nep-gth New Economics Papers
on Game Theory
Issue of 2008‒09‒13
twenty-two papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Networks with Group Counterproposals By Ricardo Nieva
  2. Pure Subgame-Perfect Equilibria in Free Transition Games By Kuipers Jeroen; Flesch Janos; Schoenmakers Gijs; Vrieze Koos
  3. Stationary quasi-perfect equilibrium partitions constitute the recursive core By Kóczy László Á.
  4. Compliance by believing: an experimental exploration on social norms and impartial agreements By Marco Faillo; Stefania Ottone; Lorenzo Sacconi
  5. The Average Tree Solution for Cooperative Games with Communication Structure By Herings P. Jean-Jacques; Laan Gerard van der; Talman Dolf; Yang Zaifu
  6. Heterogeneous bids in auctions with rational and markdown bidders - Theory and Experiment By Oliver Kirchkamp; J. Philipp Reiß
  7. Cooperation and Community Responsibility: A Folk Theorem for Repeated Matching Games with Names By Joyee Deb
  8. Indirect Reciprocity and Strategic Reputation Building in an Experimental Helping Game By Carlos Alós-Ferrer; Christoph Kuzmics
  9. Persuasion in Experimental Ultimatum Games By Ola Andersson; Matteo M. Galizzi; Tim Hoppe; Sebastian Kranz; Karen van der Wiel; Erik Wengström
  10. The Framing of Games and the Psychology of Play By Heike Hennig-Schmidt
  11. Negatively Correlated Bandits By Nicolas Klein; Sven Rady
  12. A Class of Best-Response Potential Games By D. Dragone; L. Lambertini; A. Palestini
  13. On the Time Consistency of Equilibria in Additively Separable Differential Games By E. Bacchiega; L. Lambertini; A. Palestini
  14. Can planners control competitive generators? By Contreras, Javier; Krawczyk, Jacek; Zuccollo, James
  15. Choosing Fair Lotteries to Defeat the Competition By Wagman, Liad; Conitzer, Vincent
  16. Coalition Formation and the Ancillary Benefits of Climate Policy By Michael Finus; Dirk T.G. Rübbelke
  17. The Role of Outside Options in Auction Design By Vasiliki Skreta; Nicolas Figueroa
  18. The Maximal Domain for the Revelation Principle when Preferences are Menu Dependent By Saran Rene
  19. Optimal Auction Design Under Non-Commitment By Vasiliki Skreta
  20. Preference Structure and Random Paths to Stability in Matching Markets By James W. Boudreau
  21. Paradigmatic Experiments: the Dictator Game By Francesco Guala; Luigi Mittone
  22. Stratification, Growth, and Path Dependence in Matching Markets By James W. Boudreau

  1. By: Ricardo Nieva (University of Minnesota)
    Abstract: We study two n-player sequential network formation games with externalities. Link formation is tied to simultaneous transfer selection in a Nash demand like game in each period. Players in groups can counterpropose. We give necessary and sufficient conditions for efficiency in terms of cyclical monotonicity. The n-player group version always yields efficiency.
    Keywords: Efficiency, Bargaining Protocol, Counterproposals, Network Formation, Transfers, Externalities, Groups, Coalitions
    JEL: C71 C72 C73 C78
    Date: 2008–07
  2. By: Kuipers Jeroen; Flesch Janos; Schoenmakers Gijs; Vrieze Koos (METEOR)
    Abstract: We consider a class of stochastic games, where each state is identified with a player. At any moment during play, one of the players is called active. The active player can terminate the game, or he can announce any player, who then becomes the active player. There is a non-negative payoff for each player upon termination of the game, which depends only on the player who decided to terminate. We give a combinatorial proof of the existence of subgame-perfect equilibria in pure strategies for the games in our class.
    Keywords: mathematical economics;
    Date: 2008
  3. By: Kóczy László Á. (METEOR)
    Abstract: We present sucient conditions for the implementation of the (pessimistic) recursive core (Kóczy, 2007) in discrete partition function form games using a modified version of the sequential coalition formation game by Bloch (1996) extending the results of Kóczy (2008) and - in a slightly different setup - Huang and Sjöström (2006) to games with empty residual cores (respectively, to games that are not r-balanced).
    Keywords: Economics (Jel: A)
    Date: 2008
  4. By: Marco Faillo; Stefania Ottone; Lorenzo Sacconi
    Abstract: The main contribution of this paper is twofold. First of all, it focuses on the decisional process that leads to the creation of a social norm. Secondly, it analyses the mechanisms through which subjects conform their behaviour to the norm. In particular, our aim is to study the role and the nature of Normative and Empirical Expectations and their influence on people’s decisions. The tool is the Exclusion Game, a sort of ‘triple mini-dictator game’. It represents a situation where 3 subjects – players A - have to decide how to allocate a sum S among themselves and a fourth subject - player B - who has no decisional power. The experiment consists of three treatments. In the Baseline Treatment participants are randomly distributed in groups of four players and play the Exclusion Game. In the Agreement Treatment in each group participants are invited to vote for a specific non-binding allocation rule before playing the Exclusion Game. In the Outsider Treatment, after the voting procedure and before playing the Exclusion Game, a player A for each group (the outsider) is reassigned to a different group and instructed about the rule chosen by the new group. In all the treatments, at the end of the game and before players are informed about the decisions taken during the Exclusion Game by the other co-players, first order and second order expectations (both normative and empirical) are elicited through a brief questionnaire. The first result we obtained is that subjects’ choices are in line with their empirical (not normative) expectations. The second result is that even a non-binding agreement induces convergence of empirical expectations – and, consequently, of choices. The third results is that expectation of conformity is higher in the partner protocol. This implies that a single outsider breaks the ‘trust and cooperation’ equilibrium.
    Keywords: fairness, social norms, beliefs, psychological games, experimental games
    JEL: C72 C91 A13
    Date: 2008
  5. By: Herings P. Jean-Jacques; Laan Gerard van der; Talman Dolf; Yang Zaifu (METEOR)
    Abstract: We study cooperative games with communication structure, represented by an undirectedgraph. Players in the game are able to cooperate only if they can form a network in the graph. A single-valued solution, the average tree solution, is proposed for this class ofgames. Given the graph structure we define a collection of spanning trees, where eachspanning tree specifies a particular way by which players communicate and determines a payoff vector of marginal contributions of all the players. The average tree solution is defined to be the average of all these payoff vectors. It is shown that if a game has acomplete communication structure, then the proposed solution coincides with the Shapleyvalue, and that if the game has a cycle-free communication structure, it is the solutionproposed by Herings, van der Laan and Talman (2008). We introduce the notion of linkconvexity, under which the game is shown to have a non-empty core and the average tree solution lies in the core. In general, link-convexity is weaker than convexity. For games with a cycle-free communication structure, link-convexity is even weaker than super-additivity.
    Keywords: operations research and management science;
    Date: 2008
  6. By: Oliver Kirchkamp (Universität Jena, School of Economics); J. Philipp Reiß (Maastricht University, Economics Department)
    Abstract: We present results from a series of experiments that allow us to measure overbidding and, in particular, underbidding in first-price auctions. We investigate how the amount of underbidding depends on seemingly innocent parameters of the experimental setup. To structure our data we present and test a theory of constant markdown bids. While a fraction of bidders can be well described by Bayesian Nash equilibrium bids, a larger fraction seems to either use constant markdown bids or seems to rationally optimise against a population where some members use markdown bids and some are rational.
    Keywords: Auction, Experiment, Overbidding, Underbidding, Risk-Aversion
    JEL: C92 D44
    Date: 2008–09–01
  7. By: Joyee Deb
    Date: 2008
  8. By: Carlos Alós-Ferrer; Christoph Kuzmics
    Abstract: This paper provides a general formal framework to define and analyze the concepts of focal points and frames for normal form games. The information provided by a frame is captured by a symmetry structure which is consistent with the payoff structure of the game. The set of alternative symmetry structures has itself a clear structure (a lattice). Focal points are strategy profiles which respect the symmetry structure and are chosen according to some meta-norm, which is not particular to the framed game at hand. We also clarify the difference between different concepts of symmetry used in the literature.
    Keywords: symmetry, focal points, Nash equilibria
    Date: 2008
  9. By: Ola Andersson (Department of Economics,Stockholm School of Economics); Matteo M. Galizzi (Department of Economics,University of Brescia); Tim Hoppe (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Sebastian Kranz (Department of Economics,University of Bonn); Karen van der Wiel (CentER,Tiburg University); Erik Wengström (Department of Economics,University of Copenhagen)
    Abstract: This paper experimentally studies persuasion effects in ultimatum games and finds that Proposers' payoffs significantly increase if, along with offers, they can send messages which Responders read before their acceptance decision. Higher payoffs are due to higher acceptance rates as well as more aggressive offers by Proposers.
    Keywords: Communication in Games; Cheap Talk
    JEL: C72 C91 D83
    Date: 2008–08
  10. By: Heike Hennig-Schmidt
    Abstract: Psychological game theory can help provide a rational choice explanation of framing effects; frames influence beliefs, beliefs influence motivations. We explain this theoretically, and explore the empirical relevance experimentally. In a 2×2 design of one-shot public good games we show that frames affect subject’s first- and second-order beliefs, and contributions. From a psychological game-theoretic framework we derive two mutually compatible hypotheses about guilt aversion and reciprocity under which contributions are related to second- and first-order beliefs, respectively. Our results are consistent with either.
    Keywords: Framing, psychological games, guilt aversion, reciprocity, public good games, voluntary cooperation
    JEL: C91 C72 D64 Z13
    Date: 2008–07
  11. By: Nicolas Klein; Sven Rady (Munich Graduate School of Economics, Kaulbachstr. 45, D-80539 Munich, Germany; Department of Economics, University of Munich, Kaulbachstr. 45, D-80539 Munich, Germany)
    Abstract: We analyze a two-player game of strategic experimentation with two-armed bandits. Each player has to decide in continuous time whether to use a safe arm with a known payoff or a risky arm whose likelihood of delivering payoffs is initially unknown. The quality of the risky arms is perfectly negatively correlated between players. In marked contrast to the case where both risky arms are of the same type, we find that learn- ing will be complete in any Markov perfect equilibrium if the stakes exceed a certain threshold, and that all equilibria are in cutoff strategies. For low stakes, the equilib- rium is unique, symmetric, and coincides with the planner’s solution. For high stakes, the equilibrium is unique, symmetric, and tantamount to myopic behavior. For inter- mediate stakes, there is a continuum of equilibria.
    Keywords: Strategic Experimentation, Two-Armed Bandit, Exponential Distribution, Poisson Process, Bayesian Learning, Markov Perfect Equilibrium
    JEL: C73 D83 O32
    Date: 2008–08
  12. By: D. Dragone; L. Lambertini; A. Palestini
    Date: 2008–05
  13. By: E. Bacchiega; L. Lambertini; A. Palestini
    Date: 2008–03
  14. By: Contreras, Javier; Krawczyk, Jacek; Zuccollo, James
    Abstract: Consider an electricity market populated by competitive agents using thermal generating units. Generation often emits pollution which a planner may wish to constrain through regulation. Furthermore, generators’ ability to transmit energy may be naturally restricted by the grid’s facilities. The existence of both pollution standards and transmission constraints can impose several restrictions upon the joint strategy space of the agents. We propose a dynamic, game-theoretic model capable of analysing coupled constraints equilibria (also known as generalised Nash equilibria). Our equilibria arise as solutions to the planner’s problem of avoiding both network congestion and excessive pollution. The planner can use the coupled constraints’ Lagrange multipliers to compute the charges the players would pay if the constraints were violated. Once the players allow for the charges in their objective functions they will feel compelled to obey the constraints in equilibrium. However, a coupled constraints equilibrium needs to exist and be unique for this modification of the players’ objective functions ..[there was a “to” here, incorrect?].. induce the required behaviour. We extend the three-node dc model with transmission line constraints described in [10] and [2] to utilise a two-period load duration curve, and impose multi-period pollution constraints. We discuss the economic and environmental implications of the game’s solutions as we vary the planner’s preferences.
    JEL: C63 C72
    Date: 2008–08–30
  15. By: Wagman, Liad; Conitzer, Vincent
    Abstract: We study the following game: each agent i chooses a lottery over nonnegative numbers whose expectation is equal to his budget b_i. The agent with the highest realized outcome wins and agents only care about winning). This game is motivated by various real-world settings where agents each choose a gamble and the primary goal is to come out ahead. Such settings include patent races, stock market competitions, and R&D tournaments. We show that there is a unique symmetric equilibrium when budgets are equal. We proceed to study and solve extensions, including settings where agents must obtain a minimum outcome to win; where agents choose their budgets (at a cost); and where budgets are private information.
    Keywords: Strategic gambling; Nash equilibrium; fair lotteries
    JEL: D81 L20 C70 C72
    Date: 2008–08–14
  16. By: Michael Finus (University of Stirling); Dirk T.G. Rübbelke (Center for International Climate and Environmental Research)
    Abstract: Several studies found ancillary benefits of environmental policy to be of considerable size. These additional private benefits imply not only higher cooperative but also noncooperative abatement targets. However, beyond these largely undisputed important quantitative effects, there are qualitative and strategic implications associated with ancillary benefits: climate policy is no longer a pure but an impure public good. In this paper, we investigate these implications in a setting of non-cooperative coalition formation. In particular, we address the following questions. 1) Do ancillary benefits increase participation in international environmental agreements? 2) Do ancillary benefits raise the success of these treaties in welfare terms?
    Keywords: Ancillary Benefits, Climate Policy, Coalition Formation, Game Theory, Impure Public Goods
    JEL: C72 H87 Q54
    Date: 2008–07
  17. By: Vasiliki Skreta; Nicolas Figueroa
    Date: 2008
  18. By: Saran Rene (METEOR)
    Abstract: We extend the domain of preferences to include menu-dependent preferences and characterize the maximal subset of this domain in which the revelation principle holds. Minimax-regret preference is shown to be outside this subset.
    Keywords: microeconomics ;
    Date: 2008
  19. By: Vasiliki Skreta
    Date: 2008
  20. By: James W. Boudreau (University of Connecticut)
    Abstract: This paper examines how preference correlation and intercorrelation combine to influence the length of a decentralized matching market's path to stability. In simulated experiments, marriage markets with various preference specifications begin at an arbitrary matching of couples and proceed toward stability via the random mechanism proposed by Roth and Van Vate (1990). The results of these experiments reveal that fundamental preference characteristics are critical in predicting how long the market will take to reach a stable matching. In particular, intercorrelation and correlation are shown to have an exponential impact on the number of blocking pairs that must be randomly satisfied before stability is attained. The magnitude of the impact is dramatically different, however, depending on whether preferences are positively or negatively intercorrelated.
    Keywords: Marriage matching, stability, random paths.
    JEL: C78 C15 P41
    Date: 2008–08
  21. By: Francesco Guala; Luigi Mittone
    Abstract: Recent experiments with the Dictator Game (and the ensuing discussions) have been affected by considerable confusion regarding the purpose of this design. A common complaint is that the design gives rise to fragile regularities and therefore is of little use for theory-testing. We take issue with this view, and instead argue that the Dictator Game is potentially a very useful tool for experimental game theory, if properly used. It is particularly useful for investigating social norms, but economists have failed to take advantage of the Dictator Game because they still lack an adequate theory of norms.
    Date: 2008
  22. By: James W. Boudreau (University of Connecticut; University of Connecticut)
    Abstract: This paper examines the dynamic impact of matching on economic mobility and growth. To account for complex interactions over time, experimental economies of heterogeneous agents are simulated with the match process acting as a fitness selection mechanism. Even with perfect information and substantial variety in both offspring and entrants, two-sided matching inevitably causes the population to evolve into stratified groups. Corrective measures are possible to improve mobility, but by altering the path of market evolution, a policy may have unintended negative impacts on growth and inequality.
    Keywords: Matching, stratification, path dependence.
    JEL: C78 E24 O43
    Date: 2008–05

This nep-gth issue is ©2008 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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