Essays in applied game theory

This dissertation was written under the guidance of John Morgan. It consists of five chapters. The first two chapters are on commitment and observability in games, in the line of Bagwell (1995). Specifically, Chapter 1 contains a theoretical analysis of a Stackelberg leader game with observation costs, while Chapter 2 reports on the results of a laboratory experiment of such a game. It turns out that the theoretical predictions of Chapter 1 are systematically violated in the data. Some possible explanations are discussed.; Chapter 3 consists of joint work with Harold Houba and Koos Sneek. In this chapter, bargaining over a commonly owned good is studied. The context of the model is the Great Fish War of Levhari and Mirman (1980). Contrary to the standard results in bargaining, patience is shown to be a disadvantage in such an environment. That is, the patient player gets a smaller share of the pie than the impatient player. Small differences in patience lead to large asymmetries in the bargaining outcome.; Chapter 4 studies the incentives for information acquisition in common value auctions. It is shown that the amount of resources spent on information depends on the form of the auction and on the publicness of information acquisition. When the act of information acquisition is overt, bidders acquire more information before a second-price auction than before a first-price auction. Under covert information acquisition, a first-price auction induces more information gathering than a second-price auction.; Finally, in Chapter 5, a Hotelling type model of competition and trade in the cement industry is developed. It is shown that entry of a trader is to the advantage of the consumers as it significantly lowers the average price-level. However, under uniform pricing—but not under discriminatory pricing—entry of a trader may lead to a loss in welfare. Also, introduction of a trader may reverse the Thisse and Vives (1988) result for linear city models that discriminatory pricing leads to more competition and lower prices than uniform pricing.