nep-gth New Economics Papers
on Game Theory
Issue of 2006‒11‒18
sixteen papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. Implementation of the Recursive Core for Partition Function Form Games By Chen Ying Huang; Tomas Sjostrom
  2. Sequential Coalition Formation and the Core in the Presence of Externalities By Kóczy Lászlo Á.
  3. A Psychological Game with Interdependent Preference Types By J. Atsu Amegashie
  4. Information Transmission in Coalitional Voting Games By Roberto Serrano; Rajiv Vohra
  5. Strategic power indices: Quarrelling in coalitions By Kóczy László Á.
  6. Analyse spatiale du pouvoir de vote : application au cas de l'intercommunalité dans le département du Val d'Oise By Fabrice Barthélémy; Mathieu Martin
  7. Building Social Networks By Robert P. Gilles; Sudipta Sarangi
  8. Promises and Conventions - An Approach to Pre-play Agreements By Topi Miettinen
  9. Semiparametric Estimation of Signaling Games By Kyoo il Kim
  10. Set Inference for Semiparametric Discrete Games By Kyoo il Kim
  11. Decentralized Matching Markets with Endogenous Salaries By Hideo Konishi; Margarita Sapozhnikov
  12. Constrained School Choice By Guillaume Haeringer; Flip Klijn
  13. Group Polarization in the Team Dictator Game reconsidered By Wolfgang J. Luhan; Martin G. Kocher; Matthias Sutter
  14. Revenue Sharing in Sports Leagues: The Effects on Talent Distribution and Competitive Balance By Phillip Miller
  15. Voting Paradoxes and the Human Intuition By Kóczy Lászlo Á.
  16. Decision-Making in the Context of Imprecise Probabilistic Beliefs By Klaus Nehring

  1. By: Chen Ying Huang (National Taiwan University); Tomas Sjostrom (Department of Economics, Rutgers University)
    Abstract: In partition function form games, the recursive core (r-core) is implemented by a modified version of Perry and Reny’s (1994) non-cooperative game. Specifically, every stationary subgame perfect Nash equilibrium (SSPNE) outcome is an r-core outcome. With the additional assumption of total r-balancedness, every r-core outcome is an SSPNE outcome.
    Keywords: REcursive Core, Nash Equilibrium, Partition Function Form Games
    Date: 2005–04
  2. By: Kóczy Lászlo Á. (METEOR)
    Abstract: Bloch (1996) presents a novel method to solve cooperative games with externalities. When trying to relate this to classical approaches he could only present negative results. We elaborate on these problems, define a modification of Bloch''s model and show that its order-independent equilibria coincide with the (pessimistic) recursive core.
    Keywords: Economics (Jel: A)
    Date: 2006
  3. By: J. Atsu Amegashie
    Abstract: In psychological games, higher-order beliefs, emotions, and motives - in addition to actions - affect players’ payoffs. Suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. In all of these cases, it is conceivable that the intention behind the action will matter and hence will affect your payoffs. I show that this social interaction is a psychological game. However, under certain conditions, it is a special case of games with interdependent preference types as studied in Gul and Pesendorfer (2005). I find a complex social interaction in this game. In particular, there exists a unique equilibrium in which a player may stick to a strategy of accepting every invitation with the goal of discouraging insincere invitations. This may lead one to erroneously infer that this player is eagerly waiting for an invitation, when indeed his behavior is driven more by strategic considerations than by an excessive desire for social acceptance. The discussion shows that while games with interdependent preference types can capture phenomena that psychological games seek to address, the intuition, motivation, or explanation for the same phenomenon may be different. I discuss how being tolerated but not being truly accepted can explain the rejection of mutually beneficial trades, the choice of identity, social exclusion, marital divorce, and political correctness.
    Keywords: guilt, intentions, interdependent preference types, psychological game, second-order beliefs, social interaction
    JEL: C73 J16 Z13
    Date: 2006
  4. By: Roberto Serrano (Department of Economics, Brown University); Rajiv Vohra (Department of Economics, Brown University)
    Abstract: A core allocation of a complete information economy can be characterized as one that would not be unanimously rejected in favor of another feasible alternative by any coalition. We use this test of coalitional voting in an incomplete information environment to formalize a notion of resilience. Since information transmission is implicit in the Bayesian equilibria of such voting games, this approach makes it possible to derive core concepts in which the transmission of information among members of a coalition is endogenous. Our results lend support to the credible core of Dutta and Vohra (2003) and the core proposed by Myerson (2003) as two that can be justified in terms of coalitional voting.
    Keywords: Core, Incomplete Information, Coalitional Voting, Resilience, Mediation
    JEL: C71 C72 D51 D82
    Date: 2005–01
  5. By: Kóczy László Á. (METEOR)
    Abstract: While they use the language of game theory known measures of a priory voting power are hardly more than statistical expectations assuming the random behaviour of the players. Focusing on normalised indices we show that rational players would behave differently from the indices predictions and propose a model that captures such strategic behaviour.
    Keywords: Economics (Jel: A)
    Date: 2006
  6. By: Fabrice Barthélémy (Université de Cergy-Pontoise (Théma)); Mathieu Martin (Université de Cergy-Pontoise (Théma))
    Abstract: The spatial analysis of power indices is commonly used in the literature to study the importance of ideological criteria. Our purpose is to show, through the example of some french groupings of local cities, the importance of the geographical situation of the players when considering power analysis. We show that the classical measure of power (with the Shapley-Shubik index of power) may be sometimes radically different if the geographical aspect of the player is taken into account (with the Shapley-Owen index of power).
    Keywords: Shapley-Shubik index of power, french grouping of local cities, spatial analysis
    JEL: C7 D7 R5
    Date: 2006
  7. By: Robert P. Gilles; Sudipta Sarangi
    Abstract: We examine the process of building social relationships as a non-cooperative game that requires mutual consent and involves reaching out to others at a cost. Players create their social network from amongst their set of acquaintances. Having acquaintances allows players to form naive beliefs about the feasibility of building direct relationships with their acquaintances. These myopic beliefs describe how the other players are expected to respond to the initiation of a link by a player. We introduce a stability concept called "monadic stability" where agents play a best response to their formed myopic beliefs such that these beliefs are self-confirming. The resulting equilibrium networks form subset of the set of pairwise stable networks.
    Keywords: Social networks, network formation, pairwise stability, trust, self-confirming equilibrium
    JEL: C72 C79 D85
    Date: 2006
  8. By: Topi Miettinen
    Abstract: Experiments suggest that communication increases the contribution to public goods (Ledyard, 1995). There is also evidence that, when contemplating a lie, people trade off their private benefit from the lie with the harm it inflicts on others (Gneezy, 2005). We develop a model of bilateral pre-play agreements that assumes the latter and implies the former. A preference for not lying provides a partial commitment device that enables informal agreements. We establish some general properties of the set of possible agreements in normal form games and characterize the smallest and largest such set. In symmetric games, pre-play agreements crucially depend on whether actions are strategic complements or substitutes. With strategic substitutes, commitment power tends to decrease in efficiency whereas the opposite may be true with strategic complements.
    Keywords: pre-play negotiations, communication, social norms, agreements, guilt
    JEL: C72 C78 Z13
    Date: 2006–11
  9. By: Kyoo il Kim (School of Economics and Social Sciences, Singapore Management University)
    Abstract: This paper studies an econometric modeling of a signaling game with two players where one player has one of two types. In particular, we develop an estimation strategy that identifies the payoffs structure and the distribution of types from data of observed actions. We can achieve uniqueness of equilibrium using a refinement, which enables us to identify the parameters of interest. In the game, we consider non-strategic public signals about the types. Because the mixing distribution of these signals is nonparametrically specified, we propose to estimate the model using a sieve conditional MLE. We achieve the consistency and the asymptotic normality of the structural parameters estimates. As an alternative, we allow for the possibility of multiple equilibria, without using an equilibrium selection rule. As a consequence, we adopt a set inference allowing for multiplicity of equilibria.
    Keywords: Semiparametric Estimation, Signaling Game, Set Inference, Infinite Dimensional Parame- ters, Sieve Simultaneous Conditional MLE
    JEL: C13 C14 C35 C62 C73
    Date: 2006–09
  10. By: Kyoo il Kim (School of Economics and Social Sciences, Singapore Management University)
    Abstract: We consider estimation and inference of parameters in discrete games allowing for multiple equilibria, without using an equilibrium selection rule. We do a set inference while a game model can contain infinite dimensional parameters. Examples can include signaling games with discrete types where the type distribution is nonparametrically specified and entry-exit games with partially linear payoffs functions. A consistent set estimator and a confidence interval of a function of parameters are provided in this paper. We note that achieving a consistent point estimation often requires an information reduction. Due to this less use of information, we may end up a point estimator with a larger variance and have a wider confidence interval than those of the set estimator using the full information in the model. This finding justifies the use of the set inference even though we can achieve a consistent point estimation. It is an interesting future research to compare these two alternatives: CI from the point estimation with the usage of less information vs. CI from the set estimation with the usage of the full information.
    Keywords: Semiparametric Estimation, Set Inference, Infinite Dimensional Parameters, Inequality Moment Conditions, Signaling Game with Discrete Types
    JEL: C13 C14 C35 C62 C73
    Date: 2006–09
  11. By: Hideo Konishi (Boston College); Margarita Sapozhnikov (Boston College)
    Abstract: In a Shapley-Shubik assignment problem with a supermodular output matrix, we consider games in which each firm makes a take-it-or-leave-it salary offer to one applicant, and a match is made only when the offer is accepted by her. We consider both one-shot and multistage games. In either game, we show that there can be many equilibrium salary vectors which are higher or lower than the minimal competitive salary vector. If we exclude artificial equilibria, applicants' equilibrium salary vectors are bounded above by the minimal competitive salary vector, while firms' equilibrium payoff vectors are bounded below by the payoff vector under the minimal competitive salary vector. This suggests that adopting the minimal competitive salary vector as the equilibrium outcome in decentralized markets does not have a strong justification.
    JEL: C73 C78
    Date: 2006–11–10
  12. By: Guillaume Haeringer; Flip Klijn
    Abstract: Recently, several school districts in the US have adopted or consider adopting the Student-Optimal Stable Mechanism or the Top Trading Cycles Mechanism to assign children to public schools. There is clear evidence that for school districts that employ (variants of) the so-called Boston Mechanism the transition would lead to efficiency gains. The first two mechanisms are strategy-proof, but in practice student assignment procedures impede students to submit a preference list that contains all their acceptable schools. Therefore, any desirable property of the mechanisms is likely to get distorted. We study the non trivial preference revelation game where students can only declare up to a fixed number (quota) of schools to be acceptable. We focus on the stability of the Nash equilibrium outcomes. Our main results identify rather stringent necessary and sufficient conditions on the priorities to guarantee stability. This stands in sharp contrast with the Boston Mechanism which yields stable Nash equilibrium outcomes, independently of the quota. Hence, the transition to any of the two mechanisms is likely to come with a higher risk that students seek legal action as lower priority students may occupy more preferred schools.
    Keywords: school choice, matching, stability, Gale-Shapley deferred acceptance algorithm, top trading cycles, Boston mechanism, acyclic priority structure, truncation
    JEL: C78 D78 I20
    Date: 2006–11–06
  13. By: Wolfgang J. Luhan (University of Innsbruck); Martin G. Kocher (Universiteit van Amsterdam); Matthias Sutter (University of Cologne)
    Abstract: While most papers on team decision-making find teams to behave more selfish, less trusting and less altruistic than individuals, Cason and Mui (1997) report that teams are more altruistic than individuals in a dictator game. Using a within-subjects design we re-examine group polarization by letting subjects make individual as well as team decisions in an experimental dictator game. In our experiment teams are more selfish than individuals, and the most selfish team member has the strongest influence on team decisions. Various sources of the different findings in Cason and Mui (1997) and in our paper are discussed.
    Keywords: experiment; dictator game; team behavior; social preferences
    JEL: C72 C91 C92 D70
    Date: 2006–11–01
  14. By: Phillip Miller (Department of Economics, Minnesota State University)
    Abstract: This paper uses a three-stage model of non-cooperative and cooperative bargaining in a free agent market to analyze the effect of revenue sharing on the decision of teams to sign a free agent. We argue that in all subgame perfect Nash equilibria, the team with the highest reservation price will get the player. We argue that revenue sharing will not alter the outcome of the game unless the proportion taken from high revenue teams is sufficiently high. We also argue that a revenue sharing system that rewards quality low-revenue teams can alter the outcome of the game while requiring a lower proportion to be taken from high revenue teams. We also argue that the revenue sharing systems can improve competitive balance by redistributing pivotal marginal players among teams.
    Keywords: competitive balance, revenue sharing, sports labor markets, free agency
    JEL: C7 J3 J4 L83
    Date: 2006–11
  15. By: Kóczy Lászlo Á. (METEOR)
    Abstract: Brams (2003) presents three paradoxes for power indices: some rather counter-intuitive behaviour that is exhibited by both the Shapley-Shubik and the Banzhaf indices. We show that the proportional index is free from such paradoxical behaviour. This result suggests that our intuition may be based on the proportional index and as such its use in evaluating power measures is limited.
    Keywords: Economics (Jel: A)
    Date: 2006
  16. By: Klaus Nehring (Department of Economics, University of California Davis)
    Abstract: Coherent imprecise probabilistic beliefs are modelled as incomplete comparative likelihood relations admitting a multiple-prior representation. Under a structural assumption of Equidivisibility, we provide an axiomatization of such relations and show uniqueness of the representation. In the second part of the paper, we formulate a behaviorally general axiom relating preferences and probabilistic beliefs which implies that preferences over unambiguous acts are probabilistically sophisticated and which entails representability of preferences over Savage acts in an Anscombe-Aumann-style framework. The motivation for an explicit and separate axiomatization of beliefs for the study of decision-making under ambiguity is discussed in some detail.
    Date: 2006–04

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