Game Theory
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Game Theory2014-10-03László Á. KóczyZero-determinant strategies in iterated multi-strategy games
http://d.repec.org/n?u=RePEc:arx:papers:1409.1786&r=gth
Self-serving, rational agents sometimes cooperate to their mutual benefit. The two-player iterated prisoner's dilemma game is a model for including the emergence of cooperation. It is generally believed that there is no simple ultimatum strategy which a player can control the return of the other participants. The recent discovery of the powerful class of zero-determinant strategies in the iterated prisoner's dilemma dramatically expands our understanding of the classic game by uncovering strategies that provide a unilateral advantage to sentient players pitted against unwitting opponents. However, strategies in the prisoner's dilemma game are only two strategies. Are there these results for general multi-strategy games? To address this question, the paper develops a theory for zero-determinant strategies for multi-strategy games, with any number of strategies. The analytical results exhibit that a similar scenario to the case of two-strategy games. Zero-determinant strategies in iterated prisoner's dilemma can be seen as degenerate case of our results. The results are also applied to the snowdrift game, the hawk-dove game and the chicken game.Jin-Li Guo2014-09Intermediation in Networks
http://d.repec.org/n?u=RePEc:trf:wpaper:471&r=gth
I study intermediation in networked markets using a stochastic model of multilateral bargaining in which traders compete on different routes through the network. I characterize stationary equilibrium payoffs as the fixed point of a set of intuitive value function equations and study efficiency and the impact of network structure on payoffs. There is never too little trade but there may be an inefficiency through too much trade in states where delay would be efficient. With homogenous trade surplus the payoffs for players that are not essential to a trade opportunity go to zero as trade frictions vanish.Siedlarek, Jan-Peter2014-07-20bargaining; financial networks;intermediation; matching; middlemen; networks; over-the-counter markets; stochastic gamesThe Continuous Logit Dynamic and Price Dispersion
http://d.repec.org/n?u=RePEc:bie:wpaper:521&r=gth
We define the logit dynamic for games with continuous strategy spaces and establish its fundamental properties, i.e. the existence, uniqueness and continuity of solutions. We apply the dynamic to the analysis of the Burdett and Judd (1983) model of price dispersion. Our objective is to assess the stability of the logit equilibrium corresponding to the unique Nash equilibrium of this model. Although a direct analysis of local stability is difficult due to technical difficulties, an appeal to finite approximation techniques suggest that the logit equilibrium is unstable. Price dispersion, instead of being an equilibrium phenomenon, is a cyclical phenomenon. We also establish a result on the Lyapunov stability of logit equilibria in negative definite games.Ratul Lahkar, Frank Riedel2014-08Price dispersion, Evolutionary game theory, Logit dynamicDoes expressing disapproval influence future cooperation? An experimental study
http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2014-022&r=gth
We report on an experiment designed to explore whether a written expression of disapproval affects future levels of cooperation. In between two identical public goods games, participants play a mini dictator game that, depending on the treatment, either gives or does not give the recipient the opportunity to text the dictator. The recipients of an unfair offer contribute significantly less in the second public goods game. Yet, the contribution reductions are significantly smaller in the treatments allowing for recipient communication. To control for belief-based explanations of these findings, we run treatments where we elicit beliefs about the others' contributions. It turns out that the reductions in contributions, but not the reductions in beliefs, of the unfairly treated recipients are notably smaller when messaging is possible. This tends to suggest that allowing for communication opportunities helps to curtail selfishness.Anastasios Koukoumelis, M. Vittoria Levati2014-09-08Public goods game, dictator minigame, emotions, cooperationEvolutionary Stability in Asymmetric Oligopoly. A Non-Walrasian Result
http://d.repec.org/n?u=RePEc:rwi:repape:0497&r=gth
It is a very well-known result that in terms of evolutionary stability the long-run outcome of a Cournot oligopoly market with finitely many firms approaches the perfectly competitive Walrasian market outcome (Vega-Redondo, 1997). However, in this paper we show that an asymmetric structure in the cost functions of firms may change the long-run outcome. Contrary to Tanaka (1999) we show that the evolutionarily stable price in an asymmetric Cournot oligopoly needs not equal the marginal cost, it may rather equal a weighted average of (different) marginal cost. We apply a symmetrization technique in order to transform the game with asymmetric firms into a symmetric oligopoly game and then extend Schaffer’s definition (1988) of a finite population ESS (FPESS) to this setup. Moreover, we show that the FPESS in this game represents a stochastically stable state of an evolutionary process of imitation with experimentation.Wolfgang Leininger, Hamed Moghadam2014-08Cournot oligopoly; asymmetry; finite population evolutionary stable strategy; stochastic stabilityOn the restricted cores and the bounded core of games on distributive lattices
http://d.repec.org/n?u=RePEc:hal:journl:halshs-00748331&r=gth
We consider TU-games with restricted cooperation, where the set of feasible coalitions is a distributive lattice, hence generated by a partial order on the set of players. In such a situation, the core may be unbounded, and one has to select a bounded part of the core as a solution concept. The restricted core is obtained by imposing equality constraints in the core for sets belonging to so-called normal collections, resulting (if nonempty) in the selection of a bounded face of the core. The bounded core proves to be the union of all bounded faces (restricted cores). The paper aims at investigating in depth the relation between the bounded core and restricted cores, as well as the properties and structures of the restricted cores and normal collections. In particular, it is found that a game is convex if and only if all restricted cores corresponding to the minimal nested normal collections are nonempty. Moreover, in this case the union of these restricted cores already covers the bounded core.Michel Grabisch, Peter Sudhölter2012-10TU-game; restricted cooperation; distributive lattice; core; extremal rays; faces of the core.Transferring Ownership of Public Housing to Existing Tenants : A Mechanism Design Approach
http://d.repec.org/n?u=RePEc:mtl:montec:09-2014&r=gth
This paper explores situations where tenants in public houses, in a specific neighborhood, are given the legislated right to buy the houses they live in or can choose to remain in their houses and pay the regulated rent. This type of legislation has been passed in many European countries in the last 30-35 years (the U.K. Housing Act 1980 is a leading example). The main objective with this type of legislation is to transfer the ownership of the houses from the public authority to the tenants. To achieve this goal, selling prices of the public houses are typically heavily subsidized. The legislating body then faces a trade-off between achieving the goals of the legislation and allocating the houses efficiently. This paper investigates this specific trade-off and identifies an allocation rule that is individually rational, equilibrium selecting, and group non-manipulable in a restricted preference domain that contains "almost all" preference profiles. In this restricted domain, the identified rule is the equilibrium selecting rule that transfers the maximum number of ownerships from the public authority to the tenants. This rule is preferred to the current U.K. system by both the existing tenants and the public authority. Finally, a dynamic process for finding the outcome of the identified rule, in a finite number of steps, is provided.Tommy ANDERSSON, Lars EHLERS, Lars-Gunnar SVENSSON2014public housing, existing tenants, equilibrium, minimum equilibrium prices, maximum trade, group non-manipulability, dynamic price processChanging partner in a cheap talk game: experimental evidence
http://d.repec.org/n?u=RePEc:gbl:wpaper:2014-05&r=gth
This paper considers the effects of the opportunity to change partners on communication. We experiment a standard cheap talk game where a player observes a private forecast before disclosing it (truthfully or untruthfully) in a message that he/she sends to his/her partner. Two treatments are applied: i) each two-player team remains unchanged until the experiment ends; and ii) players are offered the possibility to change their partner. We find that the opportunity to change partners affects communication in the relationship positively. Interestingly, this effect is explained by more beliefs in the messages and not by more truthful disclosure.Bonroy, O., Garapin, A., Llerena, D.2014ASYMMETRIC DOMINANCE EDITING;ATTRACTION EFFECT;COMPARABILITY;CONSUMER CHOICE;EXPERIMENTAL ECONOMICS;PRICING FORMATSOn Doping and Recovery
http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01059600&r=gth
This paper provides a game-theoretical analysis of the use by athletes of performance-enhancing drugs. We focus on a two-player game where players are heterogeneous and performances are subject to uncertainty. While the standard setup assumes these drugs increase maximum performances, we assume that they also increase the probability that a given athlete competes at his best possible level. This second effect drives the doping strategies alone, suggesting that focusing on the first effect leads to incorrect conclusions. Doping strategies are strategic complements for the top dog, whereas they are strategic substitutes for the underdog. We show that the top dog always dopes more than the underdog, and that the top dog will often prefer a world with doping than without it. We also argue that anti-doping tests may increase doping for the underdog, and that targeting such tests to the top dog provides incentive to dope for the underdog.Sebastian Bervoets, Bruno Decreuse, Mathieu Faure2014-08game theory; PED; anti-doping legislationWhat is Trustworthiness and What Drives It?
http://d.repec.org/n?u=RePEc:exc:wpaper:2014-06&r=gth
This paper reports the results of experiments designed to isolate the impact of various combinations of the following motives on trustworthiness: (i) unconditional other-regarding preferences -- like altruism, inequality aversion, quasi-maximin, etc.; (ii) deal-responsiveness -- reacting to actions that allow for a mutual improvement by adopting behavior that implies a mutual improvement; (iii) gift-responsiveness -- reacting to choices that allow the trustee to obtain an improvement by adopting actions that benefit the trustor; and (iv) vulnerability-responsiveness -- reacting to the vulnerability of the trustor by adopting actions that do not hurt the trustor. Our results indicate that -- besides unconditional other-regarding preferences -- vulnerability-responsiveness is an important determinant of trustworthiness even in cases where the vulnerability of the trustor does not come together with a gift to the trustee. Motivated by our empirical findings we provide formal definitions of trust and trustworthiness based on revealed willingness to accept vulnerability and the response to it.James C. Cox, Rudolf Kerschbamer, Daniel Neururer2014-09trustworthiness, trust, trust game, investment game, deal-responsiveness, gift-responsiveness, vulnerability-responsiveness, generosity, reciprocityOptimal sorting in group contests with complementarities
http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2014_09_01&r=gth
Contests between groups of workers are often used to create incentives in organizations. Managers can sort workers into groups in various ways in order to maximize total output. We explore how the optimal sorting of workers by ability in such environments depends on the degree of effort complementarity within groups. For moderately steep costs of effort, we find that the optimal sorting is balanced (i.e., minimizing the variance in ability between groups) when complementarity is weak, and unbalanced (i.e., maximizing the variance in ability) when complementarity is strong. However, when the cost of effort is sufficiently steep, the optimal sorting can be unbalanced for all levels of complementarity or even alternate between unbalanced and balanced as the level of complementarity increases.Philip Brookins, John Lightle, Dmitry Ryvkin2014-09group contest, complementarity, sorting, heterogeneityCorrupción, desigualdad y evasión de impuestos
http://d.repec.org/n?u=RePEc:ude:wpaper:0514&r=gth
In this paper, we consider a society composed of citizens grouped in different economic strata based on income, who must pay taxes, but there are incentives to do so, and a set of public officials (auditors), whose function is to monitor compliance with the tax rules among citizens. We assume that corrupt auditors can accept bribes from evaders. We show that income inequality as a driver acts of corruption and tax evasion. Next we introduce an evolutionary model to analyze the progress or regression of evasion and corruption among public officials. We conclude with some observations on policies and incentives to combat these social ills.Elvio Accinelli, Edgar J. Sánchez Carreracorrupt behavior; taxes; evolutionary game.On Replication and Perturbation of the McKelvey and Palfrey Centipede Game Experiment
http://d.repec.org/n?u=RePEc:exc:wpaper:2014-04&r=gth
nullJames C. Cox, Duncan James2014-08Neutrality Theorem Revisited: An Empirical Examination of Household Public Goods Provision
http://d.repec.org/n?u=RePEc:tsu:tewpjp:2014-005&r=gth
Households have many economic roles in society. One of such roles is to share household-level public goods that are jointly consumed by members of the household. Several theoretical models have been proposed in the literature: the unitary model, the non-cooperative game theoretical model and the bargaining model. Using both the information on Japanese Tax reforms conducted in the 1990s as natural experiments and Japanese panel data that has information on household expenditures in detail, we examine the relevance of the unitary model and the non-cooperative game theoretical model. We find that the neutrality result regarding income redistribution does not hold, which shows the failure of the unitary model. We also find evidences that the non-cooperative game model does not hold either.Ken Yamada, Hisahiro Naito2014-08Self-enforcing international environmental agreements and trade: taxes versus caps
http://d.repec.org/n?u=RePEc:sie:siegen:165-14&r=gth
This paper studies within a multi-country model with international trade the stability of international environmental agreements (IEAs) when countries regulate carbon emissions either by taxes or caps. Regardless of whether coalitions play Nash or are Stackelberg leaders the principal message is that the choice of caps or taxes matters. International trade and tax regulation are necessary conditions for the existence of the encompassing self-enforcing IEA, and that the latter is attained the more likely, the less severe the climate damage. Hence, cap regulation is inferior to tax regulation insofar as in case of the former there exist no large and effective self-enforcing IEAs, in particular not the encompassing self-enforcing IEA. Further results are that for the formation of encompassing self-enforcing IEAs it does not matter whether climate coalitions play Nash or are Stackelberg leaders or whether fossil fuel is modeled as a consumer good or an intermediate good.Thomas Eichner, Rüdiger Pethig2014cap, tax, international trade, self-enforcing environmental agreements, Nash, StackelbergCSR in an Asymmetric Duopoly with Environmental Externalities
http://d.repec.org/n?u=RePEc:bol:bodewp:wp959&r=gth
We investigate a linear state dfferential game describing an asymmetric Cournot duopoly with capacity accumulation à la Ramsey and a negative environmental externality (pollution), in which one of the firms has adopted corporate social responsibility (CSR) in its statute, and therefore includes consumer surplus and the environmental effects of production in its objective function. If the market is sufficiently large, the CSR firm sells more, accumulates more capital and earns higher profits than its profit-seeking rival.L. Lambertini, A. Palestini, A. Tampieri2014-08