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on Game Theory |
| By: | Peter Holch Knudsen (Department of Economics, University of Copenhagen); Lars Peter Østerdal (Department of Economics, University of Copenhagen) |
| Abstract: | Solutions for cooperative games with side-payments can be manipulated by merging a coalition of players into a single player, or, conversely, splitting a player into a number of smaller players. This paper establishes some (im-)possibility results concerning merging- or splitting-proofness of core solutions of balanced and convex games. |
| Keywords: | cooperative games; manipulation; Dutta-Ray solution |
| JEL: | C71 D23 D71 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0519&r=gth |
| By: | Jacob K. Goeree (California Institute of Technology); Arno Riedl (University of Maastricht and IZA Bonn); Aljaz Ule (CREED, University of Amsterdam) |
| Abstract: | This paper reports the results of a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the basic Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by allowing for agents with lower linking costs or higher benefits to others. We consider treatments where agents' types are common knowledge and treatments where agents' types are private information. In all treatments, the (efficient) equilibrium network has a "star" structure. We find that with homogeneous agents, equilibrium predictions fail completely. In contrast, with heterogeneous agents stars frequently occur, often with the high-value or low-cost agent in the center. Stars are not borne but rather develop: in treatments with a high-value agent, the network's centrality, stability, and efficiency all increase over time. Our results suggest that agents' heterogeneity is a major determinant for the predominance of star-like structures in real-life social networks. |
| Keywords: | network formation, stars, heterogeneity, laboratory experiments |
| JEL: | C72 C91 C92 D85 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1754&r=gth |
| By: | Ozen,Ulas; Norde,Henk; Slikker,Marco (Tilburg University, Center for Economic Research) |
| Abstract: | This study considers a simple newsvendor situation that consists of n retailers, all selling the same item with common purchasing costs and common selling prices. Groups of retailers might increase their expected joint profit by inventory centralization, which means that they make a joint order to satisfy total future demand. The resulting newsvendor games are shown to have non-empty cores in the literature. This study investigates convexity of newsvendor games. We focus our analysis on the class of newsvendor games with independent symmetric unimodal demand distributions after providing several examples outside this class that are not convex. Several interesting subclasses, containing convex games only, are identified. Additionally, we illustrate that these results can not be extended to all games in this class. |
| Keywords: | inventory centralization;newsvendor;convexity; game theory |
| JEL: | C71 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2005103&r=gth |
| By: | Jeremy Bertomeu (Carnegie Mellon University) |
| Abstract: | This paper characterizes the inefficient mixed Nash equilibria of the complete information k-double auction. The purpose of the analysis is to find restrictions on the inefficiencies that may appear in equilibrium in a model that does not include sequential moves or incomplete contracts, as a result of coordination failure. Then, we explore extensions of the model. Can a model with complete information be rejected when trade inefficiencies are due to the presence of asymmetric information? Next, we extend the analysis to the case of repeated trading sessions, risk-aversion and disappointment-aversion. |
| Keywords: | Double Auction, Bargaining, Mixed Equilibrium, Complete Information |
| JEL: | C7 |
| Date: | 2005–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0510009&r=gth |
| By: | Christopher Cotton (Cornell University) |
| Abstract: | I present a sequential-auction game in which bidders know their own valuations, and have expectations regarding the valuations of others. Bidders choose to engage in sniping or multiple-bidding behavior depending on their expectations regarding relative level of their own valuations compared to the valuations of the other active bidders. Given the prevalence of online auction goods for which bidders should reasonably be expected to know their valuations, and the existence of auctions in which players engage in both snipping and multiple bidding behavior, this new model fills a previous void in the literature regarding behavior on eBay and other online auction sites. |
| Keywords: | internet, online auctions, eBay, sniping, multiple-bidding, sequential auctions |
| JEL: | C7 D8 |
| Date: | 2005–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0510006&r=gth |
| By: | Kirkegaard, René; Per Baltzer Overgaard (Department of Economics, University of Aarhus, Denmark) |
| Abstract: | We consider “must-sell” auctions with asymmetric buyers. First, we study auctions with two asymmetric buyers, where the distribution of valuations of the strong buyer is “stretched” relative to that of the weak buyer. Then, it is known that ineffcient first-price auctions are more profitable for the seller than effcient second-price auctions. This is because the former favor the weak buyer. However, we show that the seller can do one better by augmenting the first-price auction by a pre-auction offer made exclusively to the strong buyer. Should the strong buyer reject the offer, the object is simply sold in an ordinary first-price auction. The result is driven by the fact that the unmodified first-price auction is too favorable to the weak buyer, and that the pre-auction offer allows some correction of this to the benefit of the seller. Secondly, we show quite generally that pre-auction offers never increase the profitability of second-price auctions, since they introduce the wrong kind of favoritism from the perspective of seller profits. |
| Keywords: | first-price and second-price auctions, asymmetric bidders, pre-auction offers. |
| JEL: | D44 D82 |
| Date: | 2005–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2005-17&r=gth |
| By: | Miklós Pintér (Corvinus University of Budapest) |
| Abstract: | Harsányi introduced the concept of type space in an intuitive way. Later Heifetz and Samet formalized it. Harsányi used conditional probabilities to model the beliefs of the players, Heifetz and Samet avoided using conditional probabilities formally. We show that in both cases the concept of transition probability can reproduce the models, moreover, the transition probability approach fits to both Harsányi's intuition and the formalization of Heifetz and Samet. As a consequence, our results suggest that the concept of common prior is not appropriate to determine the players' beliefs. Two examples are also given. |
| Keywords: | Beliefs, Conditional probability, Common Prior |
| JEL: | C7 D8 |
| Date: | 2005–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0510010&r=gth |