nep-gth New Economics Papers
on Game Theory
Issue of 2007‒09‒30
eight papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Rationalizability in games with a continuum of players By Pedro Jara-Moroni
  2. Belief Free Incomplete Information Games By Dirk Bergemann; Stephen Morris
  3. Recursive Global Games By Giannitsarou, Chryssi; Toxvaerd, Flavio
  4. Learning by Similarity in Coordination Problems By Jakub Steiner; Colin Stewart
  5. The Paradox of New Members: Strategic Foundations and Experimental Evidence By Michalis Drouvelis; Maria Montero; Martin Sefton
  6. Price Stackelberg game with quantity precommitment By Pedro Jara-Moroni
  7. The Role of the Common Prior in Robust Implementation By Dirk Bergemann; Stephen Morris
  8. Auctions with Anticipated Emotions: Overbidding, Underbidding, and Optimal Reserve Prices By Roider, Andreas; Schmitz, Patrick W.

  1. By: Pedro Jara-Moroni
    Abstract: The concept of Rationalizability has been used in the last fifteen years to study stability of equilibria on models with continuum of players such as standard competitive markets, macroeconomic dynamics and currency attacks. However, Rationalizability has been formally defined in a general setting only for games with a finite number of players and there is no general definition for Rationalizability in the case of games with continuum of players. In this work, we propose a definition for Point-Rationalizable Strategies in the context of Non-Atomic Non-cooperative Games with a Continuum of Players. In a special class of this games where the payoff of a player depends only on his own strategy and an aggregate value that represents the state of the game, state that is obtained from the actions of all the players, we define the set of Point-Rationalizable States. This last set is characterized and some of its' properties are explored. We study as well standard Rationalizability in a subclass of these games. We present an exploratory framework that encompasses the previously mentioned models, over which we can link the established theory and its' macroeconomic applications on stability properties of equilibria.
    Date: 2007
  2. By: Dirk Bergemann; Stephen Morris
    Date: 2007–09–24
  3. By: Giannitsarou, Chryssi; Toxvaerd, Flavio
    Abstract: The present paper contributes to the literature on dynamic games with strategic complementarities, in two interrelated ways. First, we identify a class of dynamic complete information games in which intertemporal complementarities and multiple equilibria can be fruitfully analyzed. Second, we extend the analysis to an incomplete information framework, where results from the literature on global games can be applied to select a unique Markov perfect equilibrium in monotone strategies.
    Keywords: dynamic global games; Dynamic supermodular games; endogenous cycles
    JEL: C73 D43 E32
    Date: 2007–09
  4. By: Jakub Steiner; Colin Stewart
    Abstract: We study a learning process in which subjects extrapolate from their experience of similar past strategic situations to the current decision problem. When applied to coordination games, this learning process leads to contagion of behavior from problems with extreme payoffs and unique equilibria to very dissimilar problems. In the long-run, contagion results in unique behavior even though there are multiple equilibria when the games are analyzed in isolation. Characterization of the long-run state is based on a formal parallel to rational equilibria of games with subjective priors. The results of contagion due to learning share the qualitative features of those from contagion due to incomplete information, but quantitatively they differ.
    Keywords: Similarity, learning, contagion, case-based reasoning, global games, coordination, subjective priors.
    Date: 2007–04
  5. By: Michalis Drouvelis (School of Economics, University of Nottingham); Maria Montero (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham)
    Abstract: Power indices suggest that adding new members to a voting body may affect the balance of power between the original members even if their number of votes and the decision rule remain constant. Some of the original members may actually gain, a phenomenon known as the paradox of new members. We show that the paradox can occur as an equilibrium of a noncooperative bargaining game based on the Baron-Ferejohn (1989) model of legislative bargaining. We implement this game in the laboratory and find empirical support for the paradox.
    Keywords: voting, non-cooperative bargaining, power indices, experiments, paradox of new members
    JEL: C70 C92
    Date: 2007–09
  6. By: Pedro Jara-Moroni
    Abstract: In a homogeneous product duopoly with concave demand and convex costs we study a two stage game in which, first, firms engage simultaneously in capacity (production) and, after production levels are made public, there is price Stackelberg competition in the second stage. We justify the special demand rationing on tied prices. Randomizing price leadership in the second stage game, we can find a pure strategy subgame perfect Nash equilibrium (SPNE) of the whole game, in which firms produce strictly more than in the Cournot outcome, which is as well a SPNE.
    Date: 2007
  7. By: Dirk Bergemann; Stephen Morris
    Date: 2007–09–24
  8. By: Roider, Andreas; Schmitz, Patrick W.
    Abstract: The experimental literature has documented that there is overbidding in second-price auctions, regardless of bidders' valuations. In contrast, in first-price auctions there tends to be overbidding for large valuations, but underbidding for small valuations. We show that the experimental evidence can be explained by a simple extension of the standard auction model, where bidders anticipate positive or negative emotions caused by the mere fact of winning or losing. Even if the "emotional" (dis-)utility is very small, the seller's optimal reserve price r* may be significantly different from the standard model. Moreover, r* is decreasing in the number of bidders.
    Keywords: auction theory; emotions; reserve prices
    JEL: D44 D81 D82
    Date: 2007–09

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