Matthias Blonski

Network externalities and two-part tariffs in telecommunication markets

Abstract This article analyzes demand side particularities of telecommunications markets and their consequences for the market structure. I assume that telecommunications markets are characterized by two distinguishing features: (i) the efficacy of network externalities and (ii) the presence of two-part tariffs as a simple instrument of price discrimination. Then, the usual tendency to conformity established by network externalities may in some sense be overcome by sufficient differentiation in price structures. In contrast to the perception that deregulated telecommunication markets exhibit a genuinely higher degree of competition, this article points to the observation that discrimination may retain monopoly power to network suppliers by introducing more product differentiation. Various regulation patterns and pricing rules are analyzed with respect to their influence on competition and market structure.

Characterization of pure strategy equilibria in finite anonymous games

Abstract In anonymous games a players payoff only depends on the distribution of strategies over the set of players rather than on other players identities. Anonymous games capture the essence of a wide range of social coordination problems. In this paper I characterize all pure strategy Nash equilibria of finite anonymous games. In particular, I provide a necessary and sufficient condition for a strategy distribution to correspond to a pure strategy Nash equilibrium. The proof for sufficiency is an explicit construction of all equilibria for any given equilibrium distribution. An alternative proof shows that the sufficiency result is reducible to the well known solution of a matching problem on a bipartite graph.

Social learning with case-based decisions

Abstract In decision problems with unknown payoffs, individuals use their own past experience and the experiences of others. In this article I develop a theory that links in a natural way aggregated decision processes to the underlying communication structure . In particular, I consider a binary decision problem. Since there is noise in the payoff structure agents have to learn which decision has the better performance. I analyze the long-run convergence behaviour of the social learning path for four basic communication structures. Specifically, it is shown that for complete information there is a tendency to conformity if the aspiration level of the population is low and a tendency for non-convergence if the aspiration level is high. Star communication structures , in contrast, are characterized by diversity in the long run, whereas in Δ- neighbourhood communication structures the better decision diffuses with a constant pace. The relative performances of subpopulations or cliques are shown to depend crucially on the communication intensity and relative size of the subpopulations.

Relational Contracts and Property Rights

We propose a general framework for analyzing and comparing ownership structures with respect to creating incentives for co-operative behavior (e.g. efficient investment) in long-run relationships. We generalize models by Garvey (1995), Halonen (2002), and Baker, Gibbons and Murphy (2002) and compare their results in the light of our theory, going in depth into the issue of renegotiation of ownership and strategies. We show that when agents are not restricted in their strategy choice, the short–term efficient ownership structure identified by Hart and Moore (1990) is not relational efficient — i.e. does not maximize the set of discount factors under which efficient investment can be supported in equilibrium of the repeated game. Moreover, the relational efficient ownership structure is independent of what can be renegotiated: ownership, strategies, both or none.

Equilibrium Characterization in Large Anonymous Games

In this article I characterize Nash equilibria of large anonymous games by providing the following necessary and sufficient condition for an equilibrium distribution. For no subset K of actions more players play actions in K than have a best response in K to the given distribution. While neccessity is trivial the proof for sufficiency relies on a theorem by Bollobas-Varopoulos (1974) which is an extension of Halls theorem or the marriage lemma well known from graph theory.

When is rational behavior consistent with rules of thumb? A link between evolutionary terminology and neoclassical methodology

Abstract In this article, a dynamic industry with optimizing interacting firms is formulated as a Markov game. It is shown that a suitable specification of the state space and the interaction structure leads to constant optimal decisions or routine behavior of all firms. This result depends on two crucial assumptions, the homogeneity of the state space and the linearity of the payoff functions. These assumptions may be interpreted as one possibility to understand bounded rationality . Myopic expectations according to the entry–exit process lead to a similar result in the extended entry–exit model. Hence, neoclassical methods are merged with evolutionary terminology.

Innovation and evolution as a dynamic game with rational behaviour

In the recent literature about the explanation of the behaviour of innovating firms there coexist two basically different approaches. To so calledneoclassical approach assumes maximising behaviour relating to an exogenously given innovation technology and theevolutionary approach postulates time constant routine decisions. Both explanations are supported by well known arguments. Nevertheless they seem to be completely separated in the literature. The evolutionary approach even defines itself by the separation of the neo-classical approach. In this paper the two methods or philosophies are linked in a simple duopolistic model. It will be shown, that the strategic maximising behaviour of innovating firms leads in a dynamic model to routine decisions as equilibrium strategies.

Excess Returns of Companies with a Distinguished Player

Arbitrage-free asset pricing theory suggests that equilibrium price and equilibrium value of a firm coincide and correctly anticipate the equilibrium effort of a value-enhancing manager, called the distinguished player. This article shows that in equilibrium investors trade shares of such a firm at a discount below equilibrium value and buyers earn excess returns on their investment if the distinguished player can trade anonymously. The resulting prediction that investment in companies with a distinguished player yields excess returns was confirmed by empirical evidence in von Lilienfeld-Toal and Runzi (2007) who report positive abnormal returns for owner-manager firms taken from S&P500 and S&P1500 firms.

How Many Veiled Women Can We Expect in Cairo? Characterization of Equilibria in Large Anonymous Games

Islamic fundamentalists and their secular opponents recognize that the decision of women to cover their head in public generates social pressures to conform on those wishing to remain unveiled. This article identifies the essence of social coordination problems generated by this type of externalities in terms of large anonymous games. The main result is a general characterization result that reveals the structure of equilibria. In particular, various levels of veiling can be interpreted as different equilibria of the same anonymous game.