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on Game Theory |
| By: | T.K. Ahn (Florida State University); Myungsuk Lee (Sung Kyun Kwan University); Lore Ruttan (Emory University); James M. Walker (Indiana University Bloomington) |
| Abstract: | We investigate the role of payoff asymmetry in laboratory prisoner’s dilemma games. Symmetric and Asymmetric games are examined in simultaneous and sequential settings. In the asymmetric/sequential games, we study the impact of having payoff advantaged players moving either first or second. Asymmetry reduces the rates of cooperation in simultaneous games. In sequential games, asymmetry interacts with order of play such that the rate of cooperation is highest when payoff disadvantaged players move first. The presence of an exit option increases cooperation by the players who choose to play the game when payoffs are symmetric, or when payoffs are asymmetric and the payoff disadvantaged player moves first. |
| Keywords: | cooperation, prisoner’s dilemma, heterogeneity, exit option |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2006003&r=gth |
| By: | Paola Manzini (Queen Mary, University of London); Marco Mariotti (Queen Mary, University of London) |
| Abstract: | We introduce and characterize a new class of bargaining solutions: those which can be obtained by sequentially applying two binary relations to eliminate alternatives. As a by-product we obtain as a particular case a partial characterization result by Zhou (Econometrica, 1997) of an extension of the Nash axioms and solution to domains including non-convex problems, as well as a complete characterizations of solutions that satisfy Pareto optimality, Covariance with positive affine transformations, and Independence of irrelevant alternatives. |
| Keywords: | Bargaining, Non-convex problems, Nash bargaining solution |
| JEL: | C72 D44 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp572&r=gth |
| By: | Jonathan W. Leland |
| Abstract: | Rubinstein (1988, 2003) and Leland (1994, 1998, 2001, 2002) have shown that choices based on similarity judgments will account for the vast majority of observed violations of expected and discounted utility. In this paper, I show that such judgments also explain which equilibria will be selected in single-shot games with multiple equilibria, predict circumstances in which non-equilibria outcomes may predominate in such games, and predict circumstances in which specific pure strategy outcomes will predominate in games with no pure strategy equilibria. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:0604&r=gth |
| By: | Michael Kosfeld (University of Zurich and IZA Bonn); Akira Okada (Hitotsubashi University); Arno Riedl (Maastricht University, CESifo and IZA Bonn) |
| Abstract: | Centralized sanctioning institutions are of utmost importance for overcoming free-riding tendencies and enforcing outcomes that maximize group welfare in social dilemma situations. However, little is known about how such institutions come into existence. In this paper we investigate, both theoretically and experimentally, the endogenous formation of institutions in a public goods game. Our theoretical analysis shows that players may form sanctioning institutions in equilibrium, including those where institutions govern only a subset of players. The experiment confirms that institutions are formed frequently as well as that institution formation has a positive impact on cooperation rates and group welfare. However, the data clearly reveal that players are unwilling to implement institutions in which some players have the opportunity to free ride. In sum, our results show that individuals are willing and able to create sanctioning institutions, but that the institution formation process is guided by behavioral principles not taken into account by standard theory. |
| Keywords: | public goods, institutions, sanctions, cooperation |
| JEL: | C72 C92 D72 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2288&r=gth |
| By: | David P. Myatt; Chris Wallace |
| Abstract: | The volunteer`s dilemma is an asymmetric n-player binary-action game in which a public good is provided if and only if at least one player volunteers, and consequently bears some private cost. So long as the value generated for every player exceeds this private cost there are n pure-strategy Nash equilibria in each of which a single player volunteers. Quantal-response strategy revisions allow play to move between the different equilibria. A complete characterisation of long-run play as strategy revisions approximate best replies provides an equilibrium selection device. The volunteer need not be the lowest-cost player: relatively high-cost, but nonetheless "stable" players may instead provide the public good. The cost of provision is (weakly) reduced when higher values are associated with lower costs. |
| Keywords: | Volunteer`s Dilemma, Public Goods, Evolution, Equilibrium Selection, Concordance |
| JEL: | C72 C73 H41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:270&r=gth |
| By: | Jim Engle-Warnick; Bradley Ruffle |
| Abstract: | We introduce a Bayesian method to infer repeted-game strategies in the form of if-then statements that best describe individuals' observed actions. We apply this method to buyer behavior in posted-offer market experiments. While the strategies of one-quarter of the buyers in our experiments correspond to the game-theoretic prediction of passive price-taking, for three-quarters of the buyers we infer repeated-game strategies that condition on time, price, and combinations of time and price. Our analysis fills a gap in a literature that studies the convergence of pricing behavior in posted-offer markets but has not addressed the market as a repeated game. We propose that strategy inference should at least complement existing methods of statistical inference on observed strategic behavior. |
| JEL: | C91 D42 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcl:mclwop:2005-04&r=gth |
| By: | Marcin Makowski; Edward W. Piotrowski |
| Abstract: | We study a quantum version of the sequential game illustrating problems connected with making rational decisions. We compare the results that the two models (quantum and classical) yield. In the quantum model intransitivity gains importance significantly. We argue that the quantum model describes our spontaneously shown preferences more precisely than the classical model, as these preferences are often intransitive. |
| URL: | http://d.repec.org/n?u=RePEc:sla:eakjkl:28&r=gth |
| By: | Werner Güth; Jeannette Brosig; Torsten Weiland |
| Abstract: | Collusive agreements are often observed in procurement auctions. They are probably more easily achieved when competitors’ costs are easily estimated. If, however, the individual costs of bidders are private information, effective ring formation is difficult to realize. We compare experimentally different coordination mechanisms in a first-price procurement auction in how they promote the prospects of collusive arrangements. One mechanism allows bidders to coordinate by means of unrestricted pre-play communication. The second one enables bidders to restrict their bidding range and the last one gives them the opportunity to implement mutual shareholding. According to our results firstprice procurement is quite collusion-proof when allowing for the latter two coordination mechanisms whereas, on average, pre-play communication increases bidders’ profits. |
| Keywords: | competition, collusion, auction, bidding, public procurement |
| JEL: | C72 H57 K42 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:esi:discus:2006-14&r=gth |
| By: | David Schmidt (Federal Trade Commission, Bureau of Economics); Robert Shupp (Ball State University); James M. Walker (Indiana University Bloomington) |
| Abstract: | Across many forms of rent seeking contests, the impact of risk aversion on equilibrium play is indeterminate. We design an experiment to compare individuals’ decisions across three contests which are isomorphic under risk-neutrality, but are typically not isomorphic under other risk preferences. The pattern of individual play across our contests is not consistent with a Bayes-Nash equilibrium for any distribution of risk preferences. We show that replacing the Bayes-Nash equilibrium concept with the quantal response equilibrium, along with heterogeneous risk preferences can produce equilibrium patterns of play that are very similar to the patterns we observe. |
| Keywords: | rent seeking, experiments, risk aversion, game theory |
| JEL: | C72 C92 D72 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2006004&r=gth |