nep-gth New Economics Papers
on Game Theory
Issue of 2010‒07‒24
nineteen papers chosen by
Laszlo A. Koczy
Obuda University

  1. Solidarity in games with a coalition structure By Emilio Calvo; Maria Esther Gutierrez
  2. Information, stability and dynamics in networks under institutional constraints. By Norma Olaizola; Federico Valenciano
  3. Judicial Precedent as a Dynamic Rationale for Axiomatic Bargaining Theory By Marc Fleurbaey; John E. Roemer
  4. Uniqueness of Stationary Equilibrium Payoffs in Coalitional Bargaining By Andrew McLennan and Hülya Eraslan
  5. Nash Equilibrium and information transmission coding and decoding rules By Penelope Hernandez; Amparo Urbano Salvador; Jose E. Vila
  6. An experimental study on learning about voting powers By Gabriele Esposito; Eric Guerci; Nobuyuki Hanaki; Xiaoyan Lu; Naoki Watanabe
  7. Rhetoric in Legislative Bargaining with Asymmetric Information By Ying Chen; Hülya Eraslan
  8. Picking the Winners By Pablo Amorós
  9. A natural mechanism to choose the deserving winner when the jury is made up of all contestants By Pablo Amorós
  10. Risk Pooling, Risk preferences, and Social Networks By Orazio Attansio; Abigail Barr; Juan Camilo Cardenas; Garance Genicot; Costas Mehgir
  11. Strategic Interaction and Conventions. By María Paz Espinosa; Jaromír Kovárík; Giovanni Ponti
  12. Non-existence results for diagonal transfer continuity, diagonal quasi concavity, better reply security By Francesco Ciardiello
  13. On favoritism in auctions with entry By Leandro Arozamena; Federico Weinschelbaum
  14. Dictator games in the lab and in nature: External validity tested and investigated in Ugandan primary schools By Abigail Barr; Andrew Zeitlin
  15. Exploring the concept of sustainable development through a simulation game By Odile Blanchard; Arnaud Buchs
  16. International Environmental Agreements under Uncertainty: Does the Veil of Uncertainty Help? By Michael Finus; Pedro Pintassilgo
  17. Infinite-Horizon Mechanism Design By Alessandro Pavan; Ilya Segal; Juuso Toikka
  18. The Price of Stability in Matching Markets By James W. Boudreau; Vicki Knoblauch
  19. The Walrasian Output Beats the Market By Antonio J. Morales; Gonzalo Fernández-de-Córdoba

  1. By: Emilio Calvo (ERI-CES); Maria Esther Gutierrez (Universidad del País Vasco/E.H.U)
    Abstract: A new axiomatic characterization of the two-step Shapley value (Kamijo, 2009) is presented based on a solidarity principle of the members of any union: when the game changes due to the addition or deletion of players outside the union, all members of the union will share the same gains/losses.
    Keywords: Games with a coalition structure. Owen value. The two-step Shapley value. Solidarity.
    JEL: C71
    Date: 2010–07
  2. By: Norma Olaizola (UPV/EHU); Federico Valenciano (UPV/EHU)
    Abstract: In this paper we study the effects of institutional constraints on stability, efficiency and network formation. More precisely, an exogenous "societal cover" consisting of a collection of possibly overlapping subsets that covers the whole set of players and such tha no set in this collection is contained in another specifies the social organization in different groups or "societies". It is assumed that a player may initiate links only with players that belong to at leats one society that s/he also belongs to, thus restricting the feasible strategies and networks. In this way only the players in the possiby empty "societal core", i.e., those that belong to all societies, may initiate links with all individuals. In this setting the part of the current network within each connected component of the cover is assumed to be common knowledge to all players in that component. Based on this two-ingredient model, network and societal cover, we examine the impact of societal constraints on stable/efficient architectures and on dynamics.
    Keywords: Network, Non-cooperative game, Dynamics
    JEL: C72
    Date: 2010–07–14
  3. By: Marc Fleurbaey (CNRS, Université Paris-Descartes, Sciences Po, CORE (Université catholique de Louvain) and IDEP.); John E. Roemer (Yale University)
    Abstract: Axiomatic bargaining theory (e.g., Nash’s theorem) is static. We attempt to provide a dynamic justification for the theory. Suppose a Judge or Arbitrator must allocate utility in a (infinite) sequence of two-person problems; at each date, the Judge is presented with a utility possibility set in R2+. He/she must choose an allocation in the set, constrained only by Nash’s axioms, in the sense that a penalty is paid if and only if a utility allocation is chosen at date T which is inconsistent, according to one of the axioms, with a utility allocation chosen at some earlier date. Penalties are discounted with t, and the Judge chooses any allocation, at a given date, that minimizes the penalty he/she pays as that date. Under what conditions what the Judge’s chosen allocations converge to the Nash allocation over time? We answer this question for three canonical axiomatic bargaining solutions: Nash’s, Kalai-Smorodinsky’s, and the ’egalitarian’ solution, and generalize the analysis to a broad class of axiomatic models.
    Keywords: axiomatic bargaining theory, judicial precedent, dynamic foundations, Nash’s bargaining solution.
    JEL: C70 C78 K4
    Date: 2010–05–07
  4. By: Andrew McLennan and Hülya Eraslan
    Abstract: We study a model of sequential bargaining in which, in each period before an agreement is reached, the proposer’s identity (and whether there is a proposer) are randomly determined; the proposer suggests a division of a pie of size one; each other agent either approves or rejects the proposal; and the proposal is implemented if the set of approving agents is a winning coalition for the proposer. The theory of the fixed point index is used to show that stationary equilibrium expected payoffs of this coalitional bargaining game are unique. This generalizes Eraslan (2002) insofar as: (a) there are no restrictions on the structure of sets of winning coalitions; (b) different proposers may have different sets of winning coalitions; (c) there may be a positive probability that no proposer is selected.
    Date: 2010–02
  5. By: Penelope Hernandez (ERI-CES); Amparo Urbano Salvador (ERI-CES); Jose E. Vila (ERI-CES)
    Abstract: The design of equilibrium protocols in sender-receiver games where communication is noisy occupies an important place in the Economic literature. This paper shows that the common way of constructing a noisy channel communication protocol in Information Theory does not necessarily lead to a Nash equilibrium. Given the decoding scheme, it may happen that, given some state, it is better for the sender to transmit a message that is different from that prescribed by the codebook. Similarly, when the sender uses the codebook as prescribed, the receiver may sometimes prefer to deviate from the decoding scheme when receiving a message.
    Keywords: Noisy channel, Shannon's Theorem, sender-receiver games, Nash equilibrium
    JEL: C72 C02
    Date: 2010–07
  6. By: Gabriele Esposito (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Eric Guerci (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Nobuyuki Hanaki (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579, Economics Department - Université de Tsukuba); Xiaoyan Lu (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Naoki Watanabe (Economics Department - Université de Tsukuba)
    Abstract: We investigate experimentally whether subjects can learn, from their limited experiences, about relationships between the distribution of votes in a group and associated voting powers in weighted majority voting systems (WMV). Subjects are asked to play two-stage games repeatedly. In the second stage of the game, a group of four subjects bargains over how to divide fixed amount of resources among themselves through theWMV determined in the first stage. In the first stage, two out of four subjects in the group, independently and simultaneously, choose from two options that jointly determine the distribution of a given number of votes among four members. These two subjects face a 2 × 2 matrix that shows the distribution of votes, but not associated voting powers, among four members for each outcome. Therefore, to obtain higher rewards, subjects need to learn about the latter by actually playing the second stage. The matrix subjects face in the first stage changes during the experiment to test subjects' understanding of relationships between distribution of votes and voting power. The results of our experiments suggest that although (a) many subjects learn to choose, in the votes apportionment stage, the option associated with a higher voting power, (b) it is not easy for them to learn the underlying relationships between the two and correctly anticipate their voting powers when they face a new distribution of votes.
    Keywords: experiment, learning, voting power, bargaining
    Date: 2010–07–12
  7. By: Ying Chen (Arizona State University); Hülya Eraslan (John Hopkins University)
    Abstract: In this paper we analyze a legislative bargaining game in which parties privately informed about their preferences bargain over an ideological and a distributive decision. Communication takes place before a proposal is offered and majority rule voting determines the outcome. When the private information pertains to the ideological intensities but the ideological positions are publicly known, it may not be possible to have informative communication from the legislator who is ideologically distant from the proposer, but the more moderate legislator can communicate whether he would "compromise" or fight" on ideology. If instead the private information pertains to the ideological positions, then all parties may convey whether they will "cooperate," "compromise," or fight" on ideology. When the uncertainty is about ideological intensity, the proposer is always better on making proposals for the two dimensions together despite separable preferences, but when the uncertainty is about ideological positions, bundling can result in informational loss which hurts the proposer.
    JEL: C78 D72 D82 D83
    Date: 2010–07
  8. By: Pablo Amorós (Department of Economic Theory, Universidad de Málaga)
    Abstract: We analyze the problem of choosing the w contestants who will win a competition within a group of n > w competitors when all jurors commonly observe who the w best contestants are, but they may be biased. We study conditions on the configuration of the jury so that it is possible to induce the jurors to always choose the best contestants, whoever they are. If the equilibrium concept is dominant strategies, the condition is very strong: there must be at least one juror who is totally impartial, and the planner must have some information about who this juror is. If the equilibrium concept is Nash (or subgame perfect) equilibria the condition is less demanding: for each pair of contestants, the planner must know at least one juror who is not biased in favor/against any of them. Furthermore, the latter condition is also necessary for any other equilibrium concept.
    Keywords: Mechanism design, Social choice
    JEL: C72 D71 D78
    Date: 2010–07
  9. By: Pablo Amorós (Department of Economic Theory, Universidad de Málaga)
    Abstract: We analyze the problem of a jury choosing the winner from a set of agents when the identity of the deserving winner is common knowledge amongst the jurors but each juror is biased in favor of one di¤erent agent. We propose a simple and natural mechanism that implements the socially optimal rule (the winner is the deserving winner) in subgame perfect equilibria.
    Keywords: mechanism design, contests, subgame perfect equilibrium
    JEL: C72 D71 D78
    Date: 2010–07
  10. By: Orazio Attansio; Abigail Barr; Juan Camilo Cardenas; Garance Genicot; Costas Mehgir
    Abstract: Using date from a field experiment conducted in seventy Colombian municipalities, we investigate who pools risk with whom when risk pooling arrangements are not formally enforced. We explore the roles played by risk attitudes and network connections both theoretically and empirically. We find that pairs of participants who share a bond of friendship or kinship are more likely to (1) join the same risk pooling group and to (2) group assortatively with respect to risk attitudes. Also, consistent with our theoretical finding that when there is a problem of trust the process of pooling assortativley with respect to risk preferences is perturbed, we find (3) only weak evidence of such assorting among unfamiliar individuals.
    Keywords: Field experiment; risk sharing; social sanctions; Insurance; Group formation: matching.
    JEL: C93 D71 D81 O12
    Date: 2009
  11. By: María Paz Espinosa (Universidad del País Vasco); Jaromír Kovárík (Universidad del País Vasco); Giovanni Ponti (Universidad de Alicante and Università di Ferrara)
    Abstract: The scope of the paper is the literature that employs coordination games to study social norms and conventions from the viewpoint of game theory and cognitive psychology. We claim that those two alternative approaches are complementary, as they provide different insights to explain how people converge to a unique system of self-fulfilling expectations in presence of multiple, equally viable, conventions. While game theory explains the emergence of conventions relying on efficiency and risk considerations, the psychological view is more concerned with frame and labeling effects. The interaction between these alternative (and, sometimes, competing) effects leads to the result that coordination failures may well occur and, even when coordination takes place, there is no guarantee that the convention eventually established will be the most efficient.
    Keywords: Behavioral Game Theory, conventions, social norms
    JEL: C72
    Date: 2010–07–12
  12. By: Francesco Ciardiello
    Abstract: In this brief note a sufficient condition for a non-existence result of diagonal transfer continuity is presented. It is based on the definition of anti-kernel point for a payoff function. A sufficient condition for better reply security in terms of sup inf property on the aggregate bifunction is presented. Two non-existence results for diagonally quasi concavity based on concepts of corner set with respect to a point are presented. This brief note is included in a richer research-agenda.
    Keywords: Nash Equilibria Existence; Generalized Convexity; 2 Person Game Generalized Continuity; Diagonal Transfer Quasi Concavity; Diagonal Transfer Continuity.
    Date: 2010–05
  13. By: Leandro Arozamena; Federico Weinschelbaum
    Abstract: We examine the problem of endogenous entry in a single-unit auction when the seller's welfare depends positively on the utility of a subset of potential bidders. We show that, unless the seller values those bidders' welfare more than her own "private" utility, a nondiscriminatory auction is optimal.
    Keywords: auctions, favoritism, free entry, endogenous number of bidders.
    JEL: C72 D44
    Date: 2010–07
  14. By: Abigail Barr; Andrew Zeitlin
    Abstract: This paper tests the external validity of a simple Dictator Game as a laboratory analogue for a naturally occurring policy-relevant decision-making context. In Uganda, where teacher absenteeism is a problem, primary school teachers’ allocations to parents in a Dictator Game are positively but weakly correlated with their time allocations to teaching and, so, negatively correlated with their absenteeism. Guided by a simple theoretical model, we find that the correlation can be improved by allowing for (a) variations in behavioural reference points across teachers and schools and (b) the positive effect if some School Management Committees on teacher attendance .
    Keywords: Public service, Education, Experiments, Africa, external validity, Methodology
    JEL: C91 D64 I29 O15 O17
    Date: 2010
  15. By: Odile Blanchard (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II); Arnaud Buchs (LEPII - Laboratoire d'Économie de la Production et de l'Intégration Internationale - CNRS : UMR5252 - Université Pierre Mendès-France - Grenoble II)
    Abstract: The concept of sustainable development is used in everyday life by the general public, alongside researchers, institutions, and private companies. Nevertheless, its definition is far from being unequivocal. Clarifying the outline of the concept seems necessary. We have created a simulation game to address this goal. Our paper aims at bringing an overview of how the concept of sustainable development has emerged and spread over time, depicting the features of the game, and explaining how fruitful it is to the audience. The game is highly praised by the players as it not only brings them foundational knowledge, but also allows them to enhance many skills. The framework of the game thus contributes to educating about sustainable development as well as educating for sustainable development.
    Keywords: simulation game ; sustainable development ; education ; significant learning
    Date: 2010
  16. By: Michael Finus (University of Exeter); Pedro Pintassilgo (University of Algarve)
    Abstract: Na and Shin (1998) showed that the veil of uncertainty can be conducive to the success of self-enforcing international environmental agreements. Later papers confirmed this negative conclusion about the role of learning. In the light of intensified research efforts worldwide to reduce uncertainty about the environmental impact of emissions and the cost of reducing them, this conclusion is intriguing. The purpose of this paper is threefold. First, we analyze whether the result carries over to a more general setting without restriction on the number of players and which considers not only no and full learning but also partial learning. Second, we test whether the conclusion also holds if there is uncertainty about abatement costs instead of uncertainty about the benefits from global abatement. Third, we propose a transfer scheme that mitigates the possible negative effect of learning and which may even transform it into a positive effect.
    Keywords: Transnational Cooperation, Self-enforcing International Environmental Agreements, Uncertainty, Learning
    JEL: C72 D62 D81 H41 Q20
    Date: 2010–06
  17. By: Alessandro Pavan; Ilya Segal; Juuso Toikka
    Abstract: These notes examine the problem of how to extend envelope theorems to infinite-horizon dynamic mechanism design settings, with an application to the design of "bandit auctions."
    Keywords: asymmetric information, stochastic processes, incentives, mechanism design JEL Classification Numbers: D82, C73, L1.
    Date: 2010–07–16
  18. By: James W. Boudreau (The University of Texas-Pan American); Vicki Knoblauch (University of Connecticut)
    Abstract: This paper studies the inefficiency of one-to-one matching markets as measured by the price of stability. We begin by providing some theoretical upper bounds on this type of inefficiency, bounds that vary with the composition of participants’ ordinal preference lists. We then turn to simulation experiments to further describe how changes in basic characteristics of agents’ preferences can increase or decrease the efficiency of stable matchings. Our results have important implications for those who seek to improve the functioning of real-world matching markets. Though it may be difficult or even impossible to completely ascertain preferences in a real-world market, it is possible to get a sense of general levels of correlation and intercorrelation from an empirical sample. Our results can then be of help to market designers, letting them know how substantial the price of stability is likely to be.
    Keywords: Price of stability, matching
    JEL: C78 D63 C63
    Date: 2010–04
  19. By: Antonio J. Morales (Department of Economic Theory, Universidad de Málaga); Gonzalo Fernández-de-Córdoba (Department of Economic Theory, Universidad de Málaga)
    Abstract: We show that for any market-clearing price, average profits in a symmetric industry cannot exceed the individual profits from the Walrasian output. This immediately implies that a firm itself can guarantee to beat the market by producing the Walrasian output. This property clarifies and generalizes the conditions used in the literature to prove the success of Walrasian behavior from an evolutionary perspective.
    Keywords: Walrasian equilibrium, Evolutionary foundation
    JEL: C73 D43
    Date: 2010–07

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