nep-gth New Economics Papers
on Game Theory
Issue of 2008‒04‒12
fifteen papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Sequential reciprocity in two-player, two-stages games: an experimental analysis By Geert Dhaene; Jan Bouckaert
  2. Conflict Leads to Cooperation in Nash Bargaining By Kareen Rozen
  3. A User's Guide to Solving Dynamic Stochastic Games Using the Homotopy Method By Borkovsky, RON N.; Doraszelski, Ulrich; Kryukov, Yaroslav
  4. The Core of a Partition Function Game By Laszlo A Koczy
  5. The Coalition Structure Core is Accessible By László Á. Kóczy; Luc Lauwers
  6. The Core can be accessed in a Bounded Number of Steps By László Á. Kóczy
  7. The Minimal Dominant Set is a Non-Empty Core-Extension By László Á. Kóczy; Luc Lauwers
  8. Conditional Cooperation: Disentangling Strategic from Non-Strategic Motivations By Reuben, E.; Suetens, S.
  9. Lorenz comparisons of nine rules for the adjudication of conflicting claims By Kristof Bosmans; Luc Lauwers
  10. One Person, Many Votes: Divided Majority and Information Aggregation By Bouton, Laurent; Castanheira, Micael
  11. Analysis of Voting procedures in One-Seat Elections: Condorcet Efficiency and Borda Efficiency By Dimitri Vandercruyssen
  12. Repeated Moral Hazard, Limited Liability, and Renegotiation By Ohlendorf, Susanne; Schmitz, Patrick W.
  13. A Note on Funaki and Yamato's Tragedy of the Commons By László Á.Kóczy
  14. Consumer Networks and Firm Reputation: A First Experimental Investigation By Huck, Steffen; Lünser, Gabriele; Tyran, Jean-Robert
  15. Budget Uncertainty and Faculty Contracts: A Dynamic Framework for Comparative Analysis By Khovanskaya, Irina; Sonin, Konstantin; Yudkevich, Maria

  1. By: Geert Dhaene; Jan Bouckaert
    Abstract: We experimentally test Dufwenberg and Kirchsteiger’s (2004) theory of sequential reciprocity in a sequential prisoner’s dilemma (SPD) and a mini-ultimatum game (MUG). Data on behavior and first- and second-order beliefs allow us to classify each subject’s behavior as a material best response, a reciprocity best response, both, or none. We found that in both games the behavior of about 80% of the firstmovers was a material best response, a reciprocity best response, or both. The remaining 20% of first-movers almost always made choices that were “too kind” according to the theory of reciprocity. Secondmover behavior, in both games, was fully in line with the predictions of the theory. The average behavior and beliefs across subjects were compatible with a sequential reciprocity equilibrium in the SPD but not in the MUG. We also found first- and second-order beliefs to be unbiased in the SPD and nearly unbiased in the MUG.
    Keywords: sequential reciprocity; sequential prisoner’s dilemma; mini-ultimatum game.
    JEL: A13 C70 C92 D63
    Date: 2008–03
  2. By: Kareen Rozen
    Date: 2008–04–04
  3. By: Borkovsky, RON N.; Doraszelski, Ulrich; Kryukov, Yaroslav
    Abstract: This paper provides a step-by-step guide to solving dynamic stochastic games using the homotopy method. The homotopy method facilitates exploring the equilibrium correspondence in a systematic fashion; it is especially useful in games that have multiple equilibria. We discuss the theory of the homotopy method and its implementation and present two detailed examples of dynamic stochastic games that are solved using this method.
    Keywords: computation; dynamic stochastic games; homotopy method; Markov-perfect equilibrium
    JEL: C63 C73
    Date: 2008–03
  4. By: Laszlo A Koczy
    Abstract: We consider partition function games and introduce new definitions of the core that include the effects of externalities. We assume that all players behave rationally and that all stable outcomes arising are consistent with the appropriate generalised concept of the core. The result is a recursive definition of the core where residual subgames are considered as games with fewer players and with a partition function that captures the externalities of the deviating coalition. Some properties of the new concepts are discussed.
    Date: 2008–03
  5. By: László Á. Kóczy; Luc Lauwers
    Abstract: For each outcome (i.e. a payoff vector augmented with a coalition structure) of a TU-game with a non-empty coalition structure core there exists a finite sequence of successively dominating outcomes that terminates in the coalition structure core. In order to obtain this result a restrictive dominance relation - which we label outsider independent - is employed.
    Date: 2008–03
  6. By: László Á. Kóczy
    Abstract: We prove the existence of an upper bound for the number of blockings required to get from one imputation to another provided that accessibility holds. The bound depends only on the number of players in the TU game considered. For the class of games with non-empty cores this means that the core can be reached via a bounded sequence of blockings. Primitive recursive algorithms are provided to locate accessibility paths.
    Date: 2008–03
  7. By: László Á. Kóczy; Luc Lauwers
    Abstract: A set of outcomes for a TU-game in characteristic function form is dominant if it is, with respect to an outsider-independent dominance relation, accessible (or admissible)and closed. This outsider-independent dominance relation is restrictive in the sense that a deviating coalition cannot determine the payoffs of those coalitions that are not involved in the deviation. The minimal (for inclusion) dominant set is non-empty and for a game with a non-empty coalition structure core, the minimal dominant set returns this core.
    Date: 2008–03
  8. By: Reuben, E.; Suetens, S. (Tilburg University, Center for Economic Research)
    Abstract: We use a novel experimental design to examine the role of reputational concerns in explaining conditional cooperation in social dilemmas. By using the strategy method in a repeated sequential prisoners? dilemma in which the probabilistic end is known, we can distinguish between strategically and non-strategically motivated cooperation. Second movers who are strong reciprocators ought to conditionally cooperate with first movers irrespective of whether the game continues or not. In contrast, strategically motivated second movers conditionally cooperate only if the game continues and they otherwise defect. Experimental results, with two different subject pools, indicate reputation building is used around 30% of the time, which accounts for between 50% and 75% of all realized cooperative actions. The percentage of strong reciprocators varied between 6% to 23%.
    Keywords: cooperation;reputation building;strong reciprocity;repeated prisoners? dilemma
    JEL: C91 D01 D74
    Date: 2008
  9. By: Kristof Bosmans; Luc Lauwers
    Abstract: Consider the following nine rules for adjudicating conflicting claims: the proportional, constrained equal awards, constrained equal losses, Talmud, Piniles’, constrained egalitarian, adjusted proportional, random arrival, and minimal overlap rules. For each pair of rules in this list, we examine whether or not the two rules are Lorenz comparable. We allow the comparison to depend upon whether the amount to divide is larger or smaller than the half-sum of claims. In addition, we provide Lorenz-based characterizations of the constrained equal awards, constrained equal losses, Talmud, Piniles’, constrained egalitarian, and minimal overlap rules.
    Keywords: Claims problem, Bankruptcy, Taxation, Lorenz dominance, Progressivity, Proportional rule, Constrained equal awards rule, Constrained equal losses rule, Talmud rule, Piniles’ rule, Constrained egalitarian rule, Adjusted proportional rule, Random arrival rule, Minimal overlap rule
    JEL: D63
    Date: 2008–03
  10. By: Bouton, Laurent; Castanheira, Micael
    Abstract: This paper compares the properties of three electoral systems when voters have imperfect information. Imperfect information blurs voter decisions and may divorce the electoral outcome from the true preferences of the electorate. The challenge for electoral design is therefore to translate the (sometimes contradictory) elements of information dispersed in the electorate into the most efficient aggregate outcome. We propose a novel model of multi-candidate elections in Poisson games, and show that Approval Voting produces a unique equilibrium that is fully efficient: the candidate who wins the election is the one preferred by a majority of the electorate under full information. By contrast, traditional systems such as Plurality and Runoff elections cannot cope satisfactorily with information imperfections.
    Keywords: Approval Voting; Information Aggregation; Multicandidate Elections; Poisson Games
    JEL: C72 D72 D81 D82
    Date: 2008–02
  11. By: Dimitri Vandercruyssen
    Abstract: In this paper 16 different voting procedures for one-seat elections are analysed: the rules of Borda, Condorcet, Black, Copeland, Simpson, Hare, Coombs, Baldwin, Nanson and the plurality, anti-plurality, majority, approval and runoff rules. The 2 criteria we use as a measure for the validity of the voting procedures are Condorcet efficiency (the number of times a voting procedure selects the Condorcet winner) and Borda efficiency (the number of times a voting procedure selects the Borda winner). Computer simulations calculate efficiencies for the 16 voting procedures. We find that the Borda rule is about 85% Condorcet efficient while some voting procedures are always 100 % Condorcet efficient (Black, Copeland, Simpson, Baldwin, Nanson). Another rule is only 100 % Condorcet efficient with single peaked profiles (Coombs). This can be proven theoretically. Another feature from single peaked profiles seems to be that some voting procedures select the same winner (Simpson, Baldwin, and Nanson). This result may be interesting for future research. Considering Borda efficiencies we see that the Black rule scores well, followed by the rules of Copeland, Nanson and Baldwin. Taking both Condorcet and Borda efficiencies into account, we can state that the Black rule is superior. Then come the rules of Copeland, Simpson, Nanson and Baldwin.
    Date: 2008–03
  12. By: Ohlendorf, Susanne; Schmitz, Patrick W.
    Abstract: We consider a repeated moral hazard problem, where both the principal and the wealth-constrained agent are risk-neutral. In each of two periods, the principal can make an investment and the agent can exert unobservable effort, leading to success or failure. Incentives in the second period act as carrot and stick for the first period, so that effort is higher after a success than after a failure. If renegotiation cannot be prevented, the principal may prefer a project with lower returns; i.e., a project may be "too good" to be financed or, similarly, an agent can be "overqualified."
    Keywords: Dynamic moral hazard; hidden actions; limited liability
    JEL: C73 D86
    Date: 2008–02
  13. By: László Á.Kóczy
    Abstract: In the model of Funaki and Yamato (1999) the tragedy of the commons can be avoided with pessimistic players, while this does not hold for optimistic players. We propose a new core concept to overcome this puzzle and provide numerical simulations of simple games where the conclusions coincide or are less sensitive to behavioural assumptions.
    Date: 2008–03
  14. By: Huck, Steffen; Lünser, Gabriele; Tyran, Jean-Robert
    Abstract: Arguing that consumers are the carriers of firms’ reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbours about their private experiences with different sellers. We find that such information exchange fosters firms' incentives for reputation building and, thus, enhances trust and efficiency in markets. This efficiency-enhancing effect is already achieved with a rather low level of network density.
    Keywords: consumer network; information conditions; moral hazard; reputation; trust
    JEL: C72 C92 D40 L14
    Date: 2008–01
  15. By: Khovanskaya, Irina; Sonin, Konstantin; Yudkevich, Maria
    Abstract: We study hiring decisions made by competing universities in a dynamic framework, focusing on the structure of university finance. Universities with annual state-approved financing underinvest in high-quality faculty, while universities that receive a significant part of their annual income from returns on endowments hire fewer but better faculty and provide long-term contracts. If university financing is linked to the number of students, there is additional pressure to hire low-quality short-term staff. An increase in the university's budget might force the university to switch its priorities from `research' to `teaching' in equilibrium. We employ our model to discuss the necessity for state-financed endowments, and investigate the political economics of competition between universities, path-dependence in the development of the university system, and higher-education reform in emerging market economies.
    Keywords: dynamic game; economics of education; tenure
    JEL: C73 I20
    Date: 2008–03

This nep-gth issue is ©2008 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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