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Market dominance is the control of a economic market by a firm. [1] A dominant firm possesses the power to affect competition [2] and influence market price. [3] A firms' dominance is a measure of the power of a brand, product, service, or firm, relative to competitive offerings, whereby a dominant firm can behave independent of their competitors or consumers, [4] and without concern for ...
There are two general types of implementation problems: the economic problem of producing and allocating public and private goods and choosing over a finite set of alternatives. [2] In the case of producing and allocating public/private goods, solution concepts are focused on finding dominant strategies.
Dominant Strategy: The strategy where no matter what the other player plays the dominant strategy will always be superior producing and dictating the outcome. [83] Strictly dominated strategy is a strategy where the other strategy chosen always results in a lousier outcome. [84]
If a strictly dominant strategy exists for one player in a game, that player will play that strategy in each of the game's Nash equilibria.If both players have a strictly dominant strategy, the game has only one unique Nash equilibrium, referred to as a "dominant strategy equilibrium".
The dominant-strategy revelation-principle says that every social-choice function that can be implemented in dominant-strategies can be implemented by a dominant-strategy-incentive-compatible (DSIC) mechanism. This variant was first introduced by Allan Gibbard. [1]
Every mechanism in the VCG family is a truthful mechanism, that is, a mechanism where bidding the true valuation is a dominant strategy. The trick is in step 3. The agent is paid the total value of the other agents; hence, together with its own value, the total welfare of the agent is exactly equal to the total welfare of society.
There are several different degrees of incentive-compatibility: [4] The stronger degree is dominant-strategy incentive-compatibility (DSIC). [1]: 415 It means that truth-telling is a weakly-dominant strategy, i.e. you fare best or at least not worse by being truthful, regardless of what the others do.
However, some Cournot strategy profiles are sustained as Nash equilibria but can be eliminated as incredible threats (as described above) by applying the solution concept of subgame perfection. Indeed, it is the very thing that makes a Cournot strategy profile a Nash equilibrium in a Stackelberg game that prevents it from being subgame perfect.