nep-gth New Economics Papers
on Game Theory
Issue of 2008‒05‒24
ten papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Smith and Rawls Share a Room: Stability and Medians By Klaus Bettina; Klijn Flip
  2. Bargaining Set Solution Concepts in Dynamic Cooperative Games By Hellman, Ziv
  3. Mixed Matching Markets By Winfried Hochstättler; Robert Nickel; David Schiess
  4. On Feelings as a Heuristic for Making Offers in Ultimatum Negotiations By Stephen, Andrew T.; Pham, Michel Tuan
  5. A Characterization of Sequential Rationalizability By Jose Apesteguia; Miguel A. Ballester
  6. International emissions trading in a non-cooperative equilibrium By Bjart J. Holtsmark and Dag Einar Sommervoll
  7. Imposing Monotonicity Nonparametrically in First-Price Auctions By Henderson, Daniel J.; List, John A.; Millimet, Daniel L.; Parmeter, Christopher F.; Price, Michael K.
  8. Is Segregation Robust? By Bøg, Martin
  9. Supplementary Appendix for ‘Non-Bayesian Updating: A Theoretical Framework’ By Larry G. Epstein; Jawwad Noor; Alvaro Sandroni
  10. Whom to Observe? By Bøg, Martin

  1. By: Klaus Bettina; Klijn Flip (METEOR)
    Abstract: We consider one-to-one, one-sided matching (roommate) problems in which agents can either be matched as pairs or remain single. We introduce a so-called bi-choice graph for each pair of stable matchings and characterize its structure. Exploiting this structure we obtain as a corollary the “lonely wolf” theorem and a decomposability result. The latter result together with transitivity of blocking leads to an elementary proof of the so-called stable median matching theorem, showing how the often incompatible concepts of stability (represented by the political economist Adam Smith) and fairness (represented by the political philosopher John Rawls) can be reconciled for roommate problems. Finally, we extend our results to two-sided matching problems.
    Keywords: Economics (Jel: A)
    Date: 2008
  2. By: Hellman, Ziv
    Abstract: This paper is concerned with the question of defining the bargaining set, a cooperative game solution, when cooperation takes place in a dynamic setting. The focus is on dynamic cooperative games in which the players face (finite or infinite) sequences of exogenously specified TU-games and receive sequences of imputations against those static cooperative games in each time period. Two alternative definitions of what a ‘sequence of coalitions’ means in such a context are considered, in respect to which the concept of a dynamic game bargaining set may be defined, and existence and non-existence results are studied. A solution concept we term ‘subgame-stable bargaining set sequences’ is also defined, and sufficient conditions are given for the non-emptiness of subgame-stable solutions in the case of a finite number of time periods.
    Keywords: Cooperative game; Repeated game; Bargaining set
    JEL: C71 C73
    Date: 2008–04–17
  3. By: Winfried Hochstättler; Robert Nickel; David Schiess
    Abstract: We introduce a new model for two-sided markets that generalizes stable marriages as well as assignment games. Our model is a further generalization of the model introduced by Eriksson and Karlander [2]. We prove that the core of our model is always non-empty by providing an algorithm that determines a stable solution in O(n4).
    Keywords: stable marriage, assignment game, core
    Date: 2008–04
  4. By: Stephen, Andrew T.; Pham, Michel Tuan
    Abstract: This research examines how the reliance on emotional feelings as a heuristic influences the proposal of offers in negotiations. Results from three experiments based on the classic ultimatum game show that, compared to proposers who do not rely on their feelings, proposers who rely on their feelings make less generous offers in the standard ultimatum game, more generous offers in a variant of the game allowing responders to make counteroffers, and less generous offers in the dictator game where no responses are allowed. Reliance on feelings triggers a more literal form of play, whereby proposers focus more on how they feel toward the offers themselves than on how they feel toward the possible outcomes of these offers, as if their offers were the final outcomes. Proposers relying on their feelings also tend to focus on gist-based, simpler construals of negotiations that capture only the essential aspects of the situation.
    Keywords: affect; emotions; heuristics; bargaining; ultimatum game; affect as information; affect heuristic; trust in feelings
    JEL: D81 D11 D71 A13 A12 C70 D83
    Date: 2008–05–08
  5. By: Jose Apesteguia; Miguel A. Ballester
    Abstract: A choice function is sequentially rationalizable if there is an ordered collection of asymmetric binary relations that identifies the selected alternative in every choice problem. We propose a property, F-consistency, and show that it characterizes the notion of sequential rationalizability. F-consistency is a testable property that highlights the behavioral aspects implicit in sequentially rationalizable choice. Further, our characterization result provides a novel tool with which to study how other behavioral concepts are related to sequential rationalizability, and establish a priori unexpected implications. In particular, we show that the concept of rationalizability by game trees, which, in principle, had little to do with sequential rationalizability, is a refinement of the latter. Every choice function that is rationalizable by a game tree is also sequentially rationalizable. Finally, we show that some prominent voting mechanisms are also sequentially rationalizable.
    Keywords: Individual rationality, Rationalizability, Consistency, Bounded rationality, Behavioral economics, Voting
    JEL: B41 D01
    Date: 2008–05
  6. By: Bjart J. Holtsmark and Dag Einar Sommervoll (Statistics Norway)
    Abstract: Linkage of different countries’ domestic permit markets for pollution rights into a single international market alters governments’ incentives, and may trigger adjustments of the number of allocated permits. First, this work finds that in a non-cooperative equilibrium, international emissions trading is likely to increase the total emissions. Second, although trading will give a more efficient cross-country allocation of emissions, efficiency may nevertheless fall, because an already inefficiently low abatement level is likely to be further reduced. Third, we find that large countries are likely to experience losses from linking their permit markets to the permit markets of smaller countries.
    Keywords: Emissions trading; efficiency; non-cooperative games
    JEL: C72 F53 Q54
    Date: 2008–05
  7. By: Henderson, Daniel J.; List, John A.; Millimet, Daniel L.; Parmeter, Christopher F.; Price, Michael K.
    Abstract: Monotonicity of the equilibrium bidding strategy is a key property of structural auction models. Traditional nonparametric estimators provide a flexible means of uncovering salient features of auction data, but do not formally impose the monotonicity assumption that is inherent in the models during estimation. Here, we develop a nonparametric estimator which imposes the monotonicity assumption. We accomplish this by employing the constraint weighted bootstrapping theory developed in the statistics literature. The finite sample performance of our estimator is examined using simulated data, experimental data, as well as a naturally occurring data set composed of thousands of bids from Canadian timber auctions.
    Keywords: Constrained Weighted Bootstrap; Bandwidth; Equilibrium Bidding Strategy
    JEL: C14 C12 D44
    Date: 2008–04–14
  8. By: Bøg, Martin
    Abstract: This paper studies the question of how well we understand segregation. The point of departure is Schelling’s spatial proximity model in one dimension. By introducing noise I show that segregation emerges as the long run prediction of neighborhood evolution, both when residents have Schelling-type threshold preferences and strict preferences for diversity. Analytical result are complemented with numerical simulations which show that within a reasonable time frame full segregation does not occur. When residents have a preference for diversity, I show that a natural perturbation away from the diversity monomorphism dramatically alters the long run prediction: integration is the unique long run prediction, even in the absence of noise.
    Keywords: segregation; Markov Process; Stochastic Stability; simulations
    JEL: D62 C73 C72
    Date: 2007–01–25
  9. By: Larry G. Epstein (Department of Economics, Boston University); Jawwad Noor (Department of Economics, Boston University); Alvaro Sandroni (Department of Economics, University of Pennsylvania)
    Abstract: This appendix applies the model in ”Non-Bayesian Updating: A Theoretical Frame-Work” to address the question: What do non-Bayesian updaters learn?
    Keywords: Non-Bayesian Learning
    JEL: C70 C12 D81
    Date: 2008–01–18
  10. By: Bøg, Martin
    Abstract: This paper considers the problem of a decision maker who is faced with a dynamic decision problem with several alternatives, and additionally can engage in prior consultation on one of the alternatives. Information received from others is coarse. When consulting on an alternative that the decision maker is pre-disposed to, she either consults someone that shares precisely her convictions, or she consults someone who is more ”picky” than herself. Optimality depends on the attractiveness of alternatives; when another alternative becomes sufficiently attractive the decision maker prefers a picky contact. When the decisionmaker consults on a lower ranked alternative, optimal consulting depends non-monotonically on the value of the alternative she is pre-disposed to. For high and low values of the pre-disposed alternative she prefers to consult someone with her own convictions, but for medium values she prefers to consult a picky contact. Finally a decision maker may prefer to consult on a lower ranked alternative.
    Keywords: bandit problem; observational learning; heterogeneity
    JEL: D83 C7
    Date: 2006–12–01

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