nep-gth New Economics Papers
on Game Theory
Issue of 2006‒04‒08
twelve papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. The Ex Ante Incentive Compatible Core in Exchange Economies with and without Indivisibilities By Francoise Forges
  2. Bargaining with Imperfect Enforcement By White, Lucy; Williams, Mark
  3. Strategic Complementarities in Multi-Stage Games By Vives, Xavier
  4. Mixed Bundling Auctions By Jehiel, Philippe; Meyer-Ter-Vehn, Moritz; Moldovanu, Benny
  5. On the Evolution of Market Institutions: The Platform Design Paradox By Alos-Ferrer, Carlos; Kirchsteiger, Georg; Walzl, Markus
  6. Long Persuasion Games By Francoise Forges; Frédéric Koessler
  7. Allocative and Informational Externalities in Auctions and Related Mechanisms By Jehiel, Philippe; Moldovanu, Benny
  8. The Communication Complexity of Uncoupled Nash Equilibrium Procedures By Sergiu Hart; Yishay Mansour
  9. Voice and Bargaining Power By Hans Gersbach; Hans Haller
  10. Reciprocity and Emotions when Reciprocators Know each other By Ernesto Reuben; Frans van Winden
  11. North-South Climate Change Negotiations:<br />a Sequential Game with Asymmetric Information By Alexandro Caparros; Jean-Christophe Pereau; Tarik Tazdait
  12. The Theory of Assortative Matching Based on Costly Signals By Hoppe, Heidrun C.; Moldovanu, Benny; Sela, Aner

  1. By: Francoise Forges
    Abstract: The ex ante incentive compatible core of an exchange economy with private information is the (standard) core of a socially designed characteristic function, which expresses the fact that coalitions allocate goods by means of random incentive compatible mechanisms. We first survey some results in the case of perfectly divisible goods. Examples then show that the ex ante incentive compatible core can be empty, even if utility functions are quasi-linear. If, in addition to quasi-linearity, further assumptions are made (like independent private values), the non-emptiness of the core follows nevertheless from d’Aspremont and Gérard-Varet’s construction of incentive compatible, ex post efficient mechanisms. We also introduce a private information version of Shapley and Scarf’s economies with indivisible goods, and prove that the ex ante incentive compatible core is always non-empty in this framework.
    Keywords: core, incentive compatible mechanism, indivisible goods, private information
    JEL: C71 C78 D82
    Date: 2006
  2. By: White, Lucy; Williams, Mark
    Abstract: The game-theoretic bargaining literature insists on non-cooperative bargaining procedure but allows 'cooperative' implementation of agreements. The effect of this is to allow free-reign of bargaining power with no check upon it. In reality, courts cannot implement agreements costlessly, and parties often prefer to use 'non-cooperative' implementation. We present a bargaining model which incorporates the idea that agreements may be enforced non-cooperatively. We show that this has a substantial impact in limiting the inequality of agreements, and results in a non-montonicity of the discount rate. The general need to maintain incentives for co-operation means it may appear that 'other-regarding' elements enter agents' utility functions. This helps us to understand why experimental subjects might begin negotiations anticipating 'fair' bargains. The model also explains why some parties may have incentives to deliberately write incomplete contracts which cannot be enforced in a court of law.
    Keywords: enforcement; incomplete contracts; non-cooperative bargaining; strength in weakness
    JEL: C72 C78 C91 D23
    Date: 2006–02
  3. By: Vives, Xavier
    Abstract: We provide sufficient conditions in finite-horizon multi-stage games for the value function of each player, associated to extremal Markov perfect equilibria, to display strategic complementarities and for the contemporaneous equilibrium to be increasing in the state variables.
    Keywords: adjustment costs; learning curve; Markov game; supermodularity; two-stage game
    JEL: C73 L13
    Date: 2006–03
  4. By: Jehiel, Philippe; Meyer-Ter-Vehn, Moritz; Moldovanu, Benny
    Abstract: We study multi-object auctions where agents have private and additive valuations for heterogeneous objects. We focus on the revenue properties of a class of dominant strategy mechanisms where a weight is assigned to each partition of objects. The weights influence the probability with which partitions are chosen in the mechanism. This class contains efficient auctions, pure bundling auctions, mixed bundling auctions, auctions with reserve prices and auctions with pre-packaged bundles. For any number of objects and bidders, both the pure bundling auction and separate, efficient auctions for the single objects are revenue-inferior to an auction that involves mixed bundling.
    Keywords: auction; mixed bundling; revenue maximization
    JEL: D4 D44 D82
    Date: 2006–03
  5. By: Alos-Ferrer, Carlos; Kirchsteiger, Georg; Walzl, Markus
    Abstract: This paper analyses a situation where market designers create new trading platforms and traders learn to select among them. We ask whether 'Walrasian' platforms, leading to market-clearing trading outcomes, will dominate the market in the long run. If several market designers are competing, we find that traders will learn to select non-market clearing platforms with prices systematically above the market-clearing level, provided at least one such platform is introduced by a market designer. This in turn leads all market designers to introduce such non-market clearing platforms. Hence platform competition induces non-competitive market outcomes.
    Keywords: asymmetric rationality; evolution of trading platforms; learning; market institutions
    JEL: C72 D4 D83 L1
    Date: 2006–03
  6. By: Francoise Forges; Frédéric Koessler
    Abstract: This paper characterizes geometrically the set of all Nash equilibrium payoffs achievable with unmediated communication in persuasion games, i.e., games with an informed expert and an uninformed decisionmaker in which the expert's information is certifiable. The first equilibrium characterization is provided for unilateral persuasion games, and the second for multistage, bilateral persuasion games. As in Aumann and Hart (2003), we use the concepts of diconvexification and dimartingale. A leading example illustrates both geometric characterizations and shows how the expert, whatever his type, can increase his equilibrium payoff compared to all equilibria of the unilateral persuasion game by delaying information certification.
    Keywords: cheap talk, communication, diconvexification, dimartingale, disclosure of certifiable information, jointly controlled lotteries, long conversation, persuasion, verifiable types
    JEL: C72 D82
    Date: 2006
  7. By: Jehiel, Philippe; Moldovanu, Benny
    Abstract: We study the effects of allocative and informational externalities in (multi-object) auctions and related mechanisms. Such externalities naturally arise in models that embed auctions in larger economic contexts. In particular, they appear when there is downstream interaction among bidders after the auction has closed. The endogeneity of valuations is the main driving force behind many new, specific phenomena with allocative externalities: even in complete information settings, traditional auction formats need not be efficient, and they may give rise to multiple equilibria and strategic non-participation. But, in the absence of informational externalities, welfare maximization can be achieved by Vickrey-Clarke- Groves mechanisms. Welfare-maximizing Bayes-Nash implementation is, however, impossible in multi-object settings with informational externalities, unless the allocation problem is separable across objects (e.g. there are no allocative externalities nor complementarities) or signals are one-dimensional. Moreover, implementation of any choice function via ex-post equilibrium is generically impossible with informational externalities and multidimensional types.
    Keywords: auctions; externalities; interdependent values
    JEL: D44 D82
    Date: 2006–03
  8. By: Sergiu Hart; Yishay Mansour
    Date: 2006–04–03
  9. By: Hans Gersbach; Hans Haller
    Abstract: We propose a formal concept of the power of voice in the context of a simple model where individuals form groups and trade in competitive markets. Individuals use outside options in two different ways. Actual outside options reflect the possibility to exit or to join other existing groups. Hypothetical outside options refer to hypothetical groups that are ultimately not formed. Articulation of hypothetical outside options in the bargaining process determines the relative bargaining power of the members of a group, which constitutes an instance of the power of voice. The adopted equilibrium concept endogenizes the outside options as well as the power of voice. In our illustrative example, there exists an equilibrium that uniquely determines the power of voice and the allocation of commodities.
    Keywords: Power of Voice, competitive equilibria, group formation, bargaining, articulation of outside options
    JEL: D13 D50 D71
    Date: 2006
  10. By: Ernesto Reuben; Frans van Winden
    Abstract: This is an experimental study of a three-player power-to-take game where a take authority is matched with two responders. The game consists of two stages. In the first stage, the take authority decides how much of the endowment of each responder that is left after the second stage will be transferred to the take authority (the so-called take rate). In the second stage, each responder can react by destroying any part of his or her own endowment. Two treatments are considered: one in which all players are ‘strangers’ to each other (random matching), and one in which the responders know each other from outside the lab and are more or less close ‘friends’ (whereas the take-authority is again randomly selected). We focus on how the intensity of ties between responders impacts the decisions, beliefs, and emotions of both the responders and the take-authority. Some of our findings are: (1) although take rates are about the same, friends destroy more than strangers when faced with high take rates; (2) coordination on the same destruction level is stronger among friends; (3) the high level of coordination among friends can be explained by their emotional reaction towards one another; (4) the difference between the actual and expected take rate is a much better predictor of experienced emotions and destruction than the difference between the actual and (what is considered as) the fair take rate.
    Keywords: reciprocity, social ties, emotions, expectations, experiment, friends, principal-agent relationship, appropriation, fairness
    JEL: A10 C72 C91 C92 H20 Z13
    Date: 2006
  11. By: Alexandro Caparros (IEG - Department of Economics, Institute of Economics and Geography (IEG), - - [Spanish Council for Scientific Research (CSIC)] - [] - []); Jean-Christophe Pereau (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Tarik Tazdait (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées])
    Abstract: This article determines the conditions under which theSouthern countries should act together, or separately, while negotiating with the North about climate change policy and about the conditions for future Southern engagement. The paper models the international negotiations with complete and with asymmetric information in a dynamic framework. Results show that, depending on their characteristics, the different players can obtain benefits delaying the moment of the agreement.
    Keywords: Bargaining theory; Asymmetric information; Climate change;International cooperation.
    Date: 2006–03–29
  12. By: Hoppe, Heidrun C.; Moldovanu, Benny; Sela, Aner
    Abstract: We study two-sided markets with a finite numbers of agents on each side, and with two-sided incomplete information. Agents are matched assortatively on the basis of costly signals. A main goal is to identify conditions under which the potential increase in expected output due to assortative matching (relative to random matching) is completely offset by the costs of signalling. We also study how the signalling activity and welfare on each side of the market change when we vary the number of agents and the distribution of their attributes, thereby displaying effects that are particular to small markets. Finally, we look at the continuous version of our two-sided market model and establish the connections to the finite version. Technically, the paper is based on the very elegant theory about stochastic ordering of (normalized) spacings and other linear combinations of order statistics from distributions with monotone failure rates, pioneered by R. Barlow and F. Proschan (1966, 1975) in the framework of reliability theory.
    Keywords: matching; signalling
    JEL: C7 D8
    Date: 2006–03

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