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on Game Theory |
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Issue of 2009‒05‒16
thirteen papers chosen by Laszlo A. Koczy Budapest Tech and Maastricht University |
| By: | Rabia Nessah; Guoqiang Tian |
| Date: | 2009–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:814577000000000206&r=gth |
| By: | Cobb, Barry; Basuchoudhary, Atin |
| Abstract: | Decision analysis has traditionally been applied to choices under uncertainty involving a single decision maker. Game theory has been applied to solving games of strategic interaction between two or more players. Building upon recent work of van Binsbergen and Marx (2007. Exploring relations between decision analysis and game theory. Decision Anal. 4(1) 32–40.), this paper defines a modified decision-theoretic approach to solving games of strategic interaction between two players. Using this method, the choices of the two players are modeled with separate decision trees comprised entirely of chance nodes. Optimal policies are reflected in the probabilities in the decision trees of each player. In many cases, the optimal strategy for each player can be obtained by rolling back the opponent’s decision tree. Results are demonstrated for the multi-stage signaling game, which is difficult to model using decision nodes to represent strategies,as in the approach of van Binsbergen and Marx. |
| Keywords: | decision analysis; decision tree; game theory; mixed strategy; signaling game. |
| JEL: | C02 C72 |
| Date: | 2009–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15119&r=gth |
| By: | Manfred Kerber; Colin Rowat |
| Abstract: | Jordan [2006] defined ‘pillage games’, a class of cooperative games whose dominance operator is represented by a ‘power function’ satisfying coalitional and resource monotonicity axioms. In this environment, he proved that stable sets must be finite. We use graph theory to reinterpret this result, tightening the bound, highlighting the role played by resource monotonicity, and suggesting a strategy for yet tighter bounds. |
| Keywords: | Pillage, cooperative game theory, stable sets |
| JEL: | C71 P14 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:09-01r&r=gth |
| By: | Ayse Mumcu; Ismail Saglam |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:bou:wpaper:2008/05&r=gth |
| By: | Godfrey Keller (University of Oxford); Sven Rady (University of Munich) |
| 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. Here is no equilibrium where all players use cut-off strategies, and all equilibria exhibit an ‘encouragement effect’ relative to the single-agent optimum. We construct asymmetric equilibria in which players have symmetric continuation values at suffciently 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 suffciently 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: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:260&r=gth |
| By: | Michael Greinecker |
| Abstract: | Maskin and Tirole have defined payoff-relevant states in discrete time dynamic games with observable actions in terms of a partition of the set of histories. Their proof that this partition is unique cannot be applied, when action spaces are infinite or when players are unable to condition on calendar time. This note provides a unified proof of existence and uniqueness for these cases. The method of proof is useful for problems other than the one treated here. To illustrate this, a well known characterization of common knowledge is generalized. |
| JEL: | C72 C73 D83 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:0906&r=gth |
| By: | Faias, Marta; Hervés-Beloso, Carlos; Moreno García, Emma |
| Abstract: | In this paper we consider a pure exchange economy with a finite set of types of agents which have incomplete and asymmetric information on the states of nature. Our aim is to describe the equilibrium price formation and how the lack of information may affect the allocation of resources. For it, we adapt to an asymmetric information scenario a variant of the Shapley-Shubik game introduced by Dubey and Geanakoplos (2003). |
| Keywords: | C72/ D51 |
| JEL: | C71 D51 |
| Date: | 2009–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15176&r=gth |
| By: | Sebastian Kranz; Susanne Ohlendorf (Department of Economics, University of Bonn, Adenauerallee 24-42, 53113 Bonn) |
| Abstract: | We study infinitely repeated two player games with perfect information, where each period consists of two stages: one in which the parties simultaneously choose an action and one in which they can transfer money to each other. We first derive simple conditions that allow a constructive characterization of all Pareto-optimal subgame perfect payoffs for all discount factors. Afterwards, we examine different concepts of renegotiation-proofness and extend the characterization to renegotiation-proof payoffs. |
| Keywords: | renegotiation, infinitely repeated games, side payments, optimal penal codes |
| JEL: | C73 L14 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:259&r=gth |
| By: | Audrey Hu (Tinbergen Institute, University of Amsterdam); Steven A. Matthews (Department of Economics, University of Pennsylvania); Liang Zou (Faculty of Economics and Business, University of Amsterdam) |
| Abstract: | This paper analyzes the effects of buyer and seller risk aversion in first and second-price auctions. The setting is the classic one of symmetric and independent private values, with ex ante homogeneous bidders. However, the seller is able to optimally set the reserve price. In both auctions the seller’s optimal reserve price is shown to decrease in his own risk aversion, and more so in the first-price auction. Thus, greater seller risk aversion increases the ex post efficiency of both auctions, and especially that of the first-price auction. The seller’s optimal reserve price in the first-price, but not in the second-price, auction decreases in the buyers’ risk aversion. Thus, greater buyer risk aversion also increases the ex post efficiency of the first but not the second-price auction. At the interim stage, the first-price auction is preferred by all buyer types in a lower interval, as well as by the seller. |
| Keywords: | first-price auction, second-price auction, risk aversion, reserve price |
| JEL: | D44 |
| Date: | 2009–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:09-016&r=gth |
| By: | Daniele Nosenzo (University of Nottingham); Martin Sefton (University of Nottingham) |
| Abstract: | In this paper we examine voluntary contributions to a public good when the timing of contributions is endogenously determined by contributors, focusing on the simple quasi-linear setting with two players (Varian, 1994). We show that the move order that is predicted to emerge is sensitive to how commitment opportunities are modeled. We show that a favorable move order is predicted to emerge in Hamilton and Slutsky's (1990) "observable delay" extended game, but a detrimental move order is predicted to emerge in their "action commitment" extended game. We then report a laboratory experiment designed to examine whether the predicted move ordering emerges, and how this impacts overall contributions, in these extended games. The results are similar in both extended games. We find that when the detrimental move order is observed, contributions are indeed lower, as predicted. However, this detrimental move order is seldom observed. Instead of committing to low contributions, players tend to avoid making a commitment. These experimental results on timing decisions suggest that commitment opportunities may be less damaging to public good provision than previously thought. |
| Keywords: | Public Goods, Voluntary Contributions, Sequential Contributions, Endogenous Timing, Action Commitment, Observable Delay, Experiment |
| JEL: | H41 C72 C92 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2009-09&r=gth |
| By: | Claudio Mezzetti (Department of Economics, Warwick University,); Ludovic Renou (Department of Economics, University of Leicester,) |
| Abstract: | A mechanism implements a social choice correspondence f in mixed Nash equilibrium if at any preference profile, the set of all pure and mixed Nash equilibrium outcomes coincides with the set of f-optimal alternatives at that preference profile. This definition generalizes Maskin’s definition of Nash implementation in that it does not require each optimal alternative to be the outcome of a pure Nash equilibrium. We show that the condition of weak set-monotonicity, a weakening of Maskin’s monotonicity, is necessary for implementation. We provide sufficient conditions for implementation and show that important social choice correspondences that are not Maskin monotonic can be implemented in mixed Nash equilibrium. |
| Keywords: | implementation ; Maskin monotonicity ; pure and mixed Nash equilibrium ; weak set-monotonicity ; social choice correspondence |
| JEL: | C72 D71 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:902&r=gth |
| By: | Colson, Gregory; Huffman, Wallace E.; Rousu, Matthew |
| Abstract: | Most studies utilizing experimental auction mechanisms to elicit consumersâ willingness to pay are designed to avoid potential substitution or demand-curve effects that may influence bid prices. However, previous research and auction designs have not considered the potential impact on bid prices of commodity inventories held by auction participants that were obtained through transactions outside of the auction. This omission may present a problem for interpreting and analyzing auction data. Using bids from a random nth-price auction of fresh vegetables conducted in a laboratory style setting, we test whether participantsâ outside inventories affect bidding behavior. We find that bidders do in fact consider their inventories, resulting in lower bid prices by individuals with quantity already owned. |
| Keywords: | Consumer/Household Economics, Demand and Price Analysis, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49551&r=gth |
| By: | Francesco Feri (Department of Public Finance, University of Innsbruck); Bernd Irlenbusch (London School of Economics & Political Science - Department of Management; Institute for the Study of Labor (IZA)); Matthias Sutter (University of Innsbruck - Department of Public Economics; University of Gothenburg - Department of Economics) |
| Abstract: | The need for efficient coordination is ubiquitous in organizations and industries. The literature on the determinants of efficient coordination has focused on individual decision making so far. In reality, however, teams often have to coordinate with other teams. We present a series of coordination experiments with a total of 1,101 participants. We find that teams of three subjects each coordinate much more efficiently than individuals. This finding adds one important cornerstone to the recent literature on the conditions for successful coordination. We explain the differences between individuals and teams using the experience weighted attraction learning model. |
| JEL: | C71 C91 C92 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2009_14&r=gth |