nep-gth New Economics Papers
on Game Theory
Issue of 2006‒02‒19
twenty papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. A Weak Bargaining Set for Contract Choice Problems By Somdeb Lahiri
  3. BARGAINING, VOTING, AND VALUE By Federico Valenciano; Annick Laruelle
  4. A Taxonomy of Myopic Stability Concepts for Hedonic Games By Dinko Dimitrov; Shao Chin Sung
  5. Informational Smallness and Private Monitoring in Repeated Games (with R. McLean and A. Postlewaite) By Ichiro Obara
  6. Coordination Failure in Repeated Games with Almost-Public Monitoring By George J Mailath; Stephen Morris
  7. Cooperation in the Repeated Prisoner’s Dilemma with Local Interaction By Jun Xue
  8. Mixed Bundling Auctions By Philippe Jehiel; Moritz Meyer-Ter-Vehn; Benny Moldovanu
  9. Allocative and Informational Externalities in Auctions and Related Mechanisms By Philippe Jehiel; Benny Moldovanu
  10. Collective Behavior with Endogenous Thresholds By Jun Xue
  11. Optimal Auction Design for Multiple Objects with Externalities By Vasiliki Skreta
  12. Optimal Auction Design under Non-Commitment By Vasiliki Skreta
  13. Using EPECs to model bilevel games in restructured electricity markets with locational prices By Xinmin Hu; Daniel Ralph
  14. A Theoretical Analysis of Cooperative Behavior in Multi-Agent Q-learning By Waltman, L.; Kaymak, U.
  15. Bargaining and Strategic Discrimination By Björnerstedt, Jonas; Westermark, Andreas
  16. Inducing a Self-Fulfilling Prophecy in Public Goods Games. By Pablo Brañas-Garza; Enrique Fatas; Pablo Guillen
  18. SUCCESS VERSUS DECISIVENESS: CONCEPTUAL DISCUSSION AND CASE STUDY By Federico Valenciano; Annick Laruelle; Ricardo Martínez
  19. Methods of Comparison in Games of Status By Ed Hopkins; Tatiana Kornienko

  1. By: Somdeb Lahiri (Institute for Financial Management and Research)
    Abstract: In this paper, we consider the problem of choosing a set of multi-party contracts, where each coalition of agents has a non-empty finite set of feasible contracts to choose from. We call such problems, contract choice problems. The main result of this paper states that every contract choice problem has a non-empty weak bargaining set. The need for such a solution concept which is considerably weaker than the core arises, since it is well known that even for very simple contract choice problems, the core may be empty. We also show by means of an example that the bargaining set due to Mas-Colell (1989), as well as a weaker version of it, may be empty for contract choice problems, thereby implying that the weakening we suggest is in some ways “tight”
    Keywords: Weak bargaining set, Contract choice, NTU game, Matching
    JEL: C78 D71
    Date: 2006–01
  2. By: Juana Santamaria-Garcia (Universidad de Alicante)
    Abstract: Equilibrium selection in the Nash demand game is investigated in a learning context with persistent randomness. I adopt a matching framework similar to Kandori, Mailath and Rob (1993) and assume that individuals belong to populations of different sizes. Despite the myopic behavior of individuals, the selected division of the surplus that will be observed most of the time coincides with the Nash bargaining solution. Depending on the matching scenario, either the symmetric or the generalized Nash bargaining solution is selected. In the latter case, the power is larger for the short-side of the market.
    Keywords: bargaining, best response, convention, learning, stochastic stability.
    JEL: C63 C78 D83
    Date: 2004–09
  3. By: Federico Valenciano (Universidad del País Vasco); Annick Laruelle (Universidad de Alicante)
    Abstract: This paper addresses the following issue: If a set of agents bargain on a set of feasible alternatives 'in the shadow' of a voting rule, that is, any agreement can be enforced if a 'winning coalition' supports it, what general agreements are likely to arise? In other words: What influence can the voting rule used to settle (possibly non-unanimous) agreements have on the outcome of negotiations? To give an answer we model the situation as an extension of the Nash bargaining problem in which an arbitrary voting rule replaces unanimity to settle agreements by n players. This provides a setting in which a natural extension of Nash's solution is obtained axiomatically. Two extensions admitting randomization on voting rules based on two informational scenarios are considered.
    Keywords: Bargaining, voting, value, bargaining in committees.
    Date: 2004–04
  4. By: Dinko Dimitrov (Bielefeld University); Shao Chin Sung (Aoyama Gakuin University)
    Abstract: We present a taxonomy of myopic stability concepts for hedonic games in terms of deviations, and discuss the status of the existence problems of stable coalition tructures. In particular, we show that contractual strictly core stable coalition tructures always exist, and provide su¢ cient conditions for the existence of con- ractually Nash stable and weak individually stable coalition structures on the class of separable games.
    Keywords: Coalition formation, Hedonic games, Separability, Taxonomy
    JEL: C71 A14 D20
    Date: 2006–01
  5. By: Ichiro Obara
    Date: 2005–08–29
  6. By: George J Mailath; Stephen Morris
    Date: 2006–02–08
  7. By: Jun Xue
    Abstract: This paper studies the repeated Prisoner’s Dilemma in a local interaction setup. We construct a sequential equilibrium in pure strategies that sustains cooperation for suffciently patient players. The strategy is embedded in an explicitly defined expectation system, which is a more compact way than machines to describe strategies in the local interaction setup, although essentially the expectation system can also be viewed as a finite state automaton. The belief system is derived by perturbing the strategy appropriately and following the principle that parsimonious explanations receive all the weight. The equilibrium has the property that after any global history, full cooperation will be restored after a finite number of periods.
    Keywords: Prisoner’s dilemma, local interaction, expectation
    JEL: C7
    Date: 2006–02
  8. By: Philippe Jehiel; Moritz Meyer-Ter-Vehn; Benny Moldovanu
    Date: 2006–02–08
  9. By: Philippe Jehiel; Benny Moldovanu
    Date: 2006–02–08
  10. By: Jun Xue
    Abstract: We endogenize the threshold points in Granovetter’s threshold model of collective behavior (Granovetter 1978). We do this in a simple model that combines strategic complementarity and private information in a dynamic setup with endogenous order of moves. Looking at Granovetter’s model in the strategic context allows us to highlight the sensitivity of collective outcomes to the timing of the games and the reversibility of the actions, and to emphasize an extra incentive for people to follow other people: to encourage more people to follow them.
    Keywords: Endogenous timing, irreversibility, threshold
    JEL: C7 D7
    Date: 2006–02
  11. By: Vasiliki Skreta
    Date: 2005–01–28
  12. By: Vasiliki Skreta
    Date: 2005–01–28
  13. By: Xinmin Hu; Daniel Ralph
    Abstract: CWPE0619 (EPRG0602) Xinmin Hu and Daniel Ralph (Feb 2006) Using EPECs to model bilevel games in restructured electricity markets with locational prices We study a bilevel noncooperative game-theoretic model of electricity markets with locational marginal prices. Each player faces a bilevel optimization problem that we remodel as a mathematical program with equilibrium constraints, MPEC. This gives an EPEC, equilibrium problem with equilibrium constraints. We establish sufficient conditions for existence of pure strategy Nash equilibria for this class of bilevel games and give some applications. We show by examples the effect of network transmission limits, i.e. congestion, on existence of equilibria. Then we study, for more general EPECs, the weaker pure strategy concepts of local Nash and Nash stationary equilibria. We model the latter via complementarity problems, CPs. Finally, we present numerical examples of methods that attempt to find local Nash or Nash stationary equilibria of randomly generated electricity market games. The CP solver PATH is found to be rather effective in this context.
    Keywords: electricity market, bilevel game, MPEC, EPEC, Nash stationary point, equilibrium constraints, complementarity problem
    JEL: C61 C62 C72 Q40
    Date: 2006–02
  14. By: Waltman, L.; Kaymak, U. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: A number of experimental studies have investigated whether cooperative behavior may emerge in multi-agent Q-learning. In some studies cooperative behavior did emerge, in others it did not. This report provides a theoretical analysis of this issue. The analysis focuses on multi-agent Q-learning in iterated prisoner?s dilemmas. It is shown that under certain assumptions cooperative behavior may emerge when multi-agent Q-learning is applied in an iterated prisoner?s dilemma. An important consequence of the analysis is that multi-agent Q-learning may result in non-Nash behavior. It is found experimentally that the theoretical results derived in this report are quite robust to violations of the underlying assumptions.
    Keywords: Prisoner?s Dilemma;Cooperation;Nash Equilibrium;Multi-Agent Reinforcement Learning;Multi-Agent Q-Learning;
    Date: 2006–02–01
  15. By: Björnerstedt, Jonas (The Research Institute for Industrial Economics); Westermark, Andreas (Department of Economics)
    Abstract: In bargaining between two sellers and one buyer on prices and quantities, strategic inefficiencies arise. By reallocating between the last agreement and the first, the buyer can increase it's share of the surplus. With symmetric sellers producing substitutes, the quantities in the first agreement will be higher than the efficient, and lower than the efficient in the last, implying that sellers are strategically discriminated. In equilibrium when the sellers produce substitutes, the buyer agrees first with the seller with lowest marginal cost. Efficiency is decreasing in the symmetry of the sellers and in the relative bargaining power of the sellers.
    Keywords: Bargaining; discrimination; intermediate goods; labor demand
    JEL: C78 J22 J71 L10
    Date: 2006–02–08
  16. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Enrique Fatas (LINEEX, Universidad de Valencia); Pablo Guillen (Harvard Business School)
    Abstract: This study explores how a self-fulfilling prophecy can solve a social dilemma. We ran two experimental treatments, baseline and automata. Both consisted of a finitely repeated public goods game with a surprise restart. In the automata treatment it was announced that there might be automata playing a grim trigger strategy. This announcement became a self-fulfilling prophecy. That is, most participants actually followed a grim trigger strategy in the automata treatment resulting on an increase on the average contributions to the public good relative to the baseline treatment. Moreover, four out of nine groups managed to fully cooperate almost until the last period. Furthermore, after the surprise restart, when the automata threat is less credible, subjects’ behavior was very close to that in the original game.
    Keywords: self-fulfilling prophecy, public goods game, grim trigger strategy,cooperation, automata, beliefs.
    JEL: C92 H41 C72
    Date: 2006–02–08
  17. By: Dirk Engelmann (CERGE-EI); Veronika Grimm (Universidad de Alicante)
    Abstract: We present laboratory experiments of five different multi-unit auction mechanisms. Two units of a homogeneous object were auctioned off among two bidders with flat demand for two units. We test whether expected demand reduction occurs in open and sealed-bid uniform-price auctions. Revenue equivalence is tested for these auctions as well as for the Ausubel, the Vickrey and the discriminatory sealed-bid auction. Furthermore, we compare the five mechanisms with respect to the efficient allocation of the units. We also provide some theoretical insights concerning the equilibria of uniform-price auctions with incomplete information.
    Keywords: Multi–Unit Auctions, Demand Reduction, Experimental Economics.
    JEL: D44 C91
    Date: 2004–03
  18. By: Federico Valenciano (Universidad del País Vasco); Annick Laruelle (Universidad de Alicante); Ricardo Martínez (Universidad de La Rioja)
    Abstract: In this paper, we vindicate the relevance of the notion of success or satisfaction for the normative assessment of voting rules. We provide arguments in support of this view and emphasize the conceptual and analytical differences between this notion and that of decisiveness. The conclusions are illustrated in the case study provided by three different voting rules that have been proposed for the Council of Ministers of the European Union.
    Keywords: Voting, European Union, Power indices
    Date: 2004–07
  19. By: Ed Hopkins; Tatiana Kornienko
    Abstract: This paper considers the effects of changes in the income distribution in an economy where agents’ utility depends both on consumption and on their rank in the distribution of consumption of a positional good. We introduce a new methodology to compare the behavior of agents that occupy the same rank in the two different income distributions but typically have different levels of incomes, and analyze equilibrium choices and welfare of every member of the society for continuous distributions with arbitrary, even disjoint, ranges. If an income transformation raises incomes at the lower end of the income distribution, the poor will typically be better off. But because such an income transformation also increases the degree of social competition, the middle class will typically be worse off - even if they have higher incomes as well. An increase in incomes can make all better off, but only if it is accompanied by an increase in income dispersion. Our new techniques highlight the importance of density of social space as we demonstrate that one can have an increase both in income and relative position but still be worse off.
    Keywords: Status, relative standing, income inequality, conspicuous consumption, consumption externalities, income inequality, social competitiveness, first price auctions, dispersive orderings.
    JEL: C72 D11 D31 D62
  20. By: Alistair Ulph (University of Manchester); Santiago J. Rubio (Universitat de València)
    Abstract: In Barrett's (1994) paper on transboundary pollution abatement is shown that if the signatories of an international environmental agreement act in a Stackelberg fashion, then, depending on parameter values, a self-enforcing IEA can have any number of signatories between two and the grand coalition. Barrett obtains this result using numerical simulations and also ignoring the fact that emissions must be non-negative. Recent attempts to use analytical approaches and to explicitly recognize the non-negativity constraints have suggested that the number of signatories of a stable IEA may be very small. The way such papers have dealt with non-negativity constraints is to restrict parameter values to ensure interior solutions for emissions. We argue that a more appropriate approach is to use Kuhn-Tucker conditions to derive the equilibrium of the emissions game. When this is done we show, analytically, that the key results from Barrett's paper go through. Finally, we explain why his main conclusion is correct although his analysis can implicitly imply negative emissions.
    Keywords: international externalities, self-enforcing environmental agreements, Stackelberg equilibrium, non-negative emissions constraints
    JEL: C72 D62 F02 Q20
    Date: 2004–06

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