Recent Working Papers
We argue that cooperation can become more fragile if (i) there are sufficiently many intermediate levels of cooperation and (ii) players cannot respond with large punishments to small deviations. Such disproportional punishments can be perceived as unreasonable or players can face external constraints—political checks, negative publicity, etc. Specifically, we show that regardless of how patient the players are, any prisoner’s dilemma game can be extended with intermediate levels of cooperation in such a way that full conflict is the only equilibrium outcome of the extended game.
I study mergers where each firm owns multiple shops across a country. The corresponding current practice of the European Commission prescribes the analysis of catchment areas of individual shops as isolated markets. Such an approach is internally inconsistent. Borrowing from the network theory, I show how to extend the European Commission’s approach to consistently take overlaps in catchment areas into account. I apply my network approach to an actual merger case and I find that neglecting overlaps in catchment areas can result in substantial biases. A revision of the European Commission’s practice is therefore recommended.