nep-gth New Economics Papers
on Game Theory
Issue of 2008‒06‒27
eight papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Games of capacity allocation in many-to-one matching with an aftermarket By Mumcu, Ayse; Saglam, Ismail
  2. Cooperative Games in Strategic Form By Sergiu Hart; Andreu Mas-Colell
  3. The role of fairness motives and spatial considerations in explaining departures from Nash equilibrium: stationary and evolutionary lessons from 2x2 games By Tavoni, Alessandro
  4. Global Free Trade is in the Core of a Customs Union Game By Hideo Konishi; Carsten Kowalczyk; Tomas Sjöström
  5. The Structure of Equilibrium in an Asset Market with Variable Supply By Manfred Nermuth
  6. Being of two minds: an ultimatum experiment investigating affective processes By Dominique Cappellettia; Werner Güth; Matteo Ploner
  7. Naked Exclusion: An Experimental Study of Contracts with Externalities By Claudia M. Landeo; Kathryn E. Spier
  8. Network Structure and Strategic Investments: An Experimental Analysis By Rosenkranz, Stephanie; Weitzel, Utz

  1. By: Mumcu, Ayse; Saglam, Ismail
    Abstract: In this paper, we study many-to-one matching (hospital-intern markets) with an aftermarket. We analyze the Nash equilibria of capacity allocation games, in which preferences of hospitals and interns are common knowledge and every hospital determines a quota for the regular market given its total capacity for the two matching periods. Under the intern-optimal stable matching system, we show that a pure-strategy Nash equilibrium may not exist. Common preferences for hospitals ensure the existence of equilibrium in weakly dominant strategies whereas unlike in games of capacity manipulation strong monotonicity of population is not a sufficient restriction on preferences to avoid the nonexistence problem. Besides, in games of capacity allocation, it is not true either that every hospital weakly prefers a mixed-strategy Nash equilibrium to any larger regular market quota profiles.
    Keywords: Many-to-one matching; hospital-intern market; aftermarket; capacity allocation game
    JEL: C78 D71 C72
    Date: 2008–06–19
  2. By: Sergiu Hart; Andreu Mas-Colell
    Abstract: In this paper we view bargaining and cooperation as an interaction superimposed on a strategic form game. A multistage bargaining procedure for N players, the “proposer commitment” procedure, is presented. It is inspired by Nash’s two-player variable-threat model; a key feature is the commitment to “threats.” We establish links to classical cooperative game theory solutions, such as the Shapley value in the transferable utility case. However, we show that even in standard pure exchange economies the traditional coalitional function may not be adequate when utilities are not transferable.
    Keywords: Bargaining, Commitment, Nash variable threat
    JEL: C7 D5 D7
    Date: 2008–05
  3. By: Tavoni, Alessandro
    Abstract: Substantial evidence has accumulated in recent empirical works on the limited ability of the Nash equilibrium to rationalize observed behavior in many classes of games played by experimental subjects. This realization has led to several attempts aimed at finding tractable equilibrium concepts which perform better empirically, often by introducing a reference point to which players compare the available payoff allocations, as in impulse balance equilibrium and in the inequity aversion model. The first part of this paper is concerned with reviewing the recent reference point literature and advancing a new, empirically sound, hybrid concept. In the second part, evolutionary game theoretic models are employed to investigate the role played by fairness motives as well as spatial structure in explaining the evolution of cooperative behavior.
    Keywords: Other-regarding preferences; Inequity aversion; Endogenous preferences; Evolutionary stability; Prisoner’s dilemma
    JEL: B52 A13 D64 C72 C73
    Date: 2008–06–20
  4. By: Hideo Konishi (Boston College); Carsten Kowalczyk (Fletcher School, Tufts University); Tomas Sjöström (Rutgers University)
    Abstract: This paper shows nonemptiness of the core of a customs union game with a status quo equilibrium with tariffs by employing an appropriate notion of the core as in Kowalczyk and Sjöström (1994, Economica). Specifically, we find that if customs unions may have no effects on non-member countries as in Ohyama (1972, Keio Economic Studies) and Kemp and Wan (1976, Journal of International Economics) then a subset of countries forming such a customs union does not block global free trade when accompanied by so-called Grinols transfers (Grinols, 1981, Journal of International Economics).
    Date: 2008–06–19
  5. By: Manfred Nermuth
    Abstract: We characterize the structure of Nash equilibria in asset market games with variable asset supply. In equilibrium, di®erent assets have dif- ferent returns, and (risk neutral) investors with di®erent wealth hold portfolios with di®erent structures. In equilibrium, an asset's return is inversely related to the elasticity of its supply. The larger an in- vestor, the more diversi¯ed is his portfolio. Smaller investors do not hold all the assets, but achieve higher percentage returns. More gen- erally, our results can be applied also to other \multi-market games" in which several players compete in several arenas simultaneously, like multi-market Cournot oligopolies, or multiple rent-seeking games.
    JEL: C72 D43 G12
    Date: 2008–06
  6. By: Dominique Cappellettia (CIFREM, University of Trento, Italy); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Matteo Ploner (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)
    Abstract: We experimentally investigate how affective processes influence proposers' and responders' behaviour in the Ultimatum Game. Using a dual-system approach, we tax cognitive resources through time pressure and cognitive load to enhance the influence of affective processes on behaviour. We find that proposers offer more under time pressure and this seems to be due to strategic considerations rather than to other-regarding concerns. We also find that responders are more likely to reject under time pressure. Surprisingly, both proposers and responders appear to be unaffected by cognitive load manipulation.
    Keywords: Ultimatum Game, dual-system theories, time pressure, cognitive load, Experimental Economics.
    JEL: C72 C78 C91
    Date: 2008–06–18
  7. By: Claudia M. Landeo; Kathryn E. Spier
    Abstract: This paper reports the results of an experiment designed to assess the ability of an incumbent seller to profitably foreclose a market with exclusive contracts. We use the strategic environment described by Rasmusen, Ramseyer, and Wiley (1991) and Segal and Whinston (2000) where entry is unprofitable when sufficiently many downstream buyers sign exclusive contracts with the incumbent. When discrimination is impossible, the game resembles a stag-hunt (coordination) game in which the buyers' payoffs are endogenously chosen by the incumbent seller. Exclusion occurs when the buyers fail to coordinate on their preferred equilibrium. Two-way non-binding pre-play communication among the buyers lowers the power of exclusive contracts and induces more generous contract terms from the seller. When discrimination and communication are possible, the exclusion rate rises. Divide-and-conquer strategies are observed more frequently when buyers can communicate with each other. Exclusion rates are significantly higher when the buyers' payoffs are endogenously chosen rather than exogenously given. Finally, secret offers are shown to decrease the incumbent's power to profitably exclude.
    JEL: C72 C90 K21 K41 L12 L40
    Date: 2008–06
  8. By: Rosenkranz, Stephanie; Weitzel, Utz
    Abstract: This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoullé and Kranton (2007). In particular, we are interested in disentangling the influence of global, local and individual factors. We study subjects' strategic investment decisions in four basic network structures. As predicted, we find that global factors, such as the regularity of the network structure, influence behavior. However, we also find evidence that individual play in networks is to some extent boundedly rational, in the sense that coordination is influenced by local and individual factors, such as the number of (direct) neighbors, local clustering and individuals' risk attitudes.
    Keywords: coordination; experiment; risk aversion; Social networks; strategic substitutes
    JEL: C72 C91 D00 D81 D85 H41
    Date: 2008–06

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