nep-gth New Economics Papers
on Game Theory
Issue of 2009‒02‒07
fifteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Axiomatic Theory of Equilibrium Selection in Signaling Games with Generic Payoffs By Govindan, Srihari; Wilson, Robert B.
  2. Persistent ideologies in an evolutionary setting By Lars P. Koch
  3. Conflict Leads to Cooperation in Nash Bargaining By Rozen, Kareen
  4. Efficiency Gains in Repeated Games at Random Moments in Time By Osório-Costa, António M.
  5. Symmetrically multilateral-bargained allocations in multi-sided assignment markets By Oriol Tejada; Carles Rafels
  6. On an Evolutionary Foundation of Neuroeconomics By Schipper, Burkhard
  7. Frequent Monitoring in Repeated Games under Brownian Uncertainty By Osório-Costa, António M.
  8. Elicited Beliefs and Social Information in Modified Dictator Games: What Do Dictators Believe Other Dictators Do? By Nagore Iriberri; Pedro Rey-Biel
  9. Communication and Learning By Anderlini, Luca; Gerardi, Dino; Lagunoff, Roger
  10. Instinctive Response in the Ultimatum Game By Pablo Brañas-Garza; Luis M. Miller
  11. Non-cooperative Game Theory By Bonanno, Giacomo
  12. Imitators and Optimizers in Cournot Oligopoly By Schipper, Burkhard
  13. On the Philosophy of Group Decision Methods II: Alternatives to Majority Rule By Risse, Mathias
  14. On the Philosophy of Group Decision Methods I: The Non-obviousness of Majority Rule By Risse, Mathias
  15. A 'Dual'-Improved Shortcut to the Long Run By Rozen, Kareen

  1. By: Govindan, Srihari (U of Iowa); Wilson, Robert B. (Stanford U)
    Abstract: Three axioms from decision theory select sets of Nash equilibria of signaling games in extensive form with generic payoffs. The axioms require undominated strategies (admissibility), inclusion of a sequential equilibrium (backward induction), and dependence only on the game's normal form even when embedded in a larger game with redundant strategies or irrelevant players (small worlds). The axioms are satisfied by a set that is stable (Mertens, 1989) and conversely the axioms imply that each selected set is stable and thus an essential component of admissible equilibria with the same outcome.
    Date: 2008–09
  2. By: Lars P. Koch (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We analyse finite two player games in which agents maximize given arbitrary private payoffs which we call ideologies. We define an equilibrium concept and prove existence. Based on this setup, a monotone evolutionary dynamic governs the distribution of ideologies within the population. For any finite 2 player normal form game we show that there is an open set of ideologies being not equivalent to the objective payoffs that is not selected against by evolutionary monotonic dynamics. If the game has a strict equilibrium set, we show stability of non-equivalent ideologies. We illustrate these results for generic 2 x 2-games.
    Keywords: dynamic stability, evolution of preferences, imitation dynamics
    JEL: C72 C73 D82
    Date: 2008–10
  3. By: Rozen, Kareen (Yale U)
    Abstract: We consider a Nash demand game where N players come to the bargaining table with requests for coalition partners and a potentially generated resource. We show that group learning leads to complete cooperation and an interior core allocation with probability one. Our arguments highlight group dynamics and demonstrate how destructive group behaviors--exclusion, divide and conquer tactics, and scapegoating--can propel groups toward beneficial and self-enforcing cooperation.
    JEL: C7
    Date: 2008–03
  4. By: Osório-Costa, António M.
    Abstract: This paper studies repeated games where the time of repetitions of the stage game is not known or controlled by the players. Many economic situations of interest where players repeatedly interact share this feature, players do not know exactly when is the next time they will be called to play again. We call this feature random monitoring. We show that perfect random monitoring is always superior to perfect deterministic monitoring when players discount function is convex in time domain. Surprisingly when the monitoring is imperfect but public the result does not extend in the same absolute sense. The positive effect in the players discounting is not sufficient to compensate for a larger probability of punishment for all frequencies of play. However, we establish conditions under which random monitoring allows efficiency gains on the value of the best strongly symmetric equilibrium payoffs, when compared with the classic deterministic approach.
    Keywords: Repeated Games; Random Monitoring; Perfect and Imperfect Public Monitoring; Moral Hazard; Stochastic Processes
    JEL: D82 C73 C72
    Date: 2009–01–30
  5. By: Oriol Tejada; Carles Rafels (Universitat de Barcelona)
    Abstract: We extend Rochfords (1983) notion of symmetrically pairwise-bargained equilibrium to assignment games with more than two sides. A symmetrically multilateral-bargained (SMB) allocation is a core allocation such that any agent is in equilibrium with respect to a negotiation process among all agents based on what every agent could receive -and use as a threat- in her preferred alternative matching to the optimal matching that is formed. We prove that, for balanced multi-sided assignment games, the set of SMB is always nonempty and that, unlike the two-sided case, it does not coincide in general with the kernel (Davis and Maschler, 1965). We also give an answer to an open question formulated by Rochford (1983) by introducing a kernel-based set that, together with the core, characterizes the set of SMB.
    Keywords: core, bargaining, cooperative games, kernel
    JEL: C71 C78
    Date: 2009
  6. By: Schipper, Burkhard (U of California, Davis)
    Abstract: Neuroeconomics focuses on brain imaging studies mapping neural responses to choice behavior. Economic theory is concerned with choice behavior but it is silent on neural activities. We present a game theoretic model in which players are endowed with an additional structure--a simple 'nervous system'--and interact repeatedly in changing games. The nervous system constrains information processing functions and behavioral functions. By reinterpreting results from evolutionary game theory (Germano, 2007), we suggest that nervous systems can develop to 'function well' in exogenously changing strategic environments. We present an example indicating that an analogous conclusion fails if players can influence endogenously their environment.
    JEL: C72
    Date: 2008–04
  7. By: Osório-Costa, António M.
    Abstract: This paper studies frequent monitoring in a simple infinitely repeated game with imperfect public information and discounting, where players observe the state of a continuous time Brownian process at moments in time of length Δ. It shows that efficient strongly symmetric perfect public equilibrium payoffs can be achieved with imperfect public monitoring when players monitor each other at the highest frequency, i.e. Δ→0. The approach proposed places distinct initial conditions on the process, which depend on the unknown action profile simultaneously and privately decided by the players at the beginning of each period of the game. The strong decreasing effect on the expected immediate gains from deviation when the interval between actions shrinks, and the associated increase precision of the public signals, make the result possible in the limit. The existence of a positive monotonic relation between payoffs and monitoring intensity is also found.
    Keywords: Repeated Games; Frequent Monitoring; Imperfect Public Monitoring; Brownian Motion; Moral Hazard
    JEL: D82 C73 C72
    Date: 2009–01–04
  8. By: Nagore Iriberri; Pedro Rey-Biel
    Abstract: We use subjects’ actions in modified dictator games to perform a within-subject classification of individuals into four different types of interdependent preferences: Selfish, Social Welfare maximizers, Inequity Averse and Competitive. We elicit beliefs about other subjects’ actions in the same modified dictator games to test how much of the existent heterogeneity in others’ actions is known by subjects. We find that subjects with different interdependent preferences in fact have different beliefs about others’ actions. In particular, Selfish individuals cannot conceive others being non-Selfish while Social Welfare maximizers are closest to the actual distribution of others’ actions. We finally provide subjects with information on other subjects’ actions and re-classify individuals according to their (new) actions in the same modified dictator games. We find that social information does not affect Selfish individuals, but that individuals with interdependent preferences are more likely to change their behavior and tend to behave more selfishly.
    Keywords: Interdependent preferences, social welfare maximizing, inequity aversion, belief elicitation, social information, experiments, mixture-of-types models
    JEL: C72 C9 D81
    Date: 2008–04
  9. By: Anderlini, Luca (Georgetown U); Gerardi, Dino (Yale U); Lagunoff, Roger (Georgetown U)
    Abstract: We study the intergenerational accumulation of knowledge in an infinite-horizon model of communication. Each in a sequence of players receives an informative but imperfect signal of the once-and-for-all realization of an unobserved state. The state affects all players' preferences over present and future decisions. Each player observes his own signal but does not directly observe the realized signals or actions of his predecessors. Instead, he must rely on cheap-talk messages from the previous players to fathom the past. Each player is therefore both a receiver of information with respect to his decision, and a sender with respect to all future decisions. Senders' preferences are misaligned with those of future decision makers. We ask whether there exist "full learning'' equilibria -- ones in which the players' posterior beliefs eventually place full weight on the true state. We show that, regardless of how small the misalignment in preferences is, such equilibria do not exist. This is so both in the case of private communication in which each player only hears the message of his immediate predecessor, and in the case of public communication, in which each player hears the message of all previous players. Surprisingly, in the latter case full learning may be impossible even in the limit as all players become infinitely patient. We also consider the case where all players have access to a mediator who can work across time periods arbitrarily far apart. In this case full learning equilibria exist.
    JEL: C70
    Date: 2008–02
  10. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Luis M. Miller (Centre for Experimental Social Sciences, Nuffield College, University of Oxford.)
    Abstract: In a series of recent papers, Ariel Rubinstein claims that the study of response time sheds light on the process of reasoning involved in classical economic decision problems. In particular, he considers that a distinction can be drawn between instinc- tive and cognitive reasoning. This paper complements and expands upon Rubinstein's study on time responses. We show that strategic risk is the key element in explaining differences in median response time in ultimatum behavior.
    Keywords: Economic experiments, Ultimatum game, Yes-or-No game, median response time.
    JEL: C91
    Date: 2008–11–20
  11. By: Bonanno, Giacomo (U of California, Davis)
    Abstract: This is the first draft of the entry “Game Theory” to appear in the Sage Handbook of the Philosophy of Social Science (edited by Ian Jarvie & Jesús Zamora Bonilla), Part III, Chapter 16.
    Date: 2008–08
  12. By: Schipper, Burkhard (U of California, Davis)
    Abstract: We analyze a symmetric n-firm Cournot oligopoly with a heterogeneous population of optimizers and imitators. Imitators mimic the output decision of the most successful firms of the previous round a la Vega-Redondo (1997). Optimizers play a myopic best response to the opponents' previous output. Firms are allowed to make mistakes and deviate from their decision rules with a small probability. Applying stochastic stability analysis, we find that the long run distribution converges to a recurrent set of states in which imitators are better off than are optimizers. This finding appears to be robust even when optimizers are more sophisticated. It suggests that imitators drive optimizers out of the market contradicting a fundamental conjecture by Friedman (1953).
    JEL: C72
    Date: 2008–02
  13. By: Risse, Mathias (Harvard U)
    Abstract: In this companion piece to "On the Philosophy of Group Decision Methods I: the Non-Obviousness of Majority Rule," we take a closer look at some competitors of majority rule. This exploration supplements the conclusions of the other piece, as well as offer a further-reaching introduction to some of the challenges this field currently poses to philosophers.
    Date: 2008–11
  14. By: Risse, Mathias (Harvard U)
    Abstract: Majority rule is often adopted almost by default as a group decision rule. One might think, therefore, that the conditions under which it applies, and the argument on its behalf, are well-understood. However, the standard arguments in support of majority rule display systematic deficiencies. This article explores these weaknesses, and assesses what can be said on behalf of majority rule.
    Date: 2008–11
  15. By: Rozen, Kareen (Yale U)
    Abstract: I use the theories of duality and optimal branchings to find a necessary and sufficient characterization of stochastically stable limit sets (SSLS) that helps improve the radius — modified coradius test of Ellison (2000). The improved shortcut I offer may permit the identification of SSLS when Ellison’s radius — modified coradius test fails to identify any, or may be able to pinpoint the true SSLS in cases where Ellison’s test identifies only a superset. I also demonstrate precisely why the radius — modified coradius test is not universally applicable and illuminate the connection between the modified coradius and the Lagrange multipliers of the optimal branching problem.
    JEL: C73
    Date: 2008–03

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