12:00

Asymmetric learning-equilibrium in the Salop model
Dávid Kopányi (University of Amsterdam)
Field: non-linear dynamics

This paper illustrates that least squares learning may lead to sub-optimal outcomes even when the functional form of the perceived demand function is correctly specified. We consider the Salop model with three firms and two types of consumers that face different transportation costs. Firms do not know the demand structure and they learn the demand function for their good with least squares learning. In each period, firms estimate a perceived demand function and they charge the price that maximizes their perceived profit subject to the previous price of the other firms. Then the perceived demand functions are updated with the new demand-price observations. This learning rule might lead to an asymmetric outcome in which some firms focus only on the consumers with high transportation costs. The intuition is that when a firm charges too high prices in the initial periods and thus it serves only the consumers with high transportation costs, it will not perceive it profitable to charge a lower price as it does not know that there are consumers with low transportation costs. In the paper we derive the conditions under which such asymmetric equilibrium exists and we analyze with computer simulations how frequently it occurs.

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12:45
Institutional and Technological Dynamics in a Public Goods Game
Anghel Negriu (University of Amsterdam)
Field: non-linear dynamics

Punishment and Rewarding, under various forms, are two of the most popular institutions for supporting cooperation in social dilemma. In a spatial Public Goods Game setup this paper analyzes the dynamics of two alternative punishment institutions, pool-punishment and peer-punishment. Coupled with rewarding, the co-existence of the two alternative institutions is shown possible. Peer and pool punishers, alternate in policing contributions to the public good; this results in endogenous institutional change. Technology is introduced in the model by specifying a production process for the public good that takes as input complementary factors privately owned by the agents. This results in a dynamic accumulative process where agents privately invest in the alternative production factors and update their strategies for the institutional interaction based on imitation dynamics. This provides a basis for studying techno-Institutional co-evolutionary dynamics as interference patterns between rules of interaction and technological accumulation.