nep-gth New Economics Papers
on Game Theory
Issue of 2009‒01‒17
fifteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Bargaining with Many Players: A Limit Result By Klaus Kultti; Hannu Vartiainen
  2. Computational Complexity in Additive Hedonic Games By Dinko Dimitrov; Shao-Chin Sung
  3. Congestion, Coordination and Matching By Marja-Liisa Halko; Hannu Salonen
  4. A conflict-free arbitration scheme in a large population By Hannu Vartiainen
  5. One-deviation principle in coalition formation By Hannu Vartiainen
  6. Dynamic stable set By Hannu Vartiainen
  7. Revising claims and resisting ultimatums in bargaining problems By Johannes SPINNEWYN; Frans SPINNEWYN
  8. Rationalizability in Continuous Games By Itai Arieli
  9. Auctions with Positive Synergies: Experimental Evidence By Chow, YuenLeng; Yavas, Abdullah
  10. Priorities in the Location of Multiple Public Facilities By Olivier Bochet; Sidartha Gordon
  11. Maximal Domains for Strategy-proof or Maskin Monotonic Choice Rules By Olivier Bochet; Ton Storcken
  12. Strategic Investment in International Gas-Transport Systems : A Dynamic Analysis of the Hold-up Problem By Franz Hubert; Irina Suleymanova
  13. Electoral systems and the distortion of voters' preferences By Piolatto, Amedeo
  14. The Impact of Council's Internal Decision-Making Rules on the Future EU By Mika Widgrén
  15. Do Benevolent Aspects Have Room in Explaining EU Budget Receipts? By Heikki Kauppi; Mika Widgrén

  1. By: Klaus Kultti (Department of Economics, University of Helsinki); Hannu Vartiainen (Department of Economics, Turku School of Economics)
    Abstract: We provide a simple characterization of the stationary subgame perfect equilibrium of an alternating offers bargaining game when the number of players increases without a limit. Core convergence literature is emulated by increasing the number of players by replication. The limit allocation is interpreted in terms of Walrasian market for being the first proposer.
    Keywords: non-cooperative bargaining, stationary equilibrium, replication, Walrasian market
    JEL: C72 C78
    Date: 2008–06
  2. By: Dinko Dimitrov (University of Munich); Shao-Chin Sung (Aoyama Gakuin University)
    Abstract: We investigate the computational complexity of several decision problems in hedonic coalition formation games and demonstrate that attaining stability in such games remains NP-hard even when they are additive. Precisely, we prove that when either core stability or strict core stability is under consideration, the existence problem of a stable coalition structure is NP-hard in the strong sense. Furthermore, the corresponding decision problems with respect to the existence of a Nash stable coalition structure and of an individually stable coalition structure turn out to be NP-complete in the strong sense.
    Keywords: Additive Preferences, Coalition Formation, Computational Complexity, Hedonic Games, NP-hard, NP-complete
    JEL: C63 C70 C71 D02 D70 D71
    Date: 2008–12
  3. By: Marja-Liisa Halko (Department of Accounting and Finance, Helsinki School of Economics); Hannu Salonen (Department of Economics, University of Turku)
    Abstract: We study the existence of pure strategy Nash equilibria in finite congestion and coordination games. Player set is divided into two disjoint groups, called men and women. A man choosing an action a is better off if the number of other men choosing a decreases, or if the number of women choosing a increases. Analogously, a woman becomes better off if more men or fewer women choose the same action as she does. Existence proofs are constructive: we build simple ``best reply'' algorithms that converge to an equilibrium.
    Keywords: congestion, coordination, matching
    JEL: C70 C72 C78 D83
    Date: 2008–01
  4. By: Hannu Vartiainen (Department of Economics, Turku School of Economics)
    Abstract: This paper studies allocations that can be implemented by an arbitrator subject to the constraint that the agents' outside option is to start bargaining by themselves. As the population becomes large, the set of implementable allocations shrinks to a singleton point - the conflict-free allocation. Finally, the conflict-free allocation can be implemented via a simple "lobbying" game where parties composed of agents with similar preferences bid for the right to be the first proposer in a bargaining game among the parties, i.e. in the "political game".
    Keywords: non-cooperative bargaining, arbitration, implementation
    JEL: C72 C78
    Date: 2008–06
  5. By: Hannu Vartiainen (Department of Economics, Turku School of Economics)
    Abstract: We study coalitional one-deviation principle in a framework a la Chwe (1994). The principle requires that an active coalition or any of its subcoalition will not benefit from a single deviation to a strategy that specifies, for each history of coalitional moves, an active coalition and its move. A strategy meeting the one-deviation property is characterized. Moreover, it is shown to exist. Finally, the results are compared to the existing theories of coalitional games.
    Keywords: one-deviation principle, coalition formation
    JEL: C71 C72
    Date: 2008–09
  6. By: Hannu Vartiainen (Department of Economics, Turku School of Economics)
    Abstract: We study a dynamic vNM stable set in a compact metric space under the assumption of complete and continuous dominance relation. Internal and external stability are defined with respect to farsighted dominance. Stability of an outcome is conditioned on the history via which it is reached. A dynamic stable set always exists. Any covering set by Dutta (1988) coincides with the set of outcomes that are implementable via a dynamic stable set. The maximal implementable outcome set is a version of the ultimate uncovered set.
    Keywords: vNM stable set, dynamic, history
    JEL: C71 C72
    Date: 2008–06
  7. By: Johannes SPINNEWYN; Frans SPINNEWYN
    Abstract: We propose a mechanism which implements a unique solution to the bargaining problem with two players in subgame-perfect equilibrium. Players start by making claims and accept a compromise only if they cannot gain by pursuing their claim in an ultimatum. The player offering the lowest resistance to his opponent’s claim can propose a compromise. The unique solution depends on the extent to which claims can be revised. If no revisions are allowed, compatible claims implement the Nash solution. If all revisions are allowed, maximal claims implement the Kalai-Smorodinsky solution.
    Date: 2008–12
  8. By: Itai Arieli
    Date: 2008–12
  9. By: Chow, YuenLeng; Yavas, Abdullah
    Abstract: In a standard auction, bidders bid more aggressively when the number of bidders increases. However, Krishna and Rosenthal (1996, Games and Economic Behavior) show that when bidders have multiple-unit demand that generates positive synergies, bidders bid less aggressively as the number of bidders increases. The first objective of this paper is to offer experimental evidence on this seemingly counter-intuitive theoretical prediction. Following the model of Krishna and Rosenthal, we design a simultaneous second-price sealed-bid auction for two objects with two types of bidders: single-object and multiple-object demand bidders. Our results show that bidders bid less aggressively with increased competition. The second objective is to investigate the effect of offering global bidders the option of bidding for both objects as a package as well as submitting individual bids for each object. Controlling for bidders' valuations, we find that offering this option to global bidders increases allocative efficiency and sellers' revenue.
    Keywords: Auction; Positive Synergies; Increased Competition; Package Bids
    JEL: D44 C91
    Date: 2008–12
  10. By: Olivier Bochet; Sidartha Gordon
    Abstract: A collective decision problem is described by a set of agents, a profile of single-peaked preferences over the real line and a number k of public facilities to be located. We consider public facilities that do not suffer from congestion and are non-excludable. We provide a characterization of the class of rules satisfying Pareto-efficiency, object-population monotonicity and sovereignty. Each rule in the class is a priority rule that selects locations according to a predetermined priority ordering among "interest groups". We characterize each of the subclasses of priority rules that respectively satisfy anonymity, hiding-proofness and strategy-proofness. In particular, we prove that a priority rule is strategy-proof if and only if it partitions the set of agents into a fixed hierarchy. Alternatively, any such rule can be viewed as a collection of fixed-populations generalized peak-selection median rules (Moulin, 1980), that are linked across populations, in a way that we describe.
    Keywords: Multiple public facilities; Priority rules; Hierarchical rules; Object-population monotonicity; Sovereignty; Anonymity; Strategy-proofness; Generalized median rules; Hiding-proofness
    JEL: D60 D63 D70 D71 H41
    Date: 2008–02
  11. By: Olivier Bochet; Ton Storcken
    Abstract: Domains of individual preferences for which the well-known impossibility Theorems of Gibbard-Satterthwaite and Muller-Satterthwaite do not hold are studied. First, we introduce necessary and sufficient conditions for a domain to admit non-dictatorial, Pareto efficient and either strategy-proof or Maskin monotonic social choice rules. Next, to comprehend the limitations the two Theorems imply for social choice rules, we search for the largest domains that are possible. Put differently, we look for the minimal restrictions that have to be imposed on the unrestricted domain to recover possibility results. It turns out that, for such domains, the conditions of inseparable pair and of inseparable set yield the only maximal domains on which there exist non-dictatorial, Pareto efficient and strategy-proof social choice rules. Next, we characterize the maximal domains which allow for Maskin monotonic, non-dictatorial and Pareto-optimal social choice rules.
    Keywords: Strategy-proofness; Maskin monotonicity; Restricted domains; Maximal domains
    JEL: C72 D63 D61 C78 D71
    Date: 2008–08
  12. By: Franz Hubert; Irina Suleymanova
    Abstract: We develop a dynamic model of strategic investment in a transnational pipeline system. In the absence of international contract enforcement, countries may distort investment in order to increase their bargaining power, resulting in overinvestment in expensive and underinvestment in cheap pipelines. With repeated interaction, however, there is a potential to increase efficiency through dynamic collusion. In the theoretical part we establish a fundamental asymmetry: it is easier to avoid overinvestment than underinvestment. Calibrating the model to fit the Eurasian pipeline system for natural gas, we find that the potential to improve efficiency through dynamic cooperation is large. In reality, however, only modest improvements over the non-cooperative solution have been achieved.
    Keywords: Multilateral bargaining, Hold-up, irreversible investment, collusion
    JEL: L95 L14 C71
    Date: 2008
  13. By: Piolatto, Amedeo
    Abstract: In this paper I show that in a parliamentary democracy, contrary to common wisdom, under a proportional electoral rule governments do not necessarily represent voters' preferences better than under plurality rule. While voters affect the composition of Parliament, decisions are taken by a subset of Parliamentarians: a coalition of them decides directly and through the government. As a consequence, two distortions might occur: one at the electoral stage when Parliament is formed and the other at the coalition formation stage, when government is chosen. Through a model à la Rubinstein, I show that small parties' bargaining power increases when parties are patient; for sufficiently patient parties, the small (but pivotal) ones obtain a large bargaining power. The distortion introduced by plurality rule goes in the opposite direction; this can be beneficial (in term of voters' representativeness) as long as the impact of the two distortions is similar. I show that under non restrictive conditions, plurality rule can outperform the proportional rule in terms of representativeness of voters' preferences.
    Keywords: Electoral systems; Proportional rule; Plurality rule; Voters' representation
    JEL: H1 C71 D72 P16
    Date: 2008–09–04
  14. By: Mika Widgrén (Department of Economics, Turku School of Economics)
    Abstract: This paper deals with the voting rules in the EU Council. Both internal and external impact of the voting rules are evaluated. 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 clearly to explain why the design of Council voting rules has required so much bargaining and cumbersome marathon negotiations.
    Keywords: European integration, Council of Ministers, power
    JEL: C70 D71 H77
    Date: 2008–01
  15. By: Heikki Kauppi (Department of Economics, University of Turku); Mika Widgrén (Department of Economics, Turku School of Economics)
    Abstract: The member states have self-interested objectives and they use their voting power in the Council of Ministers (CM) to maximize their shares from the EU budget, whereas European Parliament (EP) uses its power to support benevolent objectives and equality between member states. Given the current decision procedures of the EU, EP has effective power on non-compulsory expenditure covering structural spending, but not on compulsory expenditure consisting mainly of agricultural spending. We use this fact to assess how the assumed benevolent objectives of EP turn into member states' budget receipts in a power politics based model.
    Keywords: European integration, EU budget, voting power
    JEL: C71 D70 D72
    Date: 2008–09

This nep-gth issue is ©2009 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.