From Observable Behaviors to Structures of Interaction in Binary Games of Strategic Complements

Abstract We examine how performance changes at airlines in response to a change in executive incentives. Airlines with executive bonuses contingent on on-time arrival do improve on-time performance. We find evidence of strategic gaming of the incentive as some carriers increase scheduled flight times, making it easier for flights to arrive on time. This effect is more pronounced for competitive routes. Carriers also do not decrease the frequency of flights or the number of passengers to make it easier to be on time, but they do slightly decrease fares. Competitors on the same routes also improve their on-time performance, even when their executive bonuses are not contingent on on-time performance, consistent with competition in strategic complements. (JEL G30, G34, G32) Received February 5, 2018; editorial decision April 3, 2019 by Editor Andrew Ellul.

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Assessing the Likelihood of Panic-Based Bank Runs

Contributions in Theoretical Economics ◽

10.2202/1534-5971.1323 ◽

2006 ◽

Vol 6 (1) ◽

Author(s):

Alexander Zimper

Keyword(s):

Unit Interval ◽

Comparative Statics ◽

Bank Runs ◽

Response Functions ◽

Strategic Complements ◽

Continuous Type ◽

Bank Run ◽

Best Response ◽

Demand Deposit ◽

Dominance Solvability

Conditional on the considered equilibrium, the probability of a bank run in the demand-deposit contract models of Bryant (1980) and of Diamond and Dybvig (1983) is either one or zero. In contrast, we establish the existence of an interval - being a strict subset of the unit-interval - of possible bank run probabilities for a two-player demand-deposit contract model where players receive independent signals about their liquidity desire from a continuous type space. As our main result we demonstrate that this interval reduces to a unique probability of a panic-based bank strictly smaller than one if and only if there exist types for which not running on the bank is a dominant action. In addition to existing models of bank runs such as, e.g., Goldstein and Pauzner (2005), our approach also provides some assessment of the likelihood of a bank run if there are no types for which not running on the bank is a dominant action. As a consequence, we can investigate the comparative statics of the likelihood of bank runs with respect to a larger range of payoff parameters than considered in previous models. Furthermore, we derive a technical result by which the findings of Morris and Shin (2005) on the dominance-solvability of binary action games with strategic complements also apply to nice games in the sense of Moulin (1984) if players' best response functions are increasing.

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Embedding games with strategic complements into games with strategic substitutes

Journal of Mathematical Economics ◽

10.1016/j.jmateco.2018.07.005 ◽

2018 ◽

Vol 78 ◽

pp. 45-51 ◽

Cited By ~ 2

Author(s):

Zhigang Cao ◽

Xujin Chen ◽

Cheng-Zhong Qin ◽

Changjun Wang ◽

Xiaoguang Yang

Keyword(s):

Strategic Substitutes ◽

Strategic Complements

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Spillover feedback loops and strategic complements in R&D

Journal of Public Economic Theory ◽

10.1111/jpet.12397 ◽

2019 ◽

Vol 21 (6) ◽

pp. 1126-1142 ◽

Cited By ~ 6

Author(s):

Evangelia Chalioti

Keyword(s):

Feedback Loops ◽

Strategic Complements

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Targeting Interventions in Networks

Econometrica ◽

10.3982/ecta16173 ◽

2020 ◽

Vol 88 (6) ◽

pp. 2445-2471 ◽

Cited By ~ 2

Author(s):

Andrea Galeotti ◽

Benjamin Golub ◽

Sanjeev Goyal

Keyword(s):

Network Structure ◽

Principal Components ◽

Principal Component ◽

Local Network ◽

Close Connection ◽

Strategic Complements ◽

Optimal Intervention ◽

Returns To Investment

We study games in which a network mediates strategic spillovers and externalities among the players. How does a planner optimally target interventions that change individuals' private returns to investment? We analyze this question by decomposing any intervention into orthogonal principal components, which are determined by the network and are ordered according to their associated eigenvalues. There is a close connection between the nature of spillovers and the representation of various principal components in the optimal intervention. In games of strategic complements (substitutes), interventions place more weight on the top (bottom) principal components, which reflect more global (local) network structure. For large budgets, optimal interventions are simple—they essentially involve only a single principal component.

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