nep-gth New Economics Papers
on Game Theory
Issue of 2009‒06‒03
eighteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Evaluating information in zero-sum games with incomplete information on both sides By Bernard De Meyer; Ehud Lehrer; Dinah Rosenberg
  2. Preempting versus Postponing: the Stealing Game By Andrea Gallice
  3. Patience or Fairness? Analyzing Social Preferences in Repeated Games By John Duffy; Felix Munoz-Garcia
  4. The Value Of Two-Person Zero-Sum Repeated Games with Incomplete Information and Uncertain Duration By Abraham Neyman
  5. Repeated games with asymmetric information and random price fluctuations at finance markets : the case of countable state space By Victor C. Domansky; Victoria L. Kreps
  6. Stable Coalition-Governments: The Case of Three Political Parties By M. Socorro Puy
  7. Conflict of interests, (implicit) coalitions and Nash policy games By Acocella Nicola; Di Bartolomeo Giovanni; Piacquadio Paolo Giovanni
  8. Competing Auction Houses By Alexander Matros; Andriy Zapechelnyuk
  9. The Structure of Unstable Power Systems By Joseph Abdou
  10. A Note on Aumann's Core Equivalence Theorem without Monotonicity By Honda, Jun; Takekuma, Shin-Ichi
  11. Incentivising trust By Pamela Lenton; Paul Mosley
  12. Picking the Winners By Pablo Amorós
  13. Matching and network effects By Marcel Fafchamps; Marco van der Leij; Sanjeev Goyal
  14. Conflict, Settlement, and the Shadow of the Future By Michael McBride; Stergios Skaperdas
  15. Rewards and Punishments in Bargaining By Svetlana Pevnitskaya; Dmitry Ryvkin
  16. Focused Power: Experimental Manifestation of the Shapley-Shubik Power Index By Chris Geller; Jamie Mustard; Ranya Shahwan
  17. Optimal Delegation in Nash Bargaining By Roland Kirstein
  18. Optimal Collusion with Limited Severity Constraint By DE VILLEMEUR, Etienne; FLOCHEL, Laurent; VERSAEVEL, Bruno

  1. By: Bernard De Meyer (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Ehud Lehrer (School of Mathematical Sciences - Tel Aviv University); Dinah Rosenberg (LAGA - Laboratoire d'Analyse, Géométrie et Applications - CNRS : UMR7539 - Université Paris-Nord - Paris XIII)
    Abstract: In a Bayesian game some players might receive a noisy signal regarding the specific game actually being played before it starts. We study zero-sum games where each player receives a partial information about his own type and no information about that of the other player and analyze the impact the signals have on the payoffs. It turns out that the functions that evaluate the value of information share two property. The first is Blackwell monotonicity, which means that each player gains from knowing more. The second is concavity on the space of conditional probabilities.
    Keywords: Value of information, Blackwell monotonicity, concavity.
    Date: 2009–05
  2. By: Andrea Gallice
    Abstract: We present an endogenous timing game of action commitment in which play- ers can steal from each other parts of a homogeneous and perfectly divisible pie (market). We show how the incentives to preempt or to follow the rivals radi- cally change with the number of players involved in the game. In the course of the analysis we also introduce, discuss and apply the concept of pu-dominance, a generalization of the risk-dominance criterion to games with more than two players.
    Keywords: stealing, endogenous timing games, pu-dominance.
    JEL: C72 C73
    Date: 2008–06
  3. By: John Duffy; Felix Munoz-Garcia
    Abstract: This paper investigates how the introduction of social preferences affects players` equilibrium behavior in both one-shot and infinitely repeated versions of the Prisoner`s Dilemma game. We first show that defection survives as the unique equilibrium of the stage game if at least one player is not too concerned about inequity aversion. Second, we demonstrate that in the infinitely repeated version of the game, fairness concerns operate as a `substitute` for time discounting, as fairness helps sustain cooperation for lower discount factors. We then extend our results to more general simultaneous-move games, and more general preferences. Finally, we point out the implications of our findings for the design and analysis of experiments involving repeated games. In particular, repeated game equilibria which are thought to be supported by sufficiently large discount factors, may in fact be sustained by a combination of discounting and social preference parameters, an observation that may help rationalize recent experimental findings.
    JEL: C72 C73 H43 D91
    Date: 2009–05
  4. By: Abraham Neyman
    Abstract: It is known that the value of a zero-sum infinitely repeated game with incomplete information on both sides need not exist [Aumann Maschler 95]. It is proved that any number between the minmax and the maxmin of the zero-sum infinitely repeated game with incomplete information on both sides is the value of the long finitely repeated game where players' information about the uncertain number of repetitions is asymmetric.
    Date: 2009–05
  5. By: Victor C. Domansky (St. Petersburg Institute for Economics and Mathematics - Russian Academy of Sciences); Victoria L. Kreps (St. Petersburg Institute for Economics and Mathematics - Russian Academy of Sciences)
    Abstract: This paper is concerned with multistage bidding models introduced by De Meyer and Moussa Saley (2002) to analyze the evolution of the price system at finance markets with asymmetric information. The zero-sum repeated games with incomplete information are considered modeling the bidding with countable sets of possible prices and admissible bids. It is shown that, if the liquidation price of a share has a finite variance, then the sequence of values of n-step games is bounded and converges to the value of the game with infinite number of steps. We construct explicitly the optimal strategies for this game. The optimal strategy of Player 1 (the insider) generates a symmetric random walk of posterior mathematical expectations of liquidation price with absorption. The expected duration of this random walk is equal to the initial variance of liquidation price. The guaranteed total gain of Player 1 (the value of the game) is equal to this expected duration multiplied with the fixed gain per step.
    Keywords: Multistage bidding, asymmetric information, repeated games, optimal strategy.
    Date: 2009–05
  6. By: M. Socorro Puy (Department of Economic Theory, Universidad de Málaga)
    Abstract: We explore to what extent we can propose fixed negotiation rules as well as simple mechanisms (or protocols) that guarantee that politi¬cal parties can form stable coalition-governments. We analyze the case where three parties can hold office in the form of two-party coalitions. We define the family of Weighted Rules, that select political agree¬ments as a function of the bliss-points of the parties, and electoral results (Camson's Law and equal-share among others are included). We show that every weighted rule yields a stable coalition. We make use of the theory of implementation to design a protocol (in the form of a mechanism) that guarantees that a stable coalition will govern. We find that no dominant-solvable mechanism can be used for this purpose, but there is a simultaneous-unanimity mechanism that im¬plements it in Nash and strong Nash equilibrium.
    Keywords: Coalition-government, Stability, Nash-implementation
    JEL: D71 D72
    Date: 2009–06
  7. By: Acocella Nicola; Di Bartolomeo Giovanni; Piacquadio Paolo Giovanni
    Abstract: By introducing the concepts of implicit coalitions and conflict of interests in a multiple-player context, this paper generalizes some theorems on policy invariance and equilibrium existence and uniqueness for LQ policy games.
    Date: 2008–02
  8. By: Alexander Matros (University of Pittsburgh); Andriy Zapechelnyuk (University of Bonn and Kyiv School of Economics)
    Abstract: We consider a model where sellers make repeated attempts to sell an object via two competing auction houses. An auction house that attracts a seller runs a Vickrey auction among a random sample of buyers and collects two fees: a listing fee and, if the object is sold, a closing fee. We characterize equilibria and show that two equilibrium outcomes are possible: a (contestable) monopoly, and a market segmentation between the two competitors.
    Keywords: Competing auctions, mediator, listing fee, closing fee
    JEL: C73 D44 D82
    Date: 2009–04
  9. By: Joseph Abdou (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: A power system is modeled by an interaction form, the solution of which is called a settlement. By stability we mean the existence of some settlement for any preference profile. Like in other models of power structure, instability is equivalent to the existence of a cycle. Structural properties of the system like maximality, regularity, superadditivity, subadditivity and exactness are defined and used to determine the type of instability that may affect the system. A Stability Index is introduced. Loosely speaking this index measures the difficulty of the emergence of configurations that produce a deadlock. As applications we have a characterization of solvable game forms, an analysis of the structure of their instability and a localization of their stability index in case where solvability fails.
    Keywords: Interaction Form, Effectivity Function, Stability Index, Nash Equilibrium, Strong Equilibrium, Solvability, Acyclicity, Nakamura Number, Collusion
    Date: 2009–05–13
  10. By: Honda, Jun; Takekuma, Shin-Ichi
    Abstract: In an exchange economy with a continuum of traders, we establish the equivalence theorem on the core and the set of competitive allocations without assuming monotonicity of traders' preferences. Under weak assumptions we provide two alternative core equivalence theorems. The first one is for irreducible economies under Debreu's assumption on quasi-equilibria. The second one is an extension of Aumann's theorem under weaker assumptions than monotonicity.
    Keywords: core, equivalence, monotonicity, quasi-equilibrium, irreducibility
    JEL: C71 D41 D51
    Date: 2009–04
  11. By: Pamela Lenton (Department of Economics, The University of Sheffield); Paul Mosley (Department of Economics, The University of Sheffield)
    Abstract: We argue that trust can be incentivised by measures which increase the ability of trusters to protect themselves against risk. We work within the framework originally established by Berg, Dickhaut and McCabe (1995) in which trust is measured experimentally as the ability to generate reciprocity in response to an initial offer of money within a two-person game. An incentive is conveyed both by means of variations in the multiplier applied to the first player’s initial offer and by giving the first player the opportunity to insure themselves against the possibility that the second player will fail to reciprocate their initial offer. Measured trust is strongly responsive to both these incentives. Thus third parties have the ability to influence the outcome of the game, not only, as in the analysis of Charness et al (2008), by punishing failure to reciprocate and rewarding ‘good’ initial offers, but also by offering protection which strengthens the first player’s risk efficacy, or ratio of assets to risk.
    Keywords: Experimental economics; Game theory; Risk; Reciprocity
    JEL: A13 C70 C73 D81
    Date: 2009–03
  12. By: Pablo Amorós (Department of Economic Theory, Universidad de Málaga)
    Abstract: We analyze the problem of choosing the w contestants who will win a competition within a group of n>w competitors when all jurors commonly observe who are the w best contestants but may be biased. We study conditions on the configuration of the jury so that it is possible to induce the jurors to always choose the best contestants, whoever they are. If the equilibrium concept used by the jurors is dominant strategies, the necessary and sufficient conditions incorporate very strong informational requirements on the mechanism designer. If we relax the equilibrium concept to Nash or subgame perfect equilibria the necessary and sufficient conditions are less demanding. Moreover, these conditions are also necessary for any other equilibrium concept. Finally, we study one specific application: we propose a simple and natural mechanism for the case where each juror is biased in favor of one and only one (different) contestant.
    Keywords: Mechanism design, Social choice
    JEL: C72 D71 D78
    Date: 2009–06
  13. By: Marcel Fafchamps (University of Oxford); Marco van der Leij (Universidad de Alicante); Sanjeev Goyal (Department of Economics, Queen Mary)
    Abstract: The matching of individuals in teams is a key element in the functioning of an economy. The network of social ties can potentially transmit important information on abilities and reputations and also help mitigate matching frictions by facilitating interactions among ¿screened¿ individuals. We conjecture that the probability of i and j forming a team is falling in the distance between i and j in the network of existing social ties. The objective of this paper is to empirically test this conjecture. We examine the formation of coauthor relations among economists over a twenty year period. Our principal finding is that a new collaboration emerges faster among two researchers if they are ¿closer" in the existing coauthor network among economists. This proximity effect on collaboration is strong: being at a network distance of 2 instead of 3, for instance, raises the probability of initiating a collaboration by 27 percent. Research collaboration takes place in an environment where fairly detailed information concerning individual ability and productivity -reflected in publications, employment history, etc.- is publicly available. Our finding that social networks are powerful even in this setting suggests that they must affect matching processes more generally.
    Keywords: coauthorship network, matching, network effects, network formation.
    JEL: C78 D83 D85
    Date: 2009–01
  14. By: Michael McBride (Department of Economics, University of California-Irvine); Stergios Skaperdas (Department of Economics, University of California-Irvine)
    Abstract: In many instances of potential violent or non-violent conflict, the future strategic positions of adversaries are very different when there is open conflict than when there is settlement. Then, we show that as the future becomes more important, open conflict becomes more likely than settlement. We discuss the applicability of this finding in war, litigation, and other settings, and test it it in a laboratory experiment. We find that subjects are more likely to engage in risky conflict as the future becomes more important.
    Keywords: Conflict; Llitigation; Property rights; Folk theorem
    JEL: C72 C91 D01 D74
    Date: 2009–05
  15. By: Svetlana Pevnitskaya (Department of Economics, Florida State University); Dmitry Ryvkin (Department of Economics, Florida State University)
    Abstract: Bargaining fails when participants do not reach an agreement despite an opportunity for Pareto improvement. Numerous experimental studies found that in asymmetric bargaining, where one party proposes the terms and the other can accept or reject the proposal, low offers are typically rejected. We conduct an experiment where upon acceptance the responding party can apply costly rewards and/or punishments, and find that the likelihood of acceptance increases. The least generous offers have the highest chance to be accepted in the presence of punishment alone. Proposers are most generous when responders can both reward and punish, and offer least (even compared to the baseline) when responders can only reward. The optimal scheme of rewards and punishments varies with the population of proposers, indicating that the appropriate scheme can potentially compensate for a mismatch between proposers' and responders' social norms.
    Keywords: bargaining, rewards and punishments, experimental economics, ultimatum
    JEL: C78 C90
    Date: 2009–04
  16. By: Chris Geller (Deakin University); Jamie Mustard (Deakin University); Ranya Shahwan
    Abstract: Experiments evaluate the fit of the Shapley-Shubik Power Index to a controlled human environment. Subjects with differing votes divide a fixed purse by majority rule in online chat rooms under supervision. Earnings serve as a measure of power. Chat rooms and processes for selecting subjects reduce or eliminate extraneous political forces, leaving logrolling as the primary political force. Initial proposals by subjects for division of the purse allow measurement of effects from focal points and transaction costs. Net results closely fit the Shapley-Shubik Power Index.
    Keywords: Voting, Power Index, Focal Point, Shapley-Shubik, Experiment
    JEL: C71 C78 C92
    Date: 2007–11–23
  17. By: Roland Kirstein (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: When appointing a representative in negotiations, the principal can o er his agent a offer contract that promises a percentage of the bargaining result, and a bonus payment result (or penalty) if bargaining fails. Conventional wisdom of contract theory seems to suggest that the share should be as great as possible to provide proper incentives for a risk-neutral agent, while the bonus should be small or even negative. Drawing on the symmetric Nash bargaining solution, this paper argues that the optimal share is rather small, whereas the optimal bonus is rather large.
    Keywords: Endogenous threat points, marginal valuation, strategic moves
    JEL: C78 M52
    Date: 2009–01
  18. By: DE VILLEMEUR, Etienne; FLOCHEL, Laurent; VERSAEVEL, Bruno
    JEL: C72 D43 L13
    Date: 2009–03

This nep-gth issue is ©2009 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.