Mono Pricing in Hierarchical Trees

Abstract

In this chapter we analyze the consequences of endowing exchange economies with a structure of trade relationships as in the simple model of successive monopolies. We consider hierarchically structured economies that have a hierarchical tree as their hierarchical structure. Each trade relationship is given the institutional characteristic of mono pricing. Finally, the equilibrium concept we use applies backward induction. It corresponds to a natural and mild refinement of the subgame perfect equilibrium in the generalized sequential game of perfect information associated with the economy. We consider those subgame perfect equilibria that are also equilibria in very nice plays (EVNP).