nep-gth New Economics Papers
on Game Theory
Issue of 2008‒03‒08
thirteen papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Belief-free equilibria in games with incomplete information By Stefano, LOVO
  2. Conflict Leads to Cooperation in Nash Bargaining By Kareen Rozen
  3. A Stochastic Multiple Players Multi-Issues Bargaining Model for the Piave River Basin By Alessandra Sgobbi; Carlo Carraro
  4. A Continuous Model of Multilateral Bargaining with Random Arrival Times By Attila Ambrus; Shih En Lu
  5. Auctions in which Losers Set the Price By Mezzetti, Claudio; Tsetlin, Ilia
  6. Competition and Cooperation in a dynamical model of natural resources By Marta Biancardi
  7. Measuring influence among players with an ordered set of possible actions By Michel Grabisch; Agnieszka Rusinowska
  8. Buying up the block: An experimental investigation of capturing economic rents through sequential negotiations By Gautam Goswami; Thomas H. Noe; Jun Wang
  9. Doubts and equilibria By Antonio Cabrales; Jose Ramon Uriarte
  10. Technology Spillovers and Stability of International Climate Coalitions By Miyuki Nagashima; Rob Dellink
  11. The Impact of (In)Equality of Opportunities on Wealth Distribution : Evidence from Ultimatum Games By Grimalda, Gianluca; Kar, Anirban; Proto, Eugenio
  12. Collective Choice Rules on Convex Restricted Domains By Storcken Ton
  13. A Theory of Continuum Economies with Idiosyncratic Shocks and Random Matchings By Karavaev, Andrei

  1. By: Stefano, LOVO
    Abstract: We de ne belief-free equilibria in two-player games with incomplete information as se- quential equilibria for which players' continuation strategies are best-replies, after every history, independently of their beliefs about the state of nature. We characterize a set of payos that includes all belief-free equilibrium payos. Conversely, any payo in the interior of this set is a belief-free equilibrium payo
    Keywords: repeated game with incomplete information; Harsanyi doctrine; belief-free equilibria
    JEL: C72 C73
    Date: 2007–12–01
  2. By: Kareen Rozen (Cowles Foundation, Yale University)
    Abstract: We consider a Nash demand game where N players come to the bargaining table with requests for coalition partners and a potentially generated resource. We show that group learning leads to complete cooperation and an interior core allocation with probability one. Our arguments highlight group dynamics and demonstrate how destructive group behaviors -- exclusion, divide and conquer tactics, and scapegoating -- can propel groups toward beneficial and self-enforcing cooperation.
    Keywords: Nash bargaining, Learning, Core, Group conflict
    JEL: C7
    Date: 2008–03
  3. By: Alessandra Sgobbi (Fondazione Eni Enrico Mattei); Carlo Carraro (Fondazione Eni Enrico Mattei, University of Venice, CEPR, CEPS, CMCC and CESifo)
    Abstract: The objective of this paper is to investigate the usefulness of non-cooperative bargaining theory for the analysis of negotiations on water allocation and management. We explore the impacts of different economic incentives, a stochastic environment and varying individual preferences on players’ strategies and equilibrium outcomes through numerical simulations of a multilateral, multiple issues, non-cooperative bargaining model of water allocation in the Piave River Basin, in the North East of Italy. Players negotiate in an alternating-offer manner over the sharing of water resources (quantity and quality). Exogenous uncertainty over the size of the negotiated amount of water is introduced to capture the fact that water availability is not known with certainty to negotiating players. We construct the players’ objective function with their direct input. We then test the applicability of our multiple players, multi-issues, stochastic framework to a specific water allocation problem and conduct comparative static analyses to assess sources of bargaining power. Finally, we explore the implications of different attitudes and beliefs over water availability.
    Keywords: Bargaining, Non-Cooperative Game Theory, Simulation Models, Uncertainty
    JEL: C61 C71 C78
    Date: 2007–11
  4. By: Attila Ambrus (Department of Economics, Harvard University); Shih En Lu (Department of Economics, Harvard University)
    Abstract: This paper proposes a continuous-time model framework of bargaining, which is analytically tractable even in complex situations like coalitional bargaining. The main ingredients of the model are: (i) players get to make offers according to a random arrival process; (ii) there is a deadline that ends negotiations. In the case of n-player group bargaining, there is a unique subgame-perfect Nash equilibrium, and the share of the surplus a player can expect is proportional to her arrival rate. In general coalitional bargaining, existence and uniqueness of Markov perfect equilibrium is established. In convex games, the set of limit payoffs as the deadline gets infinitely far away exactly corresponds to the core. The limit allocation selected from the core is determined by the relative arrival rates. As an application of the model, legislative bargaining with deadline is investigated.
    Date: 2008–02
  5. By: Mezzetti, Claudio (Department of Economics, University of Warwick); Tsetlin, Ilia (INSEAD, Singaport)
    Abstract: We study auctions of a single asset among symmetric bidders with affiliated values. We show that the second-price auction minimizes revenue among all efficient auction mechanisms in which only the winner pays, and the price only depends on the losers' bids. In particular, we show that the k-th price auction generates higher revenue than the second-price auction, for all k > 2. If rationing is allowed, with shares of the asset rationed among the t highest bidders, then the (t + 1)-st price auction yields the lowest revenue among all auctions with rationing in which only the winners pay and the unit price only depends on the losers' bids. Finally, we compute bidding functions and revenue of the k-th price auction, with and without rationing, for an illustrative example much used in the experimental literature to study first-price, second-price and English auctions.
    Keywords: Auctions ; Second-Price Auction ; English Auction ; k-th Price Auction ; Affiliated Values ; Rationing ; Robust Mechanism Design
    JEL: D44 D82
    Date: 2008
  6. By: Marta Biancardi
    Abstract: In this paper we propose a model describing the commercial exploitation of a common property renewable resource by a population of agents. Players can cooperate or compete; cooperators maximize the utility of their group while defectors maximize their own profit. The model provides for one utility function which can be used for every kind of player. Agents aren’t assumed to be divided into the two groups from the beginning; by solving the static game we obtained the best response function of i-th player without making other agents positions. Then, the Nash equilibria we calculated point out how different strategies - all players cooperate, all players compete or players can be divided into cooperators and defectors - can coexist. In any case the total harvest depend on renewable resource stock, and it influences agents’ positions. According to the Nash equilibria, harvested is arranged to fishing population dynamics and a complete analysis for the equilibria obtained and for their stability is proposed. The effects of the different Nash equilibria on the fish stock are compared showing the more stability in the cooperative case.
    Keywords: Nash Equilibria, Resource Exploitation, Population Dynamics.
    Date: 2007–10
  7. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Agnieszka Rusinowska (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: In the paper, we introduce and study generalized weighted influence indices of a coalition on a player, where players have an ordered set of possible actions. Each player has an inclination to choose one of the actions. Due to influence of a coalition of other players, a final decision of the player may be different from his original inclination. An influence in such situations is measured by the general weighted influence index. In a particular case, the decision of the player may be closer to the inclination of the influencing coalition than his inclination was. The weighted influence index which captures such a case is called the positive weighted influence index. We also consider the negative weighted influence index, where a final decision of the player goes farther away from the inclination of the influencing coalition. Some special cases of the weighted influence indices, called a possibility influence index and an equidistributed influence index, are also defined. We consider different influence functions and study their properties. A set of followers and a set of a conditional followers of a given coalition are defined, and their properties are analyzed. We define the concepts of success, decisiveness, luck, and failure for the multi-choice model of influence.
    Keywords: decisiveness ; follower of a coalition ; influence function ; influence indices ; success
    Date: 2008
  8. By: Gautam Goswami; Thomas H. Noe; Jun Wang
    Abstract: This paper develops and experimentally implements a simple multi-negotiation bargaining game, in which one agent, called the “developer,†must reach agreements with a series of other agents, called “landowners,†in order to implement a valueincreasing project. The game has a unique subgame perfect Nash equilibrium under which the surplus from the project is split between the landowner and developer without any dissipation of value. In the actual experiments, however, on average almost half of the value of the project was dissipated. The costs of dissipation fell disproportionately on the developer, who was able to capture less than 5% of the value generated by the project. The results of this experiment call into question the ability of private negotiations between a large number of parties, even in a world without explicit contracting costs, to induce Pareto-optimal allocations of property rights.
    Keywords: multi-negotiation bargaining game, experiment, sequential negotiations
    Date: 2008
  9. By: Antonio Cabrales; Jose Ramon Uriarte
    Abstract: In real life strategic interactions decision-makers are likely to entertain doubts about the degree of optimality of their play. To capture this feature of real choice-making, we present here a model based on the doubts felt by an agent about how well is playing a game. The doubts are coupled with (and mutually reinforced by) imperfect discrimination capacity, which we model here by means of similarity relations. We assume that each agent builds procedural preferences defined on the space of expected payoffsstrategy frequencies attached to his current strategy. These preferences, together with an adaptive learning process lead to doubt-based selection dynamic systems. We introduce the concepts of Mixed Strategy Doubt Equilibria, Mixed Strategy Doubt-Full Equilibria and Mixed Strategy Doubtless Equilibria and show the theoretical and the empirical relevance of these concepts
    Keywords: Doubts, Bounded rationality, Evolutionary dynamics, Decision theory
    JEL: C72 C73 D81
    Date: 2008–02
  10. By: Miyuki Nagashima (Wageningen University); Rob Dellink (Wageningen University and Institute for Environmental Studies, VU University of Amsterdam)
    Abstract: Cooperation in international environmental agreements appears difficult to attain because of strong free-riding incentives. This paper explores how different technology spillover mechanisms among regions can influence the incentive structures to join and stabilise an international agreement. We use an applied modelling framework (STACO) that enables us to investigate stability of partial climate coalitions. Technology spillovers to coalition members increase their incentives to stay in the coalition and reduce abatement costs, which leads to larger global payoffs and a lower global CO2 stock. Several theories on the impact of technology spillovers are evaluated by simulating a range of alternative specifications. We find that while spillovers are a good instrument to improve stability of bilateral agreements, they cannot overcome the strong free rider incentives that are present in larger coalitions. This conclusion is robust against the specification of technology spillovers.
    Keywords: Climate Change Modelling, International Environmental Agreements, Non-cooperative Game Theory, Technology Spillovers
    JEL: C72 O33 Q54
    Date: 2007–11
  11. By: Grimalda, Gianluca (Department of Economics, University of Warwick); Kar, Anirban (Department of Economics, University of Warwick); Proto, Eugenio (Department of Economics, University of Warwick)
    Abstract: We study the impact on payoff distribution of varying the probability (opportunity) that a player has of becoming the proposer in an ultimatum game (UG). Subjects' assignment to roles within the UG was randomised before the interactions. Subjects played 20 rounds anonymously and with random rematching at each round. We compare the outcomes of four different settings that differed according to the distribution of opportunities between the pair of players in each round, and across the whole 20 rounds. The results clearly point to the existence of a discontinuity in the origin of the opportunity spectrum.Allowing a player a 1% probability of becoming the proposer brings about significantly lower offers and higher acceptance rates with respect to the benchmark case where a player has no such a chance. As such probability is raised to 20% and 50%, this same trend continues, but the effects are generally no longer significant with respect to the 1% setting. In one case the monotonic pattern is violated. We conclude that subjects in our experiment appear to be motivated mostly by the purely symbolic aspect of opportunity rather than by the actual fairness in the allocation of opportunities.
    Date: 2008
  12. By: Storcken Ton (METEOR)
    Abstract: We study sets of preferences that are convex with respect to the betweeness relation induced by the Kemeny distance for preferences. It appears that these sets consist of all preferences containing a certain partial ordering and the other way around all preferences containing a given partial ordering form a convex set. Next we consider restricted domains where each agent has a convex set of preferences. Necessary and sufficient conditions are formulated under which a restricted domain admits unanimous, strategy-proof and non-dictatorial choice rules. Loosely speaking it boils down to admitting monotone and non-image-dictatorial decision rules on two alternatives where the other alternatives are completely disregarded.
    Keywords: mathematical economics;
    Date: 2008
  13. By: Karavaev, Andrei
    Abstract: Many economic models use a continuum of negligible agents to avoid considering one person's effect on aggregate characteristics of the economy. Along with a continuum of agents, these models often incorporate a sequence of independent shocks and random matchings. Despite frequent use of such models, there are still unsolved questions about their mathematical justification. In this paper we construct a discrete time framework, in which major desirable properties of idiosyncratic shocks and random matchings hold. In this framework the agent space constitutes a probability space, and the probability distribution for each agent is replaced by the population distribution. Unlike previous authors, we question the assumption of known identity - the location on the agent space. We assume that the agents only know their previous history - what had happened to them before, - but not their identity. The construction justifies the use of numerous dynamic models of idiosyncratic shocks and random matchings.
    Keywords: random matching; idiosyncratic shocks; the Law of Large Numbers; aggregate uncertainty; mixing
    JEL: C78 D83 E00
    Date: 2008–02–25

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