nep-gth New Economics Papers
on Game Theory
Issue of 2008‒09‒05
eight papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Collective Bargaining and Walrasian Equilibrium By Penta, Antonio
  2. Preempting versus Postponing: the Stealing Game By Gallice, Andrea
  3. The Rationality of Irrationality for Managers: Returns- Based Beliefs and the Traveller’s Dilemma By Velu, C.; Iyer, S.
  4. Focal prices and price cycles in an alternating price duopoly experiment By Leufkens Kasper; Peeters Ronald
  5. Perfect Sequential Reciprocity and Dynamic Consistency By Penta, Antonio
  6. Comparing Models of Strategic Thinking in Van Huyck, Battalio, and Beil’s Coordination Games By Miguel A Costa-Gomes; Vincent P Crawford; Nagore Iriberri
  7. Collusion and Strategic Favoritism in Organizations By Zhijun
  8. Intentional Vagueness By Oliver Board; Andreas Blume

  1. By: Penta, Antonio
    Abstract: This paper contributes to the research agenda on non-cooperative foundations ofWalrasian Equilibrium. A class of barganing games in which agents bargain over prices and maximum trading con- straints is considered: It is proved that all the Stationary Sub- game Perfect Equilibria of these games implement Walrasian al- locations as the bargaining frictions vanish. The main novelty of the result is twofold: (1) it holds for any number of agents; (2) it is robust to di¤erent speci…cations of the bargaining process.
    Keywords: strategic bargaining; Walrasian Equilibrium
    JEL: C78 D51 C72
    Date: 2007–05
  2. By: Gallice, Andrea
    Abstract: We present an endogenous timing game of action commitment in which players can steal from each other parts of a homogeneous and perfectly divisible pie (market). We show how the incentives to preempt or to follow the rivals radically change with the number of players involved in the game. In the course of the analysis we also introduce, discuss and apply the concept of pu-dominance, a generalization of the risk-dominance criterion to games with more than two players.
    Keywords: Stealing; endogenous timing games; pu-dominance
    JEL: C72 C73
    Date: 2008–09
  3. By: Velu, C.; Iyer, S.
    Abstract: This paper discusses the importance of paradoxes of irrationality for managers by elaborating upon the rational basis for the adoption of non-equilibrium strategies in game theory. It does so by revisiting the one-shot Traveler's Dilemma game, proposing a solution which reconciles the anomaly between the empirical findings and the theoretical predictions of the Nash equilibrium suggested by the game. We contend that this seeming irrationality may be based upon the subjective probabilities of the players. We proffer an alternative basis upon which beliefs in game theory might be formed - 'returns-based beliefs' - and we present the corresponding numerical results for the Traveler's Dilemma game. We show that as long as the penalty is not too severe, then players are likely to play a high claim strategy. Our results correspond very closely to other empirical studies of the Traveler's Dilemma. Therefore, we argue that understanding the rational basis for game-theoretic paradoxes of irrationality might have important and practical uses for managerial decision-making.
    Keywords: Traveler's Dilemma, Rationality, Subjective Probabilities, Returns-Based Beliefs.
    JEL: C72 D43
    Date: 2008–05
  4. By: Leufkens Kasper; Peeters Ronald (METEOR)
    Abstract: In the infinite horizon alternating price setting duopoly of Maskin and Tirole (1988), a focal price equilibrium and an equilibrium consisting of Edgeworth cycles coexist. In this study we investigate which of these two equilibria is more likely to emerge by means of a laboratory experiment. In 20 out of 27 observations the focal price equilibrium emerges, while price cycles are observed in only one observation. Furthermore, we study the duopoly in case of a long but finite horizon. Although the corresponding unique subgame-perfect equilibrium consists of Edgeworth cycles, experimentally we still observe a focal price in the majority of the observations. Nevertheless, price cycles are observed far more often than for the infinite horizon setting.
    Keywords: microeconomics ;
    Date: 2008
  5. By: Penta, Antonio
    Abstract: Dufwenberg and Kirchsteigers (2004) extends Rabins (1993) theory of reciprocity in a dynamic sense, introducing a rule of revision for players beliefs. The Sequential Reciprocity Equilibrium [SRE] they define can be dynamically inconsistent. In this article it is argued that such dynamic inconsistency is not intrinsically related to issues of reciprocity, but rather to the particular way the beliefsupdating process is modeled. A refinement of the SRE, which is both dynamically consistent and, it is argued, more sound to assumptions usually made in the literature of information economics and philosophy, is proposed.
    Keywords: Reciprocity; Dynamic Consistency
    JEL: D64 D83 C72 C73
    Date: 2004–06
  6. By: Miguel A Costa-Gomes; Vincent P Crawford; Nagore Iriberri
    Date: 2008–08–29
  7. By: Zhijun (ESRC Centre for Competition Policy, University of East Anglia)
    Abstract: Fighting collusion has long been a challenge in organizations, whilst favoritism in organizations has long been attacked as one of the most important sources of workplace conflicts. This paper links the phenomena of collusion and favoritism together which seem to be irrelevant. We show that favoritism cannot benefit organizations where collusion is not a serious concern; meanwhile favoritism is not effective in dealing with well-organized collusion; however, strategic use of favoritism can bring conflicts among collusive subordinates and undermine the efficiency of collusion, therefore it is effective in fighting collusion.
    Keywords: collusion, favoritism, tournaments
    JEL: C72 D82
    Date: 2008–08
  8. By: Oliver Board; Andreas Blume
    Abstract: This paper analyzes communication with a language that is vague in the sense that identical messages do not always result in identical interpretations. It is shown that strategic agents frequently add to this vagueness by being intentionally vague, i.e. they deliberately choose less precise messages than they have to among the ones available to them in equilibrium. Having to communicate with a vague language can be welfare enhancing because it mitigates conflict. In equilibria that satisfy a dynamic stability condition intentional vagueness increases with the degree of conflict between sender and receiver.
    JEL: C72 D82 D83
    Date: 2008–08

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