nep-gth New Economics Papers
on Game Theory
Issue of 2008‒06‒13
six papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Folk theorems with Bounded Recall under(Almost) Perfect Monitoring By George Mailath; Wojciech Olszewski
  2. A communication equilibrium in English auctions with discrete bidding By Ricardo Gonçalves
  3. Stochastic Stability for Roommate Markets By Klaus Bettina; Klijn Flip; Walzl Markus
  4. Strategic Use of Trust By Maroš Servátka; Steven Tucker; Radovan Vadovic
  5. Peer Effects and Peer Avoidance: Epidemic Diffusion in Coevolving Networks By Constanza Fosca; Matteo Marsili; Fernando Vega-Redondo
  6. An Agent Based Simulation Of Smart Metering Technology Adoption By Zhang, T.; Nuttall, W.J.

  1. By: George Mailath; Wojciech Olszewski
    Abstract: A strategy profile in a repeated game has bounded recall L if play under the profile after two distinct histories that agree in the last L periods is equal. Mailath and Morris (2002, 2006) proved that any strict equilibrium in bounded-recall strategies of a game with full support public monitoring is robust to all perturbations of the monitoring structure towards private monitoring (the case of almost-public monitoring), while strict equilibria in unbounded-recall strategies are typically not robust. We prove that the perfect-monitoring folk theorem continues to hold when attention is restricted to strategies with bounded recall and the equilibrium is essentially required to be strict. The general result uses calendar time in an integral way in the construction of the strategy profile. If the players’ action spaces are sufficiently rich, then the strategy profile can be chosen to be independent of calendar time. Either result can then be used to prove a folk theorem for repeated games with almost-perfect almost-public monitoring.
    Keywords: Repeated games, bounded recall strategies, folk theorem, imperfect monitoring
    JEL: C72 C73
    Date: 2008–03
  2. By: Ricardo Gonçalves (Faculdade de Economia e Gestão - Universidade Católica Portuguesa (Porto))
    Abstract: This paper analyses a model of a common value English auction with discrete bidding. In this model, we show that there exists a communication equilibrium in which the high signal bidder strategically chooses his first bid so as to maximise his expected utility. Straightforward bidding, or increasing the bid by the minimum amount possible, is the equilibrium strategy for both bidders in all other auction rounds. We relate this result to recent research on English auctions with discrete bidding and auctions where bidders may have noisy information about their opponent's signals.
    Keywords: English Auctions, discrete bidding, communication equilibrium
    JEL: D44
    Date: 2008–06
  3. By: Klaus Bettina; Klijn Flip; Walzl Markus (METEOR)
    Abstract: We show that for any roommate market the set of stochastically stable matchings coincideswith the set of absorbing matchings. This implies that whenever the core is non-empty (e.g.,for marriage markets), a matching is in the core if and only if it is stochastically stable, i.e., stochastic stability is a characteristic of the core. Several solution concepts have beenproposed to extend the core to all roommate markets (including those with an empty core).An important implication of our results is that the set of absorbing matchings is the onlysolution concept that is core consistent and shares the stochastic stability characteristic withthe core.
    Keywords: Economics (Jel: A)
    Date: 2008
  4. By: Maroš Servátka (University of Canterbury); Steven Tucker (University of Canterbury); Radovan Vadovic
    Abstract: While most of the previous literature interprets trust as an action, we adopt a view that trust is represented by a belief that the other party will return a fair share. The agent’s action is then a commitment device that signals this belief. In this paper we propose and test a conjecture that economic agents use trust strategically. That is, the agents have incentives to inflate the perceived level of trust (the signal) in order to induce a more favorable outcome for themselves. In the experiment we study the behavior of subjects in a modified investment game which is played sequentially and simultaneously. While the sequential treatment allows for strategic use of trust, in the simultaneous treatment the first mover’s action is not observed and hence does not signal her belief. In line with our prediction we find that first movers send significantly more in the sequential treatment than in simultaneous. Moreover, second movers reward trusting action, but only if it is maximal. We also find that signaling with trust enhances welfare.
    Keywords: Experimental Economics; Trust; Beliefs
    JEL: C70 C91
    Date: 2008–05–15
  5. By: Constanza Fosca; Matteo Marsili; Fernando Vega-Redondo
    Abstract: We study the long-run-emergency of behavioral patterns in dynamic complex networks. Individuals display two kinds of behavior: G("good") or B ("bad"). We assume that agents have an innate tendency towards G, but can also be led towards B though the influence of peer bad behavior. We model the implications of those peer effects as an epidemic process in the standard SIS (Susceptible-Infected-Susceptible) framework. The key novelty of our model is that, unlike in received epidemic literature, the network is taken to change over time within the same time scale as behavior. Specifically, we posit that links connecting two G agents last longer, reflecting the idea that B agents tend to be avoided. The main concern of the paper is to understand the extent to which such biased network turnover may play a significant role in supporting G behavior in a social system. And indeed we find that network coevolution has nontrivial and interesting effects on long-run behavior. This yields fresh insights on the role of (endogenous) peer pressure on the diffusion of (a)social behavior as well as on the traditional study of disease epidemics.
    Keywords: Coevolutionary networks, diffusion of behavior, social dilemma, epidemics
    JEL: C71 D83 D85
    Date: 2008
  6. By: Zhang, T.; Nuttall, W.J.
    Abstract: Based on the classic behavioural theory “the Theory of Planned Behaviour”, we develop an agent-based model to simulate the diffusion of smart metering technology in the electricity market. We simulate the emergent adoption of smart metering technology under different management strategies and economic regulations. Our research results show that in terms of boosting the take-off of smart meters in the electricity market, choosing the initial users on a random and geographically dispersed basis and encouraging meter competition between energy suppliers can be two very effective strategies. We also observe an “S-curve” diffusion of smart metering technology and a “lock-in” effect in the model. The research results provide us with insights as to effective policies and strategies for the roll-out of smart metering technology in the electricity market.
    Keywords: Agent-based simulation, smart metering technology, the Theory of Planned Behaviour, technology diffusion.
    JEL: C63 C73 D78 O33
    Date: 2007–09

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