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How profitable are strategic behaviors in a market?

How profitable are strategic behaviors in a market?
How profitable are strategic behaviors in a market?
It is common wisdom that individuals behave strategically in economic environments. We consider Fisher markets with Leontief utilities and study strategic behaviors of individual buyers in market equilibria. While simple examples illustrate that buyers do get larger utilities when behaving strategically, we show that the benefits can be quite limited: We introduce the concept of incentive ratio to capture the extent to which utility can be increased by strategic behaviors of an individual, and show that the incentive ratio of Leontief markets is less than 2. We also reveal that the incentive ratios are insensitive to market sizes. Potentially, the concept incentive ratio can have applications in other strategic settings as well.
106-118
Chen, Ning
52f917c7-bcbf-4a36-9a60-d613627972a3
Deng, Xiaotie
772c0705-a735-43dc-8988-f5c527572574
Zhang, Jie
6bad4e75-40e0-4ea3-866d-58c8018b225a
Chen, Ning
52f917c7-bcbf-4a36-9a60-d613627972a3
Deng, Xiaotie
772c0705-a735-43dc-8988-f5c527572574
Zhang, Jie
6bad4e75-40e0-4ea3-866d-58c8018b225a

Chen, Ning, Deng, Xiaotie and Zhang, Jie (2011) How profitable are strategic behaviors in a market? pp. 106-118. (doi:10.1007/978-3-642-23719-5_10).

Record type: Conference or Workshop Item (Other)

Abstract

It is common wisdom that individuals behave strategically in economic environments. We consider Fisher markets with Leontief utilities and study strategic behaviors of individual buyers in market equilibria. While simple examples illustrate that buyers do get larger utilities when behaving strategically, we show that the benefits can be quite limited: We introduce the concept of incentive ratio to capture the extent to which utility can be increased by strategic behaviors of an individual, and show that the incentive ratio of Leontief markets is less than 2. We also reveal that the incentive ratios are insensitive to market sizes. Potentially, the concept incentive ratio can have applications in other strategic settings as well.

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Published date: 2011
Organisations: Agents, Interactions & Complexity

Identifiers

Local EPrints ID: 402603
URI: https://eprints.soton.ac.uk/id/eprint/402603
PURE UUID: 1a28910d-348b-484e-b7f0-679c04d1f98c
ORCID for Jie Zhang: ORCID iD orcid.org/0000-0003-1380-9952

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Date deposited: 11 Nov 2016 16:40
Last modified: 06 Jun 2018 12:14

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Contributors

Author: Ning Chen
Author: Xiaotie Deng
Author: Jie Zhang ORCID iD

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