nep-gth New Economics Papers
on Game Theory
Issue of 2007‒05‒26
nine papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Five Questions on Game Theory By Sergiu Hart
  2. Mediators Enable Truthful Voting By Bezalel Peleg; Ariel D. Procaccia
  3. Cooperation in the Commons with Unobservable Actions By Nori Tarui; Charles Mason; Stephen Polasky; Greg Ellis
  4. Majority Rule Dynamics with Endogenous Status Quo By Tasos Kalandrakis
  5. Marriage Matching with Correlated Preferences By Onur B. Celik; Vicki Knoblauch
  6. Interregional diversity of fairness concerns - An online ultimatum experiment By Sebastian J. Georg; Werner Güth; Gari Walkowitz; Torsten Weiland
  7. Positional Power in Hierarchies By René van den Brink; Frank Steffen
  9. Marriage Matching: A Conjecture of Donald Knuth By Vicki Knoblauch

  1. By: Sergiu Hart
    Date: 2007–05
  2. By: Bezalel Peleg; Ariel D. Procaccia
    Abstract: The Gibbard-Satterthwaite Theorem asserts the impossibility of designing a non-dictatorial voting rule in which truth-telling always constitutes a Nash equilibrium. We show that in voting games of complete information where a mediator is on hand, this troubling impossibility result can be alleviated. Indeed, we characterize families of voting rules where, given a mediator, truthful preference revelation is always in strong equilibrium. In particular, we observe that the family of feasible elimination procedures has the foregoing property.
    Date: 2007–04
  3. By: Nori Tarui (Department of Economics, University of Hawaii at Manoa); Charles Mason (Department of Economics and Finance, University of Wyoming); Stephen Polasky (Department of Applied Economics, University of Minnesota); Greg Ellis (Department of Economics, University of Washington)
    Abstract: We model a dynamic common property resource game with unobservable actions and non-linear stock dependent costs. We propose a strategy profile that generates a worst perfect equilibrium in the punishment phase, thereby supporting cooperation under the widest set of conditions. We show under what set of parameter values for the discount rate, resource growth rate, harvest price, and the number of resource users, this strategy supports cooperation in the commons as a subgame perfect equilibrium. The strategy profile that we propose, which involves harsh punishment after a defection followed by forgiveness, is consistent with human behavior observed in experiments and common property resource case studies.
    Keywords: Common property resource, cooperation, dynamic game, unobservable actions
    JEL: D62 Q20
    Date: 2006–11
  4. By: Tasos Kalandrakis (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158)
    Abstract: We analyze a stochastic bargaining game in which a new dollar is divided among committee members in each of an infinity of periods. In each period, a committee member is recognized and offers a proposal for the division of the dollar. The proposal is implemented if it is approved by a majority. If the proposal is rejected, then last period’s allocation is implemented. We show existence of equilibrium in Markovian strategies. It is such that irrespective of the initial status quo, the discount factor, or the probabilities of recognition, the proposer extracts the entire dollar in all periods but the initial two. We also derive a fully strategic version of McKelvey’s (1976), (1979) dictatorial agenda setting, so that a player with exclusive access to the formulation of proposals can extract the entire dollar in all periods except the first. The equilibrium collapses when within period payoffs are sufficiently concave. Winning coalitions may comprise players with high instead of low recognition probabilities, ceteris paribus.
    JEL: C73 C78 D72
    Date: 2007–05
  5. By: Onur B. Celik (University of Connecticut); Vicki Knoblauch (University of Connecticut)
    Abstract: Authors of experimental, empirical, theoretical and computational studies of two-sided matching markets have recognized the importance of correlated preferences. We develop a general method for the study of the effect of correlation of preferences on the outcomes generated by two-sided matching mechanisms. We then illustrate our method by using it to quantify the effect of correlation of preferences on satisfaction with the men-propose Gale-Shapley matching for a simple one-to-one matching problem.
    Keywords: Two-Sided Matching, Correlated preferences, Gale-Shapley algorithm
    JEL: C78 D63 B41
    Date: 2007–05
  6. By: Sebastian J. Georg (BonnEconLab, University of Bonn); Werner Güth (Max Planck Institute of Economics Jena, Strategic Interaction Unit); Gari Walkowitz (BonnEconLab, University of Bonn); Torsten Weiland (Max Planck Institute of Economics Jena, Strategic Interaction Unit)
    Abstract: Does geographic distance or the perceived social distance between subjects significantly affect proposer and responder behavior in ultimatum bargaining? To answer this question, subjects play a one-shot ultimatum game with three players (proposer, responder, and a passive dummy player) and asymmetric information (only the proposer knows what can be distributed). Treatments differ in their geographic scope by involving either one or three different locations in Germany. Observed behavior reflects the robust stylized facts of this class of ultimatum experiments and can be adequately explained by other-regarding preferences. While responder behavior does not condition on co-players' location of residence, self-interest of proposers varies significantly with the latter. Altogether, we do not detect strong discrimination based on geographic distance.
    Keywords: ultimatum bargaining, cross-cultural experiments, social preferences
    JEL: C78 C91 Z13
    Date: 2007–05–16
  7. By: René van den Brink (Vrije Universiteit Amsterdam); Frank Steffen (Management School (ULMS), University of Liverpool)
    Abstract: Power is a core concept in the analysis and design of organisations. In this paper we consider positional power in hierarchies. One of the problems with the extant literature on positional power in hierarchies is that it is mainly restricted to the analysis of power in terms of the bare positions of the actors. While such an analysis informs us about the authority structure within an organisation, it ignores the decision-making mechanisms completely. The few studies which take into account the decision-making mechanisms make all use of adaptations of well-established approaches for the analysis of power in non-hierarchical organisations such as the Banzhaf measure; and thus they are all based on the structure of a simple game, i.e. they are ‘membershipbased’. We demonstrate that such an approach is in general inappropriate for characterizing power in hierarchies as it cannot be extended to a class of decision-making mechanisms which allow certain actors to terminate a decision before all other members have been involved. As this kind of sequential decision-making mechanism turns out to be particularly relevant for hierarchies, we suggest an action-b! ased approach - represented by an extensive game form - which can take the features of such mechanisms into account. Based on this approach we introduce a power score and measure that can be applied to ascribe positional power to actors in sequential decision making mechanisms.
    Keywords: hierarchies; decision-making mechanism; power; positional power; power measure
    JEL: C79 D02 D71
    Date: 2007–05–03
  8. By: Ewald, Christian-Oliver; Xiao, Yajun
    Abstract: We consider a continuous time market model, in which agents influence asset prices. The agents are assumed to be rational and maximizing expected utility from terminal wealth. They share the same utility function but are allowed to possess different levels of information. Technically our model represents a stochastic differential game with anticipative strategy sets. We derive necessary and sufficient criteria for the existence of Nash-equilibria and characterize them for various levels of information asymmetry. Furthermore we study in how far the asymmetry in the level of information influences Nash-equilibria and general welfare. We show that under certain conditions in a competitive environment an increased level of information may in fact lower the level of general welfare. This effect can not be observed in representative agent based models, where information always increases welfare. Finally we extend our model in a way, that we add prior stages, in which agents are allowed to buy and sell information from each other, before engaging in trading with the market assets. We determine equilibrium prices for particular pieces of information in this setup.
    Keywords: information; financial markets; stochastic differential games
    JEL: G14 G11 C73
    Date: 2007
  9. By: Vicki Knoblauch (University of Connecticut)
    Abstract: Variations of the Gale-Shapley algorithm have been used and studied extensively in real world markets. Examples include matching medical residents with residency programs, the kidney exchange program and matching college students with on-campus housing. The performance of the Gale-Shapley marriage matching algorithm (1962) has been studied extensively in the special case of men's and women's preferences random. We drop the assumption that women's preferences are random and show that En /n ln n -> 1, where En is the expected number of proposals made when the men-propose Gale-Shapley algorithm is used to match n men with n women. This establishes in spirit a conjecture of Donald Knuth (1976, 1997) of thirty years standing. Under the same assumptions, we also establish bounds on the expected ranking by a woman of her assigned mate. Bounds on men's rankings of their assigned mates follow directly from the conjecture.
    Keywords: Two-Sided Matching, Gale-Shapley algorithm
    JEL: C78 D63 D70
    Date: 2007–05

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