game-theory_08/09/2009

Source : NEP (New Economics Papers) | RePEc

1. A Foundation for Markov Equilibria in Infinite Horizon Perfect Information Games

   Date:	2009-08-05
   By:	V. Bhaskar (Department of Economics, University College, London) George J. Mailath (Department of Economics, University of Pennsylvania) Stephen Morris (Department of Economics, Princeton University)
   URL:	http://d.repec.org/n?u=RePEc:pen:papers:09-029&r=gth
   We study perfect information games with an infinite horizon played by an arbitrary number of players. This class of games includes infinitely repeated perfect information games, repeated games with asynchronous moves, games with long and short run players, games with overlapping generations of players, and canonical non-cooperative models of bargaining. We consider two restrictions on equilibria. An equilibrium is purifiable if close by behavior is consistent with equilibrium when agents’ payoffs at each node are perturbed additively and independently. An equilibrium has bounded recall if there exists K such that at most one player’s strategy depends on what happened more than K periods earlier. We show that only Markov equilibria have bounded memory and are purifiable. Thus if a game has at most one long-run player, all purifiable equilibria are Markov.
   Keywords:	Markov, bounded recall, purification
   JEL:	C72

2. Fully Aggregative Games

   Date:	2009-08
   By:	Richard Cornes Roger Hartley
   URL:	http://d.repec.org/n?u=RePEc:acb:cbeeco:2009-505&r=gth
   A game is fully aggregative if payoffs and marginal payoffs depend only on a player’s own strategy and a function of the strategy profile which is common to all players. We characterize the form which this function must take in such a game and show that the game will be strategically equivalent to another game in which the function is the simple sum of strategies.
   JEL:	C72

3. Bimodal Bidding in Experimental All-Pay Auctions

   Date:	2009-08
   By:	Christiane Ernst Christian Thöni
   URL:	http://d.repec.org/n?u=RePEc:usg:dp2009:2009-25&r=gth
   We report results from experimental first-price, sealed-bid, all-pay auctions for a good with a common and known value. We observe bidding strategies in groups of two and three bidders and under two extreme information conditions. As predicted by the Nash equilibrium, subjects use mixed strategies. In contrast to the prediction under standard assumptions bids are drawn from a bimodal distribution: very high and very low bids are much more frequent than intermediate bids. Standard risk preferences cannot account for our results. However, bidding behavior is consistent with the predictions of a model with reference dependent preferences as proposed by the prospect theory.
   Keywords:	All-pay Auction; Prospect Theory, Experiment
   JEL:	D44

4. Let them cheat!

   Date:	2009-08
   By:	Rodrigo Velez (Texas A&M University) William Thomson (University of Rochester)
   URL:	http://d.repec.org/n?u=RePEc:roc:rocher:552&r=gth
   We consider the problem of fairly allocating a bundle of infinitely divisible commodities among a group of agents with “classical” preferences. We propose to measure an agent’s “sacrifice” at an allocation by the size of the set of feasible bundles that the agent prefers to her consumption. As a solution, we select the allocations at which sacrifices are equal across agents and this common sacrifice is minimal. We then turn to the manipulability of this solution. In the tradition of Hurwicz (1972, Decision and Organization, U. Minnesota Press), we identify the equilibrium allocations of the manipulation game associated with this solution when all commodities are normal: (i) for each preference profile, each equal-division constrained Walrasian allocation is an equilibrium allocation; (ii) conversely, each equilibrium allocation is equal-division constrained Walrasian. (iii) Furthermore, we show that if normality of goods is dropped, then equilibrium allocations may not be efficient.
   Keywords:	equal-sacrifice rule, manipulation game, equal-division Walrasian solution.

5. A Newton Collocation Method for Solving Dynamic Bargaining Games

   Date:	2009-08
   By:	John Duggan (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158) Tasos Kalandrakis (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158)
   URL:	http://d.repec.org/n?u=RePEc:roc:wallis:wp60&r=gth
   We develop and implement a collocation method to solve for an equilibrium in the dynamic legislative bargaining game of Duggan and Kalandrakis (2008). We formulate the collocation equations in a quasi-discrete version of the model, and we show that the collocation equations are locally Lipchitz continuous and directionally differentiable. In numerical experiments, we successfully implement a globally convergent variant of Broyden’s method on a preconditioned version of the collocation equations, and the method economizes on computation cost by more than 50% compared to the value iteration method. We rely on a continuity property of the equilibrium set to obtain increasingly precise approximations of solutions to the continuum model. We showcase these techniques with an illustration of the dynamic core convergence theorem of Duggan and Kalandrakis (2008) in a nine-player, two-dimensional model with negative quadratic prefe rences.

6. Not so cheap talk: a model of advice with communication costs

   Date:	2009-08-22
   By:	Hertel, Jo Smith, John
   URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:17056&r=gth
   We model a game similar to the interaction between an academic advisor and advisee. Like the classic cheap talk setup, an informed player sends information to an uninformed receiver who is to take an action which affects the payoffs of both sender and receiver. However, unlike the classic cheap talk setup, the preferences regarding the receiver’s actions are identical for both sender and receiver. Additionally, the sender incurs a communication cost which is increasing in the complexity of the message sent. We characterize the resulting equilibria. Under an additional out-of-equilibrium condition (Condition L), if preferences for sender and receiver are identical then the only equilibria are the most informative, feasible ones. A similar result appears in Chen, Kartik and Sobel (2008) when their No Incentive to Separate (NITS) condition is applied to the case where communication is costless but preferences diverge. Additi onally, we model the competency of the advisee by the probability that the action is selected by mistake. We show that the informativeness of the sender is decreasing in the likelihood of the mistake. When the preferences between players diverge and when there are communication costs, we are not guaranteed uniqueness and we provide an example where an increase in communication costs can improve communication.
   Keywords:	complexity; communication; cheap talk
   JEL:	D82

7. Share the Gain, Share the Pain? Almost Transferable Utility, Changes in Production Possibilities and Bargaining Solutions

   Date:	2009-08-22
   By:	Elisabeth Gugl (Department of Economics, University of Victoria) Justin Leroux (HEC Montéral and CIRPÉE)
   URL:	http://d.repec.org/n?u=RePEc:vic:vicddp:0903&r=gth
   We consider an n-person economy in which efficiency is independent of distribution but the cardinal properties of the agents’ utility functions preclude transferable utility (a property we call “Almost TU”). We show that Almost TU is a necessary and sufficient condition for all agents to either benefit jointly or suffer jointly with any change in production possibilities under well-behaved generalized utilitarian bargaining solutions (of which the Nash Bargaining and the utilitarian solutions are special cases). We apply the result to household decision-making in the context of the Rotten Kid Theorem and in evaluating a change in family taxation.
   Keywords:	Axiomatic bargaining, Solidarity, Transferable utility, Family taxation, Rotten Kid Theorem
   JEL:	C71

8. Testing unilateral and bilateral link formation

   Date:	2009
   By:	Margherita Comola Marcel Fafchamps
   URL:	http://d.repec.org/n?u=RePEc:pse:psecon:2009-30&r=gth
   The literature has shown that network architecture depends crucially on whether links are formed unilaterally or bilaterally, that is, on whether the consent of both nodes is required for a link to be formed. We propose a test of whether network data is best seen as an actual link or willingness to link and, in the latter case, whether this link is generated by an unilateral or bilateral link formation process. We illustrate this test using survey answers to a risk-sharing question in Tanzania. We find that the bilateral link formation model fits the data better than the unilateral model, but the data are best interpreted as willingness to link rather than an actual link. We then expand the model to include self-censoring and find that models with self-censoring fit the data best.

9. Growth and social capital: an evolutionary model

   Date:	2009
   By:	Correani, L Di Dio, F Garofalo, G
   URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:17043&r=gth
   In this paper, we analyze the role of cooperation between firms through a model of growth and social capital. In a growth model à la Solow we incorporate the set of resources that a relational network has at its disposals, as a distinct production factor, and thus examine its dissemination through evolutionary type processes in firm interactions. Dynamic analysis of the model demonstrates that cooperation is able to increase the productivity of factors, fostering a higher rate of growth in the long term. The most significant result is that scarcity of social capital can produce a general collapse of the economic system in areas in which long term growth is usually sustained by the learning by doing and spillover of knowledge phenomena. This conclusion leads to reconsider the role of local development economic policies that should concentrate on activities that promote repeated interaction between firms proven to be coope rative or that encourage the formation of technological consortia.
   Keywords:	Economic growth; Social capital; Networks; Evolutionary games
   JEL:	C71

game-theory_24/08/2009

Source : NEP (New Economics Papers) | RePEc

1. Continuity of the value and optimal strategies when common priors change

   Date:	2009-07
   By:	Einy, Ezra Haimanko, Ori Tumendemberelz, Biligbaatar
   URL:	http://d.repec.org/n?u=RePEc:hit:econdp:2009-09&r=gth
   We show that the value of a zero-sum Bayesian game is a Lipschitz continuous function of the players’ common prior belief, with respect to the total variation metric (that induces the topology of setwise convergence on beliefs). This is unlike the case of general Bayesian games, where lower semi-continuity of Bayesian equilibrium payoffs rests on the convergence of conditional beliefs (Engl (1994), Kajii and Morris (1998)). We also show upper, and approximate lower, semi-continuity of the optimal strategy correspondence with respect to the total variation norm, and discuss approximate lower semi-continuity of the Bayesian equilibrium correspondence in the context of zero-sum games.
   Keywords:	Zero-Sum Bayesian Games, Common Prior, Value, Optimal Strategies, Upper Semi-Continuity, Lower Approximate Semi-Continuity
   JEL:	C72

2. Bimodal Bidding in Experimental All-Pay Auctions

   Date:	2009-08
   By:	Christiane Ernst Christian Thöni
   URL:	http://d.repec.org/n?u=RePEc:usg:dp2009:2009-24&r=gth
   We report results from experimental first-price, sealed-bid, all-pay auctions for a good with a common and known value. We observe bidding strategies in groups of two and three bidders and under two extreme information conditions. As predicted by the Nash equilibrium, subjects use mixed strategies. In contrast to the prediction under standard assumptions bids are drawn from a bimodal distribution: very high and very low bids are much more frequent than intermediate bids. Standard risk preferences cannot account for our results. However, bidding behavior is consistent with the predictions of a model with reference dependent preferences as proposed by the prospect theory.
   Keywords:	All-pay Auction; Prospect Theory, Experiment
   JEL:	D44

3. Limit Solutions for Finite Horizon Bargaining Problems

   Date:	2009-06
   By:	Haruo Imai (Kyoto Institute of Economic Research, Kyoto University, Kyoto, Japan) Hannu Salonen (Department of Economics and PCRC, University of Turku, 20014 Turku, Finland)
   URL:	http://d.repec.org/n?u=RePEc:tkk:dpaper:dp51&r=gth
   We investigate a random proposer bargaining game with a dead line. A bounded time interval is divided into bargaining periods of equal length and we study the limit of the subgame perfect equilibrium outcome as the number of bargaining periods goes to infinity while the dead line is kept fixed. This limit is close to the Raiffa solution when the time horizon is very short. If the dead line goes to infinity the limit outcome converges to the time preference Nash solution. The limit outcome is given an axiomatic characterization as well.
   Keywords:	Nash solution, Raiffa solution, bargaining
   JEL:	C71

4. Endogenous Information Acquisition in Coordination Games

   Date:	2009
   By:	David P. Myatt Chris Wallace
   URL:	http://d.repec.org/n?u=RePEc:oxf:wpaper:445&r=gth
   In the context of a “beauty contest” coordination game (in which pay-offs depend on the proximity of actions to an unobserved state variable and to the average action) players choose how much costly attention to pay to various informative signals; they endogenously select information sources and how carefully to listen to them. Each signal has an underlying accuracy (how precisely it identifies the state variable) and a clarity (how easy it is for players to understand what the signal says). The unique information-acquisition equilibrium has interesting properties: only a subset of signals are assigned positive weight and attention; these are the clearest signals available, even if such signals have poor underlying accuracy; the size of the subset shrinks as the complementarity of players’ actions becomes more acute; and, if actions are more complementary, the information endogenously acquired in equilibrium is more public in nature.
   Keywords:	Coordination games, Information acquisition, Publicity, Beauty-contest games
   JEL:	C72

5. Nonparametric identification of auction models with non-separable unobserved heterogeneity

   Date:	2009-07
   By:	Yingyao Hu (Institute for Fiscal Studies and Johns Hopkins University) David McAdams Matthew Shum
   URL:	http://d.repec.org/n?u=RePEc:ifs:cemmap:15/09&r=gth
   <p>We propose a novel methodology for nonparametric identification of first-price auction models with independent private values, which accommodates auction-specific unobserved heterogeneity and bidder asymmetries, based on recent results from the econometric literature on nonclassical measurement error in Hu and Schennach (2008). Unlike Krasnokutskaya (2009), we do not require that equilibrium bids scale with the unobserved heterogeneity. Our approach accommodates a wide variety of applications, including settings in which there is an unobserved reserve price, an unobserved cost of bidding, or an unobserved number of bidders, as well as those in which the econometrician fails to observe some factor with a non-multiplicative effect on bidder values.</p>

6. Bargaining and social structure

   Date:	2009
   By:	Edoardo Gallo
   URL:	http://d.repec.org/n?u=RePEc:oxf:wpaper:443&r=gth
   This paper presents a bargaining model between individuals belonging to different groups where the equilibrium outcome depends on the communication network within each group. Belonging to a group gives an informational advantage: connections help to gather information about past transactions and this information can be used to make more accurate demands in future bargaining rounds. In the long-term there is a unique stochastically stable equilibruim which depends on the peripheral or least connected individuals in each group. Comparative statistics shows that a denser and more homogeneous network allows members of a group to obtain a better deal. An empirical analysis of the observed price differential between Asian and white buyers in New York’s Fulton fish market is consistent with these predictions. An extension explores an alternative set-up where buyers and sellers belong to the same communication network: if the n etwork is regular and the agents are homogeneous then the equilibrium division in 50-50.
   Keywords:	Network, Noncooperative bargaining, Core-periphery networks, Fulton fish market, 50-50 division.
   JEL:	C73

7. Effort Maximization in Asymmetric N-person Contest Games

   Date:	2009-07
   By:	Jörg Franke Christian Kanzow Wolfgang Leininger Alexandra Väth
   URL:	http://d.repec.org/n?u=RePEc:rwi:repape:0130&r=gth
   This paper provides existence and characterization of the optimal contest success function under the condition that the objective of the contest designer is total effort maximization among n heterogeneous players. Heterogeneity of players makes active participation of a player in equilibrium endogenous with respect to the specific contest success function adopted by the contest designer. Hence, the aim of effort maximization implies the identification of those players who should be excluded from making positive efforts.We give a general proof for the existence of an optimal contest success function and provide an algorithm for the determination of the set of actively participating players.This is turn allows to determine optimal efforts in closed form.An important general feature of the solution is that maximization of total effort requires at least three players to be active.
   Keywords:	Effort maximization, existence of solution, asymmetric contests, participation constraints
   JEL:	C72

8. Marriage, Cohabitation and Commitment

   Date:	2009-08
   By:	Iyigun, Murat (University of Colorado, Boulder)
   URL:	http://d.repec.org/n?u=RePEc:iza:izadps:dp4341&r=gth
   This paper combines partner matching with an intra-household allocation model where couples decide if they want to marry or cohabitate. Marriage encourages but does not ensure a higher level of spousal commitment, which in turn can generate a larger marital surplus. Individuals’ marital preferences and commitment costs vary, and sorting equilibria are based on individuals’ marital preferences and propensity to commit. In all equilibria, some married couples are able to cooperate and operate efficiently, but some married and all cohabiting couples act with limited commitment and non-cooperatively. When spousal marital commitment costs are gender symmetric, there is a pure-sorting equilibrium in which all partners who prefer to act with commitment in marriage are matched with someone who has the same preference. In such an equilibrium, the benefits of marital commitment accrue to both partners. When commitment costs are not gender neutral, there can also be mixed-matching equilibria in which a partner who is willing to act with commitment in marriage is matched with someone who is not. In all such equilibria, the benefits of marital commitment accrue only to those men or women who are in short supply. Consequently, a shortage of men (women) who can maritally commit makes all women (men) worse off and materially indifferent between marriage or cohabitation. An excess supply of men who prefer marriage not only reduces the marriage incentives of men and raises those of women, but also the marital commitment incentives of men. As a corollary, if the gains from marriage fall, not only will more individuals choose to cohabitate but more married couples will act non-cooperatively.
   Keywords:	collective model, intra-household bargaining, modes of partnership choice
   JEL:	C78

9. Real Options and Game Theoretical Approaches to Real Estate Development Projects: Multiple Equilibria and the Implications of Different Tie-Breaking Rules

   Date:	2009
   By:	Tommaso Gabrieli Gianluca Marcato (School of Real Estate & Planning, University of Reading)
   URL:	http://d.repec.org/n?u=RePEc:rdg:repxwp:rep-wp2009-05&r=gth
   This paper builds on a fast growing literature which introduces game theory in the analysis of real option investments in a competitive setting. Specifically, in this paper we focus on the issue of multiple equilibria and on the implications that different equilibrium selections may have for the pricing of real options and for subsequent strategic decisions. We present some theoretical results of the necessary conditions to have multiple equilibria and we show under which conditions different tie-breaking rules result in different economic decisions. We then present a numerical exercise using the information set obtained on a real estate development in South London. We find that risk aversion reduces option value and this reduction decreases marginally as negative externalities decrease.
   Keywords:	game theory and real options, equilibrium selection, real estate development
   JEL:	C73

game-theory_03/08/2009

Source : NEP (New Economics Papers) | RePEc

1. Endogenous Network Dynamics

   Date:	2009-05
   By:	Frank H. Page (Indiana University) Myrna H. Wooders
   URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.28&r=gth
   In all social and economic interactions, individuals or coalitions choose not only with whom to interact but how to interact, and over time both the structure (the “with whom”) and the strategy (“the how”) of interactions change. Our objectives here are to model the structure and strategy of interactions prevailing at any point in time as a directed network and to address the following open question in the theory of social and economic network formation: given the rules of network and coalition formation, the preferences of individuals over networks, the strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emerge and persist. Our main contributions are (i) to formulate the problem of network and coalition formation as a dynamic, stochastic game, (ii) to show that this game possesses a stationary correlated equilibrium (in network and coalition formation strategies), (iii) to show that, together with the trembles of nature, this stationary correlated equilibrium determines an equilibrium Markov process of network and coalition formation, and (iv) to show that this endogenous process possesses a finite, nonempty set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. We also extend to the setting of endogenous Markov dynamics the notions of pairwise stability (Jackson-Wolinsky, 1996), strong stability (Jacksonvan den Nouweland, 2005), and Nash stability (Bala-Goyal, 2000), and we show that in order for any network-coalition pair to persist and be stable (pairwise, strong, or Nash) it is necessary and sufficient that the pair reside in one of finitely many basins of attraction. The results we obtain here for endogenous network dynamics and stochastic basins of attraction are the dynamic analogs of our earli er results on endogenous network formation and strategic basins of at traction in static, abstract games of network formation (Page and Wooders, 2008), and build on the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005).
   Keywords:	Endogenous Network Dynamics, Dynamic Stochastic Games of Network Formation, Equilibrium Markov Process of Network Formation, Basins of Attraction, Harris Decomposition, Ergodic Probability Measures, Dynamic Path Dominance Core, Dynamic Pairwise Stability
   JEL:	A14

2. The Kalai-Smorodinsky Solution with Loss Aversion

   Date:	2009
   By:	Driesen Bram Perea Andrés Peters Hans (METEOR)
   URL:	http://d.repec.org/n?u=RePEc:dgr:umamet:2009032&r=gth
   We consider bargaining games under the assumption that bargainers are loss averse, i.e. experience disutility from obtaining an outcome lower than some reference point. We follow the approach of Shalev (2002) by imposing the self-supporting condition on a solution. Given a bargaining game, we say outcome z is self-supporting under a given bargaining solution, whenever transforming the game using outcome z as reference point, yields a transformed game in which the solution is z.We show that n-player bargaining games have a unique self-supporting outcome under the Kalai-Smorodinsky (KS) solution. We define a bargaining solution, giving exactly this outcome, and characterize it by the standard axioms of Scale Invariance [SI], Individual Monotonicity [IM], and Strong Individual Rationality [SIR], and a novel axiom called Proportional Concession Invariance [PCI].A bargaining solution satisfies PCI if moving the utopia point in the direction of the solution outcome, does not change this outcome.
   Keywords:	microeconomics ;

3. Connections Among Farsighted Agents

   Date:	2009-05
   By:	Vincent Vannetelbosch (Université catholique de Louvain) Gilles Grandjean (CORE, Université catholique de Louvain) Ana Mauleon (NRS and CEREC, Facultés universitaires Saint-Louis and FNRS and CORE, Université catholique de Louvain)
   URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.30&r=gth
   We study the stability of social and economic networks when players are farsighted. In particular, we examine whether the networks formed by farsighted players are different from those formed by myopic players. We adopt Herings, Mauleon and Vannetelbosch’s (Games and Economic Behavior, forthcoming) notion of pairwise farsightedly stable set. We first investigate in some classical models of social and economic networks whether the pairwise farsightedly stable sets of networks coincide with the set of pairwise (myopically) stable networks and the set of strongly efficient networks. We then provide some primitive conditions on value functions and allocation rules so that the set of strongly efficient networks is the unique pairwise farsightedly stable set. Under the componentwise egalitarian allocation rule, the set of strongly efficient networks and the set of pairwise (myopically) stable networks that are immune to coali tional deviations are the unique pairwise farsightedly stable set if and only if the value function is top convex.
   Keywords:	Farsighted Players, Stability, Efficiency, Connections Model, Buyerseller Networks
   JEL:	A14

4. Contractually Stable Networks

   Date:	2009-06
   By:	Vincent Vannetelbosch (CORE, Université catholique de Louvain) Jean-François Caulier (Universitaires Saint-Louis) Ana Mauleon (FNRS and CEREC, CORE, Université catholique de Louvain)
   URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.47&r=gth
   We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and effic iency.
   Keywords:	Networks, Coalition Structures, Contractual Stability, Allocation Rules
   JEL:	A14

5. Measuring influence in command games

   Date:	2009-08
   By:	Michel Grabisch (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Panthéon-Sorbonne – Paris I) Agnieszka Rusinowska (GATE – Groupe d’analyse et de théorie économique – CNRS : UMR5824 – Université Lumière – Lyon II – Ecole Normale Supérieure Lettres et Sciences Humaines)
   URL:	http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00406434_v1&r=gth
   In the paper, we study a relation between command games proposed by Hu and Shapley and an influence model. We show that our framework of influence is more general than the framework of the command games. We define several influence functions which capture the command structure. These functions are compatible with the command games, in the sense that each commandable player for a coalition in the command game is a follower of the coalition under the command influence function. Some of the presented influence functions are equivalent to the command games, that is, they are compatible with the command games, and additionally each follower of a coalition under the command influence function is also a commandable player for that coalition in the command games. For some influence functions we define the equivalent command games. We show that not for all influence functions the compatible command games exist. Moreover, we propose a more general definition of the influence index and show that under some assumptions, some power indices, which can be used in the command games, coincide with some expressions of the weighted influence indices. Both the Shapley-Shubik index and the Banzhaf index are equal to a difference between the weighted influence indices under some influence functions, and the only difference between these two power indices lies in the weights for the influence indices. An example of the Confucian model of society is broadly examined.
   Keywords:	influence function; follower; influence index; command game; commandable player; Shapley-Shubik index; Banzhaf index; Coleman indices; König-Bräuninger index

6. A Relation-algebraic Approach to Simple Games

   Date:	2009
   By:	Rudolf Berghammer (Computer-Aided Program Development – Institute of Computer Science – Christian-Albrechts-Universität, Kiel) Harrie De Swart (Faculteit Wijsbegeerte-Logica en taalanalyse – Universiteit van Tilburg) Agnieszka Rusinowska (GATE – Groupe d’analyse et de théorie économique – CNRS : UMR5824 – Université Lumière – Lyon II – Ecole Normale Supérieure Lettres et Sciences Humaines)
   URL:	http://d.repec.org/n?u=RePEc:hal:journl:halshs-00404398_v1&r=gth
   Simple games are a powerful tool to analyze decision-making and coalition formation in social and political life. In this paper, we present relation-algebraic models of simple games and develop relational algorithms for solving some basic problems of them. In particular, we test certain fundamental properties of simple games (being monotone, proper, respectively strong) and compute specific players (dummies, dictators, vetoers, null players) and coalitions (minimal winning coalitions and vulnerable winning coalitions). We also apply relation-algebra to determine central and dominant players, swingers and power indices (the Banzhaf, Holler-Packel and Deegan-Packel indices). This leads to relation-algebraic specifications, which can be executed with the help of the BDD-based tool RelView after a simple translation into the tool’s programming language. In order to demonstrate the visualization facilities of RelView we cons ider an example of the Catalonian Parliament after the 2003 election.
   Keywords:	relation algebra; RelView; simple game; winning coalition; swinger; dominant player; central player; power index

7. Optimal Equilibria of the Best Shot Game

   Date:	2009-05
   By:	Paolo Pin (Università degli Studi di Siena) Luca Dall’Asta Abolfazl Ramezanpour (Politecnico di Torino)
   URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.33&r=gth
   We consider any network environment in which the “best shot game” is played. This is the case where the possible actions are only two for every node (0 and 1), and the best response for a node is 1 if and only if all her neighbors play 0. A natural application of the model is one in which the action 1 is the purchase of a good, which is locally a public good, in the sense that it will be available also to neighbors. This game will typically exhibit a great multiplicity of equilibria. Imagine a social planner whose scope is to find an optimal equilibrium, i.e. one in which the number of nodes playing 1 is minimal. To find such an equilibrium is a very hard task for any non-trivial network architecture. We propose an implementable mechanism that, in the limit of infinite time, reaches an optimal equilibrium, even if this equilibrium and even the network structure is unknown to the social planner.
   Keywords:	Networks, Best Shot Game, Simulated Annealing
   JEL:	C61

8. Estimating Simultaneous Games with Incomplete Information under Median Restrictions

   Date:	2009-04-30
   By:	Xun Tang (Department of Economics, University of Pennsylvania)
   URL:	http://d.repec.org/n?u=RePEc:pen:papers:09-023&r=gth
   I estimate a simultaneous discrete game with incomplete information where players’ private information are only required to be median independent of observed states and can be correlated with observable states. This median restriction is weaker than other assumptions on players’ private information in the literature (e.g. perfect knowledge of its distribution or its independence of the observable states). I show index coefficients in players’ utility functions are point-identified under an exclusion restriction and fairly weak conditions on the support of states. This identification strategy is fundamentally different from that in a single-agent binary response models with median restrictions, and does not involve any parametric assumption on equilibrium selection in the presence of multiple Bayesian Nash equilibria. I then propose a two-step extreme estimator for the linear coefficients, and prove its consistency.< /td>
   Keywords:	Games with incomplete information, semiparametric identification, median restrictions, consistent estimation
   JEL:	C14

9. Coordination in Evolving Networks with Endogenous Decay

   Date:	2009-07
   By:	Francesco Feri Miguel A.Meléndez-Jiménez
   URL:	http://d.repec.org/n?u=RePEc:inn:wpaper:2009-19&r=gth
   This paper studies an evolutionary model of network formation with endogenous decay, in which agents benefit both from direct and indirect connections. In addition to forming (costly) links, agents choose actions for a coordination game that determines the level of decay of each link. We address the issues of coordination (long-run equilibrium selection) and network formation by means of stochastic stability techniques. We find that both the link cost and the trade-off between efficiency and risk-dominance play a crucial role in the long-run behavior of the system.
   Keywords:	Coordination, Networks, Risk dominance, stochastic stability
   JEL:	C72

10. Incorporating Fairness Motives into the Impulse Balance Equilibrium and Quantal Response Equilibrium Concepts: An Application to 2×2 Games

    Date:	2009-05
    By:	Alessandro Tavoni (Advanced School of Economics in Venice)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.40&r=gth
    Substantial evidence has accumulated in recent empirical works on the limited ability of the Nash equilibrium to rationalize observed behavior in many classes of games played by experimental subjects. This realization has led to several attempts aimed at finding tractable equilibrium concepts which perform better empirically; one such example is the impulse balance equilibrium (Selten, Chmura, 2008), which introduces a psychological reference point to which players compare the available payoff allocations. This paper is concerned with advancing two new, empirically sound, concepts: equity-driven impulse balance equilibrium (EIBE) and equity-driven quantal response equilibrium (EQRE): both introduce a distributive reference point to the corresponding established stationary concepts known as impulse balance equilibrium (IBE) and quantal response equilibrium (QRE). The explanatory power of the considered models leads to the following ranking, starting with the most successful in terms of fit to the experimental data: EQRE, IBE, EIBE, QRE and Nash equilibrium.
    Keywords:	Fairness, Inequity aversion, Aspiration level, Impulse balance, Quantal Response, Behavioral economics, Experimental economics
    JEL:	C72

11. Team Formation in a Network

    Date:	2009-05
    By:	Markus Kinateder (Universidad de Navarra)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.36&r=gth
    Two project leaders (or entrepreneurs) in a network, which captures social relations, recruit players in a strategic, competitive and time-limited process. Each team has an optimal size depending on the project’s quality. This is a random variable with a commonly known distribution. Only the corresponding project leader observes its realization. Any decision is only observed by the involved agents. The set of pure strategy Sequential Equilibria is characterized by giving an algorithm that selects one equilibrium at a time. An agent’s expected payoff is related to his position in the network, though no centrality measure in the literature captures this relation. A social planner frequently would achieve a higher welfare.
    Keywords:	Dynamic Competitive Group Formation, Imperfect Information
    JEL:	C72

12. Kingmakers and Leaders in Coalition Formation

    Date:	2009-05
    By:	Marc Kilgour (Wilfrid Laurier University) Steven J. Brams (New York University)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.41&r=gth
    Assume that players strictly rank each other as coalition partners. We propose a procedure whereby they “fall back” on their preferences, yielding internally compatible, or coherent, majority coalition(s), which we call fallback coalitions. If there is more than one fallback coalition, the players common to them, or kingmakers, determine which fallback coalition will form. The players(s) who are the first to be acceptable to all other members of a fallback coalition are the leader(s) of that coalition. The effects of different preference assumptions—particularly, different kinds of single-peakedness—and of player weights on the number of coherent coalitions, their connectedness, and which players become kingmakers and leaders are investigated. The fallback procedure may be used (i) empirically to identify kingmakers and leaders or (ii) normatively to select them.
    Keywords:	Coalition, Fallback Process, Kingmaker Leader, Cardinally Single-peaked, Ordinally Single-peaked
    JEL:	C71

13. Tit-for-tat Strategies in Repeated Prisoner’s Dilemma Games: Evidence from NCAA Football

    Date:	2009-07-01
    By:	Humphreys, Brad (University of Alberta, Department of Economics) Ruseski, Jane (University of Alberta, Department of Economics)
    URL:	http://d.repec.org/n?u=RePEc:ris:albaec:2009_024&r=gth
    Defection in every period is the dominant strategy Nash equilibrium in finitely repeated prisoner’s dilemma games with complete information. However, in the presence of incomplete information, players may have an incentive to cooperate in some periods, leading to tit-for-tat strategies. We describe the decision to comply with recruiting regulations or cheat made by NCAA Division IA football programs as a finitely repeated prisoner’s dilemma game. The game includes incomplete information about the resources devoted to football programs, the recruiting effort made by rival programs, and the behavior of rival programs. We test for evidence that NCAA Division IA football programs follow tit-for-tat strategies in terms of complying with or defecting from NCAA recruiting rules using panel data from NCAA Division IA football over the period 1976-2005. We find anecdotal and empirical evidence that is consistent with tit-for-tat s trategies in this setting. The presence of in-conference rivals under NCAA sanctions increases the probability of a team being placed under sanctions.
    Keywords:	noncooperative behavior; cartels; NCAA football; tit-for-tat strategies
    JEL:	C72

14. Under-connected and Over-connected Networks

    Date:	2009-05
    By:	Tim Hellmann (Bielefeld University) Berno Buechel (Bielefeld University)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.38&r=gth
    Since the seminal contribution of Jackson & Wolinsky 1996 [A Strategic Model of Social and Economic Networks, JET 71, 44-74] it has been widely acknowledged that the formation of social networks exhibits a general conflict between individual strategic behavior and collective outcome. What has not been studied systematically are the sources of inefficiency. We approach this omission by analyzing the role of positive and negative externalities of link formation. This yields general results that relate situations of positive externalities with stable networks that cannot be “too dense” in a well-defined sense, while situations with negative externalities tend to induce “too dense” networks.
    Keywords:	Networks, Network Formation, Connections, Game Theory, Externalities, Spillovers, Stability, Efficiency
    JEL:	D85

15. Power in the Heterogeneous Connections Model: The Emergence of Core-Periphery Networks

    Date:	2009-05
    By:	Dotan Persitz (Tel Aviv University)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.42&r=gth
    The heterogeneous connections model is a generalization of the homogeneous connections model of Jackson and Wolinsky (1996) in which the intrinsic value of each connection is set by a discrete, positive and symmetric function that depends solely on the types of the two end agents. Core periphery networks are defined as networks in which the agents’ set can be partitioned into two subsets, one in which the members are completely connected among themselves and the other where there are no internal links. A two-type society is defined as “power based” if both types of agents prefer to connect to one of the types over the other, controlling for path length. An exhaustive analysis shows that core periphery networks, in which the “preferred” types are in the core and the “rejected” types are in the periphery, are crucial in the “power based” society. In particular, if the linking costs are not too low and not too high, at least one such network is pairwise stable. Moreover, in many cases these networks are the unique pairwise stable networks and in all cases they are the unique strongly efficient networks. The set of efficient networks often differs from the set of pairwise stable networks, hence a discussion on this issue is developed. These results suggest heterogeneity accompanied by “power based” linking preferences as a natural explanation for many core-periphery structures observed in real life social networks.
    Keywords:	Network Formation, Heterogeneity, Pairwise Stability
    JEL:	D85

16. Constrained School Choice: An Experimental Study

    Date:	2009-05
    By:	Guillaume Haeringer (Universitat Autònoma de Barcelona) Caterina Calsamiglia (Universitat Autònoma de Barcelona) Flip Klijn (Institute for Economic Analysis (CSIC))
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.29&r=gth
    The literature on school choice assumes that families can submit a preference list over all the schools they want to be assigned to. However, in many real-life instances families are only allowed to submit a list containing a limited number of schools. Subjects’ incentives are drastically affected, as more individuals manipulate their preferentes. Including a safety school in the constrained list explains most manipulations. Competitiveness across schools plays an important role. Constraining choices increases segregation and affects the stability and efficiency of the final allocation. Remarkably, the constraint reduces significantly the proportion of subjects playing a dominated strategy.
    Keywords:	School Choice, Matching, Experiment, Gale-Shapley, Top Trading Cycles, Boston Mechanism, Efficiency, Stability, Truncation, Truthtelling, Safety School
    JEL:	C72

17. Dynamics, Stability, and Foresight in the Shapley-Scarf Housing Market

    Date:	2009-06
    By:	Yoshio Kamijo (Waseda University) Ryo Kawasaki (Tokyo Institute of Technology)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.51&r=gth
    While most of the literature starting with Shapley and Scarf (1974) have considered a static exchange economy with indivisibilities, this paper studies the dynamics of such an economy. We find that both the dynamics generated by competitive equilibrium and the one generated by weakly dominance relation, converge to a set of allocations we define as strictly stable, which we can show to exist. Moreover, we show that even when only pairwise exchanges between two traders are allowed, the strictly stable allocations are attained eventually if traders are sufficiently farsighted.
    Keywords:	Indivisible Goods Market, Dynamics, Competitive Allocation, Strict Core, Foresight, Stable Set
    JEL:	D78

18. The Hoede-Bakker index modified to the Shapley-Shubik and Holler-Packel indices

    Date:	2009
    By:	Agnieszka Rusinowska (GATE – Groupe d’analyse et de théorie économique – CNRS : UMR5824 – Université Lumière – Lyon II – Ecole Normale Supérieure Lettres et Sciences Humaines)
    URL:	http://d.repec.org/n?u=RePEc:hal:journl:halshs-00406430_v1&r=gth
    We present some modifications of the Hoede-Bakker index defined in a social network in which players may influence each other. Due to influences of the other actors, the final decision of a player may be different from his original inclination. The modifications presented in the paper are defined for an arbitrary probability distribution over all inclination vectors. In particular, they concern the situation in which the inclination vectors may be not equally probable. Furthermore, by assuming special probability distributions over all inclination vectors, we construct modifications of the Hoede-Bakker index that coincide with the Shapley- Shubik index and with the Holler-Packel index,respectively. We present a practical example in which the concepts in question are applied to Dutch parties, and a theoretical example in which we show how the modifications can be calculated.
    Keywords:	Hoede-Bakker index; inclination vector; probability distribution; Shapley-Shubik index; Holler- Packel index

19. WHEN CONSENSUS CHOICE DOMINATES INDIVIDUALISM: Jensen’s Inequality and Collective Decisions under Uncertainty

    Date:	2009-07
    By:	Charles F. Manski
    URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:15172&r=gth
    Research on collective provision of private goods has focused on distributional considerations. This paper studies a class of problems of decision under uncertainty in which the argument for collective choice emerges from the mathematics of aggregating individual payoffs. Consider decision making when each member of a population has the same objective function, which depends on an unknown state of nature. If agents knew the state of nature, they would make the same decision. However, they may have different beliefs or may use different decision criteria. Hence, they may choose different actions even though they share the same objective. Let the set of feasible actions be convex and the objective function be concave in actions, for all states of nature. Then Jensen’s inequality implies that consensus choice of the mean privately-chosen action yields a larger aggregate payoff than does individualistic decision making, in al l states of nature. If payoffs are transferable, the aggregate payoff from consensus choice may be allocated to Pareto dominate individualistic decision making, in all states of nature. I develop these ideas. I also use Jensen’s inequality to show that a planner with the power to assign actions to the members of the population should not diversify. Finally, I give a version of the collective choice result that holds with consensus choice of the median rather than mean action.
    JEL:	D7

20. Matching Markets with Signals

    Date:	2009-05
    By:	Alexey Kushnir (Pennsylvania State University)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.39&r=gth
    A costless signaling mechanism has been proposed as a device to improve welfare in decentralized two-sided matching markets. An example of such an environment is a job market for new Ph.D. economists. We study a market game of incomplete information between firms and workers and show that costless signaling is actually harmful in some matching markets. Specifically, if agents have very similar preferences, signaling lessens the total number of matches and the welfare of firms, as well as it affects ambiguously the welfare of workers. These results run contrary to previous findings that costless signaling facilitates match formation.
    Keywords:	Matching Markets, Signaling
    JEL:	C70

21. Dynamic Core-Theoretic Cooperation in a Two-Dimensional International Environmental Model

    Date:	2009-05
    By:	Marc Germain (Universite catholique de Louvain) Henry Tulkens (Université catholique de Louvain) Alphonse Magnus (Institut de mathématique, Université catholique de Louvain)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.26&r=gth
    This article deals with cooperation issues in international pollution problems in a two di- mensional dynamic framework implied by the accumulation of the pollutant and of the capital goods. Assuming that countries do reevaluate at each period the advantages to cooperate or not given the current stocks of pollutant and capital, and under the assumption that damage cost functions are linear, we define at each period of time a transfer scheme between countries, which makes cooperation better for each of them than non-cooperation. This transfer scheme is also strategically stable in the sense that it discourages partial coalitions.
    Keywords:	Stock Pollutant, Capital Accumulation, International Environmental Agreements, Dynamic Core Solution
    JEL:	Q54

22. Subgame Perfect Implementation with Almost Perfect Information and the Hold-Up Problem

    Date:	2009-07
    By:	Philippe Aghion Drew Fudenberg Richard T. Holden
    URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:15167&r=gth
    The foundations of incomplete contracts have been questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of subgame perfect implementation to the introduction of small amounts of asymmetric information. We show that Moore- Repullo mechanisms may not yield (even approximately) truthful revelation in pure or totally mixed strategies as the amount of asymmetric information goes to zero. Moreover, we argue that a wide class of extensive-form mechanisms are subject to this fragility.
    JEL:	C72

23. Feasibility Constraints and Protective Behavior in Efficient Kidney Exchange

    Date:	2009-05
    By:	Antonio Nicoló (Università degli Studi di Padova) Carmelo Rodríguez Álvarez (Universidad Complutense de Madrid)
    URL:	http://d.repec.org/n?u=RePEc:fem:femwpa:2009.31&r=gth
    We propose a model of Kidney-Exchange that incorporates the main European institutional features. We assume that patients do not consider all compatible kidneys homogeneous and patients are endowed with reservation values over the minimal quality of the kidney they may receive. Under feasibility constraints, patients’ truthful revelation of reservation values is incompatible with constrained efficiency. In the light of this result, we introduce an alternative behavioral assumption on patients’ incentives. Patients choose their revelation strategies as to “protect” themselves from bad outcomes and use a lexicographic refinement of maximin strategies. In this environment, if exchanges are pairwise, then priority rules or rules that maximize a fixed ordering provide incentives for the patients to report their true reservation values. The positive result vanishes if larger exchanges are admitted.
    Keywords:	Kidney, Matching, Protective Behavior
    JEL:	C78

24. What Do We Expect from Our Friends?

    Date:	2009-06
    By:	Quoc-Anh Do (School of Economics, Singapore Management University) Stephen Leider (Harvard University) Markus M. Mobius (Harvard University) Tanya Rosenblat (Iowa State University)
    URL:	http://d.repec.org/n?u=RePEc:siu:wpaper:09-2009&r=gth
    We conduct a field experiment in a large real-world social network to examine how subjects expect to be treated by their friends and by strangers who make allocation decisions in modified dictator games. While recipients’ beliefs accurately account for the extent to which friends will choose more generous allocations than strangers (i.e. directed altruism), recipients are not able to anticipate individual differences in the baseline altruism of allocators (measured by giving to an unnamed recipient, which is predictive of generosity towards named recipients). Recipients who are direct friends with the allocator, or even recipients with many common friends, are no more accurate in recognizing intrinsically altruistic allocators. Recipient beliefs are significantly less accurate than the predictions of an econometrician who knows the allocator’s demographic characteristics and social distance, suggesting recipients do n ot have information on unobservable characteristics of the allocator.
    Keywords:	dictator games, beliefs, baseline altruism, directed altruism, social networks
    JEL:	C73

25. Optimal Collusion with Limited Severity Constraint

    Date:	2009
    By:	Etienne Billette de Villemeur (Toulouse School of Economics, IDEI & GREMAQ, 21 allée de Brienne, 31000 Toulouse, France) Laurent Flochel (Charles River Associates International, 27 Avenue de l’opéra, 75001 Paris, France) Bruno Versaevel (EMLYON Business School & CNRS, GATE, 69134 Ecully cedex France)
    URL:	http://d.repec.org/n?u=RePEc:gat:wpaper:0909&r=gth
    Collusion sustainability depends on ï¬rms’ aptitude to impose suffciently severe punishments in case of deviation from the collusive rule. We characterize the ability of oligopolistic ï¬rms to implement a collusive strategy when their ability to punish deviations over one or several periods is limited by a severity constraint. It captures all situations in which either structural conditions (the form of payoff functions), institutional circumstances (a regulation), or ï¬nancial consider- ations (proï¬tability requirements) set a lower bound to ï¬rms’ losses. The model speciï¬cations encompass the structural assumptions (A1-A3) in Abreu (1986) [Journal of Economic Theory, 39, 191-225]. The optimal punishment scheme is characterized, and the expression of the lowest discount factor for which collusion can be sustained is computed, that both depend on the status of the severity constraint. This extends received r esults from the literature to a large class of models that include a severity constraint, and uncovers the role of structural parameters that facilitate collusion by relaxing the constraint.
    Keywords:	Collusion, Oligopoly, Penal codes
    JEL:	C72

game-theory_13/07/2009

Source : NEP (New Economics Papers) | RePEc

1. Decision Making in Unknown and Changing Environments

   Date:	2009-06
   By:	Karl Schlag (Pompeu Fabra University) Andriy Zapechelnyuk (University of Bonn and Kyiv School of Economics)
   URL:	http://d.repec.org/n?u=RePEc:kse:dpaper:19&r=gth
   We consider an agent who has to repeatedly make choices in an uncertain and changing environment, who has full information of the past, who discounts future payoffs, but who has no prior. We provide a learning algorithm that performs almost as well as the best of a given finite number of experts or benchmark strategies and does so at any point in time, provided the agent is sufficiently patient. The key is to find the appropriate degree of forgetting distant past. Standard learning algorithms that treat recent and distant past equally do not have the sequential epsilon optimality property.
   Keywords:	Adaptive learning, experts, distribution-free, epsilon-optimality, Hannan regret
   JEL:	C44

2. Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work

   Date:	2009-06
   By:	Fershtman, Chaim Pakes, Ariel
   URL:	http://d.repec.org/n?u=RePEc:cpr:ceprdp:7323&r=gth
   With applied work in mind, we define an equilibrium notion for dynamic games with asymmetric information which does not require a specification for players’ beliefs about their opponent types. This enables us to define equilibrium conditions which, at least in principal, are testable and can be computed using a simple reinforcement learning algorithm. We conclude with an example that endogenizes the maintenance decisions for electricity generators in a dynamic game among electric utilities in which the costs states of the generators are private information.
   Keywords:	Applied Markov Equilibrium; Dynamic Games; Dynamic Oligopoly
   JEL:	C63

3. Consistency and Monotonicity in One-Sided Assignment Problems

   Date:	2009-06
   By:	Bettina-Elisabeth Klaus (Harvard Business School, Negotiation, Organizations & Markets Unit) Alexandru Nichifor (Department of Economics, Maastricht University)
   URL:	http://d.repec.org/n?u=RePEc:hbs:wpaper:09-146&r=gth
   One-sided assignment problems combine important features of two well-known matching models. First, as in roommate problems, any two agents can be matched and second, as in two-sided assignment problems, the payoffs of a matching can be divided between the agents. We take a similar approach to one-sided assignment problems as Sasaki (1995) for two-sided assignment problems and we analyze various desirable properties of solutions including consistency and weak pairwise-monotonicity. We show that for the class of solvable one-sided assignment problems (i.e., the subset of one-sided assignment problems with a non-empty core), if a subsolution of the core satisfies [indifference with respect to dummy agents, continuity, and consistency] or [Pareto indifference and consistency], then it coincides with the core (Theorems 1 and 2). However, we also prove that on the class of all one-sided assignment problems (solvable or not), no solution satisfies consistency and coincides with the core whenever the core is non-empty (Theorem 3). Finally, we comment on the difficulty in obtaining further positive results for the class of solvable one-sided assignment problems in line with Sasaki’s (1995) characterizations of the core for two-sided assignment problems.
   Keywords:	(One-sided) assignment problems, consistency, core, matching.
   JEL:	C71

4. Costly Network Formation and Regular Equilibria

   Date:	2009-06
   By:	Francesco De Sinopoli (Dipartimento di Scienze Economiche, Universita degli Studi di Verona) Carlos Pimienta (School of Economics, The University of New South Wales)
   URL:	http://d.repec.org/n?u=RePEc:swe:wpaper:2009-05&r=gth
   We prove that for generic network-formation games where players incur some strictly positive cost to propose links the number of Nash equilibria is finite. Furthermore all Nash equilibria are regular and, therefore, stable sets.
   Keywords:	Network-formation games; Regular equilibrium; Stable sets
   JEL:	C62

5. Cooperation Under Incomplete Contracting

   Date:	2009
   By:	Habis Helga Herings P. Jean-Jacques (METEOR)
   URL:	http://d.repec.org/n?u=RePEc:dgr:umamet:2009028&r=gth
   We examine the notion of the core when cooperation takes place in a setting with time and uncertainty. We do so in a two-period general equilibrium setting with incomplete markets. Market incompleteness implies that players cannot make all possible binding commitments regarding their actions at different date-events. We unify various treatments of dynamic core concepts existing in the literature. This results in definitions of the Classical Core, the Segregated Core, the Two-stage Core, the Strong Sequential Core, and the Weak Sequential Core. Except for the Classical Core, all these concepts can be defined by requiring absence of blocking in period 0 and at any date-event in period 1. The concepts only differ with respect to the notion of blocking in period 0. To evaluate these concepts, we study three market structures in detail: strongly complete markets, incomplete markets in finance economies, and incomplete markets in settings with multiple commodities.
   Keywords:	mathematical economics;

6. Grading Exams: 100, 99, 98,…or A, B, C?

   Date:	2009-06
   By:	Pradeep Dubey (SUNY, Stonybrook) John Geanakoplos (Cowles Foundation, Yale University)
   URL:	http://d.repec.org/n?u=RePEc:cwl:cwldpp:1710&r=gth
   We introduce grading into games of status. Each player chooses effort, pro­ducing a stochastic output or score. Utilities depend on the ranking of all the scores. By clustering scores into grades, the ranking is coarsened, and the incen­tives to work are changed. We apply games of status to grading exams. Our main conclusion is that if students care primarily about their status (relative rank) in class, they are often best motivated to work not by revealing their exact numerical exam scores (100, 99, …,1), but instead by clumping them into coarse categories (A,B,C). When student abilities are disparate, the optimal absolute grading scheme is always coarse. Furthermore, it awards fewer A’s than there are alpha-quality students, creating small elites. When students are homogeneous, we characterize optimal absolute grading schemes in terms of the stochastic dominance between student performances (when they shirk or wor k) on subintervals of scores, show­ing again why coarse grading may be advantageous. In both the disparate case and the homogeneous case, we prove that ab­solute grading is better than grading on a curve, provided student scores are independent.
   Keywords:	Status, Grading, Incentives, Education, Exams
   JEL:	C70

7. How Communication Improves Efficiency in Bargaining: Reconciling Theory with Evidence

   Date:	2009
   By:	Saran Rene (METEOR)
   URL:	http://d.repec.org/n?u=RePEc:dgr:umamet:2009024&r=gth
   Previous theoretical literature proved the existence of an upper bound on efficiency in bilateral bargaining. In contrast, experiments consistently find players obtaining higher efficiency than the upper bound if they are allowed to communicate before the 1/2-double auction. We bridge this gap between theory and experiments by introducing an epsilon proportion of behavioral-type players who always truthfully reveal their valuations and declare a keenness to trade before bidding in the 1/2-double auction. Preplay communication is used by the strategic types to communicate their “tougher”” bargaining position, forcing the behavioral types to adopt a “weaker”” position. This further induces the strategic types to decrease the shading/exaggeration in the announcement of their valuations lest they miss the chance to trade with the “weaker”” behavioral types. As a result, for any epsilon>0, the efficiency in equilibriu m is greater than the upper bound.
   Keywords:	microeconomics ;

8. Inefficiency of equilibria in query auctions with continuous valuations

   Date:	2009
   By:	Grigorieva Elena Herings P. Jean-Jacques Müller Rudolf Vermeulen Dries (METEOR)
   URL:	http://d.repec.org/n?u=RePEc:dgr:umamet:2009025&r=gth
   Query auctions are iterative auctions in which bidders have to select in each round an action from a finite set. We show that, when bidders have continuous valuations, any ex post equilibrium in an ex post individually rational query auction can only be ex post efficient when the running time of the auction is infinite for almost all realizations of valuations of thebidders. Thus, when valuations are drawn from a continuous probability distribution, efficiency can only be bought at the expense of a running time that is infinite with probability one. For two bidders we even show this to be true when we only require efficiency with probability one.
   Keywords:	mathematical economics;

9. Strategic behavior in repeated voluntary contribution experiments

   Date:	2009
   By:	Mengel Friederike Peeters Ronald (METEOR)
   URL:	http://d.repec.org/n?u=RePEc:dgr:umamet:2009027&r=gth
   We conduct a repeated VCM (voluntary contribution mechanism) experiment using thestrategy method. We compare a partner and a stranger design and find that participantsin the partner treatment provide (i) higher initial contributions, (ii) higher contributionson average over all periods, and (iii) contributions that do not vary more strongly withpast contributions than participants in the stranger treatment. We conclude from ourevidence that strategic motives can account for a large share of the treatment differencestypically observed in this literature.
   Keywords:	public economics ;

10. Investments and the Holdup Problem in a Matching Market

    Date:	2009-06
    By:	Bester, Helmut
    URL:	http://d.repec.org/n?u=RePEc:cpr:ceprdp:7332&r=gth
    This paper studies investment incentives in the steady state of a dynamic bilateral matching market. Because of search frictions, both parties in a match are partially locked-in when they bargain over the joint surplus from their sunk investments. The associated holdup problem depends on market conditions and is more important for the long side of the market. In the case of investments in homogenous capital only the agents on the short side acquire ownership of capital. There is always underinvestment on both sides of the market. But when market frictions become negligible, the equilibrium investment levels tend towards the first-best.
    Keywords:	Holdup Problem; Investments; Matching Market
    JEL:	C78

11. Identification in Matching Games

    Date:	2009-06
    By:	Jeremy T. Fox
    URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:15092&r=gth
    I study a many-to-many, two-sided, transferable-utility matching game. Consider data on matches or relationships between agents but not on the choice set of each agent. I investigate what economic parameters can be learned from data on equilibrium matches and agent characteristics. Features of a production function, which gives the surplus from a match, are nonparametrically identified. In particular, the ratios of complementarities from multiple pairs of inputs are identified. Also, the ordering of production levels is identified.
    JEL:	C14

12. Measuring Power And Satisfaction in Societies with Opinion Leaders: Dictator and Opinion Leader Properties

    Date:	2009-06-11
    By:	René van den Brink (VU University Amsterdam) Agnieszka Rusinowska (Université Lumière Lyon) Frank Steffen (The University of Liverpool – Management School (ULMS))
    URL:	http://d.repec.org/n?u=RePEc:dgr:uvatin:20090052&r=gth
    A well known and established model in communication policy in sociology and marketing is that of opinion leadership. Opinion leaders are actors in a society who are able to affect the behavior of other members called followers. Hence, opinion leaders might have a considerable impact on the behavior of markets and other social agglomerations being made up of individual actors choosing among different alternatives. For marketing or policy purposes it is interesting to investigate the effect of different opinion leader-follower structures in markets or other collective decision-making situations in a society. We study a two-action model in which the members of a society are to choose one action, for instance, to buy or not to buy a certain joint product, or to vote yes or no on a specific proposal. Each of the actors has an inclination to choose one of the actions. By definition opinion leaders have some power over their fol lowers, and they exercise this power by influencing the behavior of their followers, i.e. their choice of action. After all actors have chosen their actions, a decision-making mechanism determines the collective choice resulting from the individual choices. Using bipartite digraphs we introduce satisfaction and power scores which allow us to analyze the actors’ satisfaction and power with respect to the collective choice for societies with different opinion leader-follower structures. Moreover, we study common dictator and opinion leader properties of the above scores and illustrate our findings for a society with five members.
    Keywords:	Bipartite digraph; influence; inclination; collective choice; opinion leader; follower; satisfaction; power; dictator properties; opinion leader properties
    JEL:	C7

13. The Structure of Unstable Power Systems

    Date:	2009-05
    By:	Joseph Abdou (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Panthéon-Sorbonne – Paris I, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris)
    URL:	http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00392515_v1&r=gth
    A power system is modeled by an interaction form, the solution of which is called a settlement. By stability we mean the existence of some settlement for any preference profile. Like in other models of power structure, instability is equivalent to the existence of a cycle. Structural properties of the system like maximality, regularity, superadditivity and exactness are defined and used to determine the type of instability that may affect the system. A stability index is introduced. Loosely speaking this index measures the difficulty of the emergence of configurations that produce a deadlock. As applications we have a characterization of solvable game forms, an analysis of the structure of their instability and a localization of their stability index in case where solvability fails.
    Keywords:	Interaction form, effectivity function, stability index, Nash equilibrium, strong equilibrium, solvability, acyclicity, Nakamura number, collusion.

14. A Stability Index for Local Effectivity Functions

    Date:	2009-01
    By:	Joseph Abdou (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Panthéon-Sorbonne – Paris I, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris)
    URL:	http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00392508_v1&r=gth
    We study the structure of unstable local effectivity functions defined for n players and p alternatives. A stability index based on the notion of cycle is introduced. In the particular case of simple games, the stability index is closely related to the Nakamura Number. In general it may be any integer between 2 and p. We prove that the stability index for maximal effectivity functions and for maximal local effectivity functions is either 2 or 3.
    Keywords:	Stability index, acyclicity, strong Nash Equilibrium, core, solvability, consistency, simple game, effectivity function.

15. Conflict Networks

    Date:	2009-06
    By:	Jörg Franke Tahir Öztürk
    URL:	http://d.repec.org/n?u=RePEc:rwi:repape:0116&r=gth
    Conflict parties are frequently involved into more than one conflict at a given time. In this paper the interrelated structure of conflictive relations is modeled as a conflict network where opponents are embedded in a local structure of bilateral conflicts. Conflict parties invest in specific conflict technology to attack their respective rivals and defend their own resources.We show that there exists a unique equilibrium for this conflict game and examine the relation between aggregated equilibrium investment (interpreted as conflict intensity) and underlying network characteristics. The derived results have implications for peaceful resolutions of conflicts because neglecting the fact that opponents are embedded into an interrelated conflict structure might have adverse consequences for conflict intensity.
    Keywords:	Network games, conflicts, conflict resolution
    JEL:	C72

16. Engineering Trust – Reciprocity in the Production of Reputation Information

    Date:	2009-03
    By:	Gary E. Bolton (Department of Supply Chain & Information Systems, Pennsylvania State University) Ben Greiner (School of Economics, The University of New South Wales) Axel Ockenfels (Department of Economics, University of Cologne)
    URL:	http://d.repec.org/n?u=RePEc:swe:wpaper:2009-02&r=gth
    Reciprocal feedback distorts the production and content of reputation information, hampering trust and trade efficiency. Data from eBay and other sources combined with laboratory data provide a robust picture of how reciprocity can be guided by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust and more efficient trade.
    Keywords:	market design; reputation; trust; reciprocity; eBay
    JEL:	C73

17. Inconsistent Incomplete Information: A Betting Experiment

    Date:	2009-06-11
    By:	Werner Güth (Max Planck Institute Jena, Strategic Interaction Group) Loreto Llorente Erviti (Universidad Publica de Navarra, Pamplona) Anthony Ziegelmeyer (Max Planck Institute Jena, Strategic Interaction Group)
    URL:	http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-043&r=gth
    We study two person-betting games with inconsistent commonly know beliefs, using an experimental approach. In our experimental games, participants bet against one another, each bettor choosing one of two possible outcomes, and payoff odds are know at the time bets are placed. Bettors’ beliefs are always commonly known. Participants play a series of betting games, in some of which the occurrence probabilities of the two outcomes differ between bettors (inconsistent beliefs) while in others the same occurrence probabilities prevail for both bettors (consistent beliefs). In the betting games with consistent commonly know beliefs, we observe that participants refrain from betting. In the betting games with inconsistent commonly know beliefs, we observe significant betting rates and the larger the discrepancy between the two bettors’ subjective expectations the larger the volume of bets. Our experimental results contrast with the existing evidence on zero-sum betting games according to which participants’ irrational inclination to bet is difficult to eliminate.
    Keywords:	Betting, Common prior, Harsanyi consistency, Experimental Economics.
    JEL:	C72

18. Nonparametric Identification of Auction Models with Non-Separable Unobserved Heterogeneity

    Date:	2009-06
    By:	Yingyao Hu, David McAdams and Matthew Shum
    URL:	http://d.repec.org/n?u=RePEc:jhu:papers:553&r=gth
    We propose a novel methodology for nonparametric identification of first-price auction models with independent private values, which accommodates auction-specific unobserved heterogeneity and bidder asymmetries, based on recent results from the econometric literature on nonclassical measurement error in Hu and Schennach (2008). Unlike Krasnokutskaya (2009), we do not require that equilibrium bids scale with the unobserved heterogeneity. Our approach accommodates a wide variety of applications, including settings in which there is an unobserved reserve price, an unobserved cost of bidding, or an unobserved number of bidders, as well as those in which the econometrician fails to observe some factor with a non-multiplicative effect on bidder values.

game-theory_03/07/2009

Source : NEP (New Economics Papers) | RePEc

1. Perfect correlated equilibria in stopping games

   Date:	2009-06-10
   By:	Heller, Yuval
   URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:15646&r=gth
   We prove that every undiscounted multi-player stopping game in discrete time admits an approximate correlated equilibrium. Moreover, the equilibrium has five appealing properties: (1) “Trembling-hand” perfectness – players do not use non-credible threats; (2) Normal-form correlation – communication is required only before the game starts; (3) Uniformness – it is an approximate equilibrium in any long enough finite-horizon game and in any discounted game with high enough discount factor; (4) Universal correlation device -the device does not depend on the specific parameters of the game. (5) Canonical – the signal each player receives is equivalent to the strategy he plays in equilibrium.
   Keywords:	stochastic games; stopping games; correlated equilibrium; perfect equilibrium; Ramsey Theorem.
   JEL:	C73

2. A Stability Index for Local Effectivity Functions.

   Date:	2009-01
   By:	Joseph Abdou (Centre d’Economie de la Sorbonne – Paris School of Economics)
   URL:	http://d.repec.org/n?u=RePEc:mse:cesdoc:09041&r=gth
   We study the structure of unstable local effectivity functions defined for n players and p alternatives. A stability index based on the notion of cycle is introduced. In the particular case of simple games, the stability index is closely related to the Nakamura Number. In general it may be any integer between 2 and p. We prove that the stability index for maximal effectivity functions and for maximal local effectivity functions is either 2 or 3.
   Keywords:	Stability index, acyclicity, strong Nash equilibrium, core, solvability, consistency, simple game, effectivity function.
   JEL:	C70

3. Axiomatic Equilibrium Selection for Generic two-player games

   Date:	2009-05-31
   By:	Srihari Govindan Robert Wilson
   URL:	http://d.repec.org/n?u=RePEc:cla:levarc:814577000000000231&r=gth

4. Complete Sequential Equilibrium and Its Alternative

   Date:	2009-05-26
   By:	Jung, Hanjoon Michael
   URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:15443&r=gth
   We propose a complete version of the sequential equilibrium (CSE) and its alternative solution concept (WCSE) for general finite-period games with observed actions. The sequential equilibrium (SE) is not a complete solution concept in that it might not be a Nash equilibrium in the general games that allow a continuum of types and strategies. The CSE is always a Nash equilibrium and is equivalent to the SE in finite games. So, the CSE is a complete solution concept in the general games as a version of the SE. The WCSE is a weak, but simple version of the CSE. It is also a complete solution concept and functions as an alternative solution concept to the CSE. Their relation with converted versions of the perfect equilibrium and the perfect Bayesian equilibrium are discussed
   Keywords:	Complete Belief; Complete Sequential Equilibirum; Finite-period game; Solution Concept; Sequential Convergency; Sequential Equilibrium.
   JEL:	C72

5. Evaluating information in zero-sum games with incomplete information on both sides.

   Date:	2009-05
   By:	Bernard De Meyer (Centre d’Economie de la Sorbonne) Ehud Lehrer (School of Mathematical Sciences – Tel Aviv University) Dinah Rosenberg (LAGA Institut Galilée – Université Paris 13)
   URL:	http://d.repec.org/n?u=RePEc:mse:cesdoc:09035&r=gth
   In a Bayesian game some players might receive a noisy signal regarding the specific game actually being played before it starts. We study zero-sum games where each player receives a partial information about his own type and no information about that of the other player and analyze the impact the signals have on the payoffs. It turns out that the functions that evaluate the value of information share two property. The first is Blackwell monotonicity, which means that each player gains from knowing more. The second is concavity on the space of conditional probabilities.
   Keywords:	Value of information, Blackwell monotonicity, concavity.
   JEL:	C72

6. Evolution of Coalition Structures under Uncertainty

   Date:	2008-03-26
   By:	De Marco, Giuseppe Romaniello, Maria
   URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:14725&r=gth
   In Hart and Kurz (1983), stability and formation of coalition structures has been investigated in a noncooperative framework in which the strategy of each player is the coalition he wishes to join. However, given a strategy profile, the coalition structure formed is not unequivocally determined. In order to solve this problem, they proposed two rules of coalition structure formation: the $\gamma$ and the $\delta$ models. \par In this paper we look at evolutionary games arising from the $\gamma$ model for situations in which each player can choose mixed strategies and has vague expectations about the formation rule of the coalitions in which is not involved; players determine at every instant their strategies and we study how, for every player, subjective beliefs on the set of coalition structures evolve coherently to the strategic choices. Coherency is regarded as a viability constraint for the differential inclusions des cribing the evolutionary game. Therefore, we investigate viability properties of the constraints and characterize velocities of pairs belief/strategies which guarantee that coherency of beliefs is always satisfied. Finally, among many coherent belief revisions (evolutions), we investigate those characterized by minimal change and provide existence results.
   Keywords:	Coalition formation; coherent beliefs; differential inclusions; viability theory; minimal change belief revision
   JEL:	D71

7. A Note on Intrinsic Correlation

   Date:	2008-12-08
   By:	Du, Songzi
   URL:	http://d.repec.org/n?u=RePEc:pra:mprapa:12698&r=gth
   In this note we characterize the strategic implication of intrinsic correlation, introduced by Brandenburger and Friedenberg (2008), in the subjective correlated equilibrium setting of a complete information game. Intrinsic correlation restricts correlation devices to variables within the game, i.e. players’s beliefs (and higher order beliefs) about each other’s strategies, in contrast to signals or sunspots from the “outside.” The characterization is a strengthening of best-response set with an injectivity condition for a certain subset identified by an iterative procedure. We also give an iterative procedure, analogous to the iterated removals of dominated strategies, that arrives at strategies consistent with our characterization, which always exist.
   Keywords:	game theory; correlated equilibrium; rationalizability; intrinsic correlation; higher order beliefs; redundant types; epistemics
   JEL:	C70

8. Repeated games with asymmetric information and random price fluctuations at finance markets : the case of countable state space.

   Date:	2009-01
   By:	Victor C. Domansky (St. Petersburg Institute for Economics and Mathematics – Russian Academy of Sciences) Victoria L. Kreps (St. Petersburg Institute for Economics and Mathematics – Russian Academy of Sciences)
   URL:	http://d.repec.org/n?u=RePEc:mse:cesdoc:09040&r=gth
   This paper is concerned with multistage bidding models introduced by De Meyer and Moussa Saley (2002) to analyze the evolution of the price system at finance markets with asymmetric information. The zero-sum repeated games with incomplete information are considered modeling the bidding with countable sets of possible prices and admissible bids. It is shown that, if the liquidation price of a share has a finite variance, then the sequence of values of n-step games is bounded and converges to the value of the game with infinite number of steps. We construct explicitly the optimal strategies for this game. The optimal strategy of Player 1 (the insider) generates a symmetric random walk of posterior mathematical expectations of liquidation price with absorption. The expected duration of this random walk is equal to the initial variance of liquidation price. The guaranteed total gain of Player 1 (the value of the game) is equa l to this expected duration multiplied with the fixed gain per step.
   Keywords:	Multistage bidding, asymmetric information, repeated games, optimal strategy.
   JEL:	C73

9. Global Analysis of an Expectations Augmented Evolutionary Dynamics

   Date:	2007-12
   By:	Angelo Antoci (Department of Economics, University of Sassari) Antonio Gay (University of Florence) Massimiliano Landi (School of Economics, Singapore Management University) Pier Luigi Sacco (IUAV, Venice)
   URL:	http://d.repec.org/n?u=RePEc:siu:wpaper:25-2007&r=gth
   We consider a deterministic evolutionary model where players form expectations about future play. Players are not fully rational and have expectations that change over time in response to current payoffs and feedback from the past. We provide a complete characterization of the qualitative dynamics so induced for a two strategies population game,and relate our findings to standard evolutionary dynamics and equilibrium selection when agents have rational forward looking expectations
   Keywords:	evolutionary games; dynamic systems; bounded rationality
   JEL:	C73

10. The Structure of Unstable Power Systems.

    Date:	2009-05
    By:	Joseph Abdou (Centre d’Economie de la Sorbonne – Paris School of Economics)
    URL:	http://d.repec.org/n?u=RePEc:mse:cesdoc:09042&r=gth
    A power system is modeled by an interaction form, the solution of which is called a settlement. By stability we mean the existence of some settlement for any preference profile. Like in other models of power structure, instability is equivalent to the existence of a cycle. Structural properties of the system like maximality, regularity, superadditivity and exactness are defined and used to determine the type of instability that may affect the system. A stability index is introduced. Loosely speaking this index measures the difficulty of the emergence of configurations that produce a deadlock. As applications we have a characterization of solvable game forms, an analysis of the structure of their instability and a localization of their stability index in case where solvability fails.
    Keywords:	Interaction form, effectivity function, stability index, Nash equilibrium, strong equilibrium, solvability, acyclicity, Nakamura number, collusion.
    JEL:	C70

11. Preemptive Investment Game with Alternative Projects

    Date:	2009-06
    By:	Michi Nishihara (Graduate School of Economics, Osaka University)
    URL:	http://d.repec.org/n?u=RePEc:osk:wpaper:0916&r=gth
    This paper derives a preemptive equilibrium in strategic investment in alternative projects. The problem is formulated in a real options model with a multidimensional state variable that represents project-specific uncertainty. The proposed method enables us to evaluate the value of potential alternatives. The results not only extend previous studies with a one-dimensional state variable but also reveal new findings. Preemptive investment takes place earlier and the project value becomes lower if the numbers of both firms and projects increase by the same amount. Interestingly, a strong correlation among profits from projects, unlike in a monopoly, plays a positive role in moderating preemptive competition.
    Keywords:	strategic real options, preemption, alternative projects, stopping game.
    JEL:	C73

12. Decision Making in Uncertain and Changing Environments

    Date:	2009-06-08
    By:	Karl H. Schlag Andriy Zapechelnyuk
    URL:	http://d.repec.org/n?u=RePEc:cla:levarc:814577000000000259&r=gth

13. The Refined Best-Response Correspondence and Backward Induction

    Date:	2009-06-08
    By:	Dieter Balkenborg Josef Hofbauer Christoph Kuzmics
    URL:	http://d.repec.org/n?u=RePEc:cla:levarc:814577000000000248&r=gth

game-theory_22/06/2009

Source : NEP (New Economics Papers) | RePEc

1. Evaluating information in zero-sum games with incomplete information on both sides

   Date:	2009-05
   By:	Bernard De Meyer (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Panthéon-Sorbonne – Paris I) Ehud Lehrer (School of Mathematical Sciences – Tel Aviv University) Dinah Rosenberg (LAGA – Laboratoire d’Analyse, Géométrie et Applications – CNRS : UMR7539 – Université Paris-Nord – Paris XIII)
   URL:	http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00390625_v1&r=gth
   In a Bayesian game some players might receive a noisy signal regarding the specific game actually being played before it starts. We study zero-sum games where each player receives a partial information about his own type and no information about that of the other player and analyze the impact the signals have on the payoffs. It turns out that the functions that evaluate the value of information share two property. The first is Blackwell monotonicity, which means that each player gains from knowing more. The second is concavity on the space of conditional probabilities.
   Keywords:	Value of information, Blackwell monotonicity, concavity.

2. Preempting versus Postponing: the Stealing Game

   Date:	2008-06
   By:	Andrea Gallice
   URL:	http://d.repec.org/n?u=RePEc:icr:wpicer:02-2008&r=gth
   We present an endogenous timing game of action commitment in which play- ers can steal from each other parts of a homogeneous and perfectly divisible pie (market). We show how the incentives to preempt or to follow the rivals radi- cally change with the number of players involved in the game. In the course of the analysis we also introduce, discuss and apply the concept of pu-dominance, a generalization of the risk-dominance criterion to games with more than two players.
   Keywords:	stealing, endogenous timing games, pu-dominance.
   JEL:	C72

3. Patience or Fairness? Analyzing Social Preferences in Repeated Games

   Date:	2009-05
   By:	John Duffy Felix Munoz-Garcia
   URL:	http://d.repec.org/n?u=RePEc:pit:wpaper:383&r=gth
   This paper investigates how the introduction of social preferences affects players` equilibrium behavior in both one-shot and infinitely repeated versions of the Prisoner`s Dilemma game. We first show that defection survives as the unique equilibrium of the stage game if at least one player is not too concerned about inequity aversion. Second, we demonstrate that in the infinitely repeated version of the game, fairness concerns operate as a `substitute` for time discounting, as fairness helps sustain cooperation for lower discount factors. We then extend our results to more general simultaneous-move games, and more general preferences. Finally, we point out the implications of our findings for the design and analysis of experiments involving repeated games. In particular, repeated game equilibria which are thought to be supported by sufficiently large discount factors, may in fact be sustained by a combination of discount ing and social preference parameters, an observation that may help rationalize recent experimental findings.
   JEL:	C72

4. The Value Of Two-Person Zero-Sum Repeated Games with Incomplete Information and Uncertain Duration

   Date:	2009-05
   By:	Abraham Neyman
   URL:	http://d.repec.org/n?u=RePEc:huj:dispap:dp512&r=gth
   It is known that the value of a zero-sum infinitely repeated game with incomplete information on both sides need not exist [Aumann Maschler 95]. It is proved that any number between the minmax and the maxmin of the zero-sum infinitely repeated game with incomplete information on both sides is the value of the long finitely repeated game where players’ information about the uncertain number of repetitions is asymmetric.

5. Repeated games with asymmetric information and random price fluctuations at finance markets : the case of countable state space

   Date:	2009-05
   By:	Victor C. Domansky (St. Petersburg Institute for Economics and Mathematics – Russian Academy of Sciences) Victoria L. Kreps (St. Petersburg Institute for Economics and Mathematics – Russian Academy of Sciences)
   URL:	http://d.repec.org/n?u=RePEc:hal:journl:halshs-00390701_v1&r=gth
   This paper is concerned with multistage bidding models introduced by De Meyer and Moussa Saley (2002) to analyze the evolution of the price system at finance markets with asymmetric information. The zero-sum repeated games with incomplete information are considered modeling the bidding with countable sets of possible prices and admissible bids. It is shown that, if the liquidation price of a share has a finite variance, then the sequence of values of n-step games is bounded and converges to the value of the game with infinite number of steps. We construct explicitly the optimal strategies for this game. The optimal strategy of Player 1 (the insider) generates a symmetric random walk of posterior mathematical expectations of liquidation price with absorption. The expected duration of this random walk is equal to the initial variance of liquidation price. The guaranteed total gain of Player 1 (the value of the game) is equa l to this expected duration multiplied with the fixed gain per step.
   Keywords:	Multistage bidding, asymmetric information, repeated games, optimal strategy.

6. Stable Coalition-Governments: The Case of Three Political Parties

   Date:	2009-06
   By:	M. Socorro Puy (Department of Economic Theory, Universidad de Málaga)
   URL:	http://d.repec.org/n?u=RePEc:mal:wpaper:2009-3&r=gth
   We explore to what extent we can propose fixed negotiation rules as well as simple mechanisms (or protocols) that guarantee that politi¬cal parties can form stable coalition-governments. We analyze the case where three parties can hold office in the form of two-party coalitions. We define the family of Weighted Rules, that select political agree¬ments as a function of the bliss-points of the parties, and electoral results (Camson’s Law and equal-share among others are included). We show that every weighted rule yields a stable coalition. We make use of the theory of implementation to design a protocol (in the form of a mechanism) that guarantees that a stable coalition will govern. We find that no dominant-solvable mechanism can be used for this purpose, but there is a simultaneous-unanimity mechanism that im¬plements it in Nash and strong Nash equilibrium.
   Keywords:	Coalition-government, Stability, Nash-implementation
   JEL:	D71

7. Conflict of interests, (implicit) coalitions and Nash policy games

   Date:	2008-02
   By:	Acocella Nicola Di Bartolomeo Giovanni Piacquadio Paolo Giovanni
   URL:	http://d.repec.org/n?u=RePEc:ter:wpaper:0054&r=gth
   By introducing the concepts of implicit coalitions and conflict of interests in a multiple-player context, this paper generalizes some theorems on policy invariance and equilibrium existence and uniqueness for LQ policy games.

8. Competing Auction Houses

   Date:	2009-04
   By:	Alexander Matros (University of Pittsburgh) Andriy Zapechelnyuk (University of Bonn and Kyiv School of Economics)
   URL:	http://d.repec.org/n?u=RePEc:kse:dpaper:17&r=gth
   We consider a model where sellers make repeated attempts to sell an object via two competing auction houses. An auction house that attracts a seller runs a Vickrey auction among a random sample of buyers and collects two fees: a listing fee and, if the object is sold, a closing fee. We characterize equilibria and show that two equilibrium outcomes are possible: a (contestable) monopoly, and a market segmentation between the two competitors.
   Keywords:	Competing auctions, mediator, listing fee, closing fee
   JEL:	C73

9. The Structure of Unstable Power Systems

   Date:	2009-05-13
   By:	Joseph Abdou (CES – Centre d’économie de la Sorbonne – CNRS : UMR8174 – Université Panthéon-Sorbonne – Paris I, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics – Ecole d’Économie de Paris)
   URL:	http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00389181_v1&r=gth
   A power system is modeled by an interaction form, the solution of which is called a settlement. By stability we mean the existence of some settlement for any preference profile. Like in other models of power structure, instability is equivalent to the existence of a cycle. Structural properties of the system like maximality, regularity, superadditivity, subadditivity and exactness are defined and used to determine the type of instability that may affect the system. A Stability Index is introduced. Loosely speaking this index measures the difficulty of the emergence of configurations that produce a deadlock. As applications we have a characterization of solvable game forms, an analysis of the structure of their instability and a localization of their stability index in case where solvability fails.
   Keywords:	Interaction Form, Effectivity Function, Stability Index, Nash Equilibrium, Strong Equilibrium, Solvability, Acyclicity, Nakamura Number, Collusion

10. A Note on Aumann’s Core Equivalence Theorem without Monotonicity

    Date:	2009-04
    By:	Honda, Jun Takekuma, Shin-Ichi
    URL:	http://d.repec.org/n?u=RePEc:hit:econdp:2009-04&r=gth
    In an exchange economy with a continuum of traders, we establish the equivalence theorem on the core and the set of competitive allocations without assuming monotonicity of traders’ preferences. Under weak assumptions we provide two alternative core equivalence theorems. The first one is for irreducible economies under Debreu’s assumption on quasi-equilibria. The second one is an extension of Aumann’s theorem under weaker assumptions than monotonicity.
    Keywords:	core, equivalence, monotonicity, quasi-equilibrium, irreducibility
    JEL:	C71

11. Incentivising trust

    Date:	2009-03
    By:	Pamela Lenton (Department of Economics, The University of Sheffield) Paul Mosley (Department of Economics, The University of Sheffield)
    URL:	http://d.repec.org/n?u=RePEc:shf:wpaper:2009004&r=gth
    We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness et al (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering pro tection which strengthens the first player’s risk efficacy, or ratio of assets to risk.
    Keywords:	Experimental economics; Game theory; Risk; Reciprocity
    JEL:	A13

12. Picking the Winners

    Date:	2009-06
    By:	Pablo Amorós (Department of Economic Theory, Universidad de Málaga)
    URL:	http://d.repec.org/n?u=RePEc:mal:wpaper:2009-2&r=gth
    We analyze the problem of choosing the w contestants who will win a competition within a group of n>w competitors when all jurors commonly observe who are the w best contestants but may be biased. We study conditions on the configuration of the jury so that it is possible to induce the jurors to always choose the best contestants, whoever they are. If the equilibrium concept used by the jurors is dominant strategies, the necessary and sufficient conditions incorporate very strong informational requirements on the mechanism designer. If we relax the equilibrium concept to Nash or subgame perfect equilibria the necessary and sufficient conditions are less demanding. Moreover, these conditions are also necessary for any other equilibrium concept. Finally, we study one specific application: we propose a simple and natural mechanism for the case where each juror is biased in favor of one and only one (different) contestant.
    Keywords:	Mechanism design, Social choice
    JEL:	C72

13. Matching and network effects

    Date:	2009-01
    By:	Marcel Fafchamps (University of Oxford) Marco van der Leij (Universidad de Alicante) Sanjeev Goyal (Department of Economics, Queen Mary)
    URL:	http://d.repec.org/n?u=RePEc:ivi:wpasad:2009-15&r=gth
    The matching of individuals in teams is a key element in the functioning of an economy. The network of social ties can potentially transmit important information on abilities and reputations and also help mitigate matching frictions by facilitating interactions among ¿screened¿ individuals. We conjecture that the probability of i and j forming a team is falling in the distance between i and j in the network of existing social ties. The objective of this paper is to empirically test this conjecture. We examine the formation of coauthor relations among economists over a twenty year period. Our principal finding is that a new collaboration emerges faster among two researchers if they are ¿closer” in the existing coauthor network among economists. This proximity effect on collaboration is strong: being at a network distance of 2 instead of 3, for instance, raises the probability of initiating a collaboration by 27 percent. Research collaboration takes place in an environment where fairly detailed information concerning individual ability and productivity -reflected in publications, employment history, etc.- is publicly available. Our finding that social networks are powerful even in this setting suggests that they must affect matching processes more generally.
    Keywords:	coauthorship network, matching, network effects, network formation.
    JEL:	C78

14. Conflict, Settlement, and the Shadow of the Future

    Date:	2009-05
    By:	Michael McBride (Department of Economics, University of California-Irvine) Stergios Skaperdas (Department of Economics, University of California-Irvine)
    URL:	http://d.repec.org/n?u=RePEc:irv:wpaper:080922&r=gth
    In many instances of potential violent or non-violent conflict, the future strategic positions of adversaries are very different when there is open conflict than when there is settlement. Then, we show that as the future becomes more important, open conflict becomes more likely than settlement. We discuss the applicability of this finding in war, litigation, and other settings, and test it it in a laboratory experiment. We find that subjects are more likely to engage in risky conflict as the future becomes more important.
    Keywords:	Conflict; Llitigation; Property rights; Folk theorem
    JEL:	C72

15. Rewards and Punishments in Bargaining

    Date:	2009-04
    By:	Svetlana Pevnitskaya (Department of Economics, Florida State University) Dmitry Ryvkin (Department of Economics, Florida State University)
    URL:	http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2009_04_01&r=gth
    Bargaining fails when participants do not reach an agreement despite an opportunity for Pareto improvement. Numerous experimental studies found that in asymmetric bargaining, where one party proposes the terms and the other can accept or reject the proposal, low offers are typically rejected. We conduct an experiment where upon acceptance the responding party can apply costly rewards and/or punishments, and find that the likelihood of acceptance increases. The least generous offers have the highest chance to be accepted in the presence of punishment alone. Proposers are most generous when responders can both reward and punish, and offer least (even compared to the baseline) when responders can only reward. The optimal scheme of rewards and punishments varies with the population of proposers, indicating that the appropriate scheme can potentially compensate for a mismatch between proposers’ and responders’ social norms.
    Keywords:	bargaining, rewards and punishments, experimental economics, ultimatum
    JEL:	C78

16. Focused Power: Experimental Manifestation of the Shapley-Shubik Power Index

    Date:	2007-11-23
    By:	Chris Geller (Deakin University) Jamie Mustard (Deakin University) Ranya Shahwan
    URL:	http://d.repec.org/n?u=RePEc:dkn:econwp:eco_2007_13&r=gth
    Experiments evaluate the fit of the Shapley-Shubik Power Index to a controlled human environment. Subjects with differing votes divide a fixed purse by majority rule in online chat rooms under supervision. Earnings serve as a measure of power. Chat rooms and processes for selecting subjects reduce or eliminate extraneous political forces, leaving logrolling as the primary political force. Initial proposals by subjects for division of the purse allow measurement of effects from focal points and transaction costs. Net results closely fit the Shapley-Shubik Power Index.
    Keywords:	Voting, Power Index, Focal Point, Shapley-Shubik, Experiment
    JEL:	C71

17. Optimal Delegation in Nash Bargaining

    Date:	2009-01
    By:	Roland Kirstein (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    URL:	http://d.repec.org/n?u=RePEc:mag:wpaper:09001&r=gth
    When appointing a representative in negotiations, the principal can o er his agent a offer contract that promises a percentage of the bargaining result, and a bonus payment result (or penalty) if bargaining fails. Conventional wisdom of contract theory seems to suggest that the share should be as great as possible to provide proper incentives for a risk-neutral agent, while the bonus should be small or even negative. Drawing on the symmetric Nash bargaining solution, this paper argues that the optimal share is rather small, whereas the optimal bonus is rather large.
    Keywords:	Endogenous threat points, marginal valuation, strategic moves
    JEL:	C78

18. Optimal Collusion with Limited Severity Constraint

    Date:	2009-03
    By:	DE VILLEMEUR, Etienne FLOCHEL, Laurent VERSAEVEL, Bruno
    URL:	http://d.repec.org/n?u=RePEc:ide:wpaper:11169&r=gth
    JEL:	C72