nep-gth New Economics Papers
on Game Theory
Issue of 2009‒12‒11
fourteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. Leadership Games with Convex Strategy Sets By Bernhard von Stengel; Shmuel Zamir
  2. Infinite Sequential Games with Perfect but Incomplete Information By Itai Arieli; Yehuda Levy
  3. A New Payment Rule for Core-Selecting Package Auctions By Aytek Erdil; Paul Klemperer
  4. Mixed Strategies in Discriminatory Divisible-good Auctions By Anderson, Edward J.; Holmberg, Pär; Philpott, Andrew B.
  5. Interpersonal Comparisons of Utility in Bargaining : Evidence from a Transcontinental Ultimatum Game By Romina Boarini; Jean-François Laslier; Stéphane Robin
  6. Third-party Punishment is more effective on Women: Experimental Evidence By Pablo Brañas-Garza; Stefania Ottone
  7. Sustainable coalitions in the commons By Luc DOYEN (CNRS - CERSP); Jean-Christophe PEREAU (GREThA UMR CNRS 5113)
  8. Learning and Stability of the Bayesian – Walrasian Equilibrium By Marialaura Pesce; Nicholas C Yannelis
  9. Cooperation in Repeated Prisoner’s Dilemma with Outside Options By Takako Fujiwara-Greve; Yosuke Yasuda
  10. Signaling in Deterministic and Stochastic Settings By Thomas D. Jeitschko; Hans-Theo Normann
  11. Mean-field approximation of stochastic population processes in games By Michel Benaïm; Jörgen Weibull
  12. Common reason to believe and framing effect in the team reasoning theory: an experimental approach By Leonardo Becchetti; Giacomo Degli Antoni; Marco Faillo
  13. Endogenous formation of alliances in conflicts By Francis Bloch
  14. Welfare maximizing contest success functions when the planner cannot commit By Luis Corchon; Matthias Dahm

  1. By: Bernhard von Stengel; Shmuel Zamir
    Abstract: A basic model of commitment is to convert a two-player game in strategic form to a “leadership game†with the same payoffs, where one player, the leader, commits to a strategy, to which the second player always chooses a best reply. This paper studies such leadership games for games with convex strategy sets. We apply them to mixed extensions of finite games, which we analyze completely, including nongeneric games. The main result is that leadership is advantageous in the sense that, as a set, the leader’s payoffs in equilibrium are at least as high as his Nash and correlated equilibrium payoffs in the simultaneous game. We also consider leadership games with three or more players, where most conclusions no longer hold.
    Date: 2009–11
  2. By: Itai Arieli; Yehuda Levy
    Abstract: Infinite sequential games, in which Nature chooses a Borel winning set and reveals it to one of the players, do not necessarily have a value if Nature has 3 or more choices. The value does exist if Nature has 2 choices. The value also does not necessarily exist if Nature chooses from 2 Borel payoff functions. Similarly, if Player 1 chooses the Borel winning set and does not reveal his selection to Player 2, then the game does not necessarily have a value if there are 3 or more choices; it does have a value if there are only 2 choices. If Player 1 chooses from 2 Borel payoff functions and does not reveal his choice, the game need not have a value either.
    Date: 2009–11
  3. By: Aytek Erdil (Dept of Economics, University of Oxford, Oxford); Paul Klemperer (Dept of Economics, University of Oxford, Oxford)
    Abstract: We propose a new, easy-to-implement, class of payment rules, “Reference Rules,” to make core-selecting package auctions more robust. Small, almost riskless, profitable deviations from “truthful bidding” are often easy for bidders to find under currently-used payment rules. Reference Rules perform better than existing rules on our marginal-incentive-to-deviate criterion, and are as robust as existing rules to large deviations. Other considerations, including fairness and comprehensibility, also support the use of Reference Rules.
    Keywords: multi-object auction, core, combinatorial auction, package auction, core-selecting auction, Vickrey auction, Vickrey, simultaneous ascending auction, robust design.
    JEL: D44 C71
    Date: 2009–09–01
  4. By: Anderson, Edward J. (Faculty of Economics and Business); Holmberg, Pär (Research Institute of Industrial Economics (IFN)); Philpott, Andrew B. (Department of Engineering Science)
    Abstract: Author: Edward J. Anderson, Pär Holmberg and Andrew B. Philpott Keywords: Pay-as-bid Auction; Divisible Good Auction; Mixed Strategy Equilibria; Wholesale Electricity Markets Pages: 71 Published: November 24, 2009 JEL-codes: D43; D44; C72 Download Wp814.pdf (756 kB) Abstract Using the concept of market-distribution functions, we derive general optimality conditions for discriminatory divisible-good auctions, which are also applicable to Bertrand games and non-linear pricing. We introduce the concept of offer distribution function to analyze randomized offer curves, and characterize mixed-strategy Nash equilibria for pay-as-bid auctions where demand is uncertain and costs are common knowledge; a setting for which pure-strategy supply function equilibria typically do not exist. We generalize previous results on mixtures over horizontal offers as in Bertrand-Edgeworth games, but more importantly we characterize novel mixtures over partly increasing supply functions.
    Keywords: Pay-as-bid Auction; Divisible Good Auction; Mixed Strategy Equilibria; Wholesale Electricity Markets
    JEL: C72 D43 D44
    Date: 2009–11–24
  5. By: Romina Boarini (OFCE - Observatoire Français des Conjonctures économiques - Observatoire Français des Conjonctures économiques); Jean-François Laslier (Département d'Economie, Ecole Polytechnique - Ecole Polytechnique); Stéphane Robin (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: This paper presents the experimental results of a “Transcontinental Ultimatum Game” implemented between India and France. The bargaining took the form of standard ultimatum games, but in one treatment Indian subjects made offers to French subjects and, in another treatment, French subjects made offers to Indian subjects. We observed that French→Indian bargaining mostly ended up with unequal splits of money in favour of French, while nearly equal splits were the most frequent outcome in Indian→French interactions. The experimental results are organized through a standard social reference model, modified for taking into account the different marginal value of money for bargainers. In our model bargaining is driven by relative standings comparisons between players, occurring in terms of real earnings (that is monetary earnings corrected for a purchasing power factor) obtained in the game. The norm of equity behind the equalization of real earnings is called local equity norm, and contrasted to a global equity norm which would encompass the wealth of players beyond the game. According to what we observed, no beyond-game concern seems to be relevantly endorsed by subjects.
    Keywords: Interpersonal Comparisons of Utility; Fairness; Bargaining experiment; Ultimatum Game
    Date: 2009
  6. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Stefania Ottone (Department of Economics, University of Milano-Bicocca)
    Abstract: Existing experimental studies mainly focus on motivations and choices of thirdparty punishers, but only few of them detect sanction efficacy contradictory results. Our paper wants to shed light on this point. In particular, we want to detect whether the threat of being punished for unfair actions is credible and affects subjects’ choices thus, making it rational to behave fairly. To disentangle the effect of expected punishment on behaviour, we implement in the lab two experimental games - the standard Dictator Game, that is used as baseline, and the Third-Party Punishment Game that incorporates a third player who observes and may punish the Dictator. The idea is that, if the Dictator in treatment TPP believes punishment is a credible threat, s/he may decide to change her/his behaviour, that is, to behave generously in order to avoid sanctions. We find a clear gender bias: women reacted to the punishment threat by increasing their transfer to the Recipient, while men did exactly the opposite.
    Date: 2009–11–20
  7. By: Luc DOYEN (CNRS - CERSP); Jean-Christophe PEREAU (GREThA UMR CNRS 5113)
    Abstract: It is well known that the non-cooperation among agents harvesting a renewable resource is critical for its sustainable management. The present paper gives insights on the complex balance between coalitions structure, resource state or dynamics and agents’ heterogeneity to avoid bio-economic collapses. A model bringing together coalition games and a viability approach is proposed to focus on the compatibility between bio-economic constraints and an exploited common stock dynamics. It is examined to what extent cooperation promotes sustainability. Based on the Shapley value, a measure of the marginal contribution of the users to the sustainability of the resource is proposed. It suggests that the stability of the grand coalition occurs for large enough stocks. By contrast, for lower levels of resource, the most efficient user plays the role of a dictator.
    Keywords: Renewable resource, dynamic game, coalition, maxmin strategy, shapley value, viability kernel
    JEL: Q20
    Date: 2009
  8. By: Marialaura Pesce; Nicholas C Yannelis
    Date: 2009
  9. By: Takako Fujiwara-Greve (Department of Economics, Keio University); Yosuke Yasuda (National Graduate Institute for Policy Studies)
    Abstract: In many repeated interactions, repetition is not guaranteed but instead must be agreed upon. We formulate a model of voluntary repetition by introducing outside options to a repeated Prisoner’s Dilemma and investigate how the structure of outside options affects the sustainability of mutual cooperation. When the outside option is deterministic and greater than the value of mutual defection, the lower bound of the discount factors that sustain repeated cooperation is greater than the one for ordinary repeated Prisoner’s Dilemma, making cooperation more difficult. However, stochastic outside options with the same mean may reduce the lower bound of discount factors as compared to the deterministic case. This is possible when the stochasticity of the options increases the value of the cooperation phase more than the value of the punishment phase. Necessary ansufficient conditions for this positive effect are given under various option structures.
    Keywords: outside option, repeated Prisoner’s Dilemma, cooperation, perturbation
    JEL: C73
    Date: 2009–07
  10. By: Thomas D. Jeitschko (Department of Economics, Michigan State University); Hans-Theo Normann (Department of Economics, Goethe University Frankfurt)
    Abstract: We contrast a standard deterministic signaling game with one where the signal-generating mechanism is stochastic. With stochastic signals a unique equilibrium emerges that involves separation and has intuitive comparative-static properties as the degree of signaling depends on the prior type distribution. With deterministic signals both pooling and separating configurations occur. Laboratory data support the theory: In the stochastic variant, there is more signaling behavior than with deterministic signals, and less frequent types distort their signals relatively more. Moreover, the degree of congruence between equilibrium and subject behavior is greater in stochastic settings compared to deterministic treatments.
    Keywords: experiments, noise, signalling, learning, stochastic environments.
    JEL: C7 C9 D8
    Date: 2009–10
  11. By: Michel Benaïm (UNINE - Institut de Mathématiques - Université de Neuchatel); Jörgen Weibull (SSE - Department of Economics - Stockholm School of Economics, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: We here establish an upper bound on the probability for deviations of a Markov population process from its mean-field approximation.
    Date: 2009
  12. By: Leonardo Becchetti (University of Rome Tor Vergata); Giacomo Degli Antoni (EconomEtica); Marco Faillo (University of Trento - Faculty of Economics)
    Abstract: The present paper is aimed at empirically verifying the role of the “common reason to believe” (Sugden 2003) and of framing (Bacharach 1999 and 2006) within the theory of team reasoning. The analysis draws on data collected trough a Traveler’s Dilemma experiment. To study the role of the common reason to believe, players’ belief in their counterpart’s choice are elicited and the correlation between the endorsement of team reasoning and beliefs is considered. With respect to the idea of frame proposed by Bacharach, we study the effect of the reduction of social distance on the probability that the “we-frame” comes to players’ mind. Social distance is decreased by introducing a meeting between the two players after the game. It is shown that the common reason to believe appropriately explains the internal logic of team reasoning and that the reduction of social distance makes the “we-frame” more likely.
    Keywords: Team Reasoning, Common Reason to Believe, Framing, Traveler’s Dilemma; Social Distance
    JEL: C72 C91 A13
    Date: 2009–11
  13. By: Francis Bloch (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: This paper studies the endogenous formation of alliance in conflicts offering a survey of the recent literature and providing new results. We analyze the effect of group sizes on conflict, study endogenous alliance formation in a general model of conflict with linear technology and discuss recent developments of the theory of alliance formation, involving the determination of sharing rules inside the alliance and dynamic alliance formation in nested conflicts.
    Keywords: alliance formation, conflicts, rent-seeking contest, collective action, the paradox of group size, sharing rules, nested conflicts
    Date: 2009
  14. By: Luis Corchon; Matthias Dahm
    Abstract: We analyze how a contest organizer chooses the winner when the contestants.efforts are already exerted and commitment to the use of a given contest success function is not possible. We define the notion of rationalizability in mixed-strategies to capture such a situation. Our approach allows to derive different contest success functions depending on the aims and attitudes of the decider. We derive contest success functions which are closely related to commonly used functions providing new support for them. By taking into account social welfare considerations our approach bridges the contest literature and the recent literature on political economy.
    Keywords: Endogenous contests, Contest success function, Mixed-Strategies
    JEL: C72 D72 D74
    Date: 2009–11

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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