nep-gth New Economics Papers
on Game Theory
Issue of 2006‒07‒28
five papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. Purification in the Infinitely-Repeated Prisoners' Dilemma By V. Bhaskar; George J. Mailath; Stephen Morris
  2. The Theory of Money and Financial Institutions: A Summary of a Game Theoretic Approach By Martin Shubik
  3. All-pay Auctions with Budget Constraints and Fair Insurance By Uwe Dulleck; Paul Frijters; Konrad Podczeck
  4. Bilateral Matching and Latin Squares By Camera, Gabriele; Selcuk, Cemil
  5. Voting Rules and Budget Allocation in an Enlarged EU By Heikki Kauppi; Mika Widgrén

  1. By: V. Bhaskar (University College London); George J. Mailath (Cowles Foundation, Yale University); Stephen Morris (Princeton University)
    Abstract: This paper investigates the Harsanyi (1973)-purifiability of mixed strategies in the repeated prisoners' dilemma with perfect monitoring. We perturb the game so that in each period, a player receives a private payoff shock which is independently and identically distributed across players and periods. We focus on the purifiability of a class of one-period memory mixed strategy equilibria used by Ely and Valimaki (2002) in their study of the repeated prisoners' dilemma with private monitoring. We find that all such strategy profiles are not the limit of one-period memory equilibrium strategy profiles of the perturbed game, for almost all noise distributions. However, if we allow infinite memory strategies in the perturbed game, then any completely-mixed equilibrium is purifiable.
    Keywords: Purification, belief-free equilibria, repeated games
    JEL: C72 C73
    Date: 2006–07
  2. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: A game theoretic approach to the theory of money and financial institution is given utilizing both the strategic and coalitional forms for describing the economy. The economy is first modeled as a strategic market game, then the strategic form is used to calculate several cooperative forms that differ from each other in their utilization of money and credit and their treatment of threats. It is shown that there are natural upper and lower bounds to the monetary needs of an economy, but even in the extreme structures the concept of "enough money" can be defined usefully, and for large economies the games obtained from the lower and upper bounds have cores that approach the same limit that is an efficient price system. The role of disequilibrium is then discussed.
    Keywords: Money, Prices, Core, Threat, Market game, Strategic market game
    JEL: C71 C72 E40
    Date: 2006–07
  3. By: Uwe Dulleck; Paul Frijters; Konrad Podczeck
    Abstract: We study all-pay auctions with budget-constrained bidders who have access to fair insurance before bidding simultaneously over a prize. We characterize a unique equilibrium for the special cases of two bidders and one prize, show existence and a heuristic for finding an equilibrium in the case of multiple bidders and multiple prizes. We end with an example of non-uniqueness of equilibria for the general case of multiple prizes and multiple players.
    JEL: C72 D72 D42
    Date: 2006–05
  4. By: Camera, Gabriele; Selcuk, Cemil
    Abstract: We study equilibrium prices and trade volume with n identical buyers and a seller who initially commits to some capacity. Sales are sequential and each price is determined by strategic bargaining. A unique sub-game perfect equilibrium exists. It is characterized by absence of costly bargaining delays and each trade is settled at a different price. Prices increase with n and fall in the seller’s capacity, so if buyers have significant bargaining power, then the seller will strategically constrain capacity to less than n. Thus, despite the efficiency of the bargaining solution, certain distributions of bargaining powers give rise to an allocative inefficiency.
    Keywords: Commitment ; Inefficiency ; Peripheral players ; Price heterogeneity ; Strategic bargaining
    JEL: C78 D20
    Date: 2006–07
  5. By: Heikki Kauppi (Department of Economics, University of Helsinki); Mika Widgrén (Department of Economics, Turku School of Economics)
    Abstract: EU declares to provide support for the rural and poor regions of its member states. However, recent research shows that past EU budget allocations (in EU-15) can be attributed to measures of the distribution of voting power in the Council of Ministers deciding on the bulk of EU spending. A standard power measure alone can explain about 85% of the variance of the past EU budget shares, while, if stable coalition patterns among member countries are taken into account, power can explain at least 95% of the budget allocation. In this paper we use such estimates to predict EU budget shares after the eastern enlargement. According to our estimates eastern enlargement has large effects on the budget receipts of the incumbent member states. Moreover, whether the voting rules are based on the Nice Treaty (NT) or the Constitutional Treaty (CT) makes a difference for most member states. Many member states would be worse off under CT than under NT.
    Keywords: EU budget, voting power, Constitutional Treaty, Treaty of Nice
    JEL: C71 D70 D72
    Date: 2006–04

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