nep-gth New Economics Papers
on Game Theory
Issue of 2007‒12‒08
nine papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Communication and Coordination: The Case of Boundedly Rational Players By Ellingsen, Tore; Östling, Robert
  2. Consumption Risk-sharing in Social Networks By Attila Ambrus; Markus Mobius; Adam Szeidl
  3. Optimal Collusion-Proof Auctions By Che, Yeon-Koo; Kim, Jinwoo
  4. Listen: I am angry! An experiment comparing ways of revealing emotions By Werner Güth; M. Vittoria Levati
  5. Time to Defect: Repeated Prisoners' Dilemma Experiments with Uncertain Horizon By Lisa Bruttel; Werner Güth; Ulrich Kamecke
  6. Hierarchical Parametric Models for Social Dilemma Games By Klaus Moeltner; James J. Murphy; John K. Stranlund; Maria Alejandra Velez
  7. A study of Approval voting on Large Poisson Games By Matias Nunez
  8. Optimal Auctions with Information Acquisition By Xianwen Shi
  9. The Double Majority Voting Rule of the EU Reform Treaty as a Democratic Ideal for an Enlarging Union : an Appraisal Using Voting Power Analysis By Leech, Dennis; Aziz, Haris

  1. By: Ellingsen, Tore (Dept. of Economics, Stockholm School of Economics); Östling, Robert (Dept. of Economics, Stockholm School of Economics)
    Abstract: Using the level-k model of boundedly rational interaction, we fully characterize the effects of pre-play communication in symmetric and generic 2x2 games. We find that one-way communication weakly increases coordination on Nash equilibrium outcomes in all such games. Although one-way communication entails Nash equilibrium when relatively sophisticated players meet, there are games in which average payoffs fall when one-way communication is allowed. Two-way communication can yield higher average payoffs than one-way communication in coordination games such as Stag Hunt, but in other games two-way communication reduces both average payoffs and the degree of coordination below the no-communication level. Extending our analysis to larger and less symmetric games, we find that communication facilitates coordination in all two-player common interest games. However, we also identify games in which communication hampers coordination.
    Keywords: Pre-play communication; coordination games; Stag Hunt; level-k; bounded rationality
    JEL: C72
    Date: 2007–11–27
  2. By: Attila Ambrus (Harvard University); Markus Mobius (Harvard University); Adam Szeidl (University of California, Berkeley)
    Abstract: We build a model of informal risk-sharing among agents organized in a social network. A connection between individuals serves as collateral that can be used to enforce insurance payments. We characterize incentive compatible risk-sharing arrangements for any network structure, and develop two main results. (1) Expansive networks, where every group of agents have a large number of links with the rest of the community relative to the size of the group, facilitate better risk-sharing. In particular, “two-dimensional” village networks organized by geography are sufficiently expansive to allow very good risk-sharing. (2) In second-best arrangements, agents organize in endogenous “risksharing islands” in the network, where shocks are shared fully within but imperfectly across islands. As a result, risk-sharing in second-best arrangements is local: socially closer agents insure each other more. In an application of the model, we explore the spillover effect of development aid on the consumption of non-treated individuals.
    Date: 2007–11
  3. By: Che, Yeon-Koo; Kim, Jinwoo
    Abstract: We study an optimal collusion-proof auction in an environment where subsets of bidders may collude not just on their bids but also on their participation. Despite their ability to collude on participation, informational asymmetry facing the potential colluders can be exploited significantly to weaken their collusive power. The second-best auction --- i.e., the optimal auction in a collusion-free environment --- can be made collusion-proof, if at least one bidder is not collusive, or there are multiple bidding cartels, or the second-best outcome involves a nontrivial probability of the object not being sold. In case the second-best outcome is not weak collusion-proof implementable, we characterize an optimal collusion-proof auction. This auction involves nontrivial exclusion of collusive bidders --- i.e., the object is not sold to any collusive bidder with positive probability.
    JEL: D8 D4
    Date: 2007–09–06
  4. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)
    Abstract: We report on an experiment designed to explore whether allowing individuals to voice their anger prevents costly punishment. For this sake, we use an ultimatum minigame and distinguish two treatments: one in which responders can only accept or reject the other, and the other in which they can also scold the proposer. By an unannounced successive two-person public goods game, with either the same partner or a different one, we additionally explore how "having a voice" affects later behavior. The evidence supports the conclusion that voicing one's outrage crowds out the need to harm oneself and the other. Yet, this emotional reaction does not lead to increased future cooperation.
    Keywords: Ultimatum bargaining, Public goods game, Outrage, Punishment
    JEL: C72 C78 C92 H41
    Date: 2007–12–04
  5. By: Lisa Bruttel (Humboldt-Universität zu Berlin, Department of Business and Economics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Ulrich Kamecke (Humboldt-Universität zu Berlin, Department of Business and Economics)
    Abstract: Using a symmetric 2-person prisoners' dilemma as the base game, each player receives a signal for the number of rounds to be played with the same partner. The actual number of rounds (the length of the supergame) is determined by the maximal signal where each player expects the other's signal to be smaller, respectively larger, by a fixed number of rounds with 50% probability. In the tradition of Folk Theorems we show that both, mutual defection and mutual cooperation until the individually perceived last round, are subgame perfect equilibrium outcomes. We find experimental evidence that many players do in fact cooperate beyond their individual signal period.
    Keywords: Prisoners' dilemma, Continuation probability, Uncertainty, Experiment
    JEL: C91 D82 D84
    Date: 2007–12–04
  6. By: Klaus Moeltner (Department of Resource Economics, University of Nevada, Reno); James J. Murphy (Department of Resource Economics & Center for Public Policy and Administration, University of Massachusetts-Amherst); John K. Stranlund (Department of Resource Economics, University of Massachusetts-Amherst); Maria Alejandra Velez (Center for Research on Environmental Decisions, Columbia University)
    Abstract: Economists have to date not been very discriminating in selecting parametric models to analyze experimental data. In this study we propose two parametric estimators tailored to accommodate both the bounded integer outcomes and the latent subject heterogeneity typically observed for Social Dilemma games. The two estimators are the Hierarchical Ordered Probit and the Hierarchical Doubly-Truncated Poisson. We illustrate how both specifications can be implemented in a Bayesian estimation framework, which circumvents estimation hurdles and allows for maximum flexibility in model comparison and model selection. We apply this framework to data from a Common Pool Resource game implemented in rural communities. We find that both estimators capture the essential effects and patterns present in the data. As expected, the truncated count data framework exhibits higher efficiency in estimation and prediction.
    Keywords: Social Dilemma Games; Hierarchical Bayesian Modeling; Ordered Probit; Truncated Poisson; Common Property Resource
    JEL: C11 C24 C93 Q22
    Date: 2007–12
  7. By: Matias Nunez (LEEP - Laboratoire d'econometrie de l'école polytechnique - CNRS : UMR7657 - Polytechnique - X)
    Abstract: Approval voting features are analysed in a context of large elections with strategic voters: Myerson's Large Poisson Games. I first establish the Magnitude Equiva- lence Theorem (MET) which substantially reduces the complexity of computing the magnitudes of pivotal events. I also show that the Winner of the election coincides with the Profile Condorcet Winner at equilibrium when preferences are restricted to be single-peaked. This is a positive result that strengthens the positive conclusions some scholars have previously drawn over this voting rule. I finally show that, with- out the previous restriction over preferences, both concepts do not generally coincide anymore.
    Date: 2007–11–28
  8. By: Xianwen Shi
    Abstract: This paper studies optimal auction design in a private value setting with endogenous information acquisition. First, we develop a general framework for modeling information acquisition when a seller wants to sell an object to one of several potential buyers who can each gather information about their valuations prior to participation. We then show that under certain conditions, standard auctions with a reserve price remain optimal, but the optimal reserve price lies between the mean valuation and the standard reserve price in Myerson (1981). We provide sufficient conditions under which the value of information to the seller is positive, and also characterize the necessary and sufficient conditions under which equilibrium information acquisition in private value auctions is socially excessive. The key to the analysis is the insight that buyer incentives to acquire information become stronger as the reserve price moves toward the mean valuation.
    Keywords: optimal auctions, information acquisition, rotation order, informational efficiency
    JEL: C70 D44 D82 D86
    Date: 2007–12–03
  9. By: Leech, Dennis (Economics Department, University of Warwick); Aziz, Haris (Computer Science Department, University of Warwick)
    Abstract: The Double Majority rule in the Treaty is claimed to be simpler, more transparent and more democratic than the existing rule. We examine these questions against the democratic ideal that the votes of all citizens in whatever member country should be of equal value using voting power analysis considering possible future enlargements involving candidate countries and then to a number of hypothetical future enlargements. We find the Double Majority rule to fails to measure up to the democratic ideal in all cases. We find the Jagiellonian compromise to be very close to this ideal.
    Keywords: European Union ; Reform Treaty ; Nice Treaty ; Qualified Majority Voting ; Power Indices
    Date: 2007

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