nep-gth New Economics Papers
on Game Theory
Issue of 2007‒01‒02
four papers chosen by
Laszlo A. Koczy
Universiteit Maastricht

  1. On the absorbability of the Guessing Game Theory - A Theoretical and Experimental Analysis By Andrea Morone; Serena Sandri; Tobias Uske
  2. Trust Games Measure Trust By Houser, Daniel; Schunk, Daniel; Winter, Joachim
  3. A Simple Test of Learning Theory By Jim Engle-Warnick; Ed Hopkins
  4. On the Lowest-Winning-Bid and the Highest-Losing-Bid Auctions By Claudio Mezzetti; Ilia Tsetlin

  1. By: Andrea Morone; Serena Sandri; Tobias Uske
    Abstract: Theory absorption, a notion introduced by Morgenstern and Schwödiauer (1972) and further elaborated by Güth and Kliemt (2004), discusses the problem whether a theory can survive its own acceptance. Whereas this holds for strategic equilibria according to the assumptions on which they are based, the problem if theories are absorbable by at most boundedly rational decision makers is hardly discussed. Based on guessing game experiments we discuss the requirements of equilibrium theory absorption and test experimentally the effects of informing none, some or all players about how to derive equilibrium predictions.
    Keywords: theory absorption, guessing game, p-beauty contest, individual behaviour, elimination of dominated strategies
    JEL: C72 C91
    Date: 2006–12
  2. By: Houser, Daniel; Schunk, Daniel; Winter, Joachim
    Abstract: The relationship between trust and risk is a topic of enduring interest. Although there are substantial differences between the ideas the terms express, many researchers from different disciplines have pointed out that these two concepts become very closely related in personal exchange contexts. This raises the important practical concern over whether behaviors in the widely-used “trust game” actually measure trust, or instead reveal more about risk attitudes. It is critical to confront this question rigorously, as data from these games are increasingly used to support conclusions from a wide variety of fields including macroeconomic development, social psychology and cultural anthropology. The aim of this paper is to provide cogent evidence on the relationship between trust and risk in “trust” games. Subjects in our experiment participate either in a trust game or in its risk game counterpart. In the trust version, subjects play a standard trust game and know their counterparts are human. In the risk version, subjects know their counterparts are computers making random decisions. We compare decisions between these treatments, and also correlate behavior with subjects’ risk attitudes as measured by the Holt and Laury (2002) risk instrument. We provide evidence that trusting behavior is different than behavior under risk. In particular, (i) decisions patterns in our trust and risk games are significantly different; and (ii) risk attitudes correlate with decisions in the risk game, but not the trust game.
    Keywords: trust; risk attitudes; laboratory experiments
    JEL: C91 C92
    Date: 2006–12
  3. By: Jim Engle-Warnick; Ed Hopkins
    Abstract: We report experiments designed to test the theoretical possibility, first discovered by Shapley (1964), that in some games learning fails to converge to any equilibrium, either in terms of marginal frequencies or of average play. Subjects played repeatedly in fixed pairings one of two 3 ´ 3 games, each having a unique Nash equilibrium in mixed strategies. The equilibrium of one game is predicted to be stable under learning, the other unstable, provided payoffs are sufficiently high. We ran each game in high and low payoff treatments. We find that, in all treatments, average play is close to equilibrium even though there are strong cycles present in the data. <P>Nous faisons le compte rendu d'expériences élaborées afin de tester la possibilité théorique, découverte par Shapley (1964), que dans certains jeux, l'apprentissage ne converge pas vers un équilibre, que ce soit en termes de fréquences marginales ou de jeu moyen. Les sujets ont joué à répétition en paires fixes à un de deux jeux 3 ´ 3, chaque jeu ayant un équilibre de Nash unique avec stratégies mixtes. On prévoit que l'équilibre du premier jeu soit stable après apprentissage, et le deuxième jeu instable, à condition que les gains soient suffisamment élevés. Pour chaque jeu, nous avons eu recours à deux différents traitements : un avec gains faibles et l’autre avec gains élevés. Nous avons constaté que dans tous les traitements, le jeu moyen est près de l'équilibre bien qu'il y ait présence de cycles importants dans les données.
    Keywords: games, learning, experiments, stochastic fictitious play, mixed strategy equilibria, jeux, apprentissage, expériences, jeu fictif stochastique, équilibres à stratégie mixte
    JEL: C72 C73 C92 D83
    Date: 2006–12–01
  4. By: Claudio Mezzetti; Ilia Tsetlin
    Abstract: Theoretical models of multi-unit, uniform-price auctions assume that the price is given by the highest losing bid. In practice, however, the price is usually given by the lowest winning bid. We derive the equilibrium bidding function of the lowest-winning-bid auction when there are k objects for sale and n bidders, and prove that it converges to the bidding function of the highest-losing-bid auction if and only if the number of losers n - k gets large. When the number of losers grows large, the bidding functions converge at a linear rate and the prices in the two auctions converge in probability to the expected value of an object to the marginal winner.
    Keywords: Auctions; Lowest-Winning Bid; Highest-Losing Bid; k-th Price Auction; (k+1)-st Price Auction
    JEL: D44 D82
    Date: 2006–12

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