On December 3, 2018, Prof. Kris De Jaegher (Utrecht University School of Economics) will give a talk about "Collective defense against strategic disruption" in the context of the SFB 901.
Abstract:
This paper provides a game-theoretic model of the collective defense of a public good against a strategic disruptor, who is worse off the more of the public good gets produced. Each player who benefits from the public good can at a cost provide an input to its production, where the production function takes the CES form. The disruptor can at a cost destroy inputs. The individual player contributes to collective defense when he overinvests in his individual input, anticipating on the fact that the disruptor may destroy some of his input. As a first step, best-response defensive and disruptive strategies are derived. Next, equilibria are derived, depending on the order of play between disruption and defense, and on the production technology of the public good. It is shown that when there are complementarities between the players’ inputs, and when the disruptor moves second and sets disruption after having observed the input levels, disruption may backfire and lead to more production of the public good than in the absence of disruption. The reason is that disruption in this case inadvertently creates an incentive scheme that punishes defectors.