Games with switching costs and endogenous references

• 成果类型: Article
• 署名作者: Guney, Begum; Richter, Michael
• 署名单位: Ozyegin University; University of London; Royal Holloway University London; City University of New York (CUNY) System; Baruch College (CUNY)
• 刊物名称: THEORETICAL ECONOMICS
• ISSN/ISSBN: 1933-6837
• DOI: 10.3982/TE4169
• 发表日期: 2022-05-01
• 页码: 617-650
• 关键词: Switching cost Nash equilibrium; CHOICE; endogenous reference; switching costs; epsilon equilibrium; D00; D01; D03; C72

摘要

We introduce a game-theoretic model with switching costs and endogenous references. An agent endogenizes his reference strategy, and then taking switching costs into account, he selects a strategy from which there is no profitable deviation. We axiomatically characterize this selection procedure in one-player games. We then extend this procedure to multiplayer simultaneous games by defining a Switching Cost Nash Equilibrium (SNE) notion, and prove that (i) an SNE always exists; (ii) there are sets of SNE, which can never be a set of Nash equilibrium for any standard game; and (iii) SNE with a specific cost structure exactly characterizes the Nash equilibrium of nearby games, in contrast to Radner's (1980) epsilon-equilibrium. Subsequently, we apply our SNE notion to a product differentiation model, and reach the opposite conclusion of Radner (1980): switching costs for firms may benefit consumers. Finally, we compare our model with others, especially Koszegi and Rabin's (2006) personal equilibrium.