nep-gth New Economics Papers
on Game Theory
Issue of 2009‒03‒14
fourteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. The Existence of Equilibria in Games with Arbitrary Strategy Spaces and Payoffs: A Full Characterization By Guoqiang Tian
  2. Coalition formation in the Airport Problem By Mahmoud Farrokhi
  3. College Admissions Game: Early Action or Early Decision? By Ayse Mumcu; Ismail Saglam
  4. Bargaining Over Public Goods By Julio Davila; Jan Eeckhout; Cesar Martinelli
  5. Characterization of Pure Strategy Equilibria in Uniform Price IPO Auctions By Ping Zhang
  6. Estimating Sequential-move Games by a Recursive Conditioning Simulator By Shiko Maruyama
  7. Simulating a Sequential Coalition Formation Process for the Climate Change Problem: First Come, but Second Served? By Finus, Michael; Rundshagen, Bianca; Eyckmans, Johan
  8. The Value of Fiat Money with an Outside Bank: An Experimental Game By Juergen Huber; Martin Shubik; Shyam Sunder
  9. What is the “value” of value-at-risk in a simulated portfolio decision-making game? By Steinbacher, Matjaz
  10. Can Contracts Solve the Hold-Up Problem? Experimental Evidence By Hoppe, Eva I.; Schmitz, Patrick W.
  11. Assessing trust through social capital? A possible experimental answer. By Migheli, Matteo
  12. Group Selection: The quest for social preferences By Salomonsson, Marcus
  13. Engineering Trust - Reciprocity in the Production of Reputation Information By Gary Bolton; Ben Greiner; Axel Ockenfels
  14. The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition By Uwe Dulleck; Rudolf Kerschbamer; Matthias Sutter

  1. By: Guoqiang Tian
    Date: 2009–03–12
  2. By: Mahmoud Farrokhi (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We have studied the incentives of forming coalitions in the Airport Problem. It has shown that in this class of games, if coalitions form freely, the Shapley value does not lead to the formation of grand or coalitions with many players. Just a coalition with a few number of players forms to act as the producer and other players would be the consumers of the product. We have found the two member coalition which forms and we have checked its stability.
    Date: 2009–03
  3. By: Ayse Mumcu; Ismail Saglam
    Date: 2008–05
  4. By: Julio Davila (Centre d'Economie de la Sorbonne. Paris School of Economics); Jan Eeckhout (Department of Economics, University of Pennsylvania); Cesar Martinelli (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: In a simple public good economy, we propose a natural bargaining procedure whose equilibria converge to Lindahl allocations as the cost of bargaining vanishes. The procedure splits the decision over the allocation in a decision about personalized prices and a decision about output levels for the public good. Since this procedure does not assume price-taking behavior, it provides a strategic foundation for the personalized taxes inherent to the Lindahl solution to the public goods problem.
    Date: 2009–01
  5. By: Ping Zhang (School of Economics, University of Nottingham)
    Abstract: We characterize pure strategy equilibria of common value multi-unit uniform price auctions under the framework of initial public offerings, where bidders have incomplete private information regarding the value of shares and submit discrete demand schedules. We show that there exists a continuum of equilibria where investors with a higher expectation about the value of shares bid for higher quantities at higher prices, and as a result the market price increases with the market value. The collusive equilibria, in which investors place bids regardless of their expectation about the value, are obtained under stricter conditions than in the continuous price case.
    Keywords: IPO, uniform price auction, divisible goods auction, share auction, tacit collusion
    JEL: D44 G12 D82
    Date: 2009–02
  6. By: Shiko Maruyama (School of Economics, The University of New South Wales)
    Abstract: Sequential decision-making is a noticeable feature of strategic interactions among agents. The full estimation of sequential games, however, has been challenging due to the sheer computational burden, especially when the game is large and asymmetric. In this paper, I propose an estimation method for discrete choice sequential games that is computationally feasible, easy-to-implement, and e¢ cient, by modifying the Geweke-Hajivassiliou-Keane (GHK) simulator, the most widely used probit simulator. I show that the recursive nature of the GHK simulator is easily dovetailed with the sequential structure of strategic interactions.
    Date: 2009–01
  7. By: Finus, Michael; Rundshagen, Bianca; Eyckmans, Johan
    Abstract: We analyze stability of self-enforcing climate agreements based on a data set generated by the CLIMNEG world simulation model (CWSM), version 1.2. We consider two new aspects which appear important in actual treaty-making. First, we consider a sequential coalition formation process where players can make proposals which are either accepted or countered by other proposals. Second, we analyze whether a moderator, like an international organization, even without enforcement power, can improve upon globally suboptimal outcomes through coordinating actions by making recommendations that must be Pareto-improving to all parties. We discuss the conceptual difficulties of implementing our algorithm.
    Keywords: International Climate Agreements; Sequential Coalition Formation; Coordination through Moderator; Integrated Assessment Model; Algorithm for Computa tions
    Date: 2009–03
  8. By: Juergen Huber; Martin Shubik; Shyam Sunder
    Date: 2009–02–27
  9. By: Steinbacher, Matjaz
    Abstract: In the paper, I simulate the social network games of a portfolio selection where agents consider VaR when managing their portfolios. Such agents behave quite differently from the agents considering only the expected returns of the alternatives that are available to them in time. The level of omniscience of agents and the presence of liquidity agents are demonstrated to be significant factors for the portfolio management.
    Keywords: social networks; portfolio decision-making; stochastic finance; Value-at-Risk
    JEL: G11 G32 Z13 C73
    Date: 2009
  10. By: Hoppe, Eva I.; Schmitz, Patrick W.
    Abstract: In the contract-theoretic literature, there is a vital debate about whether contracts can mitigate the hold-up problem when renegotiation cannot be prevented. Ultimately, the question has to be answered empirically. As a first step in that direction, we have conducted a laboratory experiment with 490 participants. We consider "cooperative" investments that directly benefit the non-investing party. While according to standard theory, contracting would be useless if renegotiation cannot be ruled out, we find that option contracts significantly improve investment incentives compared to a no-contract treatment. This finding can be explained by Hart and Moore’s (2008) notion that contracts may serve as reference points.
    Keywords: Experiment; Hold-up problem; Option contracts; Renegotiation
    JEL: C72 C91 D86
    Date: 2009–03
  11. By: Migheli, Matteo
    Abstract: Trust is an important variable in economics, as several transactions are based on it; unfortunately it is difficult to measure. The recent economic literature on social capital shows a positive association between this concept and trust. As social capital is easier to measure than trust is, this paper analyzes the possibility of assessing trust measuring social capital using experimental economics. A basic trust game is played in three Western European countries with undergraduate students; a questionnaire measures their level of social capital, as time spent within social networks. This measure is stronger and more precise than the ones generally used. In particular this paper firstly measures social capital as the intensity of a membership to a voluntary organization, while the extant literature generally considers only the membership per se. Secondly the use of an experiment instead of a questionnaire allows for constructiong a measure of trust which is in principle continuous. Thirdly to play an experiment allows for observing the behaviour of the participants better than by the means of a survey. The results are supportive of the fact that trust can be assessed through social capital, although the presence of a strong geographical effect has to be accounted for.
    Keywords: generalized trust, social capital, gender effect
    JEL: C72 C93
    Date: 2009–02
  12. By: Salomonsson, Marcus (Dept. of Economics, Stockholm School of Economics)
    Abstract: This paper surveys the literature on group selection. I describe the early contributions and the group selection controversy. I also describe the main approaches to group selection in the recent literature; fixation, assortative group formation, and reproductive externalities.
    Keywords: Altruism; spite; externalities; conformity; fixation; signalling
    JEL: C70 D62 D64
    Date: 2009–03–06
  13. By: Gary Bolton; Ben Greiner; Axel Ockenfels
    Abstract: Reciprocal feedback distorts the production and content of reputation information, hampering trust and trade efficiency. Data from eBay and other sources combined with laboratory data provide a robust picture of how reciprocity can be guided by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust and more efficient trade.
    Keywords: market design, reputation, trust, reciprocity, eBay
    JEL: C73 C9 D02 L14
    Date: 2009–02–24
  14. By: Uwe Dulleck; Rudolf Kerschbamer; Matthias Sutter
    Abstract: Credence goods markets are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies, such as under- and overtreatment or market break-down. We study in a large experiment with 936 participants the determinants for efficiency in credence goods markets. While theory predicts that either liability or verifiability yields efficiency, we find that liability has a crucial, but verifiability only a minor effect. Allowing sellers to build up reputation has little influence, as predicted. Seller competition drives down prices and yields maximal trade, but does not lead to higher efficiency as long as liability is violated.
    Keywords: Credence goods, Experiment, Liability, Verifiability, Reputation, Competition
    JEL: C72 C91 D40 D82
    Date: 2009–02

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.