nep-gth New Economics Papers
on Game Theory
Issue of 2010‒06‒26
eleven papers chosen by
Laszlo A. Koczy
Obuda University

  1. Climate Change and Game Theory By Peter Wood
  2. The cooperative endorsement of a strategic game By Penelope Hernandez; Jose A. Silva-Reus
  3. A characterization of a new value and an existing value for cooperative games with levels structure of cooperation By Mikel Alvarez-Mozos; Oriol Tejada
  4. Game Theory and Applications in Finance. By Gulick, G. van
  5. Manipulability in Matching Markets: Conflict and Coincidence of Interests By Itai Ashlagi; Flip Klijn
  6. Behavioral Effects in Individual Decisions of Network Formation: Complexity Reduces Payoff Orientation and Social Preferences By Harmsen - van Hout, Marjolein J.W.; Dellaert, Benedict G.C.; Herings, P. Jean-Jacques
  7. On the Prevalence of Framing Effects Across Subject-Pools in a Two- Person Cooperation Game By Sebastian J. Goerg; Gari Walkowitz
  8. Rent-seeking contests with independent private values By Christian Ewerhart
  9. Further Consideration of the Existence of Nash Equilibria in an Asymmetric Tax Competition Game By Emmanuelle Taugourdeau; Abderrahmane Ziad
  10. Preference for Randomization: Ambiguity Aversion and Inequality Aversion By Kaito Sato
  11. Influence Networks By Dunia López-Pintado

  1. By: Peter Wood (Resource Management in Asia-Pacific Program, Crawford School of Economics and Government, Australian National University)
    Abstract: This survey paper examines the problem of achieving global cooperation to reduce greenhouse gas emissions. Contributions to this problem are reviewed from non-cooperative game theory, cooperative game theory, and implementation theory. Solutions to games where players have a continuous choice about how much to pollute, games where players make decisions about treaty participation, and games where players make decisions about treaty ratification, are examined. The implications of linking cooperation on climate change with cooperation on other issues, such as trade, is examined. Cooperative and non-cooperative approaches to coalition formation are investigated in order to examine the behaviour of coalitions cooperating on climate change. One way to achieve cooperation is to design a game, known as a mechanism, whose equilibrium corresponds to an optimal outcome. This paper examines some mechanisms that are based on conditional commitments, and could lead to substantial cooperation.
    Keywords: Climate change negotiations; game theory; implementation theory; coalition formation; subgame perfect equilibrium
    Date: 2010–05
  2. By: Penelope Hernandez (ERI-CES); Jose A. Silva-Reus (Universitat de Alicante and IUDSP)
    Abstract: This note provides a way to translate a strategic game to a characteristic cooperative game assuming that the set of players of the cooperative game is the set of pure actions of the strategic game. Coalitions generated with only one action for each player and the total coalition characterize the Core. We calculate the worth of the total coalition to guarantee the non-emptyness condition. In particular, for a two-player game, this value is equal to the maximal sum of the diagonals.
    Keywords: Cooperative games, core
    JEL: C7
    Date: 2010–06
  3. By: Mikel Alvarez-Mozos; Oriol Tejada (Universitat de Barcelona)
    Keywords: shapley value, banzhaf value, levels structure of cooperation
    JEL: C71
    Date: 2010
  4. By: Gulick, G. van (Tilburg University)
    Abstract: Cooperation between individuals is most often realised when there is are benefits by undertaking joint action. If these benefits are transferable between individuals - think of money - then this gives rise to an allocation problem, where these benefits should be divided among these individuals. The aim of cooperative game theory is to solve these allocation problems. Contributions in this thesis to game theoretic literature involve fuzzy games and allocation schemes. In finance, situations exist that give rise to allocation problems. Individuals combining their capital typically have more investment opportunities, and thus higher revenues. The proceeds of their investments have to be divided among those individuals. Also, banks and insurance companies face several allocation problems, which are especially related to risk capital since there is a potential to hedge risk. The first problem arises when the total risk capital withheld by a firm needs to be divided over several business divisions within the firm. The second problem deals with a business sector, where it is determined how companies compensate customers of bankrupted competitors for their losses. The aforementioned problems are not only studied by construction cooperative games, but by applying the underlying rationale to the specific problems as well.
    Date: 2010
  5. By: Itai Ashlagi; Flip Klijn
    Abstract: We study comparative statics of manipulations by women in the men-proposing deferred acceptance mechanism in the two-sided one-to-one marriage market. We prove that if a group of women employs truncation strategies or weakly successfully manipulates, then all other women weakly benefit and all men are weakly harmed. We show that our results do not appropriately generalize to the many-to-one college admissions model.
    Keywords: matching, deferred acceptance, manipulability, welfare
    JEL: C78 D60
    Date: 2010–06–14
  6. By: Harmsen - van Hout, Marjolein J.W. (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Dellaert, Benedict G.C. (Department of Business Economics / Marketing Section, Erasmus School of Economics, Erasmus University Rotterdam); Herings, P. Jean-Jacques (Department of Economics, School of Business and Economics, Maastricht University)
    Abstract: Network formation constitutes an important part of many social and economic processes, but relatively little is known about how individuals make their linking decisions in networks. This article provides an experimental investigation of behavioral effects in individual decisions of network formation. Our findings demonstrate that the inherent complexity of the network setting makes individuals’ choices systematically less payoff-guided and also strongly reduces their social orientation. Furthermore, we show that specific network complexity features aggravate the former effect. These behavioral effects have important implications for researchers and managers working in areas that involve network formation.
    Keywords: network formation; individual decision making; behavioral effects; network complexity; payoff orientation; social preferences; choice experiments; mixed logit
    JEL: A14 C91 D85
    Date: 2010–05
  7. By: Sebastian J. Goerg (Max Planck Institute for Research on Collective Goods, Bonn); Gari Walkowitz (Department of Management, University of Cologne)
    Abstract: In this experimental study, involving subjects from Abu-Dis (West Bank), Chengdu (China), Helsinki (Finland), and Jerusalem (Israel), we test for a presentation bias in a two-person cooperation game. In the positive frame of the game, a transfer creates a positive externality for the opposite player, and in the negative frame, a negative one. Subjects in Abu-Dis and Chengdu show a substantially higher cooperation level in the positive externality treatment. In Helsinki and Jerusalem, no framing effect is observed. These findings are also reflected in associated first-order beliefs. We argue that comparisons across subject-pools might lead to only partially meaningful and opposed conclusions if only one treatment condition is evaluated. We therefore suggest a complementary application and consideration of different presentations of identical decision problems within (cross-cultural) research on subject-pool differences.
    Keywords: framing of decision problems, methodology, subject-pool differences
    JEL: A13 C72 C91 F51 Z13
    Date: 2010–06
  8. By: Christian Ewerhart
    Abstract: We consider symmetric rent-seeking contests with independent private valuations of the contest prize. For a two-parameter specification with continuous types, we fully characterize the Bayesian equilibrium, and study its basic properties. The willingness to waste is a hump-shaped function of the private valuation, with the median type expending the highest share of her valuation. A first-order (second-order) stochastic increase in the common type distribution raises (lowers) ex-ante expected efforts. However, neither first-order nor second-order stochastic dominance in valuations necessarily leads to a first-order stochastic dominance ranking in efforts. We also show that, as uncertainty vanishes, the Bayesian equilibrium converges to the Nash equilibrium of the model with complete information.
    Keywords: Rent seeking, conflict, independent private valuations, first-order stochastic dominance, mean-preserving spread
    JEL: C72 H41
    Date: 2010–06
  9. By: Emmanuelle Taugourdeau (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Abderrahmane Ziad (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen)
    Abstract: In this methodological paper, we prove that the key tax competition game introduced by Zodrow and Mieszkowski (1986) and Wildasin (1988), extended to asymmetric regions, possesses a Nash equilibrium under several assumptions commonly adopted in the literature : goods are supposed to be normal ; the public good is assumed to be a desired good ; the demand for capital is concave ; and the elasticity of the marginal product is bounded. The general framework we develop enrables us to obtain very tractable results. By applying our method to several examples with standard production functions, we show that it is easy to use.
    Keywords: Nash equilibrium, tax competition.
    Date: 2010–01
  10. By: Kaito Sato
    Abstract: In Anscombe and Aumann’s (1963) domain, there are two types of mixtures. One is an ex–ante mixture, or a lottery on acts. The other is an ex–post mixture, or a state–wise mixture of acts. These two mixtures have been assumed to be indifferent under the Reversal of Order axiom. However, we argue that the difference between these two mixtures is crucial in some important contexts. Under ambiguity aversion, an ex–ante mixture could provide only ex–ante hedging but not ex–post hedging. Under inequality aversion, an ex–ante mixture could provide only ex–ante equality but not ex–post equality. For each context, we develop a model that treats a preference for ex–ante mixtures separately from a preference for ex–post mixtures. One representation is an extensionof Gilboa and Schmeidler’s (1989) Maxmin preferences. The other representation is an extension of Fehr and Schmidt’s (1999) Piecewise–linear preferences. In both representations, a single parameter characterizes a preference for ex–ante mixtures. For the both representations, instead of the Reversal of Order axiom, we propose a weaker axiom, the Indifference axiom, which is a criterion, suggested in Raiffa’s (1961) critique, for evaluating lotteries on acts. These models are consistent with much recent experimental evidence in each context.
    Keywords: Ambiguity; randomization; Ellsberg paradox; other–regarding preferences; inequality; maxmin utility.
    JEL: D81
    Date: 2010–06–16
  11. By: Dunia López-Pintado (Department of Economics, Universidad Pablo de Olavide and CORE, Université Catholique de Louvain)
    Abstract: Some behaviors, ideas or technologies spread and become persistent in society, whereas others vanish. This paper analyzes the role of social influence in determining such distinct collective outcomes. Agents are assumed to acquire information from others through a certain sampling process that generates an influence network and use simple rules to decide whether to adopt or not depending on the observed sample. The diffusion threshold (i.e., the spreading rate above which the behavior becomes persistent in the population) and the endemic state (i.e., the fraction of adopters in the stationary state of the dynamics) are characterized as a function of the primitives of the model. The results highlight the importance of the correlation between visibility and connectivity (or degree) for diffusion purposes.
    Keywords: social influence, networks, diffusion threshold, endemic state.
    JEL: C73 L14 O31 O33
    Date: 2010–06

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