nep-gth New Economics Papers
on Game Theory
Issue of 2010‒01‒30
fifteen papers chosen by
Laszlo A. Koczy
Budapest Tech and Maastricht University

  1. A new necessary condition for implementation in iteratively undominated strategies By Takashi Kunimoto; Roberto Serrano
  2. Rational and Boundedly Rational Behavior in Sender-receiver Games By Massimiliano Landi; Domenico Colucci
  3. Non-cooperative games with confirmed proposals By Giuseppe Attanasi; Aurora García Gallego; Nikolaos Georgantzís; Aldo Montesano
  4. Semiparametric Estimation of Signaling Games By Kyoo il Kim
  5. Set Inference for Semiparametric Discrete Games By Kyoo il Kim
  6. Colonel Blotto’s Top Secret Files By Ayala Arad; Ariel Rubinstein
  7. Characterising Equilibrium Selection in Global Games with Strategic Complementarities By Christian Basteck; Tijmen R. Daniëls; Frank Heinemann
  8. Information Revelation in an English Auction By Nicolas Gothelf
  9. Arms or Legs: Isomorphic Dutch Auctions and Centipede Games By James C. Cox; Duncan James; ;
  10. Cognitive hierarchies and the centipede game By Bottero, Margherita
  11. Global Analysis of an Expectations Augmented Evolutionary Dynamics By Massimiliano Landi
  12. The Multi-unit Assignment Problem: Theory and Evidence from Course Allocation at Harvard By Eric Budish; Estelle Cantillon
  13. Stochastic Switching Games and Duopolistic Competition in Emissions Markets By Michael Ludkovski
  14. Optimal Collusion with Internal Contracting By Gea M. Lee
  15. Experimental Economic Approaches on Trade Negotiations By Hankyoung Sung

  1. By: Takashi Kunimoto (McGill University and CIREQ); Roberto Serrano (Brown University and IMDEA Social Sciences)
    Abstract: Implementation in iteratively undominated strategies relies on permissive conditions. However, for the sufficiency results available, authors have relied on assumptions that amount to quasilinear preferences on a numeraire. We uncover a new necessary condition that implies that such assumptions cannot be dispensed with. We term the condition “restricted deception-proofness.” It requires that, in environments with identical preferences, the social choice function be immune to all deceptions, making it then stronger than incentive compatibility. In some environments the conditions for (exact or approximate) implementation are more restrictive than previously thought.
    Keywords: mechanism design; exact and approximate implementation; iteratively undominated strategies; restricted deception-proofness; incentive compatibility; measurability
    JEL: C72 D78 D82
    Date: 2010–01–20
  2. By: Massimiliano Landi; Domenico Colucci (Singapore Management University)
    Abstract: We consider a signalling game in which a population of receivers decide on the outcome by majority rule, sender and receivers have conflicting interests, and there is uncertainty about both players’ types. We model players rationality along the lines of recent findings in behavioral game theory. We characterize the structure of the equilibria in the reduced game so obtained. We find that all pure strategy equilibria are consistent with successful attempts to mislead the receivers, and relate them to the message bin Laden sent on the eve of the 2004 US Presidential elections. The same result holds if we allow for some uncertainty about the sign of the correlation between the sender’s and the receivers’ payoffs.
    Keywords: bin Laden, sender receiver games, US Presidential elections, signalling game, payoffs
    JEL: C70 D72 D70
    Date: 2010–01
  3. By: Giuseppe Attanasi; Aurora García Gallego; Nikolaos Georgantzís; Aldo Montesano
    Date: 2010–01
  4. By: Kyoo il Kim (Singapore Management University)
    Abstract: This paper studies an econometric modeling of a signaling game with two players where one player has one of two types. In particular, we develop an estimation strategy that identi…es the payo¤s structure and the distribution of types from data of observed actions. We can achieve uniqueness of equilibrium using a re…nement, which enables us to identify the parameters of interest. In the game, we consider non-strategic public signals about the types. Because the mixing distribution of these signals is nonparametrically specifi…ed, we propose to estimate the model using a sieve conditional MLE. We achieve the consistency and the asymptotic normality of the structural parameters estimates. As an alternative, we allow for the possibility of multiple equilibria, without using an equilibrium selection rule. As a consequence, we adopt a set inference allowing for multiplicity of equilibria.
    Keywords: Semiparametric Estimation, Signaling Game, Set Inference, InÂ…nite Dimensional Parameters, Sieve Simultaneous Conditional MLE
    JEL: C13 C14 C35 C62 C73
    Date: 2010–01
  5. By: Kyoo il Kim (Singapore Management University)
    Abstract: We consider estimation and inference of parameters in discrete games allowing for multiple equilibria, without using an equilibrium selection rule. We do a set inference while a game model can contain infinite dimensional parameters. Examples can include signaling games with discrete types where the type distribution is nonparametrically specified and entry-exit games with partially linear payoffs functions. A consistent set estimator and a con.dence interval of a function of parameters are provided in this paper. We note that achieving a consistent point estimation often requires an information reduction. Due to this less use of information, we may end up a point estimator with a larger variance and have a wider confidence interval than those of the set estimator using the full information in the model. This finding justifies the use of the set inference even though we can achieve a consistent point estimation. It is an interesting future research to compare these two alternatives- CI from the point estimation with the usage of less information vs. CI from the set estimation with the usage of the full information.
    Keywords: Semiparametric Estimation, Set Inference, InÂ…nite Dimensional Parameters, Inequality Moment Conditions, Signaling Game with Discrete Types
    JEL: C13 C14 C35 C62 C73
    Date: 2010–01
  6. By: Ayala Arad; Ariel Rubinstein
    Date: 2010–01–20
  7. By: Christian Basteck; Tijmen R. Daniëls; Frank Heinemann
    Abstract: Global games are widely used for equilibrium selection to predict behaviour in complete information games with strategic complementarities. We establish two results on the global game selection. First, we show that it is independent of the payoff functions of the global game embedding, though it may depend on the noise distribution. Second, we give a simple sufficient criterion for noise independence in many action games. A many action game may be noise independent if it can be suitably decomposed into smaller (say, binary action) games, for which there are simple criteria guaranteeing noise independence. We delineate the games where noise independence may be established by counting the number of players or actions. In addition, we give an elementary proof that robustness to incomplete information implies noise independence.
    Keywords: global games, equilibrium selection, strategic complementarities
    JEL: C72 D82
    Date: 2010–01
  8. By: Nicolas Gothelf
    Abstract: This paper asks whether revealing the identity of dropping bidders is in the interest of the auctioneer in an ascending price auction with asymmetric bidders and interdependent values. We show that revealing no information about bidders’ identities may increase the expected revenue. In this setup, we identify the underlying mechanism for the failure of the often-heard recommendation that more transparency increases revenue. We also consider bidder ranking over auction formats.
    Keywords: Information revelation, identity, English auctions, market design.
    JEL: C70 D44 D82
    Date: 2010
  9. By: James C. Cox; Duncan James; ;
    Abstract: Centipede games and Dutch auctions provide important instances in which game theory fails empirically. The reasons for these empirical failures are not well understood. Standard centipede games and Dutch auctions differ from each other in terms of their Institutional Format (IF), Dynamic Structure (DS), and Information Environment (IE). This paper introduces new games that are constructed from centipede games and Dutch auctions by interchanging some of their IF, DS, and IE characteristics. The new games are introduced in isomorphic pairs. Experiment treatments with pairs of new isomorphic games provide data that yield insights into the effects on behavior of games' IF, DS, and IE characteristics.
    JEL: C72 C91 D44
    Date: 2010–01
  10. By: Bottero, Margherita (Dept. of Economics, Stockholm School of Economics)
    Abstract: In this work, I extend the normal form cognitive hierarchy model (Camerer et al. (2004)) to a class of nite two-person extensive form games. I study two versions of such a model: the rst is as faithful as possible to the normal form assumptions, while the second modi es them slightly. In both cases I consider the possibility of bayesian updating. I apply the two versions to the centipede game, testing empirically the relevant predictions. The results show that the cognitive hierarchy model outperforms backward induction in predicting experimental behavior. Moreover, modifying the original assumptions improves our understanding of the data.
    Keywords: centipede game; cognitive hierarchy; paradox backward induction; experimental data analysis
    JEL: C72 C92 D81
    Date: 2010–01–19
  11. By: Massimiliano Landi (Singapore Management University)
    Abstract: We consider a deterministic evolutionary model where players form expectations about future play. Players are not fully rational and have expectations that change over time in response to current payoffs and feedback from the past. We provide a complete characterization of the qualitative dynamics so induced for a two strategies population game, and relate our findings to standard evolutionary dynamics and equilibrium selection when agents have rational forward looking expectations.
    Keywords: evolutionary games, dynamic systems, bounded rationality
    JEL: C73
    Date: 2010–01
  12. By: Eric Budish; Estelle Cantillon
    Abstract: This paper uses data consisting of students' strategically reported preferences and their underlying true preferences to study the course allocation mechanism used at Harvard Business School. We show that the mechanism is manipulable in theory, manipulated in practice, and that these manipulations cause meaningful welfare losses. However, we also find that ex-ante welfare is higher than under the strategyproof and ex-post efficient alternative, the Random Serial Dictatorship. We trace the poor ex-ante performance of RSD to a phenomenon specific to multi-unit assignment, "callousness'. We draw lessons for the design of multi-unit assignment mechanisms and for market design more broadly.
    Keywords: Multi-unit assignment, market design, course allocation, random serial dictatorship, ex-ante efficiency, ex-post efficiency, strategyproofness, strategic behavior, field data.
    Date: 2010
  13. By: Michael Ludkovski
    Abstract: We study optimal behavior of energy producers under a CO_2 emission abatement program. We focus on a two-player discrete-time model where each producer is sequentially optimizing her emission and production schedules. The game-theoretic aspect is captured through a reduced-form price-impact model for the CO_2 allowance price. Such duopolistic competition results in a new type of a non-zero-sum stochastic switching game on finite horizon. Existence of game Nash equilibria is established through generalization to randomized switching strategies. No uniqueness is possible and we therefore consider a variety of correlated equilibrium mechanisms. We prove existence of correlated equilibrium points in switching games and give a recursive description of equilibrium game values. A simulation-based algorithm to solve for the game values is constructed and a numerical example is presented.
    Date: 2010–01
  14. By: Gea M. Lee (Singapore Management University)
    Abstract: In this paper, we develop a model of collusion in which two firms play an infinitelyrepeated Bertrand game when each firm has a privately-informed agent. The colluding firms, fixing prices, allocate market shares based on the agent’s information as to cost types. We emphasize that the presence of privately-informed agents may provide firms with a strategic opportunity to exploit an interaction between internal contracting and market-sharing arrangement- the contracts with agents may be used to induce firms’ truthful communication in their collusion, and collusive market-share allocation may act to reduce the agents’ information rents.
    Keywords: Optimal collusion, internal contract, privately-informed agents, price-fixing
    JEL: C73 L13 L14
    Date: 2010–01
  15. By: Hankyoung Sung (Korean Institute for International Economic Policy)
    Abstract: This paper experimentally examines the multilateral bargaining games to derive some policy implications for real trade negotiations. It shows the following findings- there are significant delays in games including veto players in some circumstances, but no delays in games including multiple-vote players. In addition, non-veto players as weak players, which are disadvantaged in taking share, make collusive attempts against veto players, but not effectively. As policy implications, this paper suggests enforceable deadlines or threats toward low-quality agreements to reduce the delay problems. Furthermore, as another remedy for the delays, it suggests an effort to group countries like multiple-vote players in unequal-weight games.
    Keywords: Veto, Trade negotiations, Delay
    JEL: C7 D7 C78 D72
    Date: 2010–01

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