nep-gth New Economics Papers
on Game Theory
Issue of 2006‒09‒16
thirteen papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. Belief-free Equilibria in games with incomplete information By LOVO, Stefano; HÖRNER, Johanes
  2. A Behavioral Model for Participation Games with Negative Feedback By Pietro Dindo; Jan Tuinstra
  3. Cores of Non-Atomic Market Games By Massimiliano Amarante; Fabio Maccheroni; Massimo Marinacci; Luigi Montrucchio
  4. A recursive core for partition function form games By Kóczy László Á
  5. Nash Equilibrium as an Expression of Self-Referential Reasoning By Perea Andrés
  6. Fair Divisions as Attracting Nash Equilibria of Simple Games By Marco Galbiati
  7. Judgment aggregation without full rationality By Dietrich Franz; List Christian
  8. Synergies are a reason to prefer first-price auctions! By Leufkens Kasper; Peeters Ronald
  9. Policy in a Global Coordination Game: Multiplicity vs. Robust Predictions (July 2006, with Marios Angeletos and Alessandro Pavan) By Christian Hellwig
  10. Overbidding in Independant Private-Values Auctions and Misperception of Probabilities By Olivier Armantier; Nicolas Treich
  11. Social Welfare Functions that Satisfy Pareto, Anonymity, and Neutrality: Countable Many Alternatives By Donald E. Campbell; Jerry S. Kelly
  12. Games of Status and Discrininatory Contract By Dhillon, Amrita; Herzog-Stein, Alexander
  13. Weighted Approval Voting By Jordi Masso³; Marc Vorsatz

  1. By: LOVO, Stefano; HÖRNER, Johanes
    Abstract: In this paper, the authors define belief-free equilibria in two-player games with incomplete information as sequential equilibria for which players’ continuation strategies are best-replies, after every history, independently of their beliefs about the state of nature. They characterize a set of payoffs that includes all belief-free equilibrium payoffs. Conversely, any payoff in the interior of this set is a belief-free equilibrium payoff.
    Keywords: game theory; equilibria; information
    JEL: C72 C73
    Date: 2006–05–01
  2. By: Pietro Dindo (Faculty of Economics and Business, Universiteit van Amsterdam); Jan Tuinstra (Faculty of Economics and Business, Universiteit van Amsterdam)
    Abstract: We study participation games with negative feedback, i.e. games where players choose either to participate in a certain project or not and where the payoff for participating decreases in the number of participating players. We use the replicator dynamics to model the competition between different behavioral rules that specify how to play the game in a repeated setting. This results in an analytically tractable model which is able to describe the type of behavior found in the experimental and computational literature. We find that an increase in the number of players destabilizes the unique symmetric mixed strategy Nash equilibrium. The time series of perpetually fluctuating participation rates typically exhibits linear autocorrelation structure and underparticipation. We investigate whether this time series structure can be exploited, and we relate underparticipation to the payoff structure of the participation game.
    Keywords: participation games; evolutionary game theory; nonlinear dynamics
    JEL: C72 C73
    Date: 2006–08–25
  3. By: Massimiliano Amarante; Fabio Maccheroni; Massimo Marinacci; Luigi Montrucchio
    Abstract: We study the cores of non-atomic market games, a class of transferable utility co- operative games introduced by Aumann and Shapley [2], and, more in general, of those games that admit a na-continuous and concave extension to the set of ideal coalitions, studied by Einy, Moreno, and Shitovitz [9]. We show that the core of such games is norm compact and some related results. We also give a Multiple Priors interpretation of some of our .ndings.
    Keywords: Cores, TU Games, Market Games
    JEL: C71 D81
    Date: 2006
  4. By: Kóczy László Á (METEOR)
    Abstract: We present a new solution to partition function form games that is novel in at least two ways. Firstly, the solution exploits the consistency of the partition function form, namely that the response to a deviation is established as the same solution applied to the residual game, itself a partition function form game. This consistency allows us to model residual behaviour in a natural, intuitive way. Secondly, we consider a pair of solutions as the extrema of an interval for set inclusion. Taking the whole interval rather than just one of the extremes enables us to include or exclude outcomes with certainty.
    Keywords: microeconomics ;
    Date: 2006
  5. By: Perea Andrés (METEOR)
    Abstract: Within a formal epistemic model for simultaneous-move games, we present the following conditions: (1) belief in the opponents'' rationality (BOR), stating that a player should believe that every opponent chooses an optimal strategy, (2) self-referential beliefs (SRB), stating that a player believes that his opponents hold correct beliefs about his own beliefs, (3) projective beliefs (PB), stating that i believes that j''s belief about k''s choice is the same as i''s belief about k''s choice, and (4) conditionally independent beliefs (CIB), stating that a player believes that opponents'' types choose their strategies independently. We show that, if a player satisfies BOR, SRB and CIB, and believes that every opponent satisfies BOR, SRB, PB and CIB, then he will choose a Nash equilibrium strategy (that is, a strategy that is optimal in some Nash equilibrium). We thus provide a set of sufficient conditions for Nash equilibrium strategy choice. We also show that none of these seven conditions can be dropped.
    Keywords: mathematical economics;
    Date: 2006
  6. By: Marco Galbiati
    Abstract: We consider the problem of allocating a finite number of divisible homogeneous goods to N = 2 individuals, in a way which is both envy-free and Pareto optimal. Building on Thomson (2005 Games and Economic Behavior), a new simple mechanism is presented here with the following properties: a) the mechanism fully implements the desired divisions, i.e. for each preference profile the set of equilibrium outcomes coincides with the set of fair divisions; b) the set of equilibria is a global attractor for the best-reply dynamics. Thus, players myopically adapting their strategies settle down in an fair division. The result holds even if mixed strategies are used.
    Keywords: Fair divisions, envy-free, implementation, best reply dynamics
    JEL: C78 C73
    Date: 2006
  7. By: Dietrich Franz; List Christian (METEOR)
    Abstract: Several recent results on the aggregation of judgments over logically connected propositions show that, under certain conditions, dictatorships are the only independent (i.e., propositionwise) aggregation rules generating fully rational (i.e., complete and consistent) collective judgments. A frequently mentioned route to avoid dictatorships is to allow incomplete collective judgments. We show that this route does not lead very far: we obtain (strong) oligarchies rather than dictatorships if instead of full rationality we merely require that collective judgments be deductively closed, arguably a minimal condition of rationality (compatible even with empty judgment sets). We derive several characterizations of oligarchies and provide illustrative applications to Arrowian preference aggregation and Kasher and Rubinstein''s group identification problem.
    Keywords: mathematical economics;
    Date: 2006
  8. By: Leufkens Kasper; Peeters Ronald (METEOR)
    Abstract: In this paper we show that in a private value setting first-price auctions can be preferred to second-price auctions. We consider a sequential auction of two objects with positive synergies and compare both auction formats. Although the second-price auction performs better in terms of efficiency and revenue, the first-price auction performs much better on a so far neglected dimension. Namely, the probability that the winner of the first object goes bankrupt is almost always higher when using the second-price rule. Our findings therefore support the common use of first-price auctions, most notably for procurement.
    Keywords: industrial organization ;
    Date: 2006
  9. By: Christian Hellwig
  10. By: Olivier Armantier; Nicolas Treich
    Abstract: We conduct an experiment to test whether probability misperception may be a possible alternative to risk aversion to explain overbidding in independent first-price private-values auctions. The experimental outcomes indicate that subjects underestimate their probability of winning the auction, and indeed overbid. Yet, when provided with feed-back on the precision of their predictions, subjects learn first to predict their probability of winning correctly, and second to curb-down significantly overbidding. The structural estimation of different behavioral models suggests that i) subjects are heterogenous with respect to risk preferences and probability perceptions, ii) subjects tend to best-respond to their stated beliefs, and iii) although necessary to explain fully behavior, risk aversion appears to play a lesser role than previously believed. Finally, our experimental findings are shown to be consistent with a standard theoretical auction model combining risk aversion and misperception of probabilities. <P>Nous menons une expérience pour évaluer si le fait qu'un sujet évalue mal ses probabilités de gagner peut être une hypothèse alternative à l’aversion au risque pour expliquer les surenchères lors d'enchères indépendantes privées au premier prix. Les résultats expérimentaux montrent, en effet, que les sujets sous-estiment leurs probabilités de gagner l'enchère et ont tendance à surenchérir. Cependant, lorsqu'on leur présente plus de précisions sur leurs prédictions, les sujets apprennent d'abord à prédire correctement leurs probabilités de gagner, puis à limiter considérablement la surenchère. L'estimation de différents modèles du comportement suggère que i) les sujets sont hétérogènes par rapport à leurs préférences du risque et leurs perceptions des probabilités, ii) les sujets choisissent leur meilleure réponse conditionnellement aux croyances qu’ils révèlent, et iii) bien que nécessaire pour expliquer pleinement le comportement des sujets, l'aversion au risque semble jouer un rôle moins important que prévu. Finalement, nos résultats expérimentaux sont consistants avec un modèle théorique d'enchères standard qui combine l'aversion au risque et la mauvaise perception des probabilités.
    Keywords: auctions, misperception of probabilities, overbidding, risk-aversion, aversion au risque, enchères, mauvaise perception des probabilités, surenchère
    JEL: C70 C92 D44 D81
    Date: 2006–08–01
  11. By: Donald E. Campbell (Department of Economics, College of William and Mary); Jerry S. Kelly (Department of Economics, Syracuse University)
    Abstract: For a finite number of alternatives, in the presence of Pareto, non-dictatorship, full domain, and transitivity, an extremely weak independence condition is incompatible with each of anonymity and neutrality (Campbell and Kelly [2006]). This paper explores how those results are affected when there are countably many alternatives.
    Keywords: Pareto, anonymity, neutrality
    JEL: D70 D71
    Date: 2006–09–11
  12. By: Dhillon, Amrita (Department of Economics, University of Warwick); Herzog-Stein, Alexander (Department of Economics, University of Warwick)
    Abstract: Following recent empirical evidence which indicates the importance of rank for the determination of workers’ wellbeing, this paper introduces status seeking preferences in the form of rank-dependent utility functions into a moral hazard framework with one firm and multiple workers, but no correlation in production. Workers’ concern for the rank of their wage in the firm’s wage distribution may induce the firm to offer discriminatory wage contracts when its aim is to induce all workers to expend effort.
    Date: 2006
  13. By: Jordi Masso³; Marc Vorsatz
    Abstract: To allow society to treat unequal alternatives distinctly we propose a natural extension of Approval Voting by relaxing the assumption of neutrality. According to this extension, every alternative receives ex-ante a non-negative and finite weight. These weights may differ across alternatives. Given the voting decisions of every individual (individuals are allowed to vote for, or approve of, as many alternatives as they wish to), society elects all alternatives for which the product of total number of votes times exogenous weight is maximal. Our main result is an axiomatic characterization of this voting procedure.
    Keywords: Approval Voting, Neutrality
    JEL: D71
    Date: 2006–09–04

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