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on Game Theory |
| By: | Doruk Iris; Luís Santos-Pinto |
| Abstract: | This paper explores the implications of fairness and reciprocity in dynamic market games. A reciprocal player responds to kind behavior of rivals with unkind actions (destructive reciprocity), while at the same time, it responds to kind behavior of rivals with kind actions (constructive reciprocity). The paper shows that for general perceptions of fairness, reciprocity facilitates collusion in dynamic market games. The paper also shows that this is a robust result. It holds when players' choices are strategic complements and strategic substitutes. It also holds under grim trigger punishments and optimal punishments. |
| Keywords: | fairness; reciprocity; collusion; repeated games |
| JEL: | D43 D63 L13 L21 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:09.03&r=gth |
| By: | Jeanne Hagenbach (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | In the dynamic game we consider, players are the members of a fixed network. Everyone is initially endowed with an information item that he is the only paper to hold. Players are offered a finite number of periods to centralize the initially dispersed items in the hands of any one member of the network. In every period, each agent strategically chooses whether or not to transmit the items he holds to this neighbors in the network. The sooner all the items are gathered by any individual, the better it is for the group of players as a whole. Besides, the agent who first centralizes all the items is offered an additional reward that he keeps for himself. In this framework where information transmission is strategic and physically restricted, we provide a necessary and sufficient condition for a group to pool information items in every equilibrium. This condition is independent of the network structure. The architecture of links however affects the time needed before items are centralized in equilibrium. This paper provides theoretical support to Bonacich (1990)'s experimental results. |
| Keywords: | Social network ; social dilemma ; dynamic network game ; strategic communication |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00367894_v1&r=gth |
| By: | Hannu Vartiainen (Department of Economics, Turku School of Economics) |
| Abstract: | We study auction design when parties cannot commit to the mechanism. The seller may change the rules of the game any number of times and the buyers may choose their outside option at any stage of the game. A dynamic consistency condition and an optimality condition property are defined to characterize the seller's mechanism selection behavior. The unique stationary mechanism selection rule that meets the conditions is the English auction. |
| Keywords: | auctions, commitment, consistency, one-deviation property, stationarity |
| JEL: | C72 D44 D78 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:tkk:dpaper:dp44&r=gth |
| By: | Jeanne Hagenbach (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Frédéric Koessler (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris) |
| Abstract: | We consider situations in which individuals would like to choose an action which is close to that of others, as well as close to a state of nature, with the ideal proximity to the state varying across agents. Before this coordination game is played, a cheap-talk communication stage is offered to the individuals who decide to whom they reveal their private information about the state. The information transmission occurring in the communication stage is characterized by a strategic communication network. We provide an explicit link between players' preferences and the equilibrium strategic communication networks. A key feature of our equilibrium characterization is that whether communication takes place between two agents not only depends on the conflict of interest between these agents, but also on the number and preferences of the other agents with whom they communicate. Apart from some specific cases, the equilibrium communication networks are quite complex despite our simple one-dimensional description of preference heterogeneity. In general, strategic communication networks cannot be completely Pareto-ranked, but expected social welfare always increases as the communication network expands. |
| Keywords: | Cheap talk ; coordination ; incomplete information ; networks |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00367692_v1&r=gth |
| By: | Douadia Bougherara; Sandrine Costa; Gilles Grolleau; Lisette Ibanez |
| Abstract: | A usual explanation to low levels of contribution to public goods is the fear of getting the sucker’s payoff (cooperation by the participant and defection by the other players). In order to disentangle the effect of this fear from other motives, we design a public good game where people have an assurance against getting the sucker’s payoff. We show that contributions to the public good under this ‘protective’ design are significantly higher and interact with expectations on other individuals' contribution to the public good. Some policy implications and extensions are suggested. |
| Keywords: | Experiments, Public good, Sucker’s payoff, Assurance |
| JEL: | C72 C91 H41 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:rae:wpaper:200908&r=gth |
| By: | Gary Charness (University of California, Santa Barbara); Chun-Lei Yang |
| Abstract: | We test a mechanism whereby groups are formed endogenously, through the use of voting. Once formed, groups play a public-goods game, where there are economies of scale: in two treatments the social value of an incremental contribution to the group account increases with the size of the group, but in the second treatment, the social value is capped once a certain group size is reached. Societies of nine people are initially formed randomly into three groups of three people who play the game for three periods. Individuals then learn about the average contribution of each individual (by ID number) in one's current own group, as well as the average contribution in other groups, and can decide whether to exit the group. Remaining group members choose whether to exclude any current members from the group; the new groups and 'free agents' then choose whether to merge with other existing groups and/or other free agents. We find a great degree of success for this mechanism. The average contribution rate is quite high in both treatments, but is modestly (albeit significantly) higher in the first treatment, when there is no cap on the social value of a contribution. In the first treatment, we see large and stable groups forming, but we see considerably more instability and smaller group sizes in the second treatment. The driving force appears to be the economies of scale combined with the awareness that bad behavior will result in ostracism, but in the Athenian sense of possible redemption. This redemption is a unique feature of our environment, with about one-third of the population becoming good citizens after initially being low contributors. |
| Keywords: | Endogenous group formation, Exclusion, Experiment, Merger, Ostracism, Public goods, Social efficiency, Voting, |
| Date: | 2008–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:13-08&r=gth |
| By: | Sela, Aner |
| Abstract: | We study a three-stage all-pay auction with two players in which the first player to win two matches wins the best-of-three all-pay auction. The players have values of winning the contest and may have also values of losing, the latter depending on the stage in which the contest is decided. It is shown that without values of losing, if players are heterogenous (they have different values) the best-of-three all-pay auction is less competitive (the difference between the players' probabilities to win is larger) as well as less productive (the players' total expected effort is smaller) than the one-stage all-pay auction. If players are homogenous, however, the productivity and obviously the competitiveness of the best-of-three all-pay auction and the one-stage all-pay auction are identical. These results hold even if players have values of losing that do not depend on the stage in which the contest is decided. However, the best-of-three all-pay auction with different values of losing over the contest's stages may be more productive than the one-stage all-pay auction. |
| Keywords: | All-pay auctions; Contests |
| JEL: | D44 D72 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7224&r=gth |
| By: | Yu, Yugang; Huang, G.Q. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University) |
| Abstract: | This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications. |
| Keywords: | supply chain management;nash game model;vendor managed inventory |
| Date: | 2009–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureri:1765015029&r=gth |
| By: | Gary Charness (University of California, Santa Barbara); Martin Dufwenberg |
| Abstract: | We test whether promises per se are effective in enhancing cooperative behavior in a form of trust game. In a new treatment, rather than permitting free-form messages, we instead allow only a bare promise-only message to be sent (or not). We find that bare promises are much less effective in achieving good social outcomes than free-form messages; in fact, bare promise-only messages lead to behavior that is much the same as when no messages are feasible. Our design also permits us to test the predictions of guilt aversion against the predictions of lying aversion. Our experimental results provide evidence that mainly supports the guilt-aversion predictions, but we also find some support for the presence of lying aversion. |
| Keywords: | Behavioral economics, cheap talk, communication, cost-of-lying, credibility, guilt aversion, psychological game theory, promises, |
| Date: | 2008–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:10-08&r=gth |
| By: | Heikki Kauppi (Department of Economics, University of Turku); Mika Widgrén (Department of Economics, Turku School of Economics) |
| Abstract: | It is a constant topic of debate how the European Union (EU) spends the money it collects from its member states. This paper supports the idea that the EU budget battle involves one-shot games that have persistent impacts on the budget allocations. In one way or the other, the member states are able to establish rules or contracts that restrict the budget allocation in advance. In the current status quo, France and Spain are the clearest winners of these restrictions, while Austria, Finland and Sweden, not to mention the new member states, suffer largest losses. |
| Keywords: | EU budget, voting power |
| JEL: | C71 D70 D72 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:tkk:dpaper:dp45&r=gth |
| By: | Lahiri, Somdeb |
| Abstract: | In this paper we provide a sufficient condition for a social welfare relation to be a social decision relation (i.e. an acyclic social welfare relation) when the profile of individual preferences is given. |
| Keywords: | acyclic; index; single-profile; social welfare relation |
| JEL: | C79 D71 |
| Date: | 2009–03–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14129&r=gth |