nep-gth New Economics Papers
on Game Theory
Issue of 2006‒08‒26
five papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. Awareness as an Equilibrium Notion: Normal-Form Games By Jernej Copic; Andrea Galeotti
  2. Rational and boundedly rational behavior in sender-receiver games By Massimiliano Landi; Domenico Colucci
  3. Expectations, Animal Spirits, and Evolutionary Dynamics By Angelo Antoci; Massimiliano Landi; Pier Luigi Sacco
  4. Strategy Meets Evolution: Games Suppliers and Producers Play By Brishti Guha
  5. Should Governments Auction Nationwide Spectrum Licenses? Estimating Bidder Valuations By Patrick Bajari; Jeremy T. Fox

  1. By: Jernej Copic; Andrea Galeotti
    Abstract: We study normal-form games where parts of the games may not be common knowledge. Agents may be aware only of some facts describing the game. An awareness architecture is given by agents' awareness, and an infinite regress of conjectures about other agents and their conjectures. The problem is specified by the true underlying normal-form game, and by the set of possible awareness architectures. Awareness equilibrium is given by a feasible awareness architecture for each agent, strategies that are played and these strategies have to be consistent with the awareness architectures and agents' rationality. We first study games with complete information, where each player may be aware of a subset of the set of possible actions. We then study games with incomplete information, where each player may be aware of a subset of the set of types and probability over types. Our results illustrate how a departure from the assumption of common knowledge alters equilibium predictions.
    Date: 2006–08–08
  2. By: Massimiliano Landi (School of Economics and Social Sciences, Singapore Management University); Domenico Colucci (University of Florence)
    Abstract: We consider a signalling game in which a population of receivers decide on the outcome by majority rule, sender and receivers have conflicting interests, and there is uncertainty about both players’ types. We model players rationality along the lines of recent findings in behavioral game theory. We characterize the structure of the equilibria in the reduced game so obtained. We find that all pure strategy equilibria are consistent with successful attempts to mislead the receivers, and relate them to the message bin Laden sent on the eve of the 2004 US Presidential elections. The same result holds if we allow for some uncertainty about the sign of the correlation between the sender’s and the receivers’ payoffs.
    Date: 2005–10
  3. By: Angelo Antoci (University of Sassari); Massimiliano Landi (School of Economics and Social Sciences, Singapore Management University); Pier Luigi Sacco (IUAV, Venice)
    Abstract: We consider a (deterministic) evolutionary model where players have dynamic expectations about the strategy distribution. We provide a global analysis of the co-evolution of play and expectations for a generic two{by{two game. Besides the the typical indeterminacy of the evolutionary dynamics, we find some other ones: for any initial strategy configuration the dynamics can converge to any asymptotically stable fixed point, for different initial values of the expectations. Moreover, starting from the same initial pair of strategy configuration and values of expectations, the dynamics may lead to different asymptotically stable fixed points for different parameters of the expectations.
    Keywords: evolutionary games, dynamic systems, animal spirits
    JEL: C73
    Date: 2006–03
  4. By: Brishti Guha (School of Economics and Social Sciences, Singapore Management University)
    Abstract: Final goods producers, who may be intrinsically honest (a behavioral type) or opportunistic (strategic), play a repeated game of imperfect information with suppliers of an input of variable (and non-verifiable) quality. Returns to cheating are increasing in the proportion of intrinsically honest producers. If producers compete for another scarce input, adverse selection reduces this proportion enough to enforce universal honesty, whether at a high or a low quality equilibrium. This mechanism limits the proportion of behavioral types in the population of producers over a wide range of parameters: despite their inability to compete with opportunists, they are not wholly wiped out due to the strategic response of input suppliers. Moreover, in equilibrium, opportunists must replicate the behavioral type’s behavior. Thus competition curtails the presence of the behavioral type but increases the incidence if its behavior. If a labor market, where skilled and unskilled labor coexist, is also endogenized, an honest equilibrium with both high and low quality will generally be reached; however an exclusively high quality equilibrium with unemployment of unskilled labor is also possible.
    Keywords: Moral hazard, evolution, strategic response, repeated games, skill.
    JEL: C7 D8 J4
    Date: 2006–02
  5. By: Patrick Bajari (Duke University); Jeremy T. Fox (University of Chicago)
    Abstract: We empirically study bidding in the C Block of the US mobile phone spectrum auctions. Spectrum auctions are conducted using a simultaneous ascending auction design that allows bidders to assemble packages of licenses with geographic complementarities. While this auction design allows the market to find complementarities, the auction might also result in an inefficient equilibrium. In addition, these auctions have equilibria where implicit collusion is sustained through threats of bidding wars. We estimate a structural model in order to test for the presence of complementarities and implicit collusion. The estimation strategy is valid under a wide variety of alternative assumptions about equilibrium in these auctions and is robust to potentially important forms of unobserved heterogeneity. We make suggestions about the design of future spectrum auctions.
    Date: 2005–09

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