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Regular version of the site

Book chapter

A Model of Tacit Collusion: Nash-2 Equilibrium Concept

P. 251-269.

We examine an equilibrium concept for 2-person non-cooperative games with boundedly rational agents which we call Nash-2 equilibrium. It is weaker than Nash equilibrium and equilibrium in secure strategies: a player takes into account not only current strategies but also all profitable next-stage responses of the partners to her deviation from the current profile that reduces her relevant choice set. We provide a condition for Nash-2 existence in finite games and complete characterization of Nash-2 equilibrium in strictly competitive games. Nash-2 equilibria in Hotelling price-setting game are found and interpreted in terms of tacit collusion.

In book

Edited by: L. A. Petrosyan, V. V. Mazalov. Springer, 2016.