nep-gth New Economics Papers
on Game Theory
Issue of 2009‒04‒05
seventeen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. The Value for Actions-Set Games By Calvo, Emilio; Urbano, Amparo
  2. Contractually stable networks By CAULIER, Jean-Franois; MAULEON, Ana; VANNETELBOSCH, Vincent
  3. The Rate of Convergence to Perfect Competition of Matching and Bargaining Mechanisms By Artyom Shneyerov; Adam Chi Leung Won
  4. Program Equilibria and Discounted Computation Time By Lance Fortnow
  5. Smith and Rawls Share a Room: Stability and Medians By Bettina Klaus; Flip Klijn
  6. A Characterization of the Average Tree Solution for Cycle-Free Graph Games By Mishra, D.; Talman, A.J.J.
  7. Revisiting Strategic versus Non-strategic Cooperation By Reuben, E.; Suetens, S.
  8. The Equivalence between the Core and the Equilibria of a Noncooperative Game with Competing Contracts By Zheng, Charles Zhoucheng
  9. The impact of the unilateral EU commitment on the stability of international climate agreements By BRECHET, Thierry; EYCKMANS, Johan; GERARD, Franois; MARBAIX, Philippe
  10. Towards an understanding of the endogenous nature of identity in games By Bezrukova, Katerina; Smith, John
  11. Epistemic robustness of sets closed under rational behavior By Asheim, Geir; Voorneveld, Mark; Weibull, Jörgen W.
  12. Optimal Auctions with Financially Constrained Bidders By Mallesh M. Pai; Rakesh Vohra
  13. Decentralized Matching with Aligned Preferences By Muriel Niederle; Leeat Yariv
  14. Early Admissions at Selective Colleges By Christopher Avery; Jonathan D. Levin
  15. On Gale and Shapley ÔCollege admissions and stability of marriageÕ By GABSZEWICZ, Jean J.; GARCIA, Filomena; PAIS, Joana; RESENDE, Joana
  16. Efficiency of Fairness in Voting Systems By František Turnovec
  17. A Note on the Cost-Benefit Ratio in Self-Enforcing Agreements By Hennlock, Magnus

  1. By: Calvo, Emilio; Urbano, Amparo
    Abstract: Action-Set games are transferable utility games where the set of players is finite, every player has a finite set of actions, and the worth of the game is a function of the actions taken by the players. In this setting a rule has to determine individual payoffs at each combinations of actions. Following an axiomatic approach, we define the set of Consistent Bargaining Equilibria.
    Keywords: Action-set games; Shapley value; Prekernel; Consistent Bargaining Equilibria.
    JEL: C71
    Date: 2009–02
  2. By: CAULIER, Jean-Franois; MAULEON, Ana (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); VANNETELBOSCH, Vincent (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency.
    Keywords: networks, coalition structures, contractual stability, allocation rules.
    JEL: A14 C70
    Date: 2008–12
  3. By: Artyom Shneyerov; Adam Chi Leung Won
    Abstract: We study the steady state of a market with incoming cohorts of buyers and sellers who are matched pairwise and bargain under private information. We first consider generalized random-proposer take-it-or-leave-it offer games (GRP TIOLI games). This class of games includes a simple random-proposer TIOLI game, but also many other interesting bargaining games. A friction parameter is tau, the length of the time period until the next meeting. We find that as tau (right arrow) 0, all market equilibria converge to the Walrasian limit, at the fastest possible rate Omicron (tau) among all bargaining mechanisms. Some important bargaining games not in this class may have non-convergent market equilibria. This is the case for the k-double auction: we find that there are equilibria that converge at a linear rate, those that converge at a slower rate or even not converge at all.
    Keywords: Matching and Bargaining, Search, Double Auctions, Foundations for Perfect Competition, Rate of Convergence
    JEL: C73 C78 D83
    Date: 2008–08
  4. By: Lance Fortnow
    Abstract: Tennenholtz (GEB 2004) developed Program Equilibrium to model play in a finite two-player game where each player can base their strategy on the other player's strategies. Tennenholtz's model allowed each player to produce a "loop-free" computer program that had access to the code for both players. He showed a folk theorem where any mixed-strategy individually rational play could be an equilibrium payo in this model even in a one-shot game. Kalai et al. gave a general folk theorem for correlated play in a more generic commitment model. We develop a new model of program equilibrium using general computational models and discounting the payos based on the computation time used. We give an even more general folk theorem giving correlated-strategy payoffs down to the pure minimax of each player. We also show equilibrium in other games not covered by the earlier work.
    Keywords: brokers, applied mechanism design, linear commission fees, optimal indirect mechanisms, internet auctions, auction houses.
    JEL: C72 C78 L13
    Date: 2008–11
  5. By: Bettina Klaus (Harvard Business School, Negotiation, Organizations & Markets Unit); Flip Klijn (Institute for Economic Analysis (CSIC), Campus UAB, Barcelona, Spain)
    Abstract: We consider one-to-one, one-sided matching (roommate) problems in which agents can either be matched as pairs or remain single. We introduce a so-called bi-choice graph for each pair of stable matchings and characterize its structure. Exploiting this structure we obtain as a corollary the "lone wolf" theorem and a decomposability result. The latter result together with transitivity of blocking leads to an elementary proof of the so-called stable median matching theorem, showing how the often incompatible concepts of stability (represented by the political economist Adam Smith) and fairness (represented by the political philosopher John Rawls) can be reconciled for roommate problems. Finally, we extend our results to two-sided matching problems.
    Keywords: fairness, matching, median, stability.
    JEL: C62 C78
    Date: 2009–02
  6. By: Mishra, D.; Talman, A.J.J. (Tilburg University, Center for Economic Research)
    Abstract: Herings et al. (2008) proposed a solution concept called the average tree solution for cycle-free graph games. We provide a characterization of the average tree solution for cycle-free graph games. The characteration underlines an important difference, in terms of symmetric treatment of agents, between the average tree solution and the Myerson value (Myerson, 1977) for cycle-free graph games.
    Keywords: average tree solution;graph games;Myerson value;Shapley value
    JEL: C71
    Date: 2009
  7. By: Reuben, E.; Suetens, S. (Tilburg University, Center for Economic Research)
    Abstract: We use a novel experimental design to disentangle strategically- and non-strategically-motivated cooperation. By using contingent responses in a repeated sequential prisoners’ dilemma with a known probabilistic end, we differentiate end-game behavior from continuation behavior within individuals while controlling for expectations. This design allows us to determine the extent to which strategically-cooperating individuals are responsible for the so-called endgame effect. Experiments with two different subject pools indicate that the most common motive for cooperation in repeated games is strategic and that the extent to which endgame effects are driven by strategically-cooperating individuals depends on the profitability of cooperation.
    Keywords: reputation building;strong reciprocity;conditional cooperation;strategic cooperation
    JEL: C91 D01 D74
    Date: 2009
  8. By: Zheng, Charles Zhoucheng
    Abstract: A game of competing principals is proposed. The set of subgame perfect equilibria of this game (subject to some refinement conditions) is equal to the core based on the same primitives. The blocking activity of a coalition of agents corresponds to a principal's unilateral deviation of proposing an off-path and incentive feasible contract. The equivalence between core and equilibrium is applied to cases of general equilibrium, Nash bargaining, moral hazard in polygamy, and adverse selection in auctions.
    Keywords: core, equilibrium, cooperative game theory, noncooperative game theory, coalition, polygamy
    JEL: C7
    Date: 2009–03–26
  9. By: BRECHET, Thierry (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); EYCKMANS, Johan (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); GERARD, Franois (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); MARBAIX, Philippe
    Abstract: In this paper we analyze the negotiation strategy of the European Union regarding the formation of an international climate agreement for the post-2012 era. We use game theoretical stability concepts to explore incentives for key players in the climate policy game to join future climate agreements. We compare a minus 20 percent unilateral commitment strategy by the EU with a unilateral minus 30 percent emission reduction strategy for all Annex-B countries. Using a numerical integrated assessment climate-economy simulation model, we find that carbon leakage effects are negligible. The EU strategy to reduce emissions by 30% (compared to 1990 levels) by 2020 if other Annex-B countries follow does not induce participation of the USA with a similar 30% reduction commitment. However, the model shows that an appropriate initial allocation of emission allowances may stabilize a larger and more ambitious climate coalition than the Kyoto Protocol in its first commitment period.
    Keywords: climate change, coalition theory, integrated assessment model, Kyoto protocol.
    JEL: C6 C7 H4 Q5
    Date: 2008–11
  10. By: Bezrukova, Katerina; Smith, John
    Abstract: We test the assumption that preferences are unchanged throughout a strategic game in the absence of feedback. To do so, we study the relationship between the strategic nature of a game and players' identification in social groups. We present evidence that the strategic nature of the game affects the strength of identity. We also present evidence regarding the timing of the change in identity and what causes this change. In our experiment, the subjects play one of two versions of the Prisoner's Dilemma game where the attractiveness of the uncooperative action is manipulated. We refer to the version with a relatively attractive uncooperative action as the "Mean Game" and the other as the "Nice Game." We place each subject into one of two groups. Throughout the experimental procedure we measure identity, as standard in the psychology literature, in order to assess the extent to which subjects identify with their group. First, we find evidence of an interaction between the strategic nature of the game and the action selected in the game as affecting the identity of the subject. We find that in the Mean Game, there is little difference in the change in identification of those playing cooperatively against an ingroup member and those playing uncooperatively. However, in the Nice Game, those playing cooperatively against an ingroup member exhibit a significantly stronger change in identification than those playing uncooperatively. We find that the opposite is true for outgroup matches. Also, we show that the change in identity does not occur after initial inspection of the game but rather largely after the action choice has been made. Finally, we present evidence of an explanation of the effect: identity is enhanced by actions which are perceived to be less competitive and more cooperative.
    Keywords: Group Identity; Game Theory; Other-Regarding Preferences; Endogenous Preferences
    JEL: C70 Z13 C91
    Date: 2008–12–03
  11. By: Asheim, Geir (Dept. of Economics, University of Oslo); Voorneveld, Mark (Dept. of Economics, Stockholm School of Economics); Weibull, Jörgen W. (Dept. of Economics, Stockholm School of Economics)
    Abstract: This paper provides two conditions of epistemic robustness, robustness to alternative best replies and robustness to non-best replies, and uses them to characterize variants of curb sets in finite games, including the set of rationalizable strategies.
    Keywords: epistemic game theory; epistemic robustness; rationalizability; closedness under rational behavior; mutual p-belief
    JEL: C72 D83
    Date: 2009–03–30
  12. By: Mallesh M. Pai; Rakesh Vohra
    Abstract: We consider an environment where potential buyers of an indi- visible good have liquidity constraints, in that they cannot pay more than their `budget' regardless of their valuation. A buyer's valuation for the good as well as her budget are her private information. We derive constrained-efficient and revenue maximizing auctions for this setting. In general, the optimal auction requires `pooling' both at the top and in the middle despite the maintained assumption of a mono- tone hazard rate. Further, the auctioneer will never¯find it desirable to subsidize bidders with low budgets.
    Keywords: the universal type space, the strategic topology; the uniform strategic topology; the uniform-weak topology; interim correlated rationalizable actions
    JEL: C70
    Date: 2008–08
  13. By: Muriel Niederle; Leeat Yariv
    Abstract: We study a simple model of a decentralized market game in which firms make directed offers to workers. We focus on markets in which agents have aligned preferences. When agents have complete information or when there are no frictions in the economy, there exists an equilibrium that yields the stable match. In the presence of market frictions and preference uncertainty, harsher assumptions on the richness of the economy have to be made in order for decentralized markets to generate stable outcomes in equilibrium.
    JEL: C78
    Date: 2009–04
  14. By: Christopher Avery; Jonathan D. Levin
    Abstract: Early admissions is widely used by selective colleges and universities. We identify some basic facts about early admissions policies, including the admissions advantage enjoyed by early applicants and patterns in application behavior, and propose a game-theoretic model that matches these facts. The key feature of the model is that colleges want to admit students who are enthusiastic about attending, and early admissions programs give students an opportunity to signal this enthusiasm.
    JEL: C78 D82 I20
    Date: 2009–04
  15. By: GABSZEWICZ, Jean J. (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); GARCIA, Filomena; PAIS, Joana; RESENDE, Joana (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: In this note, we start to claim that established marriages can be heavily destabilized when the population of existing couples is enriched by the arrival of new candidates to marriage. Afterwards, we discuss briefly how stability concepts can be extended to account for entry and exit phenomena affecting the composition of the marriage market.
    Keywords: matching, stability, marriage model, divorce cascades.
    JEL: C78 D00
    Date: 2008–12
  16. By: František Turnovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: Fair representation of voters in a committee representing different voters’ groups is being broadly discussed during last few years. Assuming we know what the fair representation is, there exists a problem of optimal quota: given a “fair” distribution of voting weights, how to set up voting rule (quota) in such a way that distribution of relative a priori voting power is as close as possible to distribution of relative voting weights. Together with optimal quota problem a problem of trade-off between fairness and efficiency (ability of a voting body to change status quo) is formalized by a fairness-efficiency matrix.
    Keywords: Committee system, efficiency, fairness, fairness-efficiency matrix, indirect voting power, optimal quota, power indices, voting system
    JEL: C71 D72 H77
    Date: 2009–03
  17. By: Hennlock, Magnus (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Since the analysis of a self-enforcing agreement by Barrett (1994) it has been clear that the ratio between the slopes of the marginal cost and marginal benefit functions is conclusive for stability of self-enforcing agreements. For example Finus and Rundshagen (1998) stated: 'it turns out that all qualitative results depend only on this ratio' as it determines the non-orthogonal free-riding response along Nash reaction functions. This note shows that this 'pure' connection between the cost-benefit ratio and non-orthogonal free-riding response occurs due to the 'anonymous contributions' property of public goods, and in such cases the cost-benefit ratio effect holds regardless the functional form of objectives, the formulation of congestion or the degree of impureness of the public good. Therefore we expect to see the cost-benefit ratio still be the conclusive component also in self-enforcing agreements based on more general functional forms than seen hitherto in the literature.
    Keywords: public goods; self-enforcing agreements; reaction function; coalition theory
    JEL: C70 H40
    Date: 2009–04–03

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