nep-gth New Economics Papers
on Game Theory
Issue of 2007‒08‒14
nine papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. The control of game form recognition in experiments: Understanding dominant strategy failures in a simple two person “Guessing” game By Chou, Eileen; McConnell, Margaret; Nagel, Rosemarie; Plott, Charles R.
  2. Toward Farsightedly Stable International Environmental Agreements By Dritan Osmani; Richard S.J. Tol
  3. Modelling Negotiated Decision Making: a Multilateral, Multiple Issues, Non-Cooperative Bargaining Model with Uncertainty By Carlo Carraro; Alessandra Sgobbi
  4. Oligopoly with Hyperbolic Demand: A Differential Game Approach By L. Lambertini
  5. Information Acquisition in Independent Value Auctions By Dirk Bergemann; Juuso Välimäki; Xianwen Shi
  6. Substitute Valuations, Auctions, and Equilibrium with Discrete Goods By Paul Milgrom; Bruno Stulovici
  7. Deterministic and Stochastic Prisoner's Dilemma Games: Experiments in Interdependent Security By Howard Kunreuther; Gabriel Silvasi; Eric T. Bradlow; Dylan Small
  8. Island Matching By Dale T. Mortensen
  9. Voting Power in the Australian Senate: 1901-2004 By Alex Robson

  1. By: Chou, Eileen; McConnell, Margaret; Nagel, Rosemarie; Plott, Charles R.
    Date: 2007–08
  2. By: Dritan Osmani; Richard S.J. Tol (Economic and Social Research Institute, Dublin, Ireland)
    Abstract: The stability of International Environmental Agreements (IEA) is analyzed by using game theory. The integrated assessment model FUND provides the cost-bene¯t payo® functions of pollution abatement for sixteen di®erent world regions. The farsighted stability concept of Chwe (1994) is used and solved by combinatorial algorithms. The farsighted stability con- cept captures the perfect foresight of the players and predicts which coalitions can be formed when players are farsighted. All farsightedly stable coalitions are found as well as their im- provement to environment and welfare. The farsightedly stable coalitions are re¯ned further to the preferred farsightedly stable coalitions. The d'Aspremont stable coalitions are very shortly presented in order to compare with farsighted stable ones. The stability concept of d'Aspremont et al. (1983) assumes that players are myopic and consider only single-player movements.
    Keywords: game theory, integrated assessment modeling, farsighted stability, coalition formation, d'Aspremont stability
    JEL: C72 Q54
    Date: 2007–07
  3. By: Carlo Carraro (Department of Economics, University Of Venice Ca’ Foscari); Alessandra Sgobbi (FEEM)
    Abstract: The relevance of bargaining to everyday life can easily be ascertained, yet the study of any bargaining process is extremely hard, involving a multiplicity of questions and complex issues. The objective of this paper is to provide new insights on some dimensions of the bargaining process – asymmetries and uncertainties in particular – by using a non-cooperative game theory approach. We develop a computational model which simulates the process of negotiation among more than two players, who bargain over the sharing of more than one pie. Through numerically simulating several multiple issues negotiation games among multiple players, we identify the main features of players’ optimal strategies and equilibrium agreements. As in most economic situations, uncertainty crucially affects also bargaining processes. Therefore, in our analysis, we introduce uncertainty over the size of the pies to be shared and assess the impacts on players’ strategic behaviour. Our results confirm that uncertainty crucially affects players’ behaviour and modify the likelihood of a self-enforcing agreement to emerge. The model proposed here can have several applications, in particular in the field of natural resource management, where conflicts over how to share a resource of a finite size are increasing.
    Keywords: bargaining, non-cooperative game theory, simulation models, uncertainty
    JEL: C61 C71 C78
    Date: 2007
  4. By: L. Lambertini
    Date: 2007–06
  5. By: Dirk Bergemann; Juuso Välimäki; Xianwen Shi
    Date: 2007–07–31
  6. By: Paul Milgrom; Bruno Stulovici
    Abstract: For economies in which goods are available in several (discrete) units, this paper identifies two notions of substitutes. The weaker notion guarantees monotonicity of tatonnement processses and convergence of clock auctions to a pseudo-equilibrium, but only the stronger notion, which treats each unit traded as a distinct good with its own price, guarantees that every pseudo-equilibrium is a Walrasian equilibrium, the Vickrey outcome is in the core, and the "law of aggregate demand" is satisfied. The paper provides several characterizations and properties of weak and strong substitutes.
    Keywords: Substitute Valuation, Auction, Discrete Goods, Nonlinear Price, Submodular Dual, Walrasian Equilibrium, Pseudo-Equilibrium, Law of Aggregate Demand, Vickrey Auction
    JEL: D44 C62
    Date: 2007
  7. By: Howard Kunreuther; Gabriel Silvasi; Eric T. Bradlow; Dylan Small
    Abstract: This paper examines experiments on interdependent security prisoner's dilemma games with repeated play. By utilizing a Bayesian hierarchical model, we examine how subjects make investment decisions as a function of their previous experience and their treatment condition. Our main findings are that individuals have differing underlying propensities to invest that vary across time, are affected by both the stochastic nature of the game and even more so by an individual's ability to learn about his or her counterpart's choices. Implications for individual decisions and the likely play of a person's counterpart are discussed in detail.
    JEL: C11 C12 C22 C23 C73 C91
    Date: 2007–08
  8. By: Dale T. Mortensen
    Abstract: A synthesis of the Lucas-Prescott island model and the Mortensen- Pissarides matching model of unemployment is studied. By assumption, all unmatched workers and jobs are randomly assigned to islands at the beginning of each period and the number of matches that form on a particular island is the minimum of the two realizations. When calibrated to the recently observed averages of U.S. unemployment and vacancy rates, the model fits the observed vacancy-unemployment Beveridge relationship very well and implies an implicit log linear relationship between the job finding rate and the vacancy-unemployment relationship with an elasticity near 0.5. The constrained efficient solution to the model is decentralized by a equilibrium outcome in which wages on each island are determined by a modified auction. Although the efficient solution explains only about 25% of the observed volatility in the U.S. vacancy-unemployment ratio, an equilibrium outcome in which wages are determined as the solution to a strategic bargaining game explains almost all of it.
    JEL: E24 E32 J64
    Date: 2007–08
  9. By: Alex Robson
    Abstract: Indices of voting power are intended to measure the a priori degree of in.uence that a voter or party can expect to have in framing legislation or passing motions. Commonly used measures include those proposed by Shapley and Shubik (1954), Banzhaf (1965) and Deegan and Packel (1978). This paper computes these power indices for the Australian Senate for the period 1901-2004. The introduction of the Single Transferable Vote in the Senate in 1949 appears to have had a profound effect on the voting power of both major parties, as well as on the degree of concentration of voting power.
    Date: 2007–06

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