nep-gth New Economics Papers
on Game Theory
Issue of 2008‒07‒30
thirteen papers chosen by
Laszlo A. Koczy
University of Maastricht

  1. Are the Treasures of Game Theory Ambiguous? By Jürgen Eichberger; David Kelsey
  2. Properties of Equilibrium Strategies in Multiple-Unit, Uniform-Price Auctions By Michal Bresky
  3. Generic Finiteness of Equilibrium Payoffs for Bimatrix Games By Andreu Mas-Colell
  4. Repeated Relationships with Limits on Information Processing By Andrew Postlewaite; Olivier Compte
  5. Stochastic games on a product state space: The periodic case By Flesch János; Schoenmakers Gijs; Vrieze Koos
  6. Sequential versus Simultaneous Auctioning of Procurement Contracts with Common Value and Private Value Components By De Silva Dakshina; Pagel Beatrice; Peeters Ronald
  7. Lowest Unique Bid over the Internet: Ability, Lottery or Scam? By Andrea Gallice
  8. Network formation with decreasing marginal benefits of information By Kris De Jaegher; Jurjen Kamphorst
  9. Epistemic Conditions and Social Preferences in Trust Games By Gillies, Anthony S; Rigdon, Mary L
  10. Stochastic and Deterministic Menus in Common Agency games: A corrected version By Gwenaël Piaser
  11. Incentive compatible mechanisms in multiprincipal multiagent games By Gwenaël Piaser
  12. English Auctions with Toeholds: An Experimental Study By Sotiris Georganas; Rosemarie Nagel
  13. A Case for Affirmative Action in Competition Policy By VILLENEUVE, BERTRAND; ZHANG, VANESSA YANHUA

  1. By: Jürgen Eichberger (University of Heidelberg, Department of Economics); David Kelsey (University of of Exeter, School of Business and Economics)
    Abstract: Goeree & Holt (2001) observe that, for some parameter values, Nash equilibrium provides good predictions for actual behaviour in experiments. For other payoff parameters, however, actual behaviour deviates consistently from that predicted by Nash equilibria. They attribute the robust deviations from Nash equilibrium to actual players’ considering not only marginal gains and losses but also total pay-offs. In this paper, we show that optimistic and pessimistic attitudes towards strategic ambiguity may induce such behaviour.
    Keywords: Ambiguity, coordination games, experiments, traveller’s dilemma, matching pennies, optimism
    JEL: C72 D81
    Date: 2008–07
  2. By: Michal Bresky
    Abstract: The paper analyzes the essential properties of bidder equilibrium strategies in the multi-unit uniform-price auction. In the auction the seller offers several identical units for sale, specifies a minimum accepted bid (reservation price) and sets maximum number of bids that any bidder can submit. Under these restrictions bidders use strictly increasing strategies in a symmetric equilibrium more often, and in many cases the reservation price increases the bidder's strategy which is typical in single-unit auctions. Such an auction procedure implies a unique equilibrium strategy in some cases. Thus the number of bid restriction and reservation price present in real-life multi-unit auctions restore some properties of equilibrium strategies typical for single-unit auctions.
    Keywords: Multi-unit auction, uniqueness of equilibrium in discontinuous games, uniform-price auction with reservation price.
    JEL: D44
    Date: 2008–05
  3. By: Andreu Mas-Colell
    Abstract: It is shown that in any affine space of payoff matrices the equilibrium payoffs of bimatrix games are generically finite.
    Keywords: Bimatrix Games, Generic Finiteness
    JEL: C D
    Date: 2008–07
  4. By: Andrew Postlewaite (Department of Economics); Olivier Compte (Paris School of Economics)
    Abstract: Many important strategic problems are characterized by repeated interactions among agents. There is a large literature in game theory and economics illustrating how considerations of future interactions can provide incentives for cooperation that would not be possible in one-shot interactions. Much of the work in repeated games assumes public monitoring: players observe precisely the same thing at each stage of the game. It is well-understood that even slight deviations from public monitoring increase dramatically the difficulty the problems players face in coordinating their actions. Repeated games with private monitoring incorporate differences in what players observe at each stage. Equilibria in repeated games with private monitoring, however, often seem unrealistic; the equilibrium strategies may be highly complex and very sensitive to the fine details of the stochastic relationship between players’ actions and observations. Furthermore, there is no realistic story about how players might arrive at their equilibrium strategies. We propose an alternative approach to understanding how people cooperate. Each player is endowed with a mental system that processes information: a mental system consists of a number of psychological states and a transition function between states that depends on observations made. In this world, a strategy is just a function from states to actions. Our framework has the following desirable properties: (i) players restrict attention to a relatively small set of simple strategies. (ii) the number of strategies that players compare is small enough that players might ultimately learn which perform well. We find that some mental systems allow agents to cooperate under a broad set of parameters, while others are not conducive to cooperation.
    Keywords: Repeated Games, Private Monitoring, Mental States
    JEL: D01 D70
    Date: 2007–10–01
  5. By: Flesch János; Schoenmakers Gijs; Vrieze Koos (METEOR)
    Abstract: We examine so-called product-games. These are n-player stochatic games played on a product state space S(1)U…S(n), in which player i controls the transitions on S(i). For the general n-player case, we establish the existence of 0-equilibria. In addition, for the case of two-player zero-sum games of this type, we show that both players have stationary 0-optimal strategies.In the analysis of product-games, interestingly, a central role is played by the periodic features of the transition structure. Flesch et al. [2008] showed the existence of 0-equilibria under the assumption that, for every player i, the transition structure on S(i) is aperiodic. In this article, we examine product-games with periodic transition structures. Even though a large part of the approach in Flesch et al. [2008] remains applicable, we encounter a number of tricky problems that we have to address. We provide illustrative examples to clarify the essence of the difference between the aperiodic and periodic cases.
    Keywords: mathematical economics;
    Date: 2008
  6. By: De Silva Dakshina; Pagel Beatrice; Peeters Ronald (METEOR)
    Abstract: We study procurement auctions held in sequential and simultaneous formats. For thelatter format, we find less bid participation and more aggressive bidding for projects withstrong common value components and more competition for projects having strong privatevalue components.
    Keywords: microeconomics ;
    Date: 2008
  7. By: Andrea Gallice
    Abstract: A lowest unique bid auction allocates a good to the agent who submits the lowest bid that is not matched by any other bid. This peculiar auction format is getting increasingly popular over the internet. We show that such a selling mechanism is unprofitable if bidders are rational but can become highly lucrative if bidders are myopic. In this second case, we analyze the key role played by the existence of some private signals that the seller sends to the bidders. Data about actual auctions confirm the profitability of the mechanism and the bounded rationality of the bidders.
    Keywords: Lowest Unique Bid Auctions, Signals, Bounded Rationality.
    JEL: D44 C72 D82
    Date: 2008–06
  8. By: Kris De Jaegher; Jurjen Kamphorst
    Abstract: In the two-way flow connections model of the seminal paper by Bala and Goyal (2000a), the marginal benefit of obtaining the information of one more player is constant. However, it is plausible that the marginal benefit of such information is decreasing. This paper explores the consequences for the stability of networks of such decreasing marginal benefits. We start by characterizing the strict Nash networks for both the case of constant and the case of decreasing marginal benefits. Using this characterization, we next explore how the set of strict Nash networks differs for the two cases. The results and intuition tells us that long diameter networks have certain features which make them relatively more likely to be stable under decreasing marginal benefits of information as compared to short diameter networks.
    Keywords: Network Formation, Concave Benefits, Two-Way Flow Model
    JEL: C72 D85
    Date: 2008–07
  9. By: Gillies, Anthony S; Rigdon, Mary L
    Abstract: It is well-known that subjects in bilateral bargaining experiments often exhibit choice behavior suggesting there are strong reciprocators in the population. But it is controversial whether explaining this data requires a social preference model that invokes genuine strong reciprocity or whether some social preference model built on other-regarding preferences as a surrogate can explain it. Since the data precedes theory here, all the social preference models agree on most of it — making direct tests more difficult. We report results from a laboratory experiment using a novel method for testing between the classes of social preference models in the trust game that manipulates the distribution of payoff information in the game. We find evidence supporting the strong reciprocity hypothesis.
    Keywords: social preferences; trust game; reciprocity; strong reciprocators
    JEL: C70 C91
    Date: 2008–07–13
  10. By: Gwenaël Piaser (CREFI-LSF, University of Luxembourg)
    Abstract: In this note we argue that in Common Agency games, the restriction to deterministic menus is crutial.We give an simple example (complete information, no moral hazard) in which an equilibrium is not robust to the introduction of stochastic menus.
    Keywords: Delegation Principle, Menus, Lotteries.
    JEL: D82
    Date: 2008
  11. By: Gwenaël Piaser (CREFI-LSF, University of Luxembourg)
    Abstract: It is argued that the revelation principle in multi-principal multi-agent games cannot be generalized. In other words, one cannot restrict attention to incentive compatible mechanisms, even if the concept of information is enlarged.
    Keywords: Direct Mechanims, Incentive compatible, Multiprincipals.
    JEL: D82
    Date: 2008
  12. By: Sotiris Georganas; Rosemarie Nagel
    Abstract: We run experiments on English Auctions where the bidders already own a part (toehold) of the good for sale. The theory predicts a very strong effect of even small toeholds, however we find the effects are not so strong in the lab. We explain this by analyzing the flatness of the payoff functions, which leads to relatively costless deviations from the equilibrium strategies. We find that a levels of reasoning model explains the results better than the Nash equilibrium. Moreover, we find that although big toeholds can be effective, the cost to acquire them might be higher than the strategic benefit they bring. Finally our results show that in general the seller’s revenues fall when the playing field is uneven.
    Keywords: Experiments, toehold auction, takeover, payoff, flatness, quantal response, level-k
    JEL: D44 C91 G34
    Date: 2008–07
    Abstract: We analyze the trade-off faced by competition authorities envisaging a one-shot structural reform in a capitalistic industry. A structure is (1) a sharing of productive capital at some time and (2) a sharing of sites or any other non-reproducible assets. The latter represent opportunities. These two distinct dimensions of policy illustrate the importance of a dynamic theory in which firms may differ in several respects. Though equalization of endowments and rights is theoretically optimal, realistic constraints force competition authorities to adopt second-best solutions. Affirmative action here appears to explain why helping the disadvantaged contributes maximally to social surplus.
    Keywords: Competition policy; capacity accumulation; Cournot competition; asymmetric duopoly; regulatory consistency; differential games.
    JEL: L13 L40 C73
    Date: 2008–07–23

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