nep-gth New Economics Papers
on Game Theory
Issue of 2007‒06‒30
eight papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. The Nakamura numbers for computable simple games By Kumabe, Masahiro; Mihara, H. Reiju
  2. Ambiguity and Social Interaction By Jürgen Eichberger; David Kelsey; Burkhard C. Schipper
  3. Experimental Investigation of a Cyclic Duopoly Game By Sebastian J. Goerg; Reinhard Selten
  4. Cooperation as self-interested reciprocity in the Centipede By Farina, Francesco; Sbriglia, Patrizia
  5. Smith and Rawls Share a Room By Bettina Klaus; Flip Klijn
  6. Efficiency of uniform standards for transboundary pollution problems : a note. By Basak Bayramoglu; Jean-François Jacques
  7. A differential game of intertemporal emissions trading with market power By Julien Pierre Chevallier
  8. False Alarm? Terror Alerts and Reelection By Roland Hodler; Simon Loertscher; Dominic Rohner

  1. By: Kumabe, Masahiro; Mihara, H. Reiju
    Abstract: The Nakamura number of a simple game plays a critical role in preference aggregation (or multi-criterion ranking): the number of alternatives that the players can always deal with rationally is less than this number. We comprehensively study the restrictions that various properties for a simple game impose on its Nakamura number. We find that a computable game has a finite Nakamura number greater than three only if it is proper, nonstrong, and nonweak, regardless of whether it is monotonic or whether it has a finite carrier. The lack of strongness often results in alternatives that cannot be strictly ranked.
    Keywords: Nakamura number; voting games; the core; Turing computability; axiomatic method; multi-criterion decision-making
    JEL: C69 D71 C71
    Date: 2007–06–23
  2. By: Jürgen Eichberger (University of Heidelberg, Department of Economics); David Kelsey (University of Exeter, Department of Economics); Burkhard C. Schipper (University of California, Davis, Department of Economics)
    Abstract: We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing (decreasing) equilibrium prices under Cournot (Bertrand) competition. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements.
    Keywords: Ambiguity, Optimism, Pessimism, Strategic Games, Oligopoly, Strategic Delegation, Peace-making, Strategic Complements, Choquet Expected Utility
    JEL: C72 D43 D62 D81
    Date: 2007–05
  3. By: Sebastian J. Goerg; Reinhard Selten
    Abstract: The notion of a cyclic game has been introduced by Selten and Wooders (2001). They illustrate the concept by the analysis of a cyclic  duopoly game. The experiments reported concern this game. The game was played by eleven matching groups of six players each. The observed choice fre- quencies were compared with the predictions of Nash equilibrium, impulse balance equilibrium (Selten, Abbink and Cox (2005), Selten and Chmura (2007)) and two-sample equilbrium (Osborne and Rubinstein(1998)). Pair- wise comparisons by the Wilcoxon Signed-rank test show that impulse balance equilibrium as well as two-sample equilibrium have a significantly better predictive success than Nash equilibrium. The difference between impulse balance equilibrium and two-sample equilibrium is not   significant.In each matching group three players acted only in uneven periods and   the other three only in even periods. This game has two pure strategy equi- libria in which both types of players behave differently. The data exhibit a weak but significant tendency in the direction of coordination at a   pure strategy equilibrium.
    Keywords: cyclic game duopoly experiment, impulse balance equilibrium, two-sample equilibrium
    JEL: C73 D43 C90
  4. By: Farina, Francesco; Sbriglia, Patrizia
    Abstract: Cooperation is a pervasive social phenomenon but more often than not economic theories have little to say about its causes and consequences. In this paper, we explore the hypothesis that cooperative behaviour might be motivated by purely selfish interest when the “social” payoff in a game is increasing. We report the results of a series of experiments on the centipede game. The experiments are organized in two subsequent steps. Subjects first participate in a 2-period trust game, randomly matched with unknown partners. We apply the strategy method in order to elicit their social preferences. On the basis of their pre-game behaviour, individuals are divided into three main social groups: selfish individuals, pure altruists and reciprocators. At the second step of the experiment, subjects play a repeated 6-move centipede game with increasing final payoff. Each subject plays twice in a low stake and in a high centipede game, and he/she is informed about his/her co-player social preferences. We identify the origin of cooperation within homogeneous and heterogeneous social groups.
    Keywords: social preferences; altruisms; experiments.
    JEL: A10
    Date: 2007–02
  5. By: Bettina Klaus; Flip Klijn
    Abstract: We consider one-to-one matching (roommate) problems in which agents (students) can either be matched as pairs or remain single. The aim of this paper is twofold. First, we review a key result for roommate problems (the ``lonely wolf'' theorem) for which we provide a concise and elementary proof. Second, and related to the title of this paper, we show how the often incompatible concepts of stability (represented by the political economist Adam Smith) and fairness (represented by the political philosopher John Rawls) can be reconciled for roommate problems.
    Keywords: roommate problem, stability, fairness
    JEL: C62 C78
    Date: 2007–06–20
  6. By: Basak Bayramoglu (Paris-Jourdan Sciences Economiques et Centre d'Economie de la Sorbonne); Jean-François Jacques (EURiSCO)
    Abstract: This note proposes an example which contradicts the idea that similar countries will negotiate an agreement on a uniform standard. It shows that strictly identical countries may have an interest in reducing their emissions differently, and not in a uniform way. This result relies on the existence of fixed costs in the abatement technology. Identical countries could be better off by signing an agreement on differentiated standards in order to exploit increasing returns to scale in the abatement activities. More specifically, one of the countries abates for both, and pays for the fixed cost of investment. In return, it is compensated by monetary transfers for this effort. We show that the level of fixed cost must be sufficiently high in this case.
    Keywords: Transboundary pollution, cooperative games, bargaining, standards, transfers, fixed cost.
    JEL: Q50 C71
    Date: 2007–05
  7. By: Julien Pierre Chevallier
    Abstract: In international emissions trading schemes such as the Kyoto Protocol and the European Union Emissions Trading Scheme, the suboptimal negotiation of the cap with respect to total pollution minimization leads us to critically examine the proposition that generous allocation of grandfathered permits by the regulator based on recent emissions might pave the way for dominant positions. Stemming from this politically given market imperfection, this paper develops a differential Stackelberg game with two types of noncooperative agents: a large potentially dominant agent and a competitive fringe whose size are exogenously determined. The strategic interactions are modelled on an intra-industry permits markets where agents can freely bank and borrow permits. This paper contributes to the debate on initial permits allocation and market power by focusing on the effects of allowing banking and borrowing. A documented appraisal on whether or not such provisions should be included is frequently overlooked by the debate to introduce the permits market itself among other environmental regulation tools. Results are presented under perfect information.
    Keywords: emissions trading, banking borrowing, market power
    JEL: C73 L11 Q52
    Date: 2007
  8. By: Roland Hodler; Simon Loertscher; Dominic Rohner
    Abstract: We study a game with asymmetric information to analyze whether an incumbent can improve his reelection prospects using distorted terror alerts. The voters’ preferred candidate depends on the true terror threat level, and the voters are rational and therefore aware of the incumbent’s incentive to distort alerts. In equilibrium, a moderately “Machiavellian” incumbent reports low and high threat levels truthfully, but issues the same distorted alert for a range of intermediate threat levels. He thereby ensures his reelection for some threat levels at which he would not be reelected under full information.
    Keywords: Terror alerts; voting and elections; signalling; political economics
    JEL: D72 C72 D82
    Date: 2007

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