nep-gth New Economics Papers
on Game Theory
Issue of 2007‒03‒24
twelve papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Games with limited communication structure By Talman,Dolf; Yamamoto,Yoshitsugu
  2. Abstract types and distributions in independent private value auctions By Paulo Klinger Monteiro
  3. Influence Indices By Agnieszka Rusinowska; Michel Grabisch
  4. The not-preference-based Hoede-Bakker index By Agnieszka Rusinowska
  5. Setting the Anchor: Price Communication, Level-n Theory and Communication By Wengström, Erik
  6. A Multi-Agent Congestion and Pricing Model By Xi Zou; David Levinson
  7. Less Rationality, More Efficiency: a Laboratory Experiment on "Lemons" Markets. By Roland Kirstein; Annette Kirstein
  8. Assigning Intentions when Actions are Unobservable: the Impact of Trembling in the Trust Game By James C. Cox; Cary A. Deck
  9. Does Punishment Matter? A Refinement of the Inspection Game By Rimawan Pradiptyo
  10. On the elimination of dominated strategies in stochastic models of evolution with large populations By Christoph Kuzmics
  11. R&D Delegation in a Duopoly with Spillovers By Bruno Versaevel; Désiré Vencatachellum
  12. The Allocation of European Union Allowances: Lessons, Unifying Themes and General Principles By Carlo Carraro; Barbara Buchner; Denny Ellerman

  1. By: Talman,Dolf; Yamamoto,Yoshitsugu (Tilburg University, Center for Economic Research)
    Abstract: In this paper we consider cooperative transferable utility games with limited communication structure, called graph games. Agents are able to cooperate with each other only if they can communicate directly or indirectly with each other. For the class of acyclic graph games recently the average tree solution has been proposed. It was proven that the average tree solution is a core element if the game exhibits superadditivity. It will be shown that the condition of super-additivity can be relaxed to a weaker condition, which admits for a natural interpretation. Moreover, the concept of subcore is introduced. Under the same condition it is proven that the subcore is a subset of the core and always contains the average tree solution and therefore is a non-empty refinement of the core.
    Keywords: limited communication structure;acyclic undirected graph;super-additivity; core;average tree solution
    JEL: C71
    Date: 2007
  2. By: Paulo Klinger Monteiro (EPGE/FGV)
    Date: 2007–03
  3. By: Agnieszka Rusinowska (GATE CNRS); Michel Grabisch (Université Paris I Panthéon-Sorbonne, CERMSEM)
    Abstract: In the paper, we investigate the Hoede-Bakker index - the notion which computes the overall decisional ‘power’ of a player in a social network. It is assumed that each player has an inclination (original decision) to say ‘yes’ or ‘no’ which, due to influence of other players, may be different from the final decision of the player. The main drawback of the Hoede-Bakker index is that it hides the actual role of the influence function, analyzing only the final decision in terms of success and failure. In this paper, we further investigate the Hoede-Bakker index, proposing an improvement which fully takes into account the mutual influence among players. A global index which distinguishes an influence degree from a ‘power’ index is analyzed. We define weighted influence indices, in particular, a possibility influence index which takes into account any possibility of influence, and a certainty influence index which expresses certainty of influence. We consider different influence functions and study their properties.
    Keywords: Hoede-Bakker index, influence function, influence indices
    JEL: C7 D7
    Date: 2007–03
  4. By: Agnieszka Rusinowska (GATE CNRS)
    Abstract: The paper concerns a certain modification of the generalized Hoede-Bakker index - a notion defined for a social network of players. In the original Hoede-Bakker set up, preferences of players are involved. It is assumed that a player has an inclination either to accept or to reject a proposal, but due to the influence of others, his final decision may be different from his original inclination. In this paper, we propose the not-preference-based (NPB) generalized Hoede-Bakker index, where feasible strategies instead of players’ inclinations are considered. We show that if all feasible strategy profiles are equally probable, then the NPB generalized Hoede-Bakker index is a ‘net’ Success, i.e., ‘Success - Failure’, where Success and Failure of a player is defined as the probability that the player is successful and fails, respectively. Moreover, under the assumption of equal probabilities of all feasible strategy profiles, we show that the probability that a player is lucky (Luck) equals the probability that he fails (Failure). Since Success - Luck = Decisiveness, it follows that, under the same assumption, the NPB generalized Hoede-Bakker index is equal to the probability that a player is decisive.
    Keywords: Hoede-Bakker index, feasible strategy, success, failure, decisiveness
    JEL: C7 D7
    Date: 2007–03
  5. By: Wengström, Erik (Department of Economics, Lund University)
    Abstract: This paper analyzes communication from the viewpoint of the level-n theory of bounded rationality. It examines if communication can be understood by the effect it has on high-level types’ beliefs about the actions of simpleminded level-0 players. We present experimental evidence from a slightly perturbed price competition game designed to test this interpretation. The main finding is that communication affects subjects in a way that seems compatible with the level-n model, indicating that people lie in order to fool other players that they believe do less thinking. Moreover, the results indicate that the predictive power of the level-n model does crucially depend on the possibility for high level players to form homogenous beliefs about the behavior of the level-0 players.
    Keywords: Noncooperative Game Theory; Communication; Bounded Rationality; Experiments
    JEL: C72 C92 D84
    Date: 2007–03–20
  6. By: Xi Zou; David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: A multi-agent model of travelers competing to utilize a roadway in time and space is presented in this paper to illustrate the effect of congestion and pricing on traveler behaviors and network equilibrium. To realize the spillover effect among travelers, N-player games are constructed in which the strategy set include (N+1) strategies. We solve the discrete N-player game (for N less than 8) and find Nash equilibria if they exist. This model is compared to the bottleneck model. The results of numerical simulation show that the two models yield identical results in terms of lowest total costs and marginal costs when a social optimum exists.
    Keywords: Agent-based Model, Game Theory, Congestion, Queueing, Traffic Flow, Congestion Pricing, Road Pricing, Value Pricing
    JEL: R41 R42 R48 D10 D81 D83 C72
    Date: 2006
  7. By: Roland Kirstein; Annette Kirstein (Universität Karlsruhe)
    Abstract: In this paper we experimentally test a theory of boundedly rational behavior in a "lemons market." We analyzed two different market designs, for which perfect rationality implies complete and partial market collapse, respectively. Our empirical observations deviate substantially from these predictions of rational choice theory: Even after 20 repetitions, the actual outcome is closer to e±ciency than expected. Our bounded rationality approach to explaining these observations starts with the insight that perfect rationality would require the players to perform an in¯nite number of iterative reasoning steps. Boundedly rational players, however, carry out only a limited number of such iterations. We have determined the iteration type of the players independently from their market behavior. A significant correlation exists between the iteration types and the observed price offers.
    Keywords: guessing games, beauty contests, market failure, adverse selection, lemon problem, regulatory failure, paternalistic regulation,
    JEL: D8 C7 B4
  8. By: James C. Cox; Cary A. Deck
    Abstract: This paper reports laboratory experiments investigating behavior when players may make inferences about the intentions behind others’ prior actions based on higher- or lower-accuracy information about those actions. We investigate a trust game with first mover trembling, a game in which nature determines whether the first mover’s decision is implemented or reversed. The results indicate that second movers give first movers the benefit of the doubt. However, first movers do not anticipate this response. Ultimately, it appears that subjects are thinking on at least three levels when making decisions: they are concerned with their own material well being, the trustworthiness of their counterpart, and how their own actions will be perceived.
    JEL: C70 C91 D64 D84
    Date: 2006
  9. By: Rimawan Pradiptyo (University of York, UK)
    Abstract: We attempt to revise the inspection game used by Tsebelis (1989, 1990, 1993 and Tsebelis in Bianco et al, 1990) to model phenomena in criminal justice. Recent findings from various studies, primarily conducted in the UK, are used to re-construct the game. In contrast to Tsebelis' (1989) propositions, we found that the severity of punishment may affect individuals' offending behaviour. Similar results can be found for the case in which the authority initiates crime prevention initiatives by providing incentives to law abiding individuals. Any attempts to increase the severity of punishment are less certain in reducing individuals' offending behaviour than crime prevention initiatives. This result holds so long as the authority does not alter the levels of enforcement and the severity of punishment.
    Keywords: Punishment; Deterrence effect; Crime prevention; Game theory,
    JEL: K42 C70
  10. By: Christoph Kuzmics
    Date: 2007–03–16
  11. By: Bruno Versaevel (GATE CNRS); Désiré Vencatachellum (HEC Montréal)
    Abstract: There is evidence that competing firms delegate R&D to the same independent profit-maximizing laboratory. We draw on this stylized fact to construct a model where two firms in the same industry offer transfer payments in exchange of user-specific R&D services from a common laboratory. Inter-firm and within-laboratory externalities affect the intensity of competition among delegating firms on the intermediate market for technology. Whether competition is relatively soft or tight is reflected by each firm's transfer payment offers to the laboratory. This in turn determines the laboratory's capacity to earn profits, R&D outcomes, delegating firms' profits, and social welfare. We compare the delegated R&D game to two other ones where firms (i) cooperatively conduct in-house R&D, and (ii) non-cooperatively choose in-house R&D. The delegated R&D game Pareto dominates the other two games, and the laboratory earns positive profits, only if within-laboratory R&D services are suffciently complementary but inter-firm spillovers are suffciently low. We find no room for policy intervention, because the privately profitable decision to delegate R&D, when the laboratory participates, always benefits consumers.
    Keywords: common agency, externalities, research and development
    JEL: C72 L13 O31
    Date: 2006–10
  12. By: Carlo Carraro (Department of Economics, University Of Venice Ca’ Foscari); Barbara Buchner (Fondazione Eni Enrico Mattei); Denny Ellerman (Senior Lecturer at MIT)
    Abstract: This paper is the concluding chapter of Rights, Rents and Fairness: Allocation in the European Emissions Trading Scheme, edited by the co-authors and forthcoming from Cambridge University Press. The main objective of this paper is to distill the lessons and general principles to be learnt from the allocation of allowances in the European Union Emission Trading Scheme (EU ETS), i.e. in the world’s first experience with allocating carbon allowances to sub-national entities. We discuss the lessons that emerge from this experience and make some comments on what seem to be more general principles informing the allocation process and on what are the global implications of the EU ETS. As has become obvious during the first allocation phase, the diversity of experience among the Member States is considerable, so that it must be understood that these lessons and unifying themes are drawn from the experience of most of the Member States, not necessarily from all. Lessons and unifying observations are grouped in three categories: those concerning the conditions encountered, the processes employed, and the actual choices.
    Keywords: Climate Change, Emission Trading, Allocation, Fairness, EU Policy
    JEL: C72 H23 Q25 Q28
    Date: 2006

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