nep-gth New Economics Papers
on Game Theory
Issue of 2006‒10‒28
fifteen papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. Random Marginal and Random Removal values By Calvo, Emilio
  2. Why gender based game theory? By Pablo Brañas-Garza
  3. A non-cooperative approach to the compensation rules for primeval games By Ju,Yuan; Borm,Peter
  4. NON-MONOTONITICIES AND THE ALL-PAY AUCTION TIE-BREAKING RULE By Aloisio Araujo; Luciano I. de Castro; Humberto Moreira
  5. Incentives in Core-Selecting Auctions By Paul Milgrom
  6. Existence of Equilibrium in Common Agency Games with Adverse Selection By Guilherme Carmona; José Fajardo
  7. Switching Costs in Infinitely Repeated Games1 By Barton L. Lipman; Ruqu Wang
  8. Subjective Expected Utility in Games By Alfredo Di Tillio
  9. A psychological game with interdependent preference types By J. Atsu Amegashie
  10. The Build-up of Cooperative Behavior among Non-cooperative Agents By Hassan Benchekroun; Ngo Van Long
  11. General Equilibrium and the Emergence of (Non) Market Clearing Trading Institutions By Alos-Ferrer, Carlos; Kirchsteiger, Georg
  12. (In)Transparency of Information Acquisition: A Bargaining Experiment By Gehrig, Thomas; Güth, Werner; Levínsky, René
  13. Prudence in Bargaining: The Effect of Uncertainty on Bargaining Outcomes By White, Lucy
  14. On the Empirical Content of Quantal Response Equilibrium By Philip A. Haile; Ali Hortacsu; Grigory Kosenok
  15. Bargaining Versus Fighting By Stergios Skaperdas

  1. By: Calvo, Emilio
    Abstract: We propose two variations of the non-cooperative bargaining model for games in coalitional form, introduced by Hart and Mas-Colell (1996a). These strategic games implement, in the limit, two new NTU-values: The random marginal and the random removal values. The main characteristic of these proposals is that they always select a unique payoff allocation in NTU-games. The random marginal value coincides with the Consistent NTU-value (Maschler and Owen, 1989) for hyperplane games, and with the Shapley value for TU games (Shapley, 1953). The random removal coincides with the solidarity value (Novak and Radzik, 1994) in TU-games. In large games it is showed that, in the special class of market games, the random marginal coincides with the Shapley NTU-value (Shapley,1969), and that the random removal coincides with the equal split solution.
    Keywords: Shapley value; NTU-games; large market games
    JEL: C7
    Date: 2006–10
  2. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The behavior of men and women in a number of games free of social issues is explored. The analysis is conducted for simple (2x2) and complex (guessing) games and in static and repeated settings. No gender effect is observed either in static nor in repeated games. It is concluded that gender bias vanishes in the absence of social issues.
    Keywords: Gender bias, dominated strategies, Nash equilibrium, learning.; Gender bias, dominated strategies, Nash equilibrium, learning.
    JEL: C91 J16 C72
    Date: 2006–10–19
  3. By: Ju,Yuan; Borm,Peter (Tilburg University, Center for Economic Research)
    Abstract: To model inter-individual externalities and analyze the associated compensation issue, Ju and Borm (2005) introduces a new game-theoretic framework, primeval games, and proposes, from a cooperative perspective, three compensation rules as solution concepts for primeval games: the marginalistic rule, the concession rule, and the primeval rule. In this paper, we provide a non-cooperative approach to address these problems more specifically. Inspired by the generalized bidding approach (Ju and Wettstein (2006)) for TU games, we design various bidding mechanisms to fit the model of primeval games and show that each implements the corresponding compensation rule in subgame perfect equilibrium. These mechanisms require nearly no condition on the game environment and obtain each solution itself rather than in expected terms. Moreover, since the various mechanisms share a common basic structure, this paper offers a non-cooperative benchmark to compare different axiomatic solutions, which, in return, may advance the axiomatic study of the issue by constructing alternative compensation rules.
    Keywords: 91A06;91A10;91A12; externality;compensation;primeval games;marginalistic rule;concession rule; primeval rule;bidding mechanism;implementation
    JEL: C71 C72 D62 D63
    Date: 2006
  4. By: Aloisio Araujo; Luciano I. de Castro; Humberto Moreira
    Abstract: Discontinuous games, such as auctions, may require special tie-breaking rules to guarantee equilibrium existence. The best results available ensure equilibrium existence only in mixed strategy with endogenously defined tie-breaking rules and communication of private information. We show that an all-pay auction tie-breaking rule is sufficient for the existence of pure strategy equilibrium in a class of auctions. The rule is explicitly defined and does not require communication of private information. We also characterize when special tie-breaking rules are really needed.
    Date: 2006–10
  5. By: Paul Milgrom
    Date: 2006–10–14
  6. By: Guilherme Carmona (Universidade Nova de Lisboa); José Fajardo (IBMEC Business School - Rio de Janeiro)
    Abstract: We establish the existence of sequential equilibria in general menu games, known to be sufficient to analyze common agency problems. In particular, we show that our result solves some unpleasant features of early approaches.
    Keywords: Common Agency, Menu Games, Sequential Equilibrium
    JEL: D43 D82 D89
    Date: 2006–10–24
  7. By: Barton L. Lipman (Department of Economics, Boston University); Ruqu Wang (Queen’s University)
    Abstract: We show that small switching costs can have surprisingly dramatic effects in infinitely repeated games if these costs are large relative to payoffs in a single period. This shows that the results in Lipman and Wang [2000] do have analogs in the case of infinitely repeated games. We also discuss whether the results here or those in Lipman–Wang [2000] imply a discontinuity in the equilibrium outcome correspondence with respect to small switching costs. We conclude that there is not a discontinuity with respect to switching costs but that the switching costs do create a discontinuity with respect to the length of a period.
    Date: 2006–01
  8. By: Alfredo Di Tillio
    Abstract: This paper extends Savage’s subjective approach to probability and utility from decision problems under exogenous uncertainty to choice in strategic environments. Interactive uncertainty is modeled both explicitly — using hierarchies of preference relations, the analogue of beliefs hierarchies — and implicitly — using preference structures, the analogue of type spaces à la Harsanyi — and it is shown that the two approaches are equivalent. Preference structures can be seen as those sets of hierarchies arising when certain restrictions on preferences, along with the players’ common certainty of the restrictions, are imposed. Preferences are a priori assumed to satisfy only very mild properties (reflexivity, transitivity, and monotone continuity). Thus, the results provide a framework for the analysis of behavior in games under essentially any axiomatic structure. An explicit characterization is given for Savage’s axioms, and it is shown that a hierarchy of relatively simple preference relations uniquely identifies the decision maker’s utilities and beliefs of all orders. Connections with the literature on beliefs hierarchies and correlated equilibria are discussed.
  9. By: J. Atsu Amegashie
    Date: 2006–10–20
  10. By: Hassan Benchekroun; Ngo Van Long
    Abstract: We develop a theoretical model in which each individual is, in some ultimate sense, motivated by purely egoistic satisfaction derived from the goods accruing to him, but there is an implicit social contract such that each performs duties for the others in a way that enhances the satisfaction of all. We introduce a state variable that acts as a proxy for social capital of trustworthiness and that we call the stock of cooperation. We show that noncooperative agents might condition their action on this state variable. Agents build-up the society's stock of cooperation and gradually overcome the free riding problem in a game of private contribution to a public good. We assume that there are neither penalties in the sense of trigger strategies, nor guilt and that each individual is rational. <P>Nous développons un modèle théorique dans lequel les individus sont motivés par la satisfaction égoïste que leur procure l’accumulation de biens, mais où le contrat social incite chaque individu à travailler pour les autres afin d’accroître le bien-être collectif. Nous introduisons une variable d’état représentant le stock de capital social, ou « stock de coopération ». Nous démontrons que cette variable peut influencer les actions des agents non-coopératifs. Les agents accumulent le stock de coopération de la société et réussisent à règler de manière progressive le problème du passager clandestin pour un jeu de contributions privées dans un bien public. Nous supposons qu’il n’existe pas de stratégies de pénalité, de sentiment de culpabilité chez les individus et que chaque agent est rationnel.
    Keywords: behavior rule, public goods, stock of cooperation, trust, biens public, confiance, règle de conduite, stock de coopération
    JEL: C73 H41 D60
    Date: 2006–10–01
  11. By: Alos-Ferrer, Carlos; Kirchsteiger, Georg
    Abstract: We consider a pure exchange economy, where for each good several trading institutions are available, only one of which is market-clearing. The other feasible trading institutions lead to rationing. To learn on which trading institutions to coordinate, traders follow behavioural rules of thumb that are based on the past performances of the trading institutions. Given the choice of institutions, market outcomes are determined by an equilibrium concept that allows for rationing. We find that full coordination on the market-clearing institutions without any rationing is a stochastically stable outcome, independently of the characteristics of the alternative available institutions. We also find, though, that coordination on other, non-market-clearing institutions with rationing can be stochastically stable.
    Keywords: evolution of trading platforms; general equilibrium; learning; market institutions; rationing
    JEL: C72 D4 D5 L1
    Date: 2006–09
  12. By: Gehrig, Thomas; Güth, Werner; Levínsky, René
    Abstract: We analyze how transparency affects information acquisition in a bargaining context, where proposers may chose to purchase information about the unknown outside option of their bargaining partner. Although information acquisition is excessive in all our scenarios we find that the bargaining outcome depends crucially on the transparency of the bargaining environment. In transparent games, when responders can observe whether proposers have acquired information, acceptance rates are higher. Accordingly, in transparent bargaining environments information is more valuable, both individually and socially.
    Keywords: information acquisition; transparency; ultimatum experiment
    JEL: C91 D82
    Date: 2006–09
  13. By: White, Lucy
    Abstract: We investigate the outcome of bargaining when a player’s pay-off from agreement is risky. We find that a risk-averse player typically increases his equilibrium receipts when his pay-off is made risky. This is because the presence of risk makes individuals behave 'more patiently' in bargaining. Strong analogies are drawn to the precautionary saving literature. We show that the effect of risk on receipts can be sufficiently strong that a decreasingly risk-averse player may be better off receiving a risky pay-off than a certain pay-off.
    Keywords: Nash bargaining; prudence; risk aversion; Rubinstein bargaining
    JEL: C71 C72 C78 D80
    Date: 2006–09
  14. By: Philip A. Haile (Department of Economics and Cowles Foundation, Yale University, and NBER); Ali Hortacsu (University of Chicago and NBER); Grigory Kosenok (NES)
    Abstract: The quantal response equilibrium (QRE) notion of McKelvey and Palfrey (1995) has recently attracted considerable attention, due in part to its widely documented ability to rationalize observed behavior in games played by experimental subjects. However, even with strong a priori restrictions on unobservables, QRE imposes no falsifiable restrictions: it can rationalize any distribution of behavior in any normal form game. After demonstrating this, we discuss several approaches to testing QRE under additional maintained assumptions.
    Keywords: quantal response equilibrium, falsifiability, testable restrictions, regular quantal response equilibrium, rank-cumulative probabilities, Block-Marschak polynomials
    Date: 2006–08
  15. By: Stergios Skaperdas (Department of Economics, University of California-Irvine)
    Abstract: I examine the determinants of conflict and settlement by embedding probabilistic contests in a bargaining framework. Different costly enforcement efforts (e.g., arming, litigation expenditures) induce different disagreement points and Pareto frontiers. After examining the incentives for settlement, I demonstrate how different division rules and bargaining norms have real, economic effects. I then analyze some sources of conflict. I emphasize long-term, strategic considerations by examining an illustrative model and discussing particular historical examples.
    Keywords: Conflict; Negotiation; War; Settlement; Arming; Litigation
    JEL: C70 C78 D63 D70 D74 K41
    Date: 2006–09

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