nep-gth New Economics Papers
on Game Theory
Issue of 2008‒02‒09
sixteen papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Generic Determinacy of Nash Equilibrium in Network Formation Games By Carlos Pimienta
  2. The Coalitional Nash Bargaining Solution By Olivier Compte; Philippe Jehiel
  3. Modelling Negotiated Decision Making: a Multilateral, Multiple Issues, Non-Cooperative Bargaining Model with Uncertainty By Carlo Carraro; Alessandra Sgobbi
  4. Existence and uniqueness of Nash Equilibrium in electoral competition games: The hybrid case By Alejandro Saporiti
  5. Bargaining with a Property Rights Owner By Yair Tauman; Andriy Zapechelnyuk
  6. Modifying the Hoede-Bakker index to the Shapley-Shubik and Holler-Packel indices By Agnieszka Rusinowska
  7. Optimal Fees in Internet Auctions By Alexander Matros; Andriy Zapechelnyuk
  8. Better-Reply Dynamics with Bounded Recall By Andriy Zapechelnyuk
  9. Information Transmission and Core Convergence in Quasilinear Economies By Yusuke Kamishiro; Roberto Serrano
  10. Finite-Order Beliefs and Welfare-Enhancing Instruments in the Centipede Game By Anke Gerber; Philipp C. Wichardt
  11. Communication and Learning By Luca Anderlini; Dino Gerardi; Roger Lagunoff
  12. Inter-Group Conflict and Intra-Group Punishment in an Experimental Contest Game By Klaus Abbink; Jordi Brandts; Benedikt Herrmann; Henrik Orzen
  13. Trust and Reciprocity in 2-node and 3-node Networks By Alessandra Cassar, ac; Mary Rigdon, mr
  14. College admissions and the role of information : an experimental study By Joana Pais; Agnes Pinter; Robert F. Veszteg
  15. The evolution of cheating in asymmetric contests By Aleksander Berentsen; Esther Bruegger; Simon Loertscher
  16. Incentives and Regional Coordination in Employment Services By Arjen de Vetten

  1. By: Carlos Pimienta (School of Economics, The University of New South Wales)
    Abstract: This paper shows that the set of probability distributions over networks induced by Nash equilibria of the network formation game proposed by Myerson (1991) is finite for a generic assignment of payoffs to networks. The same result can be extended to several variations of the game found in the literature.
    Keywords: Networks; generic finiteness; Nash Equilibrium
    JEL: C62 C72 D85 L14
    Date: 2007–10
  2. By: Olivier Compte; Philippe Jehiel
    Date: 2008–02–04
  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: Alejandro Saporiti
    Date: 2007
  5. By: Yair Tauman (Tel Aviv University and Stony Brook University); Andriy Zapechelnyuk (Kyiv School of Economics)
    Abstract: We consider a bargaining problem where one of the players, the intellectual property rights owner (IPRO) can allocate licenses for the use of this property among the interested parties (agents). The agents negotiate with him the allocation of licenses and the payments of the licensees to the IPRO. We state five axioms and characterize the bargaining solutions which satisfy these axioms. Every solution is characterized by a fraction a. Every agent obtains a weighted average of his individually rational level and his marginal contribution to the set of all players, where the weights are a and 1-a, respectively, uniformly over all bargaining problems. The IPRO obtains the remaing surplus. The solution for a=1/2 is the nucleolus of a naturally related game in characteristic form.
    Keywords: Bargaining solution, nucleolus, licensing, property rights
    JEL: C71 C78 D45
    Date: 2008–01
  6. By: Agnieszka Rusinowska (University of Lyon, Lyon, F-69003, France; CNRS, UMR 5824, GATE, Ecully, F-69130, France; ENS LSH, Lyon, F-69007, France ; Centre Leon Berard, Lyon, F-69003, France)
    Abstract: Abstract. In the paper, we present some modifications of the Hoede-Bakker index defined in a social network in which players may influence each other. Due to influences of the other actors, the final decision of a player may be different from his original inclination. These modifications are defined for an arbitrary probability distribution over all inclination vectors. In particular, they concern a situation in which the inclination vectors may be not equally probable. Furthermore, by assuming special probability distributions over all inclination vectors, we construct modifications of the Hoede-Bakker index that coincide with the Shapley-Shubik index and with the Holler-Packel index, respectively.
    Keywords: Hoede-Bakker index, inclination vector, probability distribution, Shapley-Shubik index
    JEL: C7 D7
    Date: 2007–12
  7. By: Alexander Matros (University of Pittsburgh); Andriy Zapechelnyuk (Kyiv School of Economics)
    Abstract: An auction house runs a second-price auction with a possibility of resale through re-auctions. It collects listing and closing fees from the seller. We find the fees which maximize the revenue of the auction house. In particular, we show that the optimal listing fee is zero. Our findings are consistent with the policies of eBay, Amazon, Yahoo, and other Internet auctions.
    Keywords: Internet auctions, auctions with resale, auction house, listing fee, closing fee
    JEL: D44 C78 D82
    Date: 2008–01
  8. By: Andriy Zapechelnyuk (Kyiv School of Economics)
    Abstract: A decision maker is engaged in a repeated interaction with Nature. The objective of the decision maker is to guarantee to himself the average payoff as large as the best-reply payoff to Nature's empirical distribution of play, no matter what Nature does. The decision maker with perfect recall can achieve this objective by a simple better-reply strategy. In this paper we demonstrate that the relationship between perfect recall and bounded recall is not straightforward: The decision maker with bounded recall may fail to achieve this objective, no matter how long recall he has and no matter what better-reply strategy he employs.
    Keywords: Better-reply dynamics, regret, bounded recall, fictitious play, approachability
    JEL: C73 D81 D83
    Date: 2008–01
  9. By: Yusuke Kamishiro (Brown University); Roberto Serrano (Brown University & IMDEA, Madrid)
    Abstract: We study core convergence in interim quasilinear economies with asymmetric information, concentrating on core notions in which information is transmitted endogenously within coalitions and the incentive constraints are relevant. Specifically, we shall focus on the credible core and randomized mediated core concepts. We consider independent replicas of the basic economy: independent copies of the economy in which each individual\'s utility only depends on the information of the individuals who belong to the same copy. We provide an example in which core convergence does not obtain for the Dutta-Vohra credible core and for Myerson\'s randomized mediated core. On the other hand, we establish a positive convergence result for a refinement of Myerson\'s core for which information disseminates across coalitions within a given random blocking mechanism. Under some conditions, this core converges to the set of incentive compatible ex-post Walrasian allocations.
    Keywords: core convergence; information transmission; coalitional voting mechanisms; mediation; rational expectations equilibrium
    JEL: C71 C72 D51 D82
    Date: 2008–02–06
  10. By: Anke Gerber; Philipp C. Wichardt
    Abstract: This paper investigates the effectiveness of two instruments designed to defer termination in the centipede game: an insurance against termination by the opponent, and an option to offer the opponent a bonus for not terminating the game. The rational prediction in both cases is passing until close to the end. Empirically, however, only the bonus option is used by the subjects. The results indicate that subjects readily understand the strategic effect of the bonus, which, once offered, renders passing until close to the end the strictly dominant strategy for both players. Yet, they fail to realise the slightly more involved strategic signal entailed in the insurance, namely that passing until close to the end is a strictly dominant strategy for an insured player. In order to further investigate this effect, we propose a simple behavioural model based on level-k thinking and show that it is largely consistent with the data.
    Keywords: Centipede Game, Cooperation, Level-k Thinking
    JEL: C91 D61
    Date: 2007–12
  11. By: Luca Anderlini; Dino Gerardi; Roger Lagunoff (Department of Economics, Georgetown University)
    Abstract: We study the intergenerational accumulation of knowledge in an infinite-horizon model of communication. Each in a sequence of players receives an informative but imperfect signal of the once-and-for-all realization of an unobserved state. The state affects all players’ preferences over present and future decisions. Each player observes his own signal but does not directly observe the realized signals or actions of his predecessors. Instead, he must rely on cheap-talk messages from the previous players to fathom the past. Each player is therefore both a receiver of information with respect to his decision, and a sender with respect to all future decisions. Senders’ preferences are misaligned with those of future decision makers. We ask whether there exist “full learning” equilibria — ones in which the players’ posterior beliefs eventually place full weight on the true state. We show that, regardless of how small the misalignment in preferences is, such equilibria do not exist. This is so both in the case of private communication in which each player only hears the message of his immediate predecessor, and in the case of public communication, in which each player hears the message of all previous players. Surprisingly, in the latter case full learning may be impossible even in the limit as all players become infinitely patient. We also consider the case where all players have access to a mediator who can work across time periods arbitrarily far apart. In this case full learning equilibria exist. Classification-JEL Codes: C70, C72, C73, D80, D83
    Keywords: Communication, Learning, Dynamic Strategic Information Transmission
    Date: 2008–08–01
  12. By: Klaus Abbink (CREED, University of Amsterdam); Jordi Brandts (Institut d'Anàlisi Econòmica (CSIC), Barcelona); Benedikt Herrmann (University of Nottingham); Henrik Orzen (University of Nottingham)
    Abstract: We study how conflict in a contest game is influenced by rival parties being groups and by group members being able to punish each other. Our main motivation stems from the analysis of socio-political conflict. The relevant theoretical prediction in our setting is that conflict expenditures are independent of group size and independent of whether punishment is available or not. We find, first, that our results contradict the independence of groupsize prediction: conflict expenditures of groups are substantially larger than those of individuals, and both are substantially above equilibrium. Towards the end of the experiment material losses in groups are 257% of the predicted level. There is, however, substantial heterogeneity in the investment behaviour of individual group members. Second, allowing group members to punish each other after individual contributions to the contest effort are revealed leads to even larger conflict expenditures. Now material losses are 869% of the equilibrium level and there is much less heterogeneity in individual group members’ investments. These results contrast strongly with those from public goods experiments where punishment enhances efficiency and leads to higher material payoffs.
    Keywords: Laboratory experiments, Rent-seeking, Conflict, Group competitiveness
    JEL: C90 D72 D74 F51 H41
    Date: 2007–12
  13. By: Alessandra Cassar, ac; Mary Rigdon, mr
    Abstract: In this paper we focus on the interaction between exogenous network structure and bargaining behavior in a laboratory experiment. Our main question is how competition and cooperation interact in bargaining environments based on networked versions of the investment game. We focus on 3-node networked markets and vary the network structure to model competition upstream (multiple sellers paired with a monopsonistic buyer) and competition downstream (a monopolistic seller paired with multiple buyers). We describe two kinds of models of trust for such networked environments, absolute and relativized models, and use this structure to generate a general hypothesis about these environments: that information crowds in cooperation on the competitive side of the market. The experimental results support this hypothesis.
    Keywords: networks; trust; reciprocity; experiments; investment game
    JEL: L14 D00 C91
    Date: 2008–01–26
  14. By: Joana Pais; Agnes Pinter; Robert F. Veszteg
    Abstract: We analyze two well-known matching mechanisms—the Gale-Shapley, and the Top Trading Cycles (TTC) mechanisms—in the experimental lab in three different informational settings, and study the role of information in individual decision making. Our results suggest that—in line with the theory—in the college admissions model the Gale-Shapley mechanism outperforms the TTC mechanisms in terms of efficiency and stability, and it is as successful as the TTC mechanism regarding the proportion of truthful preference revelation. In addition, we find that information has an important effect on truthful behavior and stability. Nevertheless, regarding efficiency, the Gale-Shapley mechanism is less sensitive to the amount of information participants hold.
    Keywords: Experiments, Information, Matching
    JEL: C78 C91 D82
    Date: 2008–01
  15. By: Aleksander Berentsen; Esther Bruegger; Simon Loertscher
    Abstract: Consider a society where all agents initially play "fair" and one agent invents a "cheating" strategy such as doping in sports. Which factors determine the success of the new cheating strategy? In order to study this question we consider an evolutionary game with local information. Three factors determine the imitation dynamics of the model: the location and the type of the innovator, the distribution of types, and the information available to the agents. In particular we find that the economy is more likely to end up in a state where all agents cheat if the innovator is of low type or when the agents are maximally segregated.
    Keywords: Evolutionary game theory, imitation dynamics, heterogeneity, local information, global interaction
    JEL: C70 C79 D83
    Date: 2007–02
  16. By: Arjen de Vetten
    Abstract: This paper presents a game theoretical model that addresses the trade off between regional coordination and incentives in the mediation of unemployed in the Netherlands. Due to yardstick competition, municipalities have financial incentives to reduce unemployment, but are not likely to cooperate with each other to have the scale advantages of a regional labour market. On the other hand, a regional public employment service, like the CWI in the Netherlands, has a higher probability and value of matching, but it lacks the incentives to exert the optimal mediation effort. The model is calibrated with information on vacancies and CWI clients for the Netherlands, in order to get an impression whether it is optimal to have a public employment service in the context of this model. Finally, various institutional settings, like a privatised employment service and a performance contract for the employment office, are considered.
    Keywords: public employment service; unemployment
    JEL: C72 H11 H72 J6
    Date: 2007–10

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