nep-gth New Economics Papers
on Game Theory
Issue of 2010‒05‒02
thirteen papers chosen by
Laszlo A. Koczy
Obuda University

  1. Strict Nash equilibria in large games with strict single crossing in types and actions By Ennio Bilancini; Leonardo Boncinelli
  2. The Computation of Perfect and Proper Equilibrium for Finite Games via Simulated Annealing By Stuart McDonald; Liam Wagner
  3. Preference Intensities and Risk Aversion in School Choice: A Laboratory Experiment By Flip Klijn; Joana Pais; Marc Vorsatz
  4. Competition and Resource Sensitivity in Marriage and Roommate Markets By Bettina Klaus
  5. Delegated agency in multiproduct oligopolies with indivisible goods By Ivan Arribas; Amparo Urbano Salvador
  6. A Core Equilibrium Convergence in a Public Goods Economy By Allouch, N.
  7. How to Add Apples and Pears: Non-Symmetric Nash Bargaining and the Generalized Joint Surplus By Samuel Danthine; Noemí Navarro
  8. Which Words Bond? An Experiment on Signaling in a Public Good Game By Serra Garcia, M.; Damme, E.E.C. van; Potters, J.J.M.
  9. A Nash bargaining solution to models of tax and investment competition: tolls and investment in serial transport corridors By Bruno De Borger; Wilfried Pauwels
  10. On the Complete Information First--Price Auction and its Intuitive Solution By Alcalde, Jose; Dahm, Matthias
  11. Matching with Trade-offs: Revealed Preferences over Competing Characteristics By Alfred Galichon; Bernard Salanie
  12. Losses from competition in a dynamic game model of a renewable resource oligopoly By Kenji Fujiwara
  13. Dominant Strategy Compromises By Peter Postl

  1. By: Ennio Bilancini; Leonardo Boncinelli
    Abstract: In this paper we study games where the space of player types is atomless, action spaces are second countable, and payoffs functions satisfy the property of strict single crossing in types and actions. Our main finding is that in this class of games every Nash equilibrium is essentially strict. We briefly develop and discuss the relevant consequences of our result.
    Keywords: atomless; single crossing; strict Nash; pure Nash; monotone Nash
    JEL: C72
    Date: 2010–04
  2. By: Stuart McDonald (Department of Economics, University of Queensland); Liam Wagner (Department of Economics, University of Queensland)
    Abstract: This paper exploits an analogy between the “trembles” that underlie the functioning of simulated annealing and the player “trembles” that underlie the Nash refinements known as perfect and proper equilibrium. This paper shows that this relationship can be used to provide a method for computing perfect and proper equilibria of n-player strategic games. This paper also shows, by example, that simulated annealing can be used to locate a perfect equilibrium in an extensive form game.
    Keywords: Game Theory
    JEL: C72 C73
    Date: 2010–01
  3. By: Flip Klijn; Joana Pais; Marc Vorsatz
    Abstract: We experimentally investigate in the laboratory two prominent mechanisms that are employed in school choice programs to assign students to public schools. We study how individual behavior is influenced by preference intensities and risk aversion. Our main results show that (a) the Gale-Shapley mechanism is more robust to changes in cardinal preferences than the Boston mechanism independently of whether individuals can submit a complete or only a restricted ranking of the schools and (b) subjects with a higher degree of risk aversion are more likely to play "safer" strategies under the Gale-Shapley but not under the Boston mechanism. Both results have important implications for the efficiency and the stability of the mechanisms.
    Keywords: school choice, risk aversion, preference intensities, laboratory experiment, Gale-Shapley mechanism, Boston mechanism, efficiency, stability, constrained choice.
    JEL: C78 C91 C92 D78 I20
    Date: 2010–04–20
  4. By: Bettina Klaus
    Abstract: We consider one-to-one matching markets in which agents can either be matched as pairs or remain single. In these so-called roommate markets agents are consumers and resources at the same time. We investigate two new properties that capture the effect newcomers have on incumbent agents. Competition sensitivity focuses on newcomers as additional consumers and requires that some incumbents will suffer if competition is caused by newcomers. Resource sensitivity focuses on newcomers as additional resources and requires that this is beneficial for some incumbents. For solvable roommate markets, we provide the first characterizations of the core using either competition or resource sensitivity. On the domain of all roommate markets, we obtain two associated impossibility results.
    Keywords: core; matching; competition sensitivity; resource sensitivity; roommate market
    JEL: C78 D63
    Date: 2010–04
  5. By: Ivan Arribas (ERI-CES); Amparo Urbano Salvador (ERI-CES)
    Abstract: This paper focuses on oligopolistic markets in which indivisible goods are sold by multiproduct firms to a continuum of homogeneous buyers, with measure normalized to one, who have preferences over bundles of products. Our analysis contributes to the literature on delegated agency games with direct externalities and complete information, extending the insights by Berheim and Whinston (1986, a , b) to markets with indivisibilities. By analyzing a kind of extended contract schedules - mixed bundling prices - that discriminate on exclusivity, the paper shows that efficient equilibria always exist in such settings. There may also exist inefficient equilibria in which the agent chooses a suboptimal bundle and no principal has a profitable deviation inducing the agent to buy the surplus-maximizing bundle because of a coordination problem among the pricipals. Inefficient equilibria can be ruled out by either assuming that all firms are pricing unsold bundles at the same profit margin as the bundle sold at equilibrium, or imposing the solution concept of subgame perfect strong equilibrium, which requires the absence of profitable deviations by any subset of principals and the agent. More specific results about the structure of equilibrium prices and payoffs for common agency outcomes are offered when the social surplus function is monotone and either submodular or supermodular.
    Keywords: Multiproduct Price Competition, Delegated Agency Games, Mixed Bundling Prices, Subgame Perfect Nash Equilibrium, Strong Equilibrium
    JEL: C72 D21 D41 D43 L13
    Date: 2010–04
  6. By: Allouch, N.
    Abstract: This paper shows a core-equilibrium convergence in a public goods economy where consumers' preferences display warm glow effects. We demonstrate that if each consumer becomes satiated to other consumers' provision, then as the economy grows large the core shrinks to the set of Edgeworth allocations. Moreover, we show that an Edgeworth allocation can be decentralized as a warm glow equilibrium.
    Keywords: competitive equilibrium, warm glow, public goods, Edgeworth, core, decentralization
    JEL: H41 C71 D64
    Date: 2010–04–30
  7. By: Samuel Danthine (Department of Economics, Université du Québec à Montréal); Noemí Navarro (Department of Economics, Université de Sherbrooke)
    Abstract: We generalize the equivalence of the non-symmetric Nash bargaining solution and the linear division of the joint surplus when bargainers use different utility scales. This equivalence in the general case requires the surplus each agent receives to be expressed in compatible, or comparable, units. This result is valid in the case of bargaining over multiple-issues. In addition, we discuss the requirements on the curvatures of the agents’ utility functions, or, in other words, on the bargainers’ attitudes towards risk.
    Keywords: Bargaining Problems, Non-Symmetric Nash Bargaining Solution, Linear Sharing
    JEL: C7 J5
    Date: 2010–04
  8. By: Serra Garcia, M.; Damme, E.E.C. van; Potters, J.J.M. (Tilburg University, Center for Economic Research)
    Abstract: We compare signaling by words and actions in a one-shot 2-person public good game with private information. The informed player, who knows the exact return from contributing, can signal by contributing first (actions) or by sending a costless message (words). Words can be about the return or about her contribution decision. Theoretically, actions lead to fully e¢ cient contributions. Words can be as influential as actions, and thus elicit the uninformed player's contribution, but allow the informed player to free-ride. The exact language used is not expected to matter. Experimentally, we find that words can be as influential as actions. Free-riding, however, does depend on the language: the informed player free-rides less when she talks about her contribution than when she talks about the returns.
    Keywords: Information transmission;costly signaling;communication;experiment.
    JEL: C72 D82 D83
    Date: 2010
  9. By: Bruno De Borger (University of Antwerp); Wilfried Pauwels (University of Antwerp)
    Abstract: The purpose of this paper is to study toll and investment competition along a serial transport corridor competition allowing for partial cooperation between regional governments. Partial cooperation is modeled as a Nash bargaining problem with endogenous disagreement points. We show that the bargaining approach to partial cooperation implies lower tolls and higher quality and capacity investment than fully non-cooperative behavior. Moreover, under bargaining, strategic behavior at the investment stage induces regions to offer lower quality and invest less in capacity as compared to full cooperation. Finally, Nash bargaining partially resolves the problem of welfare losses due to toll and capacity competition pointed out in the recent literature.
    Keywords: Nash bargaining, tax competition, congestion pricing
    JEL: H71 H77 R48 R42
    Date: 2010
  10. By: Alcalde, Jose; Dahm, Matthias
    Abstract: Despite the popularity of auction theoretical thinking, it appears that no one has presented an elementary equilibrium analysis of the complete information first-price sealed-bid auction mechanism when the bidding space has a finite grid. This paper aims to remedy that omission. We show that there always exists a "high price equilibrium" which can be considered "the intuitive solution" (an agent with the highest valuation wins the auction bidding at the second-highest valuation). Although there might be other "low price equilibria", we also show that when there are two bidders "the intuitive solution" is the unique limiting equilibrium when the grid size goes to zero and ties are randomly broken.
    Keywords: First-price auctions; undominated Nash equilibria.
    JEL: D44 C72
    Date: 2010–03–14
  11. By: Alfred Galichon (Ecole polytechnique - Economics Department); Bernard Salanie (Columbia University - Department of Economics)
    Abstract: We investigate in this paper the theory and econometrics of optimal matchings with competing criteria. The surplus from a marriage match, for instance, may depend both on the incomes and on the educations of the partners, as well as on characteristics that the analyst does not observe. The social optimum must therefore trade off matching on incomes and matching on educations. Given a flexible specification of the surplus function, we characterize under mild assumptions the properties of the set of feasible matchings and of the socially optimal matching. Then we show how data on the covariation of the types of the partners in observed matches can be used to estimate the parameters that define social preferences over matches. We provide both nonparametric and parametric procedures that are very easy to use in applications.
    JEL: C78 D61 C13
    Date: 2010
  12. By: Kenji Fujiwara (Kwansei Gakuin University)
    Abstract: This paper develops a dynamic game model of an asymmetric oligopoly with a renewable resource to reconsider welfare effects of increases in the number of firms. We show that increasing not only the number of inefficient firms but also that of Efficient firms reduces welfare, which sharply contrasts to a static outcome. It is discussed that the closed-loop property of feedback strategies plays a decisive role in this finding.
    Keywords: Dierential game, Asymmetric oligopoly, Feedback strategy
    JEL: C73 L13 Q20
    Date: 2010–04
  13. By: Peter Postl
    Abstract: We study dominant strategy implementation in a variant of the canonical public good provision model, as proposed by Borgers and Postl (2009). In this set up, we fully characterize the set of budget-balanced dominant strategy deterministric mechanisms, which are simple threshold rules. For probabilistic mechanisms that are continuously differentiable we provide a necessary and sufficient condition for dominant strategy implementation. When allowing for discontinuities in the mechanism, our necessary condition remains valid, but additional requirements must be met in order to ensure sufficiency.
    Keywords: Compromise, Dominant Strategy Implementation
    JEL: C72 D70 D80
    Date: 2010–04

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