nep-gth New Economics Papers
on Game Theory
Issue of 2008‒04‒15
thirteen papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Network Structure in a Link-formation Game: An Experimental Study By Alexander Elbittar; Rodrigo Harrison; Roberto Muñoz
  2. Distributive fairness in an intercultural ultimatum game By Sebastian Goerg; Werner Güth; Gari Walkowitz; Torsten Weiland
  3. Proportional Payoffs in Majority Games By Maria Montero
  4. Common reasoning in games By Robin P. Cubitt; Robert Sugden
  5. Adversarial scheduling analysis of Game-Theoretic Models of Norm Diffusion. By Istrate, Gabriel; Marathe, Madhav V.; Ravi, S.S.
  6. Balanced per capita contributions and levels structure of cooperation By Gómez-Rúa, María; Vidal-Puga, Juan
  7. English auctions and the Stolper-Samuelson theorem By Dubra, Juan; Echenique, Federico; Manelli, Alejandro
  8. The existence of Nash equilibria in n-player LQ-games, with applications to international monetary and trade agreements. By Di Bartolomeo Giovanni; Acocella Nicola; Hughes Hallett Andrew
  9. Information and Beliefs in a Repeated Normal-form Game By Dietmar Fehr; Dorothea Kübler; David Danz
  10. Voronoi game on disjoint open curves By M Dziubinski
  11. Deterrence, Preemption and Panic: A Common-Enemy Problem of Terrorism By Das, Satya P.; Roy Chowdhury, Prabal
  12. The Evolution of Social Norms and Individual Preferences By Rodrigo Harrison; Mauricio Villena
  13. Belief Formation: An Experiment With Outside Observers By Kyle Hyndman; Wolf Ehrblatt; Erkut Ozbay; Andrew Schotter

  1. By: Alexander Elbittar; Rodrigo Harrison (Instituto de Economía. Pontificia Universidad Católica de Chile.); Roberto Muñoz
    Abstract: Network formation is frequently modeled using link-formation games and typically present a multiplicity of Nash equilibria. Cooperative refinements - such as strong or coalitional proof Nash equilibria - have been the standard tool used for equilibrium selection in these games. Non-cooperative refinements derived from the theory of global games have shown also that, for a class of payo¤ functions, multiplicity of equilibria disappears when the game is perturbed by introducing small amounts of incomplete information. We conducted a laboratory study evaluating the predictive power of each of these refinements in an illustrative link-formation game. Compared with cooperative game solutions, the global game approach did significantly better at predicting the strategies played by individuals in the experiment.
    Keywords: Networks, Global Games, Cooperative Games, Equilibrium Selection, Experimental economics.
    JEL: C70 C92 D20 D44 D82
    Date: 2008
  2. By: Sebastian Goerg (BonnEconLab, University of Bonn); Werner Güth (Max Planck Institute of Economics); Gari Walkowitz; Torsten Weiland (Max Planck Institute of Economics)
    Abstract: Does geographic or (perceived) social distance between subjects signi?cantly affect proposer and responder behavior in ultimatum bargaining? To answer this question, subjects once play an ultimatum game with three players (proposer, responder, and dummy player) and asymmetric information (only the proposer knows what can be distributed). Treatments differ in their geographical scope in that they involve either one or three subject pools which, in the latter case, structurally differ in their between-subject pool heterogeneity. Observed choice behavior corroborates several stylized facts of this class of ultimatum games which are primarily explained by strategic play and other-regarding preferences. While the extent of self-interested allocation behavior in proposers signi?cantly varies across sites, neither proposers nor responders meaningfully condition their choices on their co-players' provenance or affiliation. Altogether, we do not discern articulate discriminative behavior based on geographic or social distance.
    Keywords: Equity, fairness, social preferences, ultimatum bargaining, redistribution, cross-national experiment
    JEL: C70 C91 D63
    Date: 2008–03–27
  3. By: Maria Montero (School of Economics, University of Nottingham)
    Abstract: This paper extends the Baron-Ferejohn model of legislative bargaining to general weighted majority games with two modifications: first, payoff division can only be agreed upon after the coalition has formed (two-stage bargaining); second, negotiations in the coalition can break down, in which case a new coalition may be formed (reversible coalitions). Under the most natural bargaining protocol, both expected payoffs and actual payoff division are proportional to the voting weights provided that the set of winning coalitions of minimum weight is weakly balanced and that the breakdown probability tends to 0. Homogeneity of the voting weights is neither necessary nor sufficient for proportional payoffs. Intermediate values of the breakdown probability produce predictions consistent with the empirical evidence on portfolio allocation in Europe: a moderate propoper advantage and a linear relationship between weights and ex post payoffs for all coalition members other than the proposer.
    Keywords: coalition formation, legislative bargaining, weighted majority games, proportional payoffs, reversible coalitions
    JEL: C71 C72 C78
    Date: 2008–03
  4. By: Robin P. Cubitt (School of Economics, University of Nottingham); Robert Sugden (School of Economics, University of East Anglia)
    Abstract: This paper makes three related contributions to noncooperative game theory: (i) a solution concept (the “ICEU solution”), which is generated by an iterative procedure that constructs trinary partitions of strategy sets and deals with problems arising from weak dominance; (ii) a class of models of players’ reasoning, inspired by David Lewis’s work on common knowledge, which can together represent common knowledge of rationality for any consistent conception of individual practical rationality; and, using these ingredients, (iii) a diagnosis of paradoxes associated with the concept of common knowledge of rationality, as represented in Bayesian models of games.
    JEL: C72
    Date: 2008–03
  5. By: Istrate, Gabriel; Marathe, Madhav V.; Ravi, S.S.
    Abstract: In (Istrate et al. SODA 2001) we advocated the investigation of robustness of results in the theory of learning in games under adversarial scheduling models. We provide evidence that such an analysis is feasible and can lead to nontrivial results by investigating, in an adversarial scheduling setting, Peyton Young's model of diffusion of norms . In particular, our main result incorporates contagion into Peyton Young's model.
    Keywords: evolutionary games; stochastic stability; adversarial scheduling.
    JEL: Z13 C73
    Date: 2008–04–09
  6. By: Gómez-Rúa, María; Vidal-Puga, Juan
    Abstract: We define a new value for games with levels structure. We introduce a new property in this class of games, balanced per capita contributions, which is related with others in the literature. We provide an axiomatic characterization of this value using this new property.
    Keywords: levels structure; value; balanced per capita contributions
    JEL: C71
    Date: 2008–04–09
  7. By: Dubra, Juan; Echenique, Federico; Manelli, Alejandro
    Abstract: We prove that the English auction (with bidders that need not be ex ante identical and may have interdependent valuations) has an efficient ex post equilibrium. We establish this result for environments where it has not been previously obtained. We also prove two versions of the Stolper-Samuelson theorem, one for economies with n goods and n factors, and one for non-square economies. Similar assumptions and methods underlie these seemingly unrelated results.
    Keywords: English auctions; Stolper-Samuelson; single crossing
    JEL: F11 D44 C60
    Date: 2007–11–15
  8. By: Di Bartolomeo Giovanni; Acocella Nicola; Hughes Hallett Andrew
    Abstract: The paper studies the relationship between equilibrium existence in LQ games and the classical theory of economic policy, generalizing some recent results. In particular, by focusing on system controllability instead of the controllability by one or some of the players, we find conditions for the existence of the Nash equilibrium that extend those required by the previous literature. The usefulness of our results is described by some examples in the field of international monetary and trade agreements.
    JEL: C72 E52 E61
    Date: 2008–04
  9. By: Dietmar Fehr; Dorothea Kübler; David Danz
    Abstract: We study beliefs and choices in a repeated normal-form game. In addition to a baseline treatment with common knowledge of the game structure and feedback about choices in the previous period, we run treatments (i) without feedback about previous play, (ii) with no infor- mation about the opponent?s payo¤s and (iii) with random matching. Using Stahl and Wilson's (1995) model of limited strategic reasoning, we classify behavior with regard to its strategic sophistication and consider its development over time. We use belief statements to track the consistency of subjects' actions and beliefs as well as the accuracy of their beliefs (relative to the opponent's true choice) over time. In the baseline treatment we observe more sophisticated play as well as more consistent and more accurate beliefs over time. We isolate feedback as the main driving force of such learning. In contrast, information about the opponent's payoffs has almost no effect on the learning path. While it has an impact on the average choice and belief structure aggregated over all periods, it does not alter the choices and the belief accuracy in their development over time.
    Keywords: experiments, beliefs, strategic uncertainty, learning
    JEL: C72 C92 D84
    Date: 2008–03
  10. By: M Dziubinski
    Abstract: Two players are endowed with resources for setting up N locations on K open curves of identical lengths, with N > K greater than or equal to 1. The players alternately choose these locations (possibly in batches of more than one in each round) in order to secure the area closer to their locations than that of their rival's. The player with the highest secured area wins the game and otherwise the game ends in a tie. Earlier research has shown that, if an analogical game is played on disjoint closed curves, the second mover advantage is in place only if K = 1, while for K > 1 both players have a tying strategy. It was also shown that this results hold for open curves of identical lengths when rules of the game additionally require players to take exactly one location in the rst round. In this paper we show that the second mover advantage is still in place for K greater than or equal to 1 and 2K -1 less than or equal to N, even if the additional restriction is dropped, while K is less than or euqal to N < 2K -1 results in the first mover advantage. We also study a natural variant of the game, where the resource mobility constraint is more stringent so that in each round each player chooses a single location and we show that the second mover advantage re-appears for K is less than or equal to N < 2K -1 if K is an even number.
    Keywords: Competitive locations, Disjoint spaces, Winning/Tying strategies, Equilibrium congurations.
    Date: 2008
  11. By: Das, Satya P.; Roy Chowdhury, Prabal
    Abstract: We develop a game-theoretic analysis of terrorism that examines the interaction between a terrorist organization and multiple target countries, and considers both pre-emption and deterrence as counter-terrorist policies. The damage from terror includes not only the material cost of fatality, injury and loss of property, but also the resultant fear. The fear-effect leads to different kinds of equilibria and implications for counter-terrorism policies. In particular, the model identifies conditions under which greater pre-emption may be the rational response to an increase in terrorism, i.e., it analyzes the merit of the dictum: ``offense is the best defense.'' Further, it examines the characteristics of cooperative behavior among target countries in dealing with the threat of terrorism.
    JEL: H77 A13 C72
    Date: 2008
  12. By: Rodrigo Harrison (Instituto de Economía. Pontificia Universidad Católica de Chile.); Mauricio Villena
    Abstract: Why does an altruistically inclined player behave altruistically in some contexts and egoistically or spitefully in others? This article provides an economic explanation to this question. The basic argument is centered on the idea that social norms shape our preferences through a process of cultural learning. In particular, we claim that, in contexts with a stable norm of reciprocity, an altruistic player can respond in kind to egoistic or spiteful players by behaving either egoistically or spitefully when confronting them and yet continue to be an altruistic player. This is why, instead of studying the evolution of preferences as such, in this work we analyze the evolution of social norms that indirectly determine individual preferences and behavior. Such a study requires that we distinguish between players' behavioral preferences, or those individuals show with their behavior, and players' intrinsic preferences, or those they inherently support or favor. We argue that, whereas the former can change through the evolution of social norms, in this case a reciprocity norm, the latter are not subject to evolutionary pressures and, therefore, we assume them to be given.
    Keywords: Social Norms, Reciprocity, Endogenous
    JEL: C72 A13
    Date: 2008
  13. By: Kyle Hyndman (SMU); Wolf Ehrblatt (NYU); Erkut Ozbay (Maryland); Andrew Schotter (NYU)
    Abstract: In this paper we investigate the necessary ingredients for an accurate model of belief formation. Using experimental data from a previous experiment, we bring in a new group of subjects whose job it is to predict the action choices of the subjects from the previous experiment. While the rules we consider are all, strictly speaking, adaptive (being based on past observables), some of the variables we uncover represent fairly sophisticated behaviour. Going from less to more sophisticated, we find that the following are important components of the belief formation process: the history of play, payoffs (whether real or ``imagined" in the sense of \citet{CH99}) of the player whose actions our subjects are predicting and the payoffs of the other player. The paper also documents the presence of subject-specific heterogeneity in both initial beliefs and, to varying degrees, almost all of the variables found to influence beliefs.
    Keywords: Game Theory, Belief Formation, Learning.
    JEL: C70 C91 D83 D84
    Date: 2008–04

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