2022/08/23 by Young-Soo Kim, Kim, Youngsoo, H. Dharma Kwon +1 · 1 citation
Decision Sciences · Economics, Econometrics and Finance · Social Sciences · #Economic theories and models #Experimental Behavioral Economics Studies #FOS: Economics and business #FOS: Mathematics #Game Theory and Applications #Optimization and Control (math.OC) #Theoretical Economics (econ.TH)
paper · pdf · doi:10.48550/arxiv.2208.11217
openalex publication_date 2022/08/23 · openalex created_date 2022/08/27 · openalex updated_date 2026/07/28
In the game of investment in the common good, the free rider problem can delay the stakeholders' actions in the form of a mixed strategy equilibrium. However, it has been recently shown that the mixed strategy equilibria of the stochastic war of attrition are destabilized by even the slightest degree of asymmetry between the players. Such extreme instability is contrary to the widely accepted notion that a mixed strategy equilibrium is the hallmark of the war of attrition. Motivated by this quandary, we search for a mixed strategy equilibrium in a stochastic game of investment in the common good. Our results show that, despite asymmetry, a mixed strategy equilibrium exists if the model takes into account the repeated investment opportunities. The mixed strategy equilibrium disappears only if the asymmetry is sufficiently high. Since the mixed strategy equilibrium is less efficient than pure strategy equilibria, it behooves policymakers to prevent it by promoting a sufficiently high degree of asymmetry between the stakeholders through, for example, asymmetric subsidy.