nep-gth New Economics Papers
on Game Theory
Issue of 2009‒07‒28
25 papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Endogenous Network Dynamics By Frank H. Page; Myrna H. Wooders
  2. The Kalai-Smorodinsky Solution with Loss Aversion By Driesen Bram; Perea Andrés; Peters Hans
  3. Connections Among Farsighted Agents By Vincent Vannetelbosch; Gilles Grandjean; Ana Mauleon
  4. Contractually Stable Networks By Vincent Vannetelbosch; Jean-François Caulier; Ana Mauleon
  5. Measuring influence in command games By Michel Grabisch; Agnieszka Rusinowska
  6. A Relation-algebraic Approach to Simple Games By Rudolf Berghammer; Harrie De Swart; Agnieszka Rusinowska
  7. Optimal Equilibria of the Best Shot Game By Paolo Pin; Luca Dall'Asta; Abolfazl Ramezanpour
  8. Estimating Simultaneous Games with Incomplete Information under Median Restrictions By Xun Tang
  9. Coordination in Evolving Networks with Endogenous Decay By Francesco Feri; Miguel A.Meléndez-Jiménez
  10. Incorporating Fairness Motives into the Impulse Balance Equilibrium and Quantal Response Equilibrium Concepts: An Application to 2x2 Games By Alessandro Tavoni
  11. Team Formation in a Network By Markus Kinateder
  12. Kingmakers and Leaders in Coalition Formation By Marc Kilgour; Steven J. Brams
  13. Tit-for-tat Strategies in Repeated Prisoner's Dilemma Games: Evidence from NCAA Football By Humphreys, Brad; Ruseski, Jane
  14. Under-connected and Over-connected Networks By Tim Hellmann; Berno Buechel
  15. Power in the Heterogeneous Connections Model: The Emergence of Core-Periphery Networks By Dotan Persitz
  16. Constrained School Choice: An Experimental Study By Guillaume Haeringer; Caterina Calsamiglia; Flip Klijn
  17. Dynamics, Stability, and Foresight in the Shapley-Scarf Housing Market By Yoshio Kamijo; Ryo Kawasaki
  18. The Hoede-Bakker index modified to the Shapley-Shubik and Holler-Packel indices By Agnieszka Rusinowska
  19. WHEN CONSENSUS CHOICE DOMINATES INDIVIDUALISM: Jensen's Inequality and Collective Decisions under Uncertainty By Charles F. Manski
  20. Matching Markets with Signals By Alexey Kushnir
  21. Dynamic Core-Theoretic Cooperation in a Two-Dimensional International Environmental Model By Marc Germain; Henry Tulkens; Alphonse Magnus
  22. Subgame Perfect Implementation with Almost Perfect Information and the Hold-Up Problem By Philippe Aghion; Drew Fudenberg; Richard T. Holden
  23. Feasibility Constraints and Protective Behavior in Efficient Kidney Exchange By Antonio Nicoló; Carmelo Rodríguez Álvarez
  24. What Do We Expect from Our Friends? By Quoc-Anh Do; Stephen Leider; Markus M. Mobius; Tanya Rosenblat
  25. Optimal Collusion with Limited Severity Constraint By Etienne Billette de Villemeur; Laurent Flochel; Bruno Versaevel

  1. By: Frank H. Page (Indiana University); Myrna H. Wooders
    Abstract: In all social and economic interactions, individuals or coalitions choose not only with whom to interact but how to interact, and over time both the structure (the “with whom”) and the strategy (“the how”) of interactions change. Our objectives here are to model the structure and strategy of interactions prevailing at any point in time as a directed network and to address the following open question in the theory of social and economic network formation: given the rules of network and coalition formation, the preferences of individuals over networks, the strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emerge and persist. Our main contributions are (i) to formulate the problem of network and coalition formation as a dynamic, stochastic game, (ii) to show that this game possesses a stationary correlated equilibrium (in network and coalition formation strategies), (iii) to show that, together with the trembles of nature, this stationary correlated equilibrium determines an equilibrium Markov process of network and coalition formation, and (iv) to show that this endogenous process possesses a finite, nonempty set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. We also extend to the setting of endogenous Markov dynamics the notions of pairwise stability (Jackson-Wolinsky, 1996), strong stability (Jacksonvan den Nouweland, 2005), and Nash stability (Bala-Goyal, 2000), and we show that in order for any network-coalition pair to persist and be stable (pairwise, strong, or Nash) it is necessary and sufficient that the pair reside in one of finitely many basins of attraction. The results we obtain here for endogenous network dynamics and stochastic basins of attraction are the dynamic analogs of our earlier results on endogenous network formation and strategic basins of attraction in static, abstract games of network formation (Page and Wooders, 2008), and build on the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005).
    Keywords: Endogenous Network Dynamics, Dynamic Stochastic Games of Network Formation, Equilibrium Markov Process of Network Formation, Basins of Attraction, Harris Decomposition, Ergodic Probability Measures, Dynamic Path Dominance Core, Dynamic Pairwise Stability
    JEL: A14 C71 C72
    Date: 2009–05
  2. By: Driesen Bram; Perea Andrés; Peters Hans (METEOR)
    Abstract: We consider bargaining games under the assumption that bargainers are loss averse, i.e. experience disutility from obtaining an outcome lower than some reference point. We follow the approach of Shalev (2002) by imposing the self-supporting condition on a solution. Given a bargaining game, we say outcome z is self-supporting under a given bargaining solution, whenever transforming the game using outcome z as reference point, yields a transformed game in which the solution is z.We show that n-player bargaining games have a unique self-supporting outcome under the Kalai-Smorodinsky (KS) solution. We define a bargaining solution, giving exactly this outcome, and characterize it by the standard axioms of Scale Invariance [SI], Individual Monotonicity [IM], and Strong Individual Rationality [SIR], and a novel axiom called Proportional Concession Invariance [PCI].A bargaining solution satisfies PCI if moving the utopia point in the direction of the solution outcome, does not change this outcome.
    Keywords: microeconomics ;
    Date: 2009
  3. By: Vincent Vannetelbosch (Université catholique de Louvain); Gilles Grandjean (CORE, Université catholique de Louvain); Ana Mauleon (NRS and CEREC, Facultés universitaires Saint-Louis and FNRS and CORE, Université catholique de Louvain)
    Abstract: We study the stability of social and economic networks when players are farsighted. In particular, we examine whether the networks formed by farsighted players are different from those formed by myopic players. We adopt Herings, Mauleon and Vannetelbosch’s (Games and Economic Behavior, forthcoming) notion of pairwise farsightedly stable set. We first investigate in some classical models of social and economic networks whether the pairwise farsightedly stable sets of networks coincide with the set of pairwise (myopically) stable networks and the set of strongly efficient networks. We then provide some primitive conditions on value functions and allocation rules so that the set of strongly efficient networks is the unique pairwise farsightedly stable set. Under the componentwise egalitarian allocation rule, the set of strongly efficient networks and the set of pairwise (myopically) stable networks that are immune to coalitional deviations are the unique pairwise farsightedly stable set if and only if the value function is top convex.
    Keywords: Farsighted Players, Stability, Efficiency, Connections Model, Buyerseller Networks
    JEL: A14 C70 D20
    Date: 2009–05
  4. By: Vincent Vannetelbosch (CORE, Université catholique de Louvain); Jean-François Caulier (Universitaires Saint-Louis); Ana Mauleon (FNRS and CEREC, CORE, Université catholique de Louvain)
    Abstract: We develop a theoretical framework that allows us to study which bilateral links and coalition structures are going to emerge at equilibrium. We define the notion of coalitional network to represent a network and a coalition structure, where the network specifies the nature of the relationship each individual has with his coalition members and with individuals outside his coalition. To predict the coalitional networks that are going to emerge at equilibrium we propose the concept of contractual stability which requires that any change made to the coalitional network needs the consent of both the deviating players and their original coalition partners. We show that there always exists a contractually stable coalitional network under the simple majority decision rule and the component-wise egalitarian or majoritarian allocation rules. Moreover, requiring the consent of group members may help to reconcile stability and efficiency.
    Keywords: Networks, Coalition Structures, Contractual Stability, Allocation Rules
    JEL: A14 C70
    Date: 2009–06
  5. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Agnieszka Rusinowska (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: In the paper, we study a relation between command games proposed by Hu and Shapley and an influence model. We show that our framework of influence is more general than the framework of the command games. We define several influence functions which capture the command structure. These functions are compatible with the command games, in the sense that each commandable player for a coalition in the command game is a follower of the coalition under the command influence function. Some of the presented influence functions are equivalent to the command games, that is, they are compatible with the command games, and additionally each follower of a coalition under the command influence function is also a commandable player for that coalition in the command games. For some influence functions we define the equivalent command games. We show that not for all influence functions the compatible command games exist. Moreover, we propose a more general definition of the influence index and show that under some assumptions, some power indices, which can be used in the command games, coincide with some expressions of the weighted influence indices. Both the Shapley-Shubik index and the Banzhaf index are equal to a difference between the weighted influence indices under some influence functions, and the only difference between these two power indices lies in the weights for the influence indices. An example of the Confucian model of society is broadly examined.
    Keywords: influence function; follower; influence index; command game; commandable player; Shapley-Shubik index; Banzhaf index; Coleman indices; König-Bräuninger index
    Date: 2009–08
  6. By: Rudolf Berghammer (Computer-Aided Program Development - Institute of Computer Science - Christian-Albrechts-Universität, Kiel); Harrie De Swart (Faculteit Wijsbegeerte-Logica en taalanalyse - Universiteit van Tilburg); Agnieszka Rusinowska (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: Simple games are a powerful tool to analyze decision-making and coalition formation in social and political life. In this paper, we present relation-algebraic models of simple games and develop relational algorithms for solving some basic problems of them. In particular, we test certain fundamental properties of simple games (being monotone, proper, respectively strong) and compute specific players (dummies, dictators, vetoers, null players) and coalitions (minimal winning coalitions and vulnerable winning coalitions). We also apply relation-algebra to determine central and dominant players, swingers and power indices (the Banzhaf, Holler-Packel and Deegan-Packel indices). This leads to relation-algebraic specifications, which can be executed with the help of the BDD-based tool RelView after a simple translation into the tool's programming language. In order to demonstrate the visualization facilities of RelView we consider an example of the Catalonian Parliament after the 2003 election.
    Keywords: relation algebra; RelView; simple game; winning coalition; swinger; dominant player; central player; power index
    Date: 2009
  7. By: Paolo Pin (Università degli Studi di Siena); Luca Dall'Asta; Abolfazl Ramezanpour (Politecnico di Torino; he Abdus Salam International Centre for Theoretical Physics)
    Abstract: We consider any network environment in which the “best shot game” is played. This is the case where the possible actions are only two for every node (0 and 1), and the best response for a node is 1 if and only if all her neighbors play 0. A natural application of the model is one in which the action 1 is the purchase of a good, which is locally a public good, in the sense that it will be available also to neighbors. This game will typically exhibit a great multiplicity of equilibria. Imagine a social planner whose scope is to find an optimal equilibrium, i.e. one in which the number of nodes playing 1 is minimal. To find such an equilibrium is a very hard task for any non-trivial network architecture. We propose an implementable mechanism that, in the limit of infinite time, reaches an optimal equilibrium, even if this equilibrium and even the network structure is unknown to the social planner.
    Keywords: Networks, Best Shot Game, Simulated Annealing
    JEL: C61 C63 D85 H41
    Date: 2009–05
  8. By: Xun Tang (Department of Economics, University of Pennsylvania)
    Abstract: I estimate a simultaneous discrete game with incomplete information where players’ private information are only required to be median independent of observed states and can be correlated with observable states. This median restriction is weaker than other assumptions on players’ private information in the literature (e.g. perfect knowledge of its distribution or its independence of the observable states). I show index coefficients in players’ utility functions are point-identified under an exclusion restriction and fairly weak conditions on the support of states. This identification strategy is fundamentally different from that in a single-agent binary response models with median restrictions, and does not involve any parametric assumption on equilibrium selection in the presence of multiple Bayesian Nash equilibria. I then propose a two-step extreme estimator for the linear coefficients, and prove its consistency.
    Keywords: Games with incomplete information, semiparametric identification, median restrictions, consistent estimation
    JEL: C14 C35 C51
    Date: 2009–04–30
  9. By: Francesco Feri; Miguel A.Meléndez-Jiménez
    Abstract: This paper studies an evolutionary model of network formation with endogenous decay, in which agents benefit both from direct and indirect connections. In addition to forming (costly) links, agents choose actions for a coordination game that determines the level of decay of each link. We address the issues of coordination (long-run equilibrium selection) and network formation by means of stochastic stability techniques. We find that both the link cost and the trade-off between efficiency and risk-dominance play a crucial role in the long-run behavior of the system.
    Keywords: Coordination, Networks, Risk dominance, stochastic stability
    JEL: C72 C73 D83 D85
    Date: 2009–07
  10. By: Alessandro Tavoni (Advanced School of Economics in Venice)
    Abstract: Substantial evidence has accumulated in recent empirical works on the limited ability of the Nash equilibrium to rationalize observed behavior in many classes of games played by experimental subjects. This realization has led to several attempts aimed at finding tractable equilibrium concepts which perform better empirically; one such example is the impulse balance equilibrium (Selten, Chmura, 2008), which introduces a psychological reference point to which players compare the available payoff allocations. This paper is concerned with advancing two new, empirically sound, concepts: equity-driven impulse balance equilibrium (EIBE) and equity-driven quantal response equilibrium (EQRE): both introduce a distributive reference point to the corresponding established stationary concepts known as impulse balance equilibrium (IBE) and quantal response equilibrium (QRE). The explanatory power of the considered models leads to the following ranking, starting with the most successful in terms of fit to the experimental data: EQRE, IBE, EIBE, QRE and Nash equilibrium.
    Keywords: Fairness, Inequity aversion, Aspiration level, Impulse balance, Quantal Response, Behavioral economics, Experimental economics
    JEL: C72 C91 D01 D63
    Date: 2009–05
  11. By: Markus Kinateder (Universidad de Navarra)
    Abstract: Two project leaders (or entrepreneurs) in a network, which captures social relations, recruit players in a strategic, competitive and time-limited process. Each team has an optimal size depending on the project’s quality. This is a random variable with a commonly known distribution. Only the corresponding project leader observes its realization. Any decision is only observed by the involved agents. The set of pure strategy Sequential Equilibria is characterized by giving an algorithm that selects one equilibrium at a time. An agent’s expected payoff is related to his position in the network, though no centrality measure in the literature captures this relation. A social planner frequently would achieve a higher welfare.
    Keywords: Dynamic Competitive Group Formation, Imperfect Information
    JEL: C72 C73 D85
    Date: 2009–05
  12. By: Marc Kilgour (Wilfrid Laurier University); Steven J. Brams (New York University)
    Abstract: Assume that players strictly rank each other as coalition partners. We propose a procedure whereby they “fall back” on their preferences, yielding internally compatible, or coherent, majority coalition(s), which we call fallback coalitions. If there is more than one fallback coalition, the players common to them, or kingmakers, determine which fallback coalition will form. The players(s) who are the first to be acceptable to all other members of a fallback coalition are the leader(s) of that coalition. The effects of different preference assumptions—particularly, different kinds of single-peakedness—and of player weights on the number of coherent coalitions, their connectedness, and which players become kingmakers and leaders are investigated. The fallback procedure may be used (i) empirically to identify kingmakers and leaders or (ii) normatively to select them.
    Keywords: Coalition, Fallback Process, Kingmaker Leader, Cardinally Single-peaked, Ordinally Single-peaked
    JEL: C71 C78 D72
    Date: 2009–05
  13. By: Humphreys, Brad (University of Alberta, Department of Economics); Ruseski, Jane (University of Alberta, Department of Economics)
    Abstract: Defection in every period is the dominant strategy Nash equilibrium in finitely repeated prisoner's dilemma games with complete information. However, in the presence of incomplete information, players may have an incentive to cooperate in some periods, leading to tit-for-tat strategies. We describe the decision to comply with recruiting regulations or cheat made by NCAA Division IA football programs as a finitely repeated prisoner's dilemma game. The game includes incomplete information about the resources devoted to football programs, the recruiting effort made by rival programs, and the behavior of rival programs. We test for evidence that NCAA Division IA football programs follow tit-for-tat strategies in terms of complying with or defecting from NCAA recruiting rules using panel data from NCAA Division IA football over the period 1976-2005. We find anecdotal and empirical evidence that is consistent with tit-for-tat strategies in this setting. The presence of in-conference rivals under NCAA sanctions increases the probability of a team being placed under sanctions.
    Keywords: noncooperative behavior; cartels; NCAA football; tit-for-tat strategies
    JEL: C72 L13 L83
    Date: 2009–07–01
  14. By: Tim Hellmann (Bielefeld University); Berno Buechel (Bielefeld University)
    Abstract: Since the seminal contribution of Jackson & Wolinsky 1996 [A Strategic Model of Social and Economic Networks, JET 71, 44-74] it has been widely acknowledged that the formation of social networks exhibits a general conflict between individual strategic behavior and collective outcome. What has not been studied systematically are the sources of inefficiency. We approach this omission by analyzing the role of positive and negative externalities of link formation. This yields general results that relate situations of positive externalities with stable networks that cannot be “too dense” in a well-defined sense, while situations with negative externalities tend to induce “too dense” networks.
    Keywords: Networks, Network Formation, Connections, Game Theory, Externalities, Spillovers, Stability, Efficiency
    JEL: D85 C72 L14
    Date: 2009–05
  15. By: Dotan Persitz (Tel Aviv University)
    Abstract: The heterogeneous connections model is a generalization of the homogeneous connections model of Jackson and Wolinsky (1996) in which the intrinsic value of each connection is set by a discrete, positive and symmetric function that depends solely on the types of the two end agents. Core periphery networks are defined as networks in which the agents' set can be partitioned into two subsets, one in which the members are completely connected among themselves and the other where there are no internal links. A two-type society is defined as "power based" if both types of agents prefer to connect to one of the types over the other, controlling for path length. An exhaustive analysis shows that core periphery networks, in which the "preferred" types are in the core and the "rejected" types are in the periphery, are crucial in the "power based" society. In particular, if the linking costs are not too low and not too high, at least one such network is pairwise stable. Moreover, in many cases these networks are the unique pairwise stable networks and in all cases they are the unique strongly efficient networks. The set of efficient networks often differs from the set of pairwise stable networks, hence a discussion on this issue is developed. These results suggest heterogeneity accompanied by "power based" linking preferences as a natural explanation for many core-periphery structures observed in real life social networks.
    Keywords: Network Formation, Heterogeneity, Pairwise Stability
    JEL: D85 L14
    Date: 2009–05
  16. By: Guillaume Haeringer (Universitat Autònoma de Barcelona); Caterina Calsamiglia (Universitat Autònoma de Barcelona); Flip Klijn (Institute for Economic Analysis (CSIC))
    Abstract: The literature on school choice assumes that families can submit a preference list over all the schools they want to be assigned to. However, in many real-life instances families are only allowed to submit a list containing a limited number of schools. Subjects' incentives are drastically affected, as more individuals manipulate their preferentes. Including a safety school in the constrained list explains most manipulations. Competitiveness across schools plays an important role. Constraining choices increases segregation and affects the stability and efficiency of the final allocation. Remarkably, the constraint reduces significantly the proportion of subjects playing a dominated strategy.
    Keywords: School Choice, Matching, Experiment, Gale-Shapley, Top Trading Cycles, Boston Mechanism, Efficiency, Stability, Truncation, Truthtelling, Safety School
    JEL: C72 C78 D78 I20
    Date: 2009–05
  17. By: Yoshio Kamijo (Waseda University); Ryo Kawasaki (Tokyo Institute of Technology)
    Abstract: While most of the literature starting with Shapley and Scarf (1974) have considered a static exchange economy with indivisibilities, this paper studies the dynamics of such an economy. We find that both the dynamics generated by competitive equilibrium and the one generated by weakly dominance relation, converge to a set of allocations we define as strictly stable, which we can show to exist. Moreover, we show that even when only pairwise exchanges between two traders are allowed, the strictly stable allocations are attained eventually if traders are sufficiently farsighted.
    Keywords: Indivisible Goods Market, Dynamics, Competitive Allocation, Strict Core, Foresight, Stable Set
    JEL: D78 C71
    Date: 2009–06
  18. By: Agnieszka Rusinowska (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: We present some modifications of the Hoede-Bakker index defined in a social network in which players may influence each other. Due to influences of the other actors, the final decision of a player may be different from his original inclination. The modifications presented in the paper are defined for an arbitrary probability distribution over all inclination vectors. In particular, they concern the situation in which the inclination vectors may be not equally probable. Furthermore, by assuming special probability distributions over all inclination vectors, we construct modifications of the Hoede-Bakker index that coincide with the Shapley- Shubik index and with the Holler-Packel index,respectively. We present a practical example in which the concepts in question are applied to Dutch parties, and a theoretical example in which we show how the modifications can be calculated.
    Keywords: Hoede-Bakker index; inclination vector; probability distribution; Shapley-Shubik index; Holler- Packel index
    Date: 2009
  19. By: Charles F. Manski
    Abstract: Research on collective provision of private goods has focused on distributional considerations. This paper studies a class of problems of decision under uncertainty in which the argument for collective choice emerges from the mathematics of aggregating individual payoffs. Consider decision making when each member of a population has the same objective function, which depends on an unknown state of nature. If agents knew the state of nature, they would make the same decision. However, they may have different beliefs or may use different decision criteria. Hence, they may choose different actions even though they share the same objective. Let the set of feasible actions be convex and the objective function be concave in actions, for all states of nature. Then Jensen's inequality implies that consensus choice of the mean privately-chosen action yields a larger aggregate payoff than does individualistic decision making, in all states of nature. If payoffs are transferable, the aggregate payoff from consensus choice may be allocated to Pareto dominate individualistic decision making, in all states of nature. I develop these ideas. I also use Jensen's inequality to show that a planner with the power to assign actions to the members of the population should not diversify. Finally, I give a version of the collective choice result that holds with consensus choice of the median rather than mean action.
    JEL: D7 D81 H42
    Date: 2009–07
  20. By: Alexey Kushnir (Pennsylvania State University)
    Abstract: A costless signaling mechanism has been proposed as a device to improve welfare in decentralized two-sided matching markets. An example of such an environment is a job market for new Ph.D. economists. We study a market game of incomplete information between firms and workers and show that costless signaling is actually harmful in some matching markets. Specifically, if agents have very similar preferences, signaling lessens the total number of matches and the welfare of firms, as well as it affects ambiguously the welfare of workers. These results run contrary to previous findings that costless signaling facilitates match formation.
    Keywords: Matching Markets, Signaling
    JEL: C70
    Date: 2009–05
  21. By: Marc Germain (Universite catholique de Louvain); Henry Tulkens (Université catholique de Louvain); Alphonse Magnus (Institut de mathématique, Université catholique de Louvain)
    Abstract: This article deals with cooperation issues in international pollution problems in a two di- mensional dynamic framework implied by the accumulation of the pollutant and of the capital goods. Assuming that countries do reevaluate at each period the advantages to cooperate or not given the current stocks of pollutant and capital, and under the assumption that damage cost functions are linear, we define at each period of time a transfer scheme between countries, which makes cooperation better for each of them than non-cooperation. This transfer scheme is also strategically stable in the sense that it discourages partial coalitions.
    Keywords: Stock Pollutant, Capital Accumulation, International Environmental Agreements, Dynamic Core Solution
    JEL: Q54 Q58 F42 F53 O21
    Date: 2009–05
  22. By: Philippe Aghion; Drew Fudenberg; Richard T. Holden
    Abstract: The foundations of incomplete contracts have been questioned using or extending the subgame perfect implementation approach of Moore and Repullo (1988). We consider the robustness of subgame perfect implementation to the introduction of small amounts of asymmetric information. We show that Moore- Repullo mechanisms may not yield (even approximately) truthful revelation in pure or totally mixed strategies as the amount of asymmetric information goes to zero. Moreover, we argue that a wide class of extensive-form mechanisms are subject to this fragility.
    JEL: C72 C73 D23 L22
    Date: 2009–07
  23. By: Antonio Nicoló (Università degli Studi di Padova); Carmelo Rodríguez Álvarez (Universidad Complutense de Madrid)
    Abstract: We propose a model of Kidney-Exchange that incorporates the main European institutional features. We assume that patients do not consider all compatible kidneys homogeneous and patients are endowed with reservation values over the minimal quality of the kidney they may receive. Under feasibility constraints, patients' truthful revelation of reservation values is incompatible with constrained efficiency. In the light of this result, we introduce an alternative behavioral assumption on patients' incentives. Patients choose their revelation strategies as to “protect” themselves from bad outcomes and use a lexicographic refinement of maximin strategies. In this environment, if exchanges are pairwise, then priority rules or rules that maximize a fixed ordering provide incentives for the patients to report their true reservation values. The positive result vanishes if larger exchanges are admitted.
    Keywords: Kidney, Matching, Protective Behavior
    JEL: C78 D78
    Date: 2009–05
  24. By: Quoc-Anh Do (School of Economics, Singapore Management University); Stephen Leider (Harvard University); Markus M. Mobius (Harvard University); Tanya Rosenblat (Iowa State University)
    Abstract: We conduct a field experiment in a large real-world social network to examine how subjects expect to be treated by their friends and by strangers who make allocation decisions in modified dictator games. While recipients’ beliefs accurately account for the extent to which friends will choose more generous allocations than strangers (i.e. directed altruism), recipients are not able to anticipate individual differences in the baseline altruism of allocators (measured by giving to an unnamed recipient, which is predictive of generosity towards named recipients). Recipients who are direct friends with the allocator, or even recipients with many common friends, are no more accurate in recognizing intrinsically altruistic allocators. Recipient beliefs are significantly less accurate than the predictions of an econometrician who knows the allocator’s demographic characteristics and social distance, suggesting recipients do not have information on unobservable characteristics of the allocator.
    Keywords: dictator games, beliefs, baseline altruism, directed altruism, social networks
    JEL: C73 C91 D64
    Date: 2009–06
  25. By: Etienne Billette de Villemeur (Toulouse School of Economics, IDEI & GREMAQ, 21 allée de Brienne, 31000 Toulouse, France); Laurent Flochel (Charles River Associates International, 27 Avenue de l’opéra, 75001 Paris, France); Bruno Versaevel (EMLYON Business School & CNRS, GATE, 69134 Ecully cedex France)
    Abstract: Collusion sustainability depends on ï¬rms' aptitude to impose suffciently severe punishments in case of deviation from the collusive rule. We characterize the ability of oligopolistic ï¬rms to implement a collusive strategy when their ability to punish deviations over one or several periods is limited by a severity constraint. It captures all situations in which either structural conditions (the form of payoff functions), institutional circumstances (a regulation), or ï¬nancial consider- ations (proï¬tability requirements) set a lower bound to ï¬rms' losses. The model speciï¬cations encompass the structural assumptions (A1-A3) in Abreu (1986) [Journal of Economic Theory, 39, 191-225]. The optimal punishment scheme is characterized, and the expression of the lowest discount factor for which collusion can be sustained is computed, that both depend on the status of the severity constraint. This extends received results from the literature to a large class of models that include a severity constraint, and uncovers the role of structural parameters that facilitate collusion by relaxing the constraint.
    Keywords: Collusion, Oligopoly, Penal codes
    JEL: C72 D43 L13
    Date: 2009

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