nep-gth New Economics Papers
on Game Theory
Issue of 2006‒01‒24
twenty-one papers chosen by
László Á. Kóczy
Universiteit Maastricht

  1. Bargaining Sets of Majority Voting Games By Ron Holzman; Bezalel Peleg; Peter Sudholter
  2. The core-partition of hedonic games. By Vincent Iehlé
  3. The component fairness solution for cycle-free graph games By Herings,P. Jean-Jacques; Laan,Gerard van der; Talman,Dolf
  4. Existence of Optimal Strategies in Markov Games with Incomplete Information By Abraham Neyman
  5. Club Formation Games with Farsighted Agents By Frank H. Page, Jr.; Myrna H. Wooders
  8. Growth of Strategy Sets, Entropy and Nonstationary Bounded Recall By Abraham Neyman Null; Daijiro Okada
  9. The Asympotic Shapley Value for a Simple Market Game By Thomas M. Liggett; Steven A. Lippman; Richard P. Rumelt
  11. Altruism or Artefact? A Note on Dictator Game Giving By Nicholas Bardsley
  12. A strategic model of complex networks formation. By Nicolas Carayol; Pascale Roux
  13. Empirical Models of Auctions By Susan Athey; Philip A. Haile
  14. Common reasoning in games: a resolution of the paradoxes of ‘common knowledge of rationality’ By Robin Cubitt; Robert Sugden
  15. THE IMPACT OF CHANGE IN AUCTION FORMAT ON BIDDING BEHAVIOR By Dakshina G. De Silva; Anuruddha Kankanamge; Georgia Kosmopoulou
  16. Fair Allocation of Production Externalities: Recent Results By SPRUMONT, Yves; MOULIN, Hervé
  17. A Yosida-Hewitt decomposition for totally monotone games on locally compact sigma-compact topological spaces. By Yann Rébillé
  18. Experientia Docet: Professionals Play Minimax in Laboratory Experiments By Ignacio Palacios-Huerta; Oscar Volij
  19. Uniform Price Auction and Fixed Price Offerings in IPO: An Experimental Comparison By Ping Zhang
  20. Social Network Theory, Broadband and the World Wide Web By Daniel Sgroi
  21. Existence d'un équilibre de Nash dans un jeu discontinu. By Jean-Marc Bonnisseau; Pascal Gourdel; Hakim Hammami

  1. By: Ron Holzman; Bezalel Peleg; Peter Sudholter
    Date: 2005–12–31
  2. By: Vincent Iehlé (CERMSEM)
    Abstract: A pure hedonic game describes the situation where player's utility depends only on the identity of the members of the group he belongs to. The paper provides a necessary and sufficient condition for the existence of core-partition in hedonic games. The condition is based on a new concept of balancedness, called pivotal balancedness. pivotal balancedness involves especially the notion pivotal distribution that associates to each coalition a sub-group of players in the coalition. Then, we proceed to a review of several sufficient conditions for core-partition existence showing how the results can be unified through suitably chosen pivotal distributions.
    Keywords: Hedonic game, group formation, core-partition, balancedness.
    JEL: C71
    Date: 2005–12
  3. By: Herings,P. Jean-Jacques; Laan,Gerard van der; Talman,Dolf (Tilburg University, Center for Economic Research)
    Abstract: In this paper we study cooperative games with limited cooperation possibilities, represented by an undirected cycle-free communication graph. Players in the game can cooperate if and only if they are connected in the graph, i.e. they can communicate with one another. We introduce a new single-valued solution concept, the component fairness solution. Our solution is characterized by component efficiency and component fairness. The interpretation of component fairness is that deleting a link between two players yields for both resulting components the same average change in payoff, where the average is taken over the players in the component. Component fairness replaces the axiom of fairness characterizing the Myerson value, where the players whose link is deleted face the same loss in payoff. The component fairness solution is always in the core of the restricted game in case the game is superadditive and can be easily computed as the average of n specific marginal vectors, where n is the number of players. We also show that the component fairness solution can be generated by a specific distribution of the Harsanyi-dividends.
    Keywords: TU-games;communication structure;Myerson value;fairness;marginal vector; 90B18;91A12;91A43
    JEL: C71
    Date: 2005
  4. By: Abraham Neyman
    Abstract: The existence of a value and optimal strategies is proved for the class of twoperson repeated games where the state follows a Markov chain independently of players’ actions and at the beginning of each stage only player one is informed about the state. The results apply to the case of standard signaling where players’ stage actions are observable, as well as to the model with general signals provided that player one has a nonrevealing repeated game strategy. The proofs reduce the analysis of these repeated games to that of classical repeated games with incomplete information on one side.
    Date: 2005–12
  5. By: Frank H. Page, Jr. (Department of Finance, University of Alabama); Myrna H. Wooders (Department of Economics, Vanderbilt University)
    Abstract: Modeling club structures as bipartite networks, we formulate the problem of club formation as a game of network formation and identify those club networks that are stable if agents behave farsightedly in choosing their club memberships. Using the farsighted core as our stability notion, we show that if agents' payoffs are single-peaked and agents agree on the peak club size (i.e., agents agree on the optimal club size) and if there sufficiently many clubs to allow for the partition of agents into clubs of optimal size, then a necessary and sufficient condition for the farsighted core to be nonempty is that agents who end up in smaller-than-optimal size clubs have no incentive to switch their memberships to already existing clubs of optimal size. In contrast, we show via an example that if there are too few clubs relative to the number of agents, then the farsighted core may be empty. Contrary to prior results in the literature involving myopic behavior, our example shows that overcrowding and farsightedness lead to instability in club formation.
    Keywords: Club formation, club networks, noncooperative games, farsighted stability, farsighted core, path dominance
    JEL: D85 D71 C72 C73
    Date: 2005–12
  6. By: Roberto Serrano; Oscar Volij
    Abstract: In an exchange economy with a finite number of indivisible goods, we analyze a dynamic trading process of coalitional recontracting where agents maymake mistakes with small probability. We show first that the recurrent classes of the unperturbed (mistake-free) process consist of (i) all core allocations as absorbing states, and (ii) non-singleton classes of non-core allocations. Next, we introduce a perturbed process, where the resistance of each transition is a function of the number of agents that make mistakes –do not improve– in the transition and of the seriousness of each mistake. If preferences are always strict, we show that the unique stochastically stable state of the perturbed process is the Walrasian allocation. In economies with indifferences, non-core cycles are sometimes stochastically stable, while some core allocations are not. The robustness of these results is confirmed in a weak coalitional recontracting process.
    Date: 2005–11
  7. By: Geoffroy de Clippel; Roberto Serrano
    Abstract: For games in partition function form, we explore the implications of distinguishing between the concepts of intrinsic marginal contributions and externalities. If one requires efficiency for the grand coalition, we provide several results concerning extensions of the Shapley value. Using the axioms of efficiency, anonymity, marginality and monotonicity, we provide upper and lower bounds to players' payoffs when affected by external effects, and a characterization of an ``externality-free'' value. If the grand coalition does not form, we characterize a payoff configuration on the basis of the principle of balanced contributions. We also analyze a game of coalition formation that yields sharp predictions
    Date: 2005–11
  8. By: Abraham Neyman Null (Hebrew University); Daijiro Okada (Rutgers University)
    Abstract: This paper initiates the study of long term interactions where players' bounded rationality varies over time. Time dependent bounded rationality is reflected in part in the number $\psi(t)$ of distinct strategies in the first $t$-stages. We examine how the growth rate of $\psi_i(t)$ affects equilibrium outcomes of repeated games, and, as a special case, we study the repeated games with nonstationary bounded recall.
    Keywords: bounded rationality; strategy set growth; strategic complexity; nonstationary bounded recall; repeated games;
    JEL: C72 C73
    Date: 2005–11–24
  9. By: Thomas M. Liggett; Steven A. Lippman; Richard P. Rumelt
    Date: 2006–01–09
  10. By: Anirban Kar; Indrajit Ray; Roberto Serrano
    Abstract: We view achieving a particular correlated equilibrium distribution for a normal form game as an implementation problem. We show, using a parametric version of the two-person Chicken game and a wide class of correlated equilibrium distributions, that a social choice function that chooses a particular correlated equilibrium distribution from this class does not satisfy the Maskin monotonicity condition and therefore can not be fully implemented in Nash equilibrium
    Date: 2005–11
  11. By: Nicholas Bardsley (CeDEx, Nottingham School of Economics, University of Nottingham)
    Abstract: Experimental dictator games have been used to explore unselfish behaviour. Evidence is presented here, however, that subjects’ generosity can be reversed by allowing them to take money from a partner. Dictator game giving therefore does not stem from orthodox social preferences. It can be interpreted plausibly as an artefact of experimentation. Alternatively the evaluation of an action depends on the composition of the choice set. Implications of these possibilities are explored for experimental methodology and charitable donations respectively. The artefact interpretation is empirically superior, and implies that researchers should investigate demand characteristics of experimental protocols.
    Keywords: altruism, artificiality, experiments, methodology
    JEL: C91 C70 D63 D64
    Date: 2005–04
  12. By: Nicolas Carayol; Pascale Roux
    Abstract: This paper introduces a spatialized variation of the Connections model of Jackson and Wolinski (1996). Agents benefit from their direct and indirect connections in a communication network. They are arranged on a circle and bear costs for maintaining direct connections which are linearly increasing with geographic distance. In a dynamic setting, this model is shown to generate networks that exhibit the small world properties shared by many real social and economic networks.
    Keywords: Strategic Network Formation, Pairwise Stability, Small World, Monte Carlo.
    Date: 2006
  13. By: Susan Athey; Philip A. Haile
    Date: 2006–01–13
  14. By: Robin Cubitt (School of Economics, University of Nottingham); Robert Sugden (School of Economics, University of East Anglia)
    Abstract: The game-theoretic assumption of ‘common knowledge of rationality’ leads to paradoxes when rationality is represented in a Bayesian framework as cautious expected utility maximization with independent beliefs (ICEU). We diagnose and resolve these paradoxes by presenting a new class of formal models of players’ reasoning in which the analogue of common knowledge is provability in common reason. We show that a range of standards of decision-theoretic practical rationality can be assumed without inconsistency to be provable in common reason in models of this class. We investigate the implications arising when the standard of decision-theoretic rationality so assumed is ICEU.
    JEL: C72
    Date: 2005–09
  15. By: Dakshina G. De Silva (Texas Tech University); Anuruddha Kankanamge (University of Oklahoma); Georgia Kosmopoulou (University of Oklahoma)
    Abstract: We investigate differences in bidding behavior and participation patterns between simultaneous and multi-round auction formats held in the state of Oklahoma. Theory suggests there could be differential bidding effects arising from synergies and the release of relevant information across the two formats. We find no statistically significant difference in either the number of bids submitted or the bidding patterns observed relative to the control group of auctions held under a uniform format in Texas.
    Keywords: Auctions, Multi-round auctions.
    JEL: D44
    Date: 2005–12–31
  16. By: SPRUMONT, Yves; MOULIN, Hervé
    Abstract: We survey recent axiomatic results in the theory of cost-sharing. In this litterature, a method computes the individual cost shares assigned to the users of a facility for any profile of demands and any monotonic cost function. We discuss two theories taking radically different views of the asymmetries of the cost function. In the full responsibility theory, each agent is accountable for the part of the costs that can be unambiguously separated and attributed to her own demand. In the partial responsibility theory, the asymmetries of the cost function have no bearing on individual cost shares, only the differences in demand levels matter. We describe several invariance and monotonicity properties that reflect both normative and strategic concerns. We uncover a number of logical trade-offs between our axioms, and derive axiomatic characterizations of a handful of intuitive methods: in the full responsibility approach, the Shapley-Shubik, Aumann-Shapley, and subsidyfree serial methods, and in the partial responsibility approach, the cross-subsidizing serial method and the family of quasi-proportional methods.
    Date: 2005
  17. By: Yann Rébillé (CERMSEM)
    Abstract: We prove for totally monotone games defined on the set of Borel sets of a locally compact sigma-compact topological space a similar decomposition theorem to the famous Yosida-Hewitt's one for finitely additive measures. This way any totally monotone decomposes into a continuous part and a pathological part which vanishes on the compact subsets. We obtain as corollaries some decompositions for finitely additive set functions and for minitive set functions.
    Keywords: Choquet's integral representation theorem, Yosida-Hewitt decomposition, totally monotone games.
    Date: 2005–12
  18. By: Ignacio Palacios-Huerta; Oscar Volij
    Date: 2006–01–13
  19. By: Ping Zhang (School of Economics, University of Nottingham)
    Abstract: We compare the performances of uniform price auctions with fixed price offerings using laboratory experiments. In the uniform treatment, there is no evidence that the tacit collusion equilibrium has been achieved. On the contrary, subjects with higher expected value bid more aggressively. Their behaviour is close to an equilibrium derived where all players participate. The resulting market prices are significantly higher than the market value of a bidder with a low value signal. As a consequence, in our experiment uniform price auctions are superior to fixed price offerings in terms of revenue raising.
    Keywords: experiment, IPO, uniform price auction, fixed price offering, multi-unit demand, divisible goods
    JEL: D44 G12 C91
    Date: 2005–10
  20. By: Daniel Sgroi
    Abstract: This paper aims to predict some possible futures for the World Wide Web based on several key network parameters: size, complexity, cost and increasing connection speed thorough the uptake of broadband technology. This is done through the production of a taxonomy specifically evaluating the stability properties of the fully-connected star and complete networks, based on the Jackson and Wolinsky (1996) connections model modified to incorporate complexity concerns. We find that when connection speeds are low neither the star nor complete networks are stable, and when connection speeds are high the star network is usually stable, while the complete network is never stable. For intermediate speed levels much depends upon the other parameters. Under plausible assumptions about the future, we find that the Web may be increasingly dominated by a single intermediate site, perhaps best described as a search engine.
    Keywords: social network theory, connection speed, broadband, complete network, fully-connected star
    JEL: D85
    Date: 2006–01
  21. By: Jean-Marc Bonnisseau (CERMSEM); Pascal Gourdel (CERMSEM); Hakim Hammami (CERMSEM)
    Abstract: In this paper, we present a more simple and independent proof of Reny's theorem (1998), on the existence of a Nash equilibrium in discontinue game, with a better-reply secure game in a Hausdorff topological vector space stronger than Reny's one. We will get the equivalence if the payoff function is upper semi-contineous like in the second Reny's exemple. Our proof is based on a new version of the existence of maximal element of Fan-Browder given by Deguire and Lassonde (1995). Reny's proof used a lemma of approximation of payoff function by a continuous sequence and show the existence of Nash equilibrium by the existence of equilibrium in mixed strategy proved in continuous game by the classical result.
    Keywords: Discontinuous games, better-reply secure, Nash equilibrium, payoff security.
    JEL: C69 C72
    Date: 2005–12

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