nep-gth New Economics Papers
on Game Theory
Issue of 2009‒07‒17
fifteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Stable Sets in Three Agent Pillage Games By Manfred Kerber; Colin Rowat
  3. Unattainable Payoffs for Repeated Games of Private Monitoring By Josh Cherry; Lones Smith
  4. Cooperation, Imitation and Correlated Matching By Javier Rivas
  5. Communication, Advice and Beliefs in an Experimental Public Goods Game By Ananish Chaudhuri; Pushkar Maitra; Susan Skeath
  6. OBLIGATION RULES By Gustavo Bergantiños; Anirban Kar
  7. Using Turn Taking to Mitigate Conflict and Coordination Problems in the Repeated Battle of the Sexes Game By Sau-Him Paul lau; Vai-Lam Mui
  9. The High/Low Divide: Self-Selection by Values in Auction Choice By Radosveta Ivanova-Stenzel; Timothy Salmon
  10. Frictional Matching: Evidence from Law School Admission By Pascal Courty; Mario Pagliero
  11. Decision-making Procedures: A General Theory and Its Field Experimental Test By Aldashev, Gani; Kirchsteiger, Georg; Sebald, Alexander
  15. Who Matters in Coordination Problems? By Jozsef Sakovics; Jakub Steiner

  1. By: Manfred Kerber; Colin Rowat
    Abstract: Jordan [2006, “Pillage and property”, JET] characterises stable sets for three special cases of ‘pillage games’. For anonymous, three agent pillage games we show that: when the core is non-empty, it must take one of five forms; all such pillage games with an empty core represent the same dominance relation; when a stable set exists, and the game also satisfies a continuity and a responsiveness assumption, it is unique and contains no more than 15 elements. This result uses a three step procedure: first, if a single agent can defend all of the resources against the other two, these allocations belong to the stable set; dominance is then transitive on the loci of allocations on which the most powerful agent can, with any ally, dominate the third, adding the maximal elements of this set to the stable set; finally, if any allocations remain undominated or not included, the game over the remaining allocations is equivalent to the ‘majority pillage game’, which has a unique stable set [Jordan and Obadia, 2004, “Stable sets in majority pillage games”, mimeo]. Non-existence always reflects conditions on the loci of allocations along which the most powerful agent needs an ally. The analysis unifies the results in Jordan [2006] when n = 3.
    Keywords: pillage, cooperative game theory, core, stable sets, algorithm
    JEL: C63 C71 P14
    Date: 2009–06
  2. By: Bhaskar Dutta (Department of Economics University of Warwick); Lars Ehlers (Départment de Sciences Économiques Université de Montréal, Québec); Anirban Kar (Department of Economics, Delhi School of Economics, Delhi, India)
    Abstract: We provide new characterization results for the value of games in partition function form. In particular, we use the potential of a game to define the value. We also provide a characterization of the class of values which satises one form of reduced game consistency.
    Keywords: Shapley value, potential, consistency, games in partition function form.
    Date: 2008–07
  3. By: Josh Cherry; Lones Smith
    Date: 2009–07–01
  4. By: Javier Rivas
    Abstract: We study a setting where players are matched into pairs to play a Prisoners' Dilemma game. In the model presented, players are not rational; they simply imitate the more successful actions they observe. Furthermore, a certain correlation is added to the matching process: players that belong to a pair were both parties cooperate repeat partner next period whilst all other players are randomly matched into pairs. Although cooperation vanishes for any initial interior condition under complete random matching, the correlation in the matching process considered in this paper makes a signi cant amount of cooperation the unique outcome under mild conditions. Furthermore, it is shown that no separating equilibrium, i.e. a situation where cooperators and defectors are not matched together, exits.
    Keywords: Cooperation; Correlated Matching; Imitation; Prisoners' Dilemma
    JEL: C71 C73 C78
    Date: 2009–06
  5. By: Ananish Chaudhuri; Pushkar Maitra; Susan Skeath
    Abstract: We study the efficacy of horizontal versus vertical social learning processes in a public goods game. In one treatment, subjects about to play the game can make nonbinding common knowledge announcements about their intentions while, in another, subjects do not communicate directly with group members but receive common knowledge advice from the previous generation of players. A third treatment has subjects play with neither communication nor advice. We find that groups that engage in peer communication achieve much lower levels of contribution to the public good than do groups that receive advice. We attribute this finding in part to the fact that some subjects in the communication treatment opted to make no announcement during the communication phase of play.
    Keywords: Voluntary contributions mechanism, Advice, Communication, Beliefs, Experiments.
    JEL: C92 C33 C34
    Date: 2009–06
  6. By: Gustavo Bergantiños (Research Group in Economic Analysis University of Vigo, Spain); Anirban Kar (Department of Economics, Delhi School of Economics, Delhi, India)
    Abstract: We provide a characterization of the obligation rules in the context of minimum cost spanning tree games. We also explore the relation between obligation rules and random order values of the irreducible cost game - it is shown that the later is a subset of the obligation rules. Moreover we provide a necessary and sucient condition on obligation function such that the corresponding obligation rule coincides with a random order value.
    Date: 2008–07
  7. By: Sau-Him Paul lau; Vai-Lam Mui
    Abstract: The Battle of the Sexes game, which captures both conflict and coordination problems, has been applied to a wide range of situations. We show that, by reducing conflict of interests and enhancing coordination, (eventual) turn taking supported by a “turn taking with independent randomizations†strategy allows the players to engage in intertemporal sharing of the gain from cooperation. Using this insight, we decompose the benefit from turn taking into conflict-mitigating and coordination-enhancing components. Our analysis suggests that an equilibrium measure of the “intertemporal degree of conflict†provides an intuitive way to understand the sources of welfare gain from turn taking in the repeated Battle of the Sexes game. We find that when this equilibrium measure is higher, players behave more aggressively and the welfare gain from turn taking is smaller.
    Keywords: Battle of the Sexes game, turn taking, conflict-mitigating, coordinationenhancing
    JEL: C70 C72
    Date: 2009–05
  8. By: Timothy N Cason; Vai-Lam Mui
    Abstract: This paper presents a laboratory collective resistance (CR) game to study how different forms of repeated interactions, with and without communication, can help coordinate subordinates’ collective resistance to a “divide-and-conquer†transgression against their personal interests. In the one-shot CR game, a first–mover (the “leaderâ€) decides whether to transgress against two responders. Successful transgression increases the payoff of the leader at the expense of the victim(s) of transgression. The two responders then simultaneously decide whether to challenge the leader. The subordinates face a coordination problem in that their challenge against the leader’s transgression will only succeed if both of them incur the cost to do so. The outcome without transgression can occur in equilibrium with standard money-maximizing preferences with repeated interactions, but this outcome is not an equilibrium with standard preferences when adding non-binding subordinate “cheap talk†communication in the one-shot game. Nevertheless, we find that communication (in the one-shot game) is at least as effective as repetition (with no communication) in reducing the transgression rate. Moreover, communication is better than repetition in coordinating resistance, because it makes it easier for subordinates to identify others who have social preferences and are willing to incur the cost to punish a violation of social norms.
    Keywords: Communication, Cheap Talk, Collective Resistance, Divide-and-Conquer, Laboratory Experiment, Repeated Games, Social Preferences
    JEL: C92 D74
    Date: 2009–06
  9. By: Radosveta Ivanova-Stenzel (Department of Economics, Humboldt-University of Berlin); Timothy Salmon (Department of Economics, Florida State University)
    Abstract: Most prior theoretical and experimental work involving auction choice has assumed bidders only find out their value after making a choice of which auction to enter. In this paper we examine whether or not subjects knowing their value prior to making an auction choice impacts their choice decision and/or the outcome of the auctions. The results show a strong impact. Subjects with low values choose the first price sealed bid auction more often while subjects with high values choose the ascending auction more often. The average number of bidders in both formats ended up being on average the same, but due to the self-selection bias the ascending auction raised as much revenue on average as the first price sealed bid auction. The two formats also generate efficiency levels that are roughly equivalent though the earnings of bidders are higher in the ascending auction.
    Keywords: bidder preferences, private values, sealed bid auctions, ascending auctions, endogenous entry
    JEL: C91 D44
    Date: 2009–06
  10. By: Pascal Courty; Mario Pagliero
    Abstract: We measure friction in the matching of students and law schools as the number of unnecessary student applications and school admissions that have to be undertaken per actual matriculation. We show that friction increases with student and school attractiveness, but decreases for top schools and students. We discuss connections with the literature on frictional matching.
    Keywords: college admission, frictional matching, assortative matching, student portfolio, school standard
    JEL: D02 C78
    Date: 2009
  11. By: Aldashev, Gani; Kirchsteiger, Georg; Sebald, Alexander
    Abstract: It is a persistent finding in psychology and experimental economics that people's behavior is not only shaped by outcomes but also by decision-making procedures. In this paper we develop a general framework capable of modelling these procedural concerns. Within the context of psychological games we define procedures as mechanisms that influence the probabilities of reaching different endnodes. We show that for such procedural games a sequential psychological equilibrium always exists. Applying this approach within a principal-agent context we show that the way less attractive jobs are allocated is crucial for the effort exerted by agents. This prediction is tested in a field experiment, where some subjects had to type in data, whereas others had to verify the data inserted by the typists. The controllers' wage was 50% higher than that of the typists. In one treatment the less attractive typists' jobs were allocated directly, whereas in the other treatment the allocation was done randomly. As predicted, random allocation led to higher effort levels of the typists than direct appointment.
    Keywords: Appointment Procedures; Procedural Concerns; Psychological Game Theory
    JEL: A13 C70 C93 D63
    Date: 2009–07
  12. By: Chongwoo Choe; Shingo Ishiguro
    Abstract: This paper studies internal organization of a firm using an incomplete contracting approach `a la Grossman-Hart-Moore and Aghion-Tirole. The two key ingredients of our model are externalities among tasks that require coordination, and investment in task-specific human capital. We compare three types of organizational structures: centralization where the decision authority for all tasks is given to the party without task-specific human capital, decentralization where the decision authority for each task is given to the party with necessary human capital, and hierarchical delegation where the decision authority is allocated in a hierarchical fashion. Centralization is optimal when externalities and the requisite coordination are the main issue in organization design. Decentralization is optimal if the investment in human capital is more important. Hierarchical delegation is optimal in the intermediate case. We also discuss the optimal pattern of hierarchical delegation as well as several directions extending the basic model.
    Keywords: Delegation, Incomplete Contracts, Hierarchy
    JEL: C70 D23 L22
    Date: 2009–06
  13. By: Chongwoo Choe; In-Uck Park
    Abstract: In a typical corporate hierarchy, the manager is delegated the authority to make strategic decisions, and to contract with other employees. We study when such delegation can be optimal. In centralization, the owner retains the authority, which fails to motivate the manager to acquire valuable information, leading to suboptimal decisions and inefficient incentive provision to the worker. Beneficial delegation should necessarily motivate the manager to acquire information, which is possible only when the authority is delegated to the manager. We also document comparative statics results regarding the benefits of delegation and discuss when delegation is more likely to dominate centralization.
    Keywords: Corporate hierarchies, information gathering, delegation, centralization.
    JEL: C72 D21 D82 L22
    Date: 2009–06
  14. By: Dyuti Banerjee; Anupama Sethi
    Abstract: In this paper we consider different forms of intra-group transfers and the resulting type of group formation. We introduce the concept of partial joint liability and revenue sharing and show that this form of intra-group transfer may result in heterogeneous group formation. Its uniqueness is established by the fact that other transfer schemes always result in homogenous group formation.
    Keywords: Heterogeneous group formation, partial joint liability and revenue sharing
    JEL: O12 O16
    Date: 2009–06
  15. By: Jozsef Sakovics; Jakub Steiner
    Abstract: We consider a common investment project that is vulnerable to a self-fulfilling coordination failure and hence is strategically risky. Based on their private information, agents { who have heterogeneous investment incentives - form expectations or "sentiments" about the project's outcome. We find that the sum of these sentiments is constant across different strategy profiles and it is independent of the distribution of incentives. As a result, we can think of sentiment as a scarce resource divided up among the different payoff types. Applying this finding, we show that agents who benefit little from the project's success have a large impact on the coordination process. The agents with small benefits invest only if their sentiment towards the project is large per unit investment cost. As the average sentiment is constant, a subsidy decreasing the investment costs of these agents will "free up" a large amount of sentiment, provoking a large impact on the whole economy. Intuitively, these agents, insensitive to the project's outcome and hence to the actions of others, are influential because they modify their equilibrium behavior only if the others change theirs substantially.
    Keywords: Heterogeneous Agents, Global Games, Poverty Traps, Strategic Complementarity, Representative Agent.
    JEL: C7 D8 O12
    Date: 2008–06–22

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.
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