nep-gth New Economics Papers
on Game Theory
Issue of 2010‒02‒20
seven papers chosen by
Laszlo A. Koczy
Obuda University

  1. Strategic Sophistication of Individuals and Teams in Experimental Normal-Form Games By Sutter, Matthias; Czermak, Simon; Feri, Francesco
  2. Consumption Risk-sharing in Social Networks By Attila Ambrus; Markus Mobius; Adam Szeidl
  3. Delayed Perfect Monitoring in Repeated Games By Kinateder, Markus
  4. Potential games in volatile environments By Mathias Staudigl
  5. Cooperation and diversity. An evolutionary approach By Bruni, Luigino; Smerilli, Alessandra
  6. Multivariate Matching Methods That are Monotonic Imbalance Bounding By Stefano Iacus; Gary King; Giuseppe Porro
  7. Colorful economics: seeing red in a prisoner's dilemma game By Kaufmann W.; Van Witteloostuijn A.; Boone Ch.

  1. By: Sutter, Matthias (University of Innsbruck); Czermak, Simon (University of Innsbruck); Feri, Francesco (University of Innsbruck)
    Abstract: We present an experiment on strategic thinking and behavior of individuals and teams in one-shot normal-form games. Besides making choices, decision makers have to state their first- and second-order beliefs. We find that teams play the Nash strategy significantly more often, and their choices are more often consistent by being a best reply to first order beliefs. We identify the complexity of a game and the payoffs in equilibrium as determining the likelihood of consistent behavior according to textbook rationality. Using a mixture model, the estimated probability to play strategically is 62% for teams, but only 40% for individuals.
    Keywords: strategic sophistication, beliefs, experiment, team decision making, individual decision making
    JEL: C72 C91 C92
    Date: 2010–01
  2. By: Attila Ambrus; Markus Mobius; Adam Szeidl
    Abstract: We develop a model of informal risk-sharing in social networks, where relationships between individuals can be used as social collateral to enforce insurance payments. We characterize incentive compatible risk-sharing arrangements and obtain two results. (1) The degree of informal insurance is governed by the expansiveness of the network, measured by the number of connections that groups of agents have with the rest of the community, relative to group size. Two-dimensional networks, where people have connections in multiple directions, are sufficiently expansive to allow very good risk-sharing. We show that social networks in Peruvian villages satisfy this dimensionality property; thus, our model can explain Townsend's (1994) puzzling observation that village communities often exhibit close to full insurance. (2) In second-best arrangements, agents organize in endogenous "risk-sharing islands" in the network, where shocks are shared fully within, but imperfectly across islands. As a result, network based risk-sharing is local: socially closer agents insure each other more.
    JEL: D02 D31 D70
    Date: 2010–02
  3. By: Kinateder, Markus
    Abstract: Delayed perfect monitoring in an in…nitely repeated discounted game is studied. A player perfectly observes any other player's action choice with a fixed, but finite delay. The observational delays between different pairs of players are heterogeneous and asymmetric. The Folk Theorem extends to this setup, although for a range of discount factors strictly below 1, the set of belief-free equilibria is reduced under certain conditions. This model applies to any situation in which there is a heterogeneous delay between information generation and the players-reaction to it.
    Keywords: Repeated Game; Delayed Perfect Monitoring; Folk Theorem
    JEL: C72 C73
    Date: 2009–12
  4. By: Mathias Staudigl
    Abstract: This papers studies the co-evolution of networks and play in the context of finite population potential games. Action revision, link creation and link destruction are combined in a continuous-time Markov process. I derive the unique invariant distribution of this process in closed form, as well as the marginal distribution over action profiles and the conditional distribution over networks. It is shown that the equilibrium interaction topology is an inhomogeneous random graph. Furthermore, a characterization of the set of stochastically stable states is provided, generalizing existing results to models with endogenous interaction structures.
    JEL: C73 D83 D85
    Date: 2010–02
  5. By: Bruni, Luigino; Smerilli, Alessandra
    Abstract: n this paper we propose a pluralistic and multi-dimensional ap- proach to cooperation. Specifically, we seek to show that, in certain settings, less unconditional forms of cooperation may be combined with more gratuitous ones. Starting with the prisoner’s dilemma game, the evolution of cooperation is analyzed in the presence of different strate- gies, which represent the heterogeneity of the forms of cooperation in civil life. There are many behaviour patterns, though not all of them are based on self-interest and conditionality. The dynamics of coop- eration are studied through the use of evolutionary games applied in contexts that are either one-shot or repetitive. One of the most impor- tant results of the paper is the conclusion that cooperation is favoured by heterogeneity.
    Keywords: cooperation; Prisoner’s Dilemma; reciprocity; hetero- geneity; evolutionary game theory
    JEL: D64 C73 C72
    Date: 2010–01
  6. By: Stefano Iacus (Department of Economics, Business and Statistics, University of Milan, IT); Gary King (Institute for Quantitative Social Science, Harvard University); Giuseppe Porro (Department of Economics and Statistics, University of Trieste)
    Abstract: We introduce a new ``Monotonic Imbalance Bounding'' (MIB) class of matching methods for causal inference that satisfies several important in-sample properties. MIB generalizes and extends in several new directions the only existing class, ``Equal Percent Bias Reducing'' (EPBR), which is designed to satisfy weaker properties and only in expectation. We also offer strategies to obtain specific members of the MIB class, and present a member of this class, called Coarsened Exact Matching, whose properties we analyze from this new perspective.
    Keywords: causal inference, treatment effect, matching,
    Date: 2009–10–16
  7. By: Kaufmann W.; Van Witteloostuijn A.; Boone Ch.
    Abstract: The color red has been found to influence behavior and performance in a wide range of settings. We introduce the color red in a Prisoner’s Dilemma by performing a series of oneshot and repeated Bertrand duopoly laboratory games. We hypothesize a positive relationship between the color red and the number of competitive choices. Furthermore, we expect to see a habituation effect, implying that the impact of red on competitive behavior is more pronounced at the beginning of the experiment, to then fade away over time. Results indicate that the effect of the color red on cooperative behavior is more complex than hypothesized. We find no main effect for the color red, but we do reveal a significant habituation effect of the color red in the one-shot games. Contrary to our expectation, however, an escalation effect emerges in the repeated game, which suggests that the competition-enhancing effect of red is reinforced by receiving feedback about the other party’s choice.
    Date: 2009–11

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