nep-gth New Economics Papers
on Game Theory
Issue of 2009‒04‒25
ten papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Contractually stable networks By Jean-Franois, CAULIER; Ana, MAULEON; Vincent, VANNETELBOSCH
  2. An Almost Ideal Sharing Scheme for Coalition Games with Externalities By Finus, Michael; Eyckmans, Johan
  3. On Gale and Shapley ÔCollege admissions and stability of marriageÕ By Jean J. GABSZEWICZ; Filomena, GARCIA; Joana, PAIS; Joana, RESENDE
  4. Aggregate Comparative Statics By Acemoglu, Daron; Jensen, Martin Kaae
  5. Homo Æqualis: A Cross-Society Experimental Analysis of Three Bargaining Games By Abigail Barr; Chris Wallace; Jean Ensminger; Juan Camilo Cárdenas
  6. Strategic Experimentation with Poisson Bandits By Keller, Godfrey; Rady, Sven
  7. Doves and hawks in economics revisited [An evolutionary quantum game theory-based analysis of financial crises] By Hanauske, Matthias; Kunz, Jennifer; Bernius, Steffen; König, Wolfgang
  8. Interviewing in Two-Sided Matching Markets By Robin S. Lee; Michael Schwarz
  9. Experts and Their Records By Alexander Frankel; Michael Schwarz
  10. Gathering Information before Signing a Contract: Experimental Evidence By Hoppe, Eva I.; Schmitz, Patrick W.

  1. By: Jean-Franois, CAULIER; Ana, MAULEON; Vincent, VANNETELBOSCH (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    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, whre the network specifies the natyure 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 equiibrium 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; coaliation structures; contractual stability; allocation rules
    JEL: A14 C70
    Date: 2008–11–02
  2. By: Finus, Michael; Eyckmans, Johan
    Abstract: Cooperative agreements among firms to coordinate R&D investments and share knowledge or coordination among nations to reduce trade barriers or to provide global public goods usually proves difficult due to free-rider incentives. In this paper, we propose a sharing scheme for the distribution of the gains from cooperation for games with externalities and heterogeneous players in order to mitigate free-rider problems. We show that every sharing rule belonging to our scheme leads to the same set of stable coalitions which is never empty. This scheme is "almost ideal" because it stabilizes those coalitions generating the highest possible global worth among the set of all "potentially stable coalitions". Our Almost Ideal Sharing Scheme is particularly powerful for economic problems where outsiders benefit from the coalition's actions (positive externalities) and which therefore are likely to suffer from severe free-riding.
    Keywords: sharing schemes; externalities; partition function; coalition games
    Date: 2009–04
  3. By: Jean J. GABSZEWICZ (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Filomena, GARCIA; Joana, PAIS; Joana, RESENDE
    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: 2008–12–01
  4. By: Acemoglu, Daron; Jensen, Martin Kaae
    Abstract: In aggregative games, each player's payoff depends on her own actions and an aggregate of the actions of all the players (for example, sum, product or some moment of the distribution of actions). Many common games in industrial organization, political economy, public economics, and macroeconomics can be cast as aggregative games. In most of these situations, the behavior of the aggregate is of interest both directly and also indirectly because the comparative statics of the actions of each player can be obtained as a function of the aggregate. In this paper, we provide a general and tractable framework for comparative static results in aggregative games. We focus on two classes of aggregative games: (1) aggregative of games with strategic substitutes and (2) "nice" aggregative games, where payoff functions are continuous and concave in own strategies. We provide simple sufficient conditions under which "positive shocks" to individual players increase their own actions and have monotone effects on the aggregate. We show how this framework can be applied to a variety of examples and how this enables more general and stronger comparative static results than typically obtained in the literature.
    Keywords: aggregative games; contests; oligopoly; robust comparative statics; strategic substitutes
    JEL: C62 C72
    Date: 2009–04
  5. By: Abigail Barr; Chris Wallace; Jean Ensminger; Juan Camilo Cárdenas
    Abstract: Data from three bargaining games—the Dictator Game, the Ultimatum Game, and the Third-Party Punishment Game—played in 15 societies are presented. The societies range from US undergraduates to Amazonian, Arctic, and African hunter-gatherers. Behaviour within the games varies markedly across societies. The paper investigates whether this behavioural diversity can be explained solely by variations in inequality aversion. Combining a single parameter utility function with the notion of subgame perfection generates a number of testable predictions. While most of these are supported, there are some telling divergences between theory and data: uncertainty and preferences relating to acts of vengeance may have influenced play in the Ultimatum and Third- Party Punishment Games; and a few subjects used the games as an opportunity to engage in costly signalling.
    Date: 2009–03–05
  6. By: Keller, Godfrey; Rady, Sven
    Abstract: We study a game of strategic experimentation with two-armed bandits where the risky arm distributes lump-sum payoffs according to a Poisson process. Its intensity is either high or low, and unknown to the players. We consider Markov perfect equilibria with beliefs as the state variable. As the belief process is piecewise deterministic, payoff functions solve differential-difference equations. There is no equilibrium where all players use cut-off strategies, and all equi\-libria exhibit an `encouragement effect' relative to the single-agent optimum. We construct asymmetric equilibria in which players have symmetric continuation values at sufficiently optimistic beliefs yet take turns playing the risky arm before all experimentation stops. Owing to the encouragement effect, these equilibria Pareto dominate the unique symmetric one for sufficiently frequent turns. Rewarding the last experimenter with a higher continuation value increases the range of beliefs where players experiment, but may reduce average payoffs at more optimistic beliefs. Some equilibria exhibit an `anticipation effect': as beliefs become more pessimistic, the continuation value of a single experimenter increases over some range because a lower belief means a shorter wait until another player takes over.
    Keywords: Strategic Experimentation; Two-Armed Bandit; Poisson Process; Bayesian Learning; Piecewise Deterministic Process; Markov Perfect Equilibrium; Differential-Difference Equation
    JEL: C73 D83 O32
    Date: 2009–04–09
  7. By: Hanauske, Matthias; Kunz, Jennifer; Bernius, Steffen; König, Wolfgang
    Abstract: The last financial and economic crisis demonstrated the dysfunctional long-term effects of aggressive behaviour in financial markets. Yet, evolutionary game theory predicts that under the condition of strategic dependence a certain degree of aggressive behaviour remains within a given population of agents. However, as the consequences of the financial crisis exhibit, it would be desirable to change the 'rules of the game' in a way that prevents the occurrence of any aggressive behaviour and thereby also the danger of market crashes. The paper picks up this aspect. Through the extension of the in literature well-known Hawk-Dove game by a quantum approach, we can show that dependent on entanglement, also evolutionary stable strategies can emerge, which are not predicted by classical evolutionary game theory and where the total economic population uses a non aggressive quantum strategy.
    Keywords: Evolutionary game theory; financial crisis; hawk-dove game; quantum game theory
    JEL: D53 A13 C02 C70 Z13 C73
    Date: 2009–04–14
  8. By: Robin S. Lee; Michael Schwarz
    Abstract: We introduce the interview assignment problem, which generalizes the one-to-one matching model of Gale and Shapley (1962) by introducing a stage of costly information acquisition. Agents may learn preferences over partners via costly interviews. Although there exist multiple equilibria where all agents receive the same number of interviews, efficiency depends on overlap – the number of common interview partners among agents. We prove the equilibria with the highest degree of overlap yields the highest probability of being matched. The analysis suggests that institutions which ration interviews or create labor market segmentation may lead to greater efficiency in information acquisition activities.
    JEL: C78 D85 J01
    Date: 2009–04
  9. By: Alexander Frankel; Michael Schwarz
    Abstract: Consider an environment where long-lived experts repeatedly interact with short-lived customers. In periods when an expert is hired, she chooses between providing a profitable major treatment or a less profitable minor treatment. The expert has private information about which treatment best serves the customer, but has no direct incentive to act in the customer's interest. Customers can observe the past record of each expert's actions, but never learn which actions would have been appropriate. We find that there exists an equilibrium in which experts always play truthfully and choose the customer's preferred treatment. The expert is rewarded for choosing the less profitable action with future business: customers return to an expert with high probability if the previous treatment was minor, and low probability if it was major. If experts have private information regarding their own payoffs as well as what treatments are appropriate, then there is no equilibrium with truthful play in every period. But we construct equilibria where experts are truthful arbitrarily often as their discount factor converges to one.
    JEL: C7 C73 D82 J01
    Date: 2009–04
  10. By: Hoppe, Eva I.; Schmitz, Patrick W.
    Abstract: A central insight of agency theory is that when a principal offers a contract to a privately informed agent, the principal trades off ex post efficiency in the bad state of nature against a larger profit in the good state of nature. We report about an experiment with 508 participants designed to test whether this fundamental trade-off is actually relevant. In particular, we investigate settings with both exogenous and endogenous information structures. We find that theory is indeed a useful predictor for the relative magnitudes of the principals' offers, the agents' information gathering decisions, and the occurrence of ex post inefficiencies.
    Keywords: adverse selection; agency theory; experiment; information gathering
    JEL: C72 C91 D82 D86
    Date: 2009–04

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