Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82829
Authors: 
Dufwenberg, Martin
Güth, Werner
Year of Publication: 
1998
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 1998:9
Abstract: 
Two major methods of explaining economic institutions, namely by strategic choices or through (indirect) evolution, are compared for the case of a homogenous quadratic duopoly market. Sellers either can provide incentives for agents to care for sales, or evolve as sellers who care for sales in addition to profits. The two approaches are conceptually quite different, yet similar in the sense that both allow certain kinds of commitment. We show that when the two models are set up in intuitively comparable ways strategic delegation does not change the market results as compared to the usual duopoly solution, while indirect evolution causes a more competitive behavior. Thus the case at hand underscores the differences between the two approaches in explaining economic institutions.
Subjects: 
Indirect evolution
strategic delgation
commitment
duopoly markets
agency theory
JEL: 
C72
D21
D43
Document Type: 
Working Paper

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