expend money for restraining illegal immigration.

When Pretence can be Beneficial

The paper examines when unilateral and bilateral pretence may be beneficial distinguishing between positive and negative externalities. Using a two-player single period game and defining altruism, selfishness and meanness as "sentimental continuity" it is shown how the optimal level of the pretended sentimentality is determined. The novelty of the model is that the optimal degree of altruism (meanness) depends on the extent of the positive (negative) externalities.

Credibility of Voluntary Disclosure

I examine the credibility of a manager's disclosure of privately observed nonverifiable information to an investor in a repeated cheap-talk game setting. In the single-period game no communication occurs. In the repeated game, however, the manager almost always truthfully reveals his private information provided the manager is sufficiently patient, the accounting report is sufficiently useful for assessing the truthfulness of the manager's voluntary disclosure, and the manager's disclosure performance is evaluated over a sufficiently long period. These factors may explain a manager's propensity to release private information to investors.

The Pro-competitive Effect of Two-Part Tariffs

Two producers delegate sales of differentiated products to common retailers, each with a monopoly position. Each producer can offer either a linear or a two-part tariff. In the single-period game each producer's dominant strategy is to use a two-part tariff. If the two producers' products are sufficiently close substitutes and the discount factor is sufficiently high, both producers offering linear tariffs can be sustained as an equilibrium outcome in an infinitely repeated game.

Strategic Financial Disclosure: Evidence from Labor Negotiations

Abstract.Evidence of strategic behavior in public financial disclosure is provided by analyzing 673 disclosures that were made before, during, and after four Canadian labor strikes. Financial disclosures included quantitative and qualitative information about the sampled companies that appeared in print media during the periods of interest. Strategic behavior involved the naming of one actor by another in the disclosures. The analyses showed that disclosure frequency was much higher during and immediately preceding the strikes than in other periods. Network‐analytic techniques were employed to examine the linkages among seven groups of actors that were named in the disclosures. The disclosure networks increased in density during the strikes but became less centralized. Our analysis supports the view that strategic interactions in disclosures are multilateral and dynamic. Thus, any attempt to model financial disclosure during labor negotiations as a bilateral single‐period game would appear to be simplistic. Disclosure management in this setting seems to occur within a complex economic and social setting.