How profitable are strategic behaviors in a market?

Conference item

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.

Authors: Chen, N; Deng, X; Zhang, J

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Springer Berlin Heidelberg
• Host title: Algorithms – ESA 2011 : 19th Annual European Symposium, Saarbrücken, Germany, September 5-9, 2011. Proceedings
• Pages: 106-118
• Series: Lecture Notes in Computer Science
• Series number: 6942
• Publication date: 2011-08-30
• Event title: ESA 2011 - 19th European Symposium on Algorithms
• Event location: Saarbrücken, Germany
• Event website: https://esa2011.mpi-inf.mpg.de/
• Event start date: 2011-09-05
• Event end date: 2011-09-07
• DOI: 10.1007/978-3-642-23719-5_10
• ISSN: 0302-9743
• EISBN: 978-3-642-23719-5
• ISBN: 978-3-642-23718-8
• Language: English