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How Profitable Are Strategic Behaviors in a Market?

  • Ning Chen
  • Xiaotie Deng
  • Jie Zhang
Part of the Lecture Notes in Computer Science book series (LNCS, volume 6942)

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.

Keywords

Utility Function Equilibrium Price Market Equilibrium Dominant Strategy Strategic Behavior 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Ning Chen
    • 1
  • Xiaotie Deng
    • 2
  • Jie Zhang
    • 3
  1. 1.Division of Mathematical Sciences, School of Physical and Mathematical SciencesNanyang Technological UniversitySingapore
  2. 2.Department of Computer ScienceUniversity of LiverpoolUK
  3. 3.Department of Computer ScienceCity University of Hong KongHong Kong

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