nep-gth New Economics Papers
on Game Theory
Issue of 2008‒11‒18
sixteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. On the Existence of Pure-Strategy Equilibria in Large Games By Carmona, Guilherme; Podczeckz, Konrad
  2. Consistency and the sequential equal contributions rule for airport problems By Chun Youngsub; Kayi Çağatay; Yeh Chun-Hsien
  3. Evolution and Correlated Equilibrium By Lars Koch
  4. An Impossibility in Sequencing Problems By Kayi Çağatay; Ramaekers Eve
  5. Multi-person Bargaining With Complementarity: Is There Holdout? By Roy Chowdhury, Prabal; Sengupta, Kunal
  6. Storable Votes and Agenda Order Control. Theory and Experiments By Alessandra Casella
  7. Strategic power indices: Quarrelling in coalitions By László Á. Kóczy
  8. A computational voting model By Luigi Maregno; Corrado Pasquali
  9. The Impact of Council Voting Rules on EU Decision-Making By Mika Widgrén
  10. An Existence Result for Discontinuous Games By Carmona, Guilherme
  11. Riskiness, Risk Aversion, and Risk Sharing: Cooperation in a Dynamic Insurance Game By Sarolta Laczó
  12. Mechanism design with partially-specified participation games By Laurent Lamy
  13. Unravelling in Two-Sided Matching Markets and Similarity of Preferences By Hanna W. Halaburda
  14. Does scarcity exacerbate the tragedy of the commons? Evidence from fishers€٠experimental responses By Maldonado, Jorge H.; Moreno-Sanchez, Rocio del Pilar
  15. We-thinking and 'double-crossing': frames, reasoning and equilibria By Smerilli, Alessandra
  16. Common Property, Information, and Cooperation: Commercial Fishing in the Bering Sea By Robert H. Hicks; Alan C. Haynie; Kurt E. Schnier

  1. By: Carmona, Guilherme; Podczeckz, Konrad
    Abstract: TOver the years, several formalizations and existence results for games with a continuum of players have been given. These include those of Schmeidler (1973), Rashid (1983), Mas-Colell (1984), Khan and Sun (1999) and Podczeck (2007a). The level of generality of each of these existence results is typically regarded as a criterion to evaluate how appropriate is the corresponding formalization of large games. In contrast, we argue that such evaluation is pointless. In fact, we show that, in a precise sense, all the above existence results are equivalent. Thus, all of them are equally strong and therefore cannot rank the different formalizations of large games.
    Date: 2008
  2. By: Chun Youngsub; Kayi Çağatay; Yeh Chun-Hsien (METEOR)
    Abstract: We consider the problem of sharing the cost of a public facility among agents who have different needs for it. We base two characterizations of the sequential equal contributions rule on smallest-cost consistency. Namely, (i) the rule is the only rule satisfying equal treatment of equals, independence of all but the smallest-cost, and smallest-cost consistency, and (ii) it is the only rule satisfying equal share lower bound, cost monotonicity, and smallest-cost consistency.
    Keywords: mathematical economics;
    Date: 2008
  3. By: Lars Koch
    Abstract: We show that a set of outcomes outside the convex hull of Nash equilibria can be asymptotically stable with respect to convex monotonic evolutionary dynamics. Boundedly rational agents receive signals and condition the choice of strategies on the signals. A set of conditional strategies is asymptotically stable only if it represents a strict (correlated-)equilibrium set. There are correlated equilibria that cannot be represented by an asymptotically stable signal contingent strategy. For generic games it is shown that if signals are endogenous but no player has an incentive to manipulate the signal generating process and if the signal contingent strategy is asymptotically stable, then and only then, the outcome must be a strict Nash equilibrium.
    Keywords: Dynamic Stability, Noncooperative Games, Correlated Equilibrium, Evolution
    JEL: C72 D80
    Date: 2008–06
  4. By: Kayi Çağatay; Ramaekers Eve (METEOR)
    Abstract: A set of agents with different waiting costs have to receive a service of different length of time from a single provider which can serve only one agent at a time. One needs to form a queue and set up monetary transfers to compensate the agents who have to wait. We prove that no rule satisfies efficiency of queues and coalitional strategy-proofness.
    Keywords: mathematical economics;
    Date: 2008
  5. By: Roy Chowdhury, Prabal; Sengupta, Kunal
    Abstract: This paper studies a non-cooperative bargaining problem with one buyer and many sellers, focussing on the tension between the complementarity intrinsic to such a setup and efficiency. We address this problem in a very general setup with a technology that allows for variable degrees of complementarity, a bargaining protocol that is symmetric and allows for both secret, as well as publicly observable offers, and strategies that allow for history dependence. We examine equilibria for all parameter values. Interestingly, and in contrast to most of the literature, we demonstrate that there is a large class of parameter values such that an asymptotically efficient equilibrium with a positive buyer payoff exists - thus demonstrating that strategic holdout is not a serious obstacle to the working of the Coase theorem. For robustness we examine alternative contractual forms, i.e. conditional and equity contracts, as well as variations that allow for multiple project implementation and asymmetric sellers.
    Keywords: Multi-person bargaining; holdout; complementarity; efficiency; Coase theorem.
    JEL: D23 L14 D62 C78
    Date: 2008–10
  6. By: Alessandra Casella
    Abstract: The paper studies a voting scheme where members of a committee voting sequentially on a known series of binary proposals are each granted a single extra bonus vote to cast as desired - a streamlined version of Storable Votes. When the order of the agenda is exogenous, a simple sufficient condition guarantees the existence of welfare gains, relative to simple majority voting. But if one of the voters controls the order of the agenda, does the scheme become less efficient? The endogeneity of the agenda gives rise to a cheap talk game, where the chair can use the order of proposals to transmit information about his priorities. The game has multiple equilibria, differing systematically in the precision of the information transmitted. The chair can indeed benefit, but the aggregate welfare effects are of ambiguous sign and very small in all parameterizations studied. The theoretical conclusions are tested through laboratory experiments. Subjects have difficulty identifying the informative strategies, and tend to cast the bonus vote on their highest intensity proposal. As a result, realized payoffs are effectively identical to what they would be if the agenda were exogenous. The bonus vote matters; the chair's control of the agenda does not.
    JEL: C9 D02 D7 D8
    Date: 2008–11
  7. By: László Á. Kóczy (Department of Economics, Maastricht University)
    Abstract: While they use the language of game theory known measures of a priory voting power are hardly more than statistical expectations assuming voters behave randomly. Focusing on normalised indices we show that rational players would behave differently from the in-dices predictions and propose a model that captures such strategic behaviour.
    Keywords: Banzhaf index, Shapley-Shubik index, a priori voting power, rational players
    JEL: C71 D72
    Date: 2008–11
  8. By: Luigi Maregno; Corrado Pasquali
    Abstract: Social choice models usually assume that choice is among exogenously given and non decomposable alternatives. Often, on the contrary, choice is among objects that are constructed by individuals or institutions as complex bundles made of many interdependent components. In this paper we present a model of object construction in majority voting and show that, in general, by appropriate changes of such bundles, different social outcomes may be obtained, depending upon initial conditions and agenda, intransitive cycles and median voter dominance may be made appear or disappear, and that, finally, decidability may be ensured by increasing manipulability or viceversa.
    Keywords: Social choice; object construction power; agenda power; intran- sitive cycles; median voter theorem.
    JEL: D71 D72
    Date: 2008–11–11
  9. By: Mika Widgrén
    Abstract: ABSTRACT : This paper deals with the design of voting rules in the EU Council. Both internal and external impact of the voting rules are examined. Internal impact affects the distribution of power among the member states and external impact affects power relations between the main decision-making bodies in the EU. One of the main lessons of the analysis is that voting rules matter. This clearly explains why the design of Council voting rules has required so much bargaining and cumbersome marathon negotiations. The internal decision-making rules in the Council have substantial impact on both the national distribution of power in the Council and inter-institutional power between the EU´s decision-making bodies.
    Keywords: European integration, Council of Ministers, power
    JEL: C70 D71 H77
    Date: 2008–11–10
  10. By: Carmona, Guilherme
    Abstract: We introduce a notion of upper semicontinuity, weak upper semicontinuity, adn show that it, together with a weak form of payoff security, is enough to guarantee the existence of Nash equilibria in compact, quasiconcave normal form games.
    Date: 2008
  11. By: Sarolta Laczó (Toulouse School of Economics (Gremaq))
    Abstract: This paper examines how cooperation in an insurance game depends on risk preferences and the riskiness of income. It considers a dynamic game where commitment is limited, and characterizes the level of cooperation as measured by the reciprocal of the discount factor above which perfect risk sharing is self-enforcing. When agents face no aggregate risk, there is more cooperation, if (i) the utility function is more concave, and if (ii) income is more risky considering a mean-preserving spread or an SSD deterioration. However, (ii) no longer holds when insurance can only be incomplete, because of the interplay of idiosyncratic and aggregate risk. In the case of exponential (isoelastic) utility, cooperation depends positively on both the coefficient of absolute (relative) risk aversion and the standard deviation (coefficient of variation), and is independent of mean income. This paper also relates the level of cooperation to informal insurance transfers and the smoothness of consumption when perfect risk sharing is not achieved.
    Keywords: informal insurance, limited commitment, risk preferences, riskiness, comparative statics, dynamic stochastic games
    JEL: C73 D80
    Date: 2008–10
  12. By: Laurent Lamy
    Abstract: This paper considers the implementation of an economic outcome under complete information when the strategic and informational details of the participation game are partially-specified. This means that full participation is required to be a subgame-perfect equilibrium for a large variety of extensive modifications of the simultaneous-move participation game in the same vein as Kalai [Large Robust Games, Econometrica 72 (2004) 1631-1665].
    Date: 2008
  13. By: Hanna W. Halaburda (Harvard Business School, Strategy Unit)
    Abstract: This paper investigates the causes and welfare consequences of unravelling in two-sided matching markets. It shows that similarity of preferences is an important factor driving unravelling. In particular, it shows that under the ex-post stable mechanism (the mechanism that the literature focuses on), unravelling is more likely to occur when participants have more similar preferences. It also shows that any Pareto-optimal mechanism must prevent unravelling, and that the ex-post stable mechanism is Pareto-optimal if and only if it prevents unravelling.
    Keywords: two-sided matching, unravelling, similarity of preferences
    JEL: C72 C78 D82
    Date: 2008–11
  14. By: Maldonado, Jorge H.; Moreno-Sanchez, Rocio del Pilar
    Abstract: Economic Experimental Games (EEG) have challenged the theoretical prediction showing that individuals balance own and collective interests when making decisions that deviate away from suboptimal Nash equilibrium. However, few studies have analyzed whether these deviations from Nash equilibrium towards social optimum are affected as the stock of resource changes. Performing EEG with real fishers we test the hypothesis that behavior of participants €ӭeasured as relative deviations from Nash equilibrium- differs under a situation of abundance versus a situation of scarcity. The design of our EEG is based on a profit maximization model that incorporates intertemporal effects of aggregated extraction. Our findings show that in a situation of scarcity, players over extract the resource making decisions above the Nash equilibrium, obtaining less profit, mining the others-regarding interest, and exacerbating the tragedy of the commons. This result challenges previous general findings from the EEG literature. When individuals face abundance of the resource, however, they deviate downward from the individualistic and myopic behavior prediction. This phenomenon of private inefficient over exploitation is corrected when management strategies are introduced in the game, which underlines the importance of institutions.
    Keywords: Resource /Energy Economics and Policy,
    Date: 2008
  15. By: Smerilli, Alessandra
    Abstract: The idea of we-thinking, or we-reasoning, is increasingly drawing the attention of more and more economists. The two main contributors are Bacharach and Sugden, and they approach the topic in two different ways. Sugden's aim is to show that we-reasoning is a consistent and logical way of thinking, but he does not face the problem of how we-reasoning can arise. Bacharach's theory is based on frames and his never reached aim (because of his death) was to explain we-thinking in terms of Variable Frame Theory. But some of his intuitions conflict with the logical analysis he proposes. In the present paper, I take a different approach to the way in which we-thinking works. Based on a not fully developed intuition of Bacharach's, i.e. the `double-crossing' problem in Prisoners' Dilemma (PD) game, I propose a framework in which a person is allowed to have both I-thoughts, when she is we-reasoning, and we-concepts, when she is I-reasoning, and develop my analysis in terms of equilibrium concepts.
    Keywords: we-thinking; frames; we-equilibria
    JEL: D70 Z10 C70
    Date: 2008–11–02
  16. By: Robert H. Hicks (Department of Economics, College of William and Mary); Alan C. Haynie (Alaska Fisheries Science Center,National Marine Fisheries Service); Kurt E. Schnier (Department of Economics,Andrew Young School of Policy Studies, Georgia State University)
    Abstract: A substantial theoretical and experimental literature has focused on the conditions under which cooperative behavior among actors providing public goods or extracting common-pool resources arises. The literature identifies the importance of coercion, small groups of actors, or the existence of social norms as conducive to cooperation. This research empirically investigates cooperative behavior in a natural resource extraction industry in which the provision of a public good (bycatch avoidance) in the Alaskan flatfish fishery is essential to the duration of the fishing season, and an information provision mechanism exists to relay information to all individuals. Using a mixed logit model of spatial fishing behavior our results show that conditionally cooperative behavior is prevalent but deteriorates as bycatch constraints tighten.
    Keywords: cooperative games, spatial econometrics, fisheries, location choice
    JEL: Q22 C25 D71
    Date: 2008–11–14

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