nep-gth New Economics Papers
on Game Theory
Issue of 2009‒07‒11
nine papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Social Norms, Information and Trust among Strangers: Theory and Evidence By John Duffy; Huan Xie; Yong-Ju Lee
  2. Modeling a Multi-Choice Game Based on the Spirit of Equal Job Opportunities (New) By Hsiao, Chih-Ru; Chiou, Wen-Lin
  3. Effizienzaspekte alternativer Streitbeilegung By Roland Kirstein
  4. Never change a winning team: The effect of substitutions on success in football tournaments By Mengel Friederike
  5. Are Social Preferences Skin Deep? Dictators under Cognitive Load By Hauge, Karen Evelyn; Brekke, Kjell Arne; Johansson, Lars-Olof; Johansson-Stenman, Olof; Svedsäter, Henrik
  6. The Incentives to Participate in and the Stability of International Climate Coalitions: A Game-Theoretic Approach Using the WITCH Model By Valentina Bossetti; Carlo Carraro; Enrica De Cian; Romain Duval; Emanuele Massetti; Massimo Tavoni
  7. Strong composition down. Characterizations of new and classical bankruptcy rules. By Ricardo Martinez
  8. Budget deficits as devices for appropriating extra funds: An investigation of sharing rules By Grepperud, Sverre
  9. Cooperation in transboundary water sharing under climate change By Bhaduri, Anik; Manna, Utpal; Barbier, Edward; Liebe, Jens

  1. By: John Duffy; Huan Xie; Yong-Ju Lee
    Abstract: How do norms of trust and reciprocity arise? We investigate this question by examining behavior in an experiment where subjects play a series of indefinitely repeated trust games. Players are randomly and anonymously matched each period. The parameters of the game are chosen so as to support trust and reciprocity as a sequential equilibrium when no reputational information is available. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and how long that history must be. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information.
    JEL: C72 C91 C92
    Date: 2009–07
  2. By: Hsiao, Chih-Ru; Chiou, Wen-Lin
    Abstract: The H&R Shapley value defined by Hsiao and Raghavan for multi-choice cooperative game is redundant free. If the H&R Shapley value is used as the solution of a game, there won't be any objection to a player's taking redundant actions. Therefore, the spirit of the law on equal job opportunities is automatically fulfilled. Also, if the H&R Shapley value is used as the solution of a game, it makes no difference to the players whether they have the same number of options or not. Moreover, the D&P Shapley value, the P&Z Shapley value and the WAC value are linear combinations of the H&R Shapley value, hence, they have all the same dummy free properties and the independent property as does the H&R Shapley value. Finally the N&P Shapley value is not redundant free.
    Keywords: Shapley value; multi-choice cooperative game; redundant free; independent of non-essential players.
    JEL: C7 K31
    Date: 2009–07–01
  3. By: Roland Kirstein (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: The paper compares the Nash bargaining solution of a simple settlement game (with perfect and complete information and imperfect decision making judges) to the equilibrium results of a trial game without settlement stage. The comparison allows for an evaluation of the efficiency of settlement with regard to primary and secondary cost. Das Paper stellt die Nash-Verhandlungslösung eines Vergleichsspiels (mit perfekter, vollständiger Information und imperfekten Gerichten) neben die Gleichgewichtslösungen eines Klagespiels ohne Vergleichsstufe. Die Ergebnisse erlauben Aussagen zu primären und tertiären Kosten (mithin zur Effizienz) von Prozessvergleichen.
    Keywords: Zivilprozess, Vergleich, trial, efficiency, Nash bargaining solution
    JEL: K41 C78
    Date: 2008–09
  4. By: Mengel Friederike (METEOR)
    Abstract: We identify a strong and significant negative effect of substitutions in (irrelevant) early games in worldcup and olympic football tournaments on performance in later rounds. We argue that this effect is due to the psychological consequences of such a decision and evaluate alternative possible explanations.
    Keywords: Economics (Jel: A)
    Date: 2009
  5. By: Hauge, Karen Evelyn (Department of Economics, Oslo University); Brekke, Kjell Arne (Department of Economics, Oslo University); Johansson, Lars-Olof (Department of Psychology, University of Gothenburg); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University); Svedsäter, Henrik (Organisational Behaviour, London Business School)
    Abstract: We study the impact of cognitive load in dictator games to test two conflicting views of moral behavior. Are social preferences skindeep in the sense that they are the result of humans’ cognitive reasoning while the natural instinct is selfish, or is rather the natural instinct to share fairly while our cognitive capacities are able to adjust moral principles in a selfserving manner? Some previous studies in more complex settings give conflicting answers, and to disentangle different possible mechanisms we use simple games. We study both charitable giving and the behavior of dictators under high and low cognitive load, where high cognitive load is assumed to reduce the impact of cognitive processes on behavior. In the dictator game we use both a give frame, where the dictator is given an amount and may share some or all of it to a partner, and a take frame, where dictators may take from an amount initially allocated to the partner. The results from four different studies indicate that the effect of cognitive load is small if at all existing.<p>
    Keywords: Social Preferences; experiments; dictator game; cognitive load
    JEL: C91
    Date: 2009–07–03
  6. By: Valentina Bossetti; Carlo Carraro; Enrica De Cian; Romain Duval; Emanuele Massetti; Massimo Tavoni
    Abstract: This paper uses WITCH, an integrated assessment model with a game-theoretic structure, to explore the prospects for, and the stability of broad coalitions to achieve ambitious climate change mitigation action. Only coalitions including all large emitting regions are found to be technically able to meet a concentration stabilisation target below 550 ppm CO2eq by 2100. Once the free-riding incentives of non-participants are taken into account, only a “grand coalition” including virtually all regions can be successful. This grand coalition is profitable as a whole, implying that all countries can gain from participation provided appropriate transfers are made across them. However, neither the grand coalition nor smaller but still environmentally significant coalitions appear to be stable. This is because the collective welfare surplus from cooperation is not found to be large enough for transfers to offset the free-riding incentives of all countries simultaneously. Some factors omitted from the analysis, which might improve coalition stability, include the co-benefits from mitigation action, the costless removal of fossil fuel subsidies, as well as alternative assumptions regarding countries’ bargaining behaviour.<P>Incitations à participer à des coalitions internationales de lutte contre le changement climatique et stabilité de ces coalitions : Une analyse en théorie des jeux à l’aide du modèle WITCH<BR>Cet article utilise WITCH, un modèle d’évaluation intégré doté d’une structure en théorie des jeux, pour explorer les perspectives et la stabilité de larges coalitions de lutte contre le changement climatique. Il ressort que seules des coalitions incluant toutes les principales régions émettrices ont la capacité technique d’atteindre une cible de stabilisation des concentrations inférieure à 550 ppm CO2eq à l’horizon 2100. Une fois pris en compte les comportements de passager clandestin des régions non-participantes, seule une « grande coalition » regroupant pratiquement toutes les régions du monde est susceptible d’atteindre une telle cible. Cette grande coalition est profitable, impliquant qu’il est toujours possible de mettre en place un ensemble de transferts entre pays tel que tous gagnent à participer. Cependant, ni la grande coalition, ni des coalitions de moindre de taille mais néanmoins significatives d’un point de vue environnemental, n’apparaissent stables. Ceci tient au fait que le surplus collectif engendré par la coopération n’est pas suffisant pour permettre des transferts offrant à tous les pays simultanément les gains qu’ils tireraient d’un comportement de passager clandestin. Certains facteurs non pris en compte ici pourraient améliorer la stabilité des coalitions, tels les bénéfices connexes de la lutte contre le changement climatique, la possibilité de supprimer sans coût les subventions aux énergies fossiles, ou encore des hypothèses alternatives concernant le comportement de négociation des pays.
    Keywords: climate policy, politique climatique, climate coalition, coalition climatique, game theory, théorie des jeux, free riding, passager clandestin
    JEL: C68 C72 D58 Q54
    Date: 2009–06–30
  7. By: Ricardo Martinez (Department of Economic Theory, Universidad de Málaga)
    Abstract: This paper is devoted to the study of claims problems. We identify the family of rules that satisfy strong composition down (robustness with respect to reevaluations of the estate) and consistency (robustness with respect to changes in the set of agents) together. Such a family is the Þxed path rules, which is a generalization of the weighted constrained equal awards rules. In addition, once strong composition down and consistency are combined with homogeneity only the weighted constrained equal awards rules survive. We also prove that the constrained equal awards rule is the only rule that satisÞes strong composition down, consistency and equal treatment of equals together.
    Keywords: strong composition down, Þxed path rules, constrained equal awards rule, weighted constrained equal awards rules
    JEL: D63 D70
    Date: 2009–06
  8. By: Grepperud, Sverre (Institute of Health Management and Health Economics)
    Abstract: This paper considers a model with a sponsor and several bureaus to analyse the role of sharing rules. Various incentives for budget overspending are identified; among them the overspending of budgets due to soft budget constraints. Four different sharing rules are also considered that differ with respect to their strategic properties and whether the share is exogenous or endogenous. <p> The results show that sharing on the basis of egalitarian principles yields a lower budget deficit than sharing based upon relative deficits both in symmetric and asymmetric games. The ranking of deficits that follow from sharing based upon relative budgets and sharing that equalises ex-post debt ratios is shown to depend on the properties of the health production function.
    Keywords: Budget deficits; bailouts; appropriating activities
    JEL: D29 H72 I18
    Date: 2009–06–29
  9. By: Bhaduri, Anik; Manna, Utpal; Barbier, Edward; Liebe, Jens
    Abstract: As multiple countries share a river, the likelihood of a water resource conflict from climate change could be higher between countries. In this paper, we demonstrate how countries can cooperate in transboundary water sharing in a sustainable way, given the impacts of climate change. We illustrate the case of water sharing of the Volta River between the upstream and downstream country, Burkina Faso and Ghana respectively, where the latter country faces a tradeoff of water use between agriculture in the north and production of hydro energy in the south. In the framework of a stochastic Stackelberg differential game, we have shown how the issue of water sharing could be linked to hydropower export that can make water sharing between the countries sustaining in the event of climate change. Our results indicate that during cooperation, Ghana will have an opportunity to increase its water abstraction for agriculture, which has remained largely restricted. We also find that the equilibrium strategies in the long run steady state distribution are stable even with increasing variances of water flow.
    Keywords: Climate Change, Water sharing, Resource /Energy Economics and Policy, Risk and Uncertainty,
    Date: 2009–06

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.