
on Game Theory 
By:  Le Breton, Michel; Weber, Shlomo 
Abstract:  In this note we introduce a general class of games where the payoff of every player are affected by her intrinsic taste for available strategic choices; intensity of her dyadic social interactions of with others in the peer group; and conformity effect. We show, that if the dyadic social influences are symmetric and the conformity effect is identical for all players, every game in our class admits a Nash equilibrium in pure strategies. Our proof relies on the fact that our game is potential (Rosenthal (1973), Monderer and Shapley (1996)). We also illustrate the universality of our result through a large spectrum of applications in economics, political science and sociology. 
Keywords:  conformity effect; dyadic externalities; Nash equilibria; potential games; Social interactions 
JEL:  C72 D85 
Date:  2009–04 
URL:  http://d.repec.org/n?u=RePEc:cpr:ceprdp:7279&r=gth 
By:  Francesco Ciardiello; Andrea Di Liddo 
Abstract:  A coalition is usually called stable if nobody has an immediate incentive to leave or to enter the coalition since he does not improve his payoff. This myopic behaviour does not consider further deviations which can take place after the first move. Chwe (1994) incorporated the idea of a farsighted behaviour in his definition of large consistent set (LCS). In some respects, we propose a different idea of dominance relation based on indirect dominance and on a different concept of belief on moving coalitions’ behavior. A notion of stability for a coalitional game is introduced by taking into account the different degree of risk/safety of any player participating in a move. Some results about uncovered sets, internal stability are investigated. By exploiting our dominance and stability concepts, the prisoner’s dilemma in coalitional form and its Nash equilibrium are studied. Some examples illustrating the differences between the largest consistent set, our stable set and stable set due to von Neumann and Morgenstern (1947) are presented. 
Date:  2009–02 
URL:  http://d.repec.org/n?u=RePEc:ufg:qdsems:032009&r=gth 
By:  Seamus Hogan (University of Canterbury) 
Abstract:  Consider the class of games in which each player chooses a strategy from a connected subset of the real line. Many oligopoly models fall into this class. In many of these applications, it would be useful to show that an equilibrium was unique, or at least to have a set of conditions under which uniqueness would hold. In this paper, we first prove a uniqueness theorem that is slightly less restrictive than the contraction mapping theorem for mappings from the subsets of the real line onto itself, and then show how uniqueness in the general game can be shown by proving uniqueness using an iterative sequence of RtoR mappings. This iterative approach works by considering the equilibrium for an mplayer game holding the strategies of all other players fixed, starting with a twoplayer game. If one can show that the mplayer game has a unique equilibrium for all possible values for the remaining players strategies, then one can add one player at a time and consider the RtoR mapping from that player’s strategy on to the unique equilibrium of the first m players and back onto the (m+1)th player’s strategy. We then show how a general condition for each one of this sequence of mappings to have a unique equilibrium is that the leading principal minors of a matrix derived from the Jacobean matrix of bestresponse functions be positive, and how this general condition encompasses and generalises some existing uniqueness theorems for particular games 
Keywords:  Uniqueness; Continuous Games; Oligopoly 
JEL:  C62 C72 D43 
Date:  2009–04–17 
URL:  http://d.repec.org/n?u=RePEc:cbt:econwp:09/06&r=gth 
By:  D. Dragone; L. Lambertini; G. Leitmann; A. Palestini 
Date:  2008–09 
URL:  http://d.repec.org/n?u=RePEc:bol:bodewp:644&r=gth 
By:  Christopher J. Tyson (Queen Mary, University of London) 
Abstract:  We formulate and study a general finitehorizon bargaining game with simultaneous moves and a disagreement outcome that need not be the worst possible result for the agents. Conditions are identified under which the game is dominance solvable in the sense that iterative deletion of weakly dominated strategies selects a unique outcome. Our analysis uses a backward induction procedure to pinpoint the latest moment at which a coalition can be found with both an incentive and the authority to force one of the available alternatives. Iterative dominance then implies that the alternative characterized in this way will be agreed upon at the outset  or, if a suitable coalition is never found, that no agreement will be reached. 
Keywords:  Backward induction, Coalition, Core, Weak dominance 
JEL:  H41 D64 C62 
Date:  2009–04 
URL:  http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp644&r=gth 
By:  Lisa V. Bruttel (University of Konstanz, Department of Economics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Ulrich Kamecke (HumboldtUniversity Berlin, Department of Business and Economics); Vera Popova (Max Planck Institute of Economics, Strategic Interaction Group) 
Abstract:  Unlike previous attempts to implement cooperation in a prisoners' dilemma game with an infinite horizon in the laboratory, we focus on extended prisoners' dilemma games in which a second (pure strategy) equilibrium allows for voluntary cooperation in all but the last round. Our four main experimental treatments distinguish long versus short horizon and strict versus nonstrict additional equilibrium compared to the control treatment, a standard prisoners' dilemma. Quite surprisingly, according to our results, only a strict additional equilibrium increases cooperation rate for a given time horizon. As expected a longer time horizon promotes cooperation. 
Keywords:  Folk theorem, Finite horizon, Prisoners' dilemma, Experiment 
JEL:  C73 C91 
Date:  2009–04–21 
URL:  http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009030&r=gth 
By:  Ngo Van Long; Gerhard Sorger 
Abstract:  We consider situations in which a principal tries to induce an agent to spend e®ort on accumulating a state variable that a®ects the wellbeing of both parties. The only incentive mechanism that the principal can use is a statedependent transfer of her own utility to the agent. Formally, the model is a Stackelberg di®erential game in which the players use feedback strategies. Whereas in general Stackelberg di®erential games with feedback strategy spaces the leader's optimization problem has nonstandard features that make it extremely hard to solve, in the present case this problem can be rewritten as a standard optimal control problem. Two examples are used to illustrate our approach. 
JEL:  C61 C73 D82 
Date:  2009–04 
URL:  http://d.repec.org/n?u=RePEc:vie:viennp:0905&r=gth 
By:  Michalis Drouvelis; Wieland Muller; Alex Possajennikov 
Abstract:  The common prior assumption is pervasive in gametheoretic models with incomplete information. This paper investigates experimentally the importance of inducing a common prior in a twoperson signaling game. For a specific probability distribution of the sender's type, the longrun behavior without an induced common prior is shown to be different from the behavior when a common prior is induced, while for other distributions behavior is similar under both regimes. We also present a learning model that allows players to learn about the other players' strategies and the prior distribution of the sender's type. We show that this learning model accurately accounts for all main features of the data. 
Date:  2009–04 
URL:  http://d.repec.org/n?u=RePEc:yor:yorken:09/08&r=gth 
By:  Nizar Allouch (Queen Mary, University of London) 
Abstract:  This paper deals with a coreequilibrium equivalence in an economy with public goods where preferences of consumers display warm glow effects. We demonstrate that provided that each consumer becomes satiated to other consumers provision, it holds that, for a sufficiently large economy, the set of Edgeworth allocations is nonempty. Moreover, we show that an Edgeworth allocation could be decentralized as a warm glow equilibrium. 
Keywords:  Competitive equilibrium, Warm glow, Public goods, Edgeworth, Core, Decentralization 
JEL:  H41 C71 D64 
Date:  2009–04 
URL:  http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp642&r=gth 
By:  M. Vittoria Levati (Max Planck Institute of Economics, Jena); Ro'i Zultan (The Center for Rationality, The Hebrew University of Jerusalem) 
Abstract:  This paper provides a new way to identify conditional cooperation in a realtime version of the standard voluntary contribution mechanism. Our approach avoids most drawbacks of the traditional procedures because it relies on endogenous cycle lengths, which are defined by the number of contributors a player waits before committing to a further contribution. Based on hypothetical distributions of randomly generated contribution sequences, we provide strong evidence for conditionally cooperative behavior. Moreover, notwithstanding a decline in contributions, conditional cooperation is found to be stable over time. 
Keywords:  Public goods game, Realtime protocol, Information feedback, Conditional cooperation, Simulations 
JEL:  C72 C92 H41 
Date:  2009–04–20 
URL:  http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009029&r=gth 