nep-gth New Economics Papers
on Game Theory
Issue of 2007‒06‒23
nine papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Robust virtual implementation with incomplete information: Towards a reinterpretation of the Wilson doctrine By Georgy Artemov; Takashi Kunimoto; Roberto Serrano
  2. Strategic Exploitation of a Common-Property Resource under Uncertainty By Christos Koulovatianos; Carsten Schröder; Ulrich Schmidt
  3. Network Formation With Endogenous Decay By Francesco Feri
  4. College Admissions Game: Early Action or Early Decision? By Mumcu, Ayse; Saglam, Ismail
  5. Friendship Selection By Javier Rivas
  6. Trust and truth By Ellingsen, Tore; Johannesson, Magnus; Lilja, Jannie; Zetterqvist, Henrik
  7. Does a Seller Really Want Another Bidder? By Ronald M. Harstad
  8. Group polarization in the team dictator game reconsidered By Wolfgang Luhan; Martin Kocher; Matthias Sutter
  9. Effects of Asymmetric Payoffs and Information Cost in Sequential Information Revelation Games By Young-Ro Yoon

  1. By: Georgy Artemov (Brown University); Takashi Kunimoto (McGill University); Roberto Serrano (Brown University & IMDEA)
    Abstract: We consider robust virtual implementation, where robustness is the requirement that implementation succeed in all type spaces consistent with a given payoff type space as well as with a given space of first-order beliefs about the other agents\' payoff types. This last bit, which constitutes our reinterpretation of the Wilson doctrine, allows us to obtain very permissive results. Our first result is that generically, if there are at least three alternatives, any incentive compatible social choice function is robustly virtually implementable in iteratively undominated strategies. Further, we characterize robust virtual implementation in iteratively undominated strategies by means of incentive compatibility and measurability. Our characterization is independent of the presence of monetary transfers or assumptions alike, made in previous studies. Our work also clarifies the measurability condition in connection to the generic diversity of preferences used in our first result.
    Keywords: Wilson doctrine; mechanism design; robust virtual implementation; iteratively undominated strategies; incentive compatibility; measurability; type diversity
    JEL: C72 C78 D82
    Date: 2007–05–27
  2. By: Christos Koulovatianos; Carsten Schröder; Ulrich Schmidt
    Abstract: We study the impact of uncertainty on the strategies and dynamics of symmetric noncooperative games among players who exploit a non-excludable resource that reproducesunder uncertainty. We focus on a particular class of games that deliver a unique Nash equilibrium in linear-symmetric strategies of resource exploitation. We show that, for this class of games, the tragedy of the commons is always present. For various changes in the riskiness of the random primitives of the model we provide general characterizations of features of the model that explain links between the degree of riskiness and strategic exploitation decisions. Finally, we provide a specific example that demonstrates the usefulness of our general results and, within the specific example, we study cases where increases in risk amplify or mitigate the tragedy of the commons.
    JEL: C73 C72 C61 Q20 O13 D90 D43
    Date: 2007–06
  3. By: Francesco Feri
    Abstract: This paper considers a model of economic network characterized by an endogenous architecture and frictions in the relations among agents as described in Bala and Goyal (2000). We propose a similar network model with the difference that frictions in the relations among agents are endogenous. Frictions are modeled as dependent on the result of a coordination game, played by every pair of directly linked agents and characterized by 2 equilibria: one efficient and the other risk dominant. The model has a multiplicity of equilibria and we produce a characterization of those are stochastically stable.
    Keywords: Network, Decay, Strategic Interaction
    JEL: A14 D20 J00
    Date: 2007–06
  4. By: Mumcu, Ayse; Saglam, Ismail
    Abstract: In this paper, we study the long-played, yet until now unmodeled, college admissions game over early admissions plans using a many-to-one matching framework. We characterize the equilibrium strategies of each college involving its early quota out of its total capacity, and the set of admissible and deferred students within its applicant pool independently from the early admissions plans of the colleges in the market. Given these strategies, we show that for each college early action is a weakly dominant choice between early admissions plans.
    Keywords: Many-to-one matching; early action; early decision; college admissions
    JEL: C71 D71 C78
    Date: 2007–06–15
  5. By: Javier Rivas
    Abstract: We model the formation of friendships as repeated cooperation within a set of heterogeneous players. The model builds around three of the most important facts about friendship: friends help each other, there is reciprocity in the relationship and people usually have few friends. In our results we explain how similarity between people affects the friendship selection. We also characterize when the friendship network won’t depend on the random process by which people meet each other. Finally, we explore how players’ patience influences the length of their friendship relations. Our results match and explain empirical evidence reported in social studies on friendship. For instance, our model explains why troublesome subjects have few friends.
    Keywords: Friendship, cooperative game, grim trigger strategy, social networks
    JEL: C72 C73 Z13
    Date: 2007
  6. By: Ellingsen, Tore (Dept. of Economics, Stockholm School of Economics); Johannesson, Magnus (Dept. of Economics, Stockholm School of Economics); Lilja, Jannie (Department of Peace and Conflict Research, Uppsala University); Zetterqvist, Henrik (Hilti)
    Abstract: In a laboratory experiment, we create relationships between pairs of anonymous subjects through a Prisoners' dilemma game. Thereafter the same subjects play a private values (sealed-bid double auction) bargaining game with or without communication. Communication substantially increases bargaining efficiency among subjects who cooperated in the Prisoners' dilemma, but has no significant effect on bargaining outcomes when one subject defected. Subjects who cooperated in the Prisoners' dilemma bid more aggresively if their opponent defected. Cooperators also lie more about their valuations when their opponent defected: Compared to the case of mutual cooperation, the cooperators' rate of honest revelation decreases from 64% to 6% and the rate of outright deception increases from 7% to 53%. Our results provide qualitatively new evidence that many people are strong recipricators: They are willing to bear private costs in order to reward good behavior and punish bad behavior, even when the rewards and punishments are unobservable.
    Keywords: Bargaining; Communication; Honesty; Trust; Strong reciprocity
    JEL: C91 D74 Z13
    Date: 2006–11–01
  7. By: Ronald M. Harstad (Department of Economics, University of Missouri-Columbia)
    Abstract: Jeremy I. Bulow and Paul D. Klemperer (AER, 1996) argue that the usual concerns of auction design miss the big picture, and show that a simple English auction without a reserve price and N + 1 bidders attains expected revenue in excess of any auction with N bidders. The issue of how this additional bidder might be attracted is not treated in their model. In fact, that an auction can convince another bidder it is worth his while to compete carries a critical message about expected revenue. In those many markets where potential bidders decide whether to compete in an auction based on the expected probability of bidding, Bulow and Klemperer's conclusion is shown here to be overturned. I explore the symmetric equilibrium of a model where potential bidders first decide whether to participate in an auction, and then participants select bidding strategies. Expected revenue is increased by some degree of bidder discouragement, in that it is never optimal to have all N potential bidders participate with probability one, even for very small N
    Keywords: affiliated-values auctions, auction revenue, number of bidders, increased competition, endegenous bidder participation
    JEL: D44 D82 C72
    Date: 2007–05–15
  8. By: Wolfgang Luhan; Martin Kocher; Matthias Sutter
    Abstract: While most papers on team decision-making find that teams behave more selfishly, less trustingly and less altruistically 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 explanations for 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: 2007–07
  9. By: Young-Ro Yoon (Indiana University Bloomington)
    Abstract: This paper explores the effects of costly information and asymmetry in reward and penalty on an agent's strategic behavior in acquiring and revealing information. Whether information is costly to acquire or not, in order to induce truthfulness in an agent's action, the penalty should not be stressed more than the reward to avoid herding or imitation. When the reward is greater than the penalty, if information is not costly, for the relatively low quality of information, the agent exhibits anti-herding. However, an equilibrium -- in which she acts truthfully for all parameters of information quality -- can be induced by managing the reward and penalty. If information is costly, within certain parameter sets of information quality, the agent exhibits deviation and imitation. Also, for the moderate quality of information, the agent acquires her information although it is costly and reveals it truthfully. The derived results can provide the reasoning behind agents' behavior trends in information revelation according to reputation and the difficulty of a given task.
    Keywords: Asymmetry in reward and penalty, Information Cost, Truthfulness in information revelation, Herding, Anti-Herding, Imitation, Deviation
    JEL: D81 D82
    Date: 2007–06

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