Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k Approach
Existing models of nonrenewable resources assume that sophisticated agents compete with other sophisticated agents. This study instead uses a level-k approach to examine cases where the focal agent is uncertain about the strategy of his opponent or predicts that the opponent will act in a nonsophist...
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| Format: | Article |
| Language: | English |
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Wiley
2017-01-01
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| Series: | Discrete Dynamics in Nature and Society |
| Online Access: | http://dx.doi.org/10.1155/2017/2768045 |
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| _version_ | 1832560390023675904 |
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| author | Ingmar Vierhaus Roel van Veldhuizen Armin Fügenschuh |
| author_facet | Ingmar Vierhaus Roel van Veldhuizen Armin Fügenschuh |
| author_sort | Ingmar Vierhaus |
| collection | DOAJ |
| description | Existing models of nonrenewable resources assume that sophisticated agents compete with other sophisticated agents. This study instead uses a level-k approach to examine cases where the focal agent is uncertain about the strategy of his opponent or predicts that the opponent will act in a nonsophisticated manner. Level-0 players are randomized uniformly across all possible actions, and level-k players best respond to the action of player k-1. We study a dynamic nonrenewable resource game with a large number of actions. We are able to solve for the level-1 strategy by reducing the averaging problem to an optimization problem against a single action. We show that lower levels of strategic reasoning are close to the Walras and collusive benchmark, whereas higher level strategies converge to the Nash-Hotelling equilibrium. These results are then fitted to experimental data, suggesting that the level of sophistication of participants increased over the course of the experiment. |
| format | Article |
| id | doaj-art-6bde7121e6134fcfaf43380f0d293dde |
| institution | Kabale University |
| issn | 1026-0226 1607-887X |
| language | English |
| publishDate | 2017-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Discrete Dynamics in Nature and Society |
| spelling | doaj-art-6bde7121e6134fcfaf43380f0d293dde2025-02-03T01:27:45ZengWileyDiscrete Dynamics in Nature and Society1026-02261607-887X2017-01-01201710.1155/2017/27680452768045Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k ApproachIngmar Vierhaus0Roel van Veldhuizen1Armin Fügenschuh2Helmut Schmidt University/University of the Federal Armed Forces, Hamburg, GermanyWZB Berlin Social Science Center, Berlin, GermanyHelmut Schmidt University/University of the Federal Armed Forces, Hamburg, GermanyExisting models of nonrenewable resources assume that sophisticated agents compete with other sophisticated agents. This study instead uses a level-k approach to examine cases where the focal agent is uncertain about the strategy of his opponent or predicts that the opponent will act in a nonsophisticated manner. Level-0 players are randomized uniformly across all possible actions, and level-k players best respond to the action of player k-1. We study a dynamic nonrenewable resource game with a large number of actions. We are able to solve for the level-1 strategy by reducing the averaging problem to an optimization problem against a single action. We show that lower levels of strategic reasoning are close to the Walras and collusive benchmark, whereas higher level strategies converge to the Nash-Hotelling equilibrium. These results are then fitted to experimental data, suggesting that the level of sophistication of participants increased over the course of the experiment.http://dx.doi.org/10.1155/2017/2768045 |
| spellingShingle | Ingmar Vierhaus Roel van Veldhuizen Armin Fügenschuh Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k Approach Discrete Dynamics in Nature and Society |
| title | Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k Approach |
| title_full | Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k Approach |
| title_fullStr | Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k Approach |
| title_full_unstemmed | Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k Approach |
| title_short | Strategic Uncertainty in Markets for Nonrenewable Resources: A Level-k Approach |
| title_sort | strategic uncertainty in markets for nonrenewable resources a level k approach |
| url | http://dx.doi.org/10.1155/2017/2768045 |
| work_keys_str_mv | AT ingmarvierhaus strategicuncertaintyinmarketsfornonrenewableresourcesalevelkapproach AT roelvanveldhuizen strategicuncertaintyinmarketsfornonrenewableresourcesalevelkapproach AT arminfugenschuh strategicuncertaintyinmarketsfornonrenewableresourcesalevelkapproach |