DP5241 Participation Games: Market Entry, Coordination and the Beautiful Blonde

Author(s): Simon P Anderson , Maxim Engers

Publication Date: September 2005

Keyword(s): market entry , coordination , Nash equilibrium , mixed strategy equilibrium , common property resource problem , comparative statics

JEL(s): C72 , D43 , L13

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP5241.asp

We find the Nash equilibria for monotone n-player symmetric games where each player chooses whether to participate. Examples include market entry games, coordination games, and the bar-room game depicted in the movie 'A Beautiful Mind'. The symmetric Nash equilibrium involves excessive participation (a common property resource problem) if participants’ payoffs are decreasing (in the number of participants), and insufficient participation if payoffs are increasing. With decreasing payoffs there can be many equilibria, but with increasing payoffs there are only three. Some comparative static properties of changing one player’s participation payoffs are counter-intuitive, especially with more than two players.