WORKING PAPERS

Summary

Large conglomerate firms dominate many markets and often avoid direct price competition with each other. This behavior—called forbearance—can look like tacit collusion, where firms quietly agree not to undercut each other, even though competition laws require that new entrants must be allowed to participate freely. This creates a social dilemma: what's best for each firm individually (to compete aggressively) may make the overall market worse. The paper investigates how strategic restraint—when done right—can result in stable and efficient market outcomes, especially under uncertainty or incomplete information.

Cited Document:

• Mayaki, A. A. B. (2025) 'Pareto-Nash Allocations under Incomplete Information: A Model of Stable Optima' - Royal Economic Society (March 28, 2025)

Summary

This paper introduces a dynamic signalling framework in which agents navigate cooperation under incomplete information and wage rigidity. Specifically, it develops a three-period model to formalize how economic agents can commit to Pareto-optimal Nash reversion strategies following a temporary breakdown in cooperation. The setting reflects environments with sticky efficiency wages and uncertain productivity shocks.

The model addresses a persistent challenge in labour and organizational economics: how cooperative equilibria can be sustained when wages are slow to adjust and informational asymmetries distort expectations. Classic repeated-game approaches often assume infinite horizons or full observability; this paper departs from those assumptions by modeling finite-period cooperation with incomplete information and forward-looking signalling incentives.

Cited Document:

• Mayaki, A. A.B. (2024) 'Pareto-Nash Reversion Strategies: Three Period Dynamic Co-operative Signalling with Sticky Efficiency Wages' (June 24, 2024)