nep-gth New Economics Papers
on Game Theory
Issue of 2010‒09‒11
nineteen papers chosen by
Laszlo A. Koczy
Obuda University

  1. A non-robustness in the order structure of the equilibrium set in lattice games By Andrew Monaco; Tarun Sabarwal
  2. Different Approaches to Influence Based on Social Networks and Simple Games By Michel Grabisch; Agnieszka Rusinowska
  3. Trust is bound to emerge (In the repeated Trust Game) By Luciano Andreozzi
  4. The Non-Constant-Sum Colonel Blotto Game By Brian Roberson; Dmitriy Kvasov
  5. Threshold Value: how binding thresholds affect the outcome of a negotiation By Sylvie Thoron
  6. The Optimal Defense of Networks of Targets By Dan Kovenock; Brian Roberson
  7. On the evolution of prize perceptions in contests By Boudreau, James W.; Shunda, Nicholas
  8. A simple economic teaching experiment on the hold-up problem By Balkenborg, Dieter; Kaplan, Todd R; Miller, Tim
  9. The fog of fraud – mitigating fraud by strategic ambiguity By Matthias Lang; Achim Wambach
  10. Natural Resource Distribution and Multiple Forms of Civil War By Massimo Morelli; Dominic Rohner
  11. Testing Unilateral and Bilateral Link Formation By Margherita Comola; Marcel Fafchamps
  12. How (Not) To Decide: Procedural Games By Gani Aldashev; Georg Kirchsteiger; Alexander Sebald
  13. "Core-Selecting Auctions: An Experimental Study" By Eiichiro Kazumori
  14. On the Bertrand core and equilibrium of a market By Robert Routledge
  15. Optimal Mechanisms for an Auction Mediator By Alexander Matros; Andriy Zapechelnyuk
  16. Coalitions and networks By Fox, Jonathan A
  17. Una Aplicación de la Teoría de Juegos Cooperativos a la Descomposición de la Pobreza en México By Juan Carlos Chávez Martín del Campo; Horacio González Sánchez; Hector Villarreal Páez
  18. Deception and confession: Experimental evidence from a deception game in Japan By Keiko Aoki, Kenju Akai, Kenta Onoshiro
  19. Relational Contracting Under the Threat of Expropriation – Experimental Evidence By Brown, M.; Serra Garcia, M.

  1. By: Andrew Monaco (Department of Economics, University of Kansas); Tarun Sabarwal (Department of Economics, University of Kansas)
    Abstract: The order and lattice structure of the equilibrium set in games with strategic complements are not robust to a minimal introduction of strategic substitutes. In a lattice game in which all-but-one players exhibit strategic complements (with one player exhibiting strict strategic complements), and the remaining player exhibits strict strategic substitutes, no two equilibria are comparable. More generally, in a lattice game, if there is reason to believe that either (1) just one player has strict strategic complements and another player has strict strategic substitutes, or (2) just one player has strict strategic substitutes and has singleton-valued best-responses, then without any restrictions on the strategic interaction among the other players, we may conclude that no two equilibria are comparable. In such cases, the equilibrium set is a non-empty, complete lattice, if, and only if, there is a unique equilibrium. Moreover, in such cases, with linearly ordered strategy spaces, the game has at most one symmetric equilibrium.
    Keywords: Lattice games, strategic complements, strategic substitutes, equilibrium set
    JEL: C70 C72
    Date: 2010–08
  2. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: We present an overview of research on a certain model of influence in a social network. Each agent has to make an acceptance/rejection decision, and he has an inclination to choose either the yes-action or the no-action. The agents are embedded in a social network which models influence between them. Due to the influence, a decision of an agent may differ from his preliminary inclination. Such a transformation between the agents' inclinations and their decisions are represented by an influence function. Follower functions encode the players who constantly follow the opinion of a given unanimous coalition. We examine properties of the influence and follower functions and study the relation between them. The model of influence is also compared to the framework of command games in which a simple game is built for each agent. We study the relation between command games and influence functions. We also define influence indices and determine the relations between these indices and some well-known power indices. Furthermore, we enlarge the set of possible yes/no actions to multi-choice games and investigate the analogous tools related to influence in the multi-choice model.
    Keywords: influence, social network, influence function, command game
    Date: 2010
  3. By: Luciano Andreozzi
    Abstract: This paper addresses the emergence of cooperation in asymmetric pris- oners' dilemmas in which one player chooses after having observed the other player's choice (Trust Game). We use the finite automata approach with complexity costs to study the equilibria of the repeated version of this game. We show that there is a small set of automata that form the unique Closed Under Rational Behavior (CURB) set for this game. This set contains two non-strict Nash equilibria, a cooperative and a non- cooperative one. We show that the cooperative equilibrium is the only (cyclically) stable set under the so called Best Response Dynamics.
    JEL: C70 C72
    Date: 2010
  4. By: Brian Roberson; Dmitriy Kvasov
    Abstract: The Colonel Blotto game is a two-player constant-sum game in which each player simultaneously distributes his fixed level of resources across a set of contests. In the traditional formulation of the Colonel Blotto game, the players’ resources are “use it or lose it” in the sense that any resources which are not allocated to one of the contests are forfeited. This article examines a non-constant-sum version of the Colonel Blotto game which relaxes this use it or lose it feature. We find that if the level of asymmetry between the players’ budgets is below a threshold, then there exists a oneto- one mapping from the unique set of equilibrium univariate marginal distribution functions in the constant-sum game to those in the non-constant-sum game. Once the asymmetry of the players’ budgets exceeds the threshold this relationship breaks down and we construct a new equilibrium.
    Keywords: Colonel Blotto Game, All-Pay Auction, Contests, Mixed Strategies
    JEL: C72 D7
    Date: 2010–08
  5. By: Sylvie Thoron (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)
    Abstract: The objective of this paper is to give the prospective outcome or "prospect" of a negotiation when the players' value can only be realized if a certain threshold is reached. Thresholds can be of different forms such as a certain number of players, a certain coalition of players or a certain total level of contribution. A value is proposed, which is defined for a given game and a given threshold. It is derived from a decomposition of the Shapley value.
    Keywords: threshold, commitment, Shapley value, coalition structures, weights
    Date: 2010–08–31
  6. By: Dan Kovenock; Brian Roberson
    Abstract: This paper examines a game-theoretic model of attack and defense of multiple networks of targets in which there exist intra-network strategic complementarities among targets. The defender’s objective is to successfully defend all of the networks and the attacker’s objective is to successfully attack at least one network of targets. In this context, our results highlight the importance of modeling asymmetric attack and defense as a conflict between “fully” strategic actors with endogenous entry and force expenditure decisions as well as allowing for general correlation structures for force expenditures within and across the networks of targets.
    Keywords: Asymmetric Conflict, Attack and Defense, Weakest-Link, Best-Shot
    JEL: C7 D74
    Date: 2010–08
  7. By: Boudreau, James W.; Shunda, Nicholas
    Abstract: We apply an indirect evolutionary approach to players' perceived prize valuations in contests. Evolution in finite populations leads to preferences that overstate the prize's material value and induce overexpenditure. We establish an equivalence between the behavior evolutionarily stable preferences induce and evolutionarily stable strategies.
    Keywords: Contest; Prize valuation; Preference evolution; Evolutionarily stable preferences
    JEL: D74 D72 C72 C73
    Date: 2010–08–25
  8. By: Balkenborg, Dieter; Kaplan, Todd R; Miller, Tim
    Abstract: The hold-up problem is central to the theory of incomplete contracts. It shows how the difficulty to write complete contracts and the resulting need to renegotiate can lead to underinvestment. We describe the design of a simple teaching experiment that illustrates the hold-up problem. The model used is a simple perfect information game. The experiment can hence also be used to illustrate the concept of subgame perfect equilibrium and the problem of making non-binding commitments.
    Keywords: classroom experiment; holdup problem
    JEL: L14 K12 C90
    Date: 2010–09–03
  9. By: Matthias Lang (Max Planck Institute for Research on Collective Goods, Bonn); Achim Wambach (University of Cologne)
    Abstract: Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing claim reports might act as a powerful deterrent. We show that uncertainty about fraud detection can be an effective strategy to deter ambiguity-averse agents from reporting false insurance claims. If, in addition, the auditing costs of the insurers are heterogeneous, it can be optimal not to commit, because committing to a fraud detection strategy eliminates the ambiguity. Thus strategic ambiguity can be an equilibrium outcome in the market and competition does not force firms to provide the relevant information. This finding is also relevant in other auditing settings and complements the literature on games with ambiguity-averse players.
    Keywords: commitment, Ambiguity, Fraud, Strategic Uncertainty, Costly State Verification
    JEL: D8 K4
    Date: 2010–05
  10. By: Massimo Morelli (Columbia University); Dominic Rohner (University of Zurich)
    Abstract: We examine how natural resource location, rent sharing and fighting capacities of different groups matter for ethnic conflict. A new type of bargaining failure due to multiple types of potential conflicts (and hence multiple threat points) is identified. The theory predicts conflict to be more likely when the geographical distribution of natural resources is uneven and when a minority group has better chances to win a secessionist rather than a centrist conflict. For sharing rents, resource proportionality is salient in avoiding secessions and strength proportionality in avoiding centrist civil wars. We present empirical evidence that is consistent with the model.
    Keywords: Natural Resources, Conflict, Strength Proportionality, Resource Proportionality, Secession, Bargaining Failure
    JEL: C72 D74 Q34
    Date: 2010–08
  11. By: Margherita Comola; Marcel Fafchamps
    Abstract: The literature has shown that network architecture depends crucially on whether links are formed unilaterally or bilaterally, that is, on whether the consent of both nodes is required for a link to be formed. They propose a test of whether network data is best seen as an actual link or willingness to link and, in the latter case, whether this link is generated by an unilateral o rbilateral link formation process. They illustrate this test using survey answers to a risk-sharing question inTanzania. They find that the bilateral link formation model fits the data better than the unilateral model, but the data are best interpreted as willingness to link rather than an actual link. They then expand the model to include self-censoring and find that models with self-censoring fit the data best. [Working Paper No. 236]
    Keywords: network architecture; pairwise stability; risk sharing
    Date: 2010
  12. By: Gani Aldashev; Georg Kirchsteiger; Alexander Sebald
    Abstract: Psychologists and experimental economists …nd that peoples behavior is shaped not only by outcomes but also by the procedures through which these outcomes are reached. Using Psychological Game Theory we develop a general framework allowing players to be motivated by procedural concerns. We present two areas in which procedural concerns play a key role. First, we apply our framework to policy experiments and show that if subjects exhibit procedural concerns, the way in which researchers allocate subjects into treatment and control groups influences the experimental results. The estimate of the treatment e¤ect is always biased as compared to the e¤ect of a general introduction of the treatment. In our second application we analyze the problem of appointing agents into jobs that di¤er in terms of their desirability. Because of procedural concerns the principals choice of appointment procedure a¤ects the subsequent e¤ort choice of agents. We test this theoretical hypothesis in a …eld experiment. The results are consistent with our predictions.
    Keywords: Procedural concerns; Psychological game theory; Policy experiments; Appointment procedures
    JEL: A13 C70 C93 D63
    Date: 2010–08
  13. By: Eiichiro Kazumori (Faculty of Economics, University of Tokyo)
    Abstract: Many business and policy problems, such as allocation of spectrum rights and financial assets, involve allocation of heterogeneous objects among players with superadditive values. This paper uses laboratory experiments to study core-selecting auctions (clock-proxy auctions of Ausubel, Cramton, and Milgrom (2004)) recently proposed as a solution to this problem. Our experimental design involves three factors. The first factor is the auction design and we consider generalized Vickrey auctions, simultaneous ascending auctions, and clock-proxy auctions. The second factor is the value structure of agents. In addition to a benchmark case of additive values, we considered superadditive value structures which feature the exposure problem and the coordination problem. The third factor is subject characteristics. We ran experiments with professional traders and university students. We found that clock-proxy auctions outperformed generalized Vickrey auctions. Clock-proxy auctions outperformed simultaneous ascending auctions with the exposure problem value structure, and did statistically equally well with the additive and the coordination problem value structure. The result suggests a trade-off between efficiency improvements and complexity in package bidding. An ANOVA of outcomes demonstrated that auction designs were significant, and the interaction terms were often significant. We estimated the effect of auction design on efficiency and revenue and found that its magnitude depended on the valuation structure and subject characteristics. The result suggests that market design is not one-size-fits-all and a successful design builds on an understanding of fine details of the problem environments.
    Date: 2010–08
  14. By: Robert Routledge
    Date: 2010
  15. By: Alexander Matros (University of South Carolina); Andriy Zapechelnyuk (Queen Mary, University of London)
    Abstract: We consider a dynamic auction environment with a long-lived seller and short-lived buyers mediated by a third party. A mediator has incomplete information about traders' values and selects an auction mechanism to maximize her expected revenue. We characterize mediator-optimal mechanisms and show that an optimal mechanism has a simple implementation as a Vickrey auction with a reserve price where the seller pays to the mediator only a fixed percentage from the closing price.
    Keywords: Optimal mechanism, Vickrey auction, Mediator
    JEL: C73 D44 D82
    Date: 2010–08
  16. By: Fox, Jonathan A
    Abstract: Coalitions are partnerships among distinct actors that coordinate action in pursuit of shared goals. But what distinguishes them from other kinds of partnerships? The term is widely used to describe joint ventures in a wide range of arenas, most notably in international geopolitics or political party competition and governance. The literature on coalitions is dominated by discussions of war and peace, election campaigns, and parliamentary dynamics. Just as in war or politics, successful collective action in civil society often depends on the formation and survival of coalitions – insofar as the whole is often greater than the sum of the parts.
    Keywords: Globalization and Regulation, Social Movements
    Date: 2009–12–01
  17. By: Juan Carlos Chávez Martín del Campo (Department of Economics and Finance, Universidad de Guanajuato); Horacio González Sánchez (Centro de Estudios de las Finanzas Públicas, Cámara de Diputados); Hector Villarreal Páez (Escuela de Graduados en Administración Pública y Política Pública, ITESM)
    Abstract: El presente artículo estima la descomposición de la variación en la pobreza en México aplicando algunos resultados derivados de la teoría de juegos cooperativos. En particular, se utiliza el enfoque del valor Shapley (Shapley 1953) para estimar la contribución del crecimiento, la distribución del ingreso y los precios en la descomposición. La disminución observada en la familia P_alpha de medidas de pobreza durante el periodo 2000-2008 se asocia principalmente al componente crecimiento. Sin embargo, la distribución del ingreso y la inflación tuvieron un papel preponderante en la dinámica de la pobreza para los subperiodos 2000-2002 y 2006-2008, respectivamente.
    Keywords: Pobreza, Descomposición, Valores de Shapley
    JEL: C71 D31 H22 I32
    Date: 2010–08
  18. By: Keiko Aoki, Kenju Akai, Kenta Onoshiro
    Abstract: This study investigated lying behavior and the behavior of people who were deceived by using a deception game (Gneezy, 2005) in both anonymity and face-to-face conditions, and in two different monetary payoffs between senders and receivers. Moreover, subjects were used to investigate lying behavior in students as well as in people from a variety of different socioeconomic backgrounds. Wealso explored how liars feel about lying by using new messages sent from the senders to the receivers after the receivers selected the option on which the earnings in the experiment depended. The following results are obtained: i) lying behavior in the senders significantly differed between students and non-students at a payoff in the anonymity treatment, but did not significantly differ between students in the anonymity and face-to-face treatments; ii) lying behavior was not influenced by gender; iii) liars’ feelings about lying were influenced more in the face-to-face treatment than in the anonymity treatment; and iv) the receivers who were deceived were more likely to believe a sender’s message tobe true in the anonymity treatment. This study implies that having face-to-face contact prompts liars to confess their behavior because they mayfeel remorse orguilt. In addition, people who are deceived overestimate the chances of not being deceived by a stranger.
    Date: 2010–08
  19. By: Brown, M.; Serra Garcia, M. (Tilburg University, Center for Economic Research)
    Abstract: We examine how relational contracting in credit and investment relationships is affected by the potential expropriation of funds. We implement credit relationships in which repayment is not third-party enforceable, i.e. borrowers can default on their loans. In our main treatment the borrower can expropriate the lender’s funds: a defaulting borrower can reinvest the loaned funds in future periods. In a control treatment borrowers cannot expropriate borrowed funds, i.e. if they default they cannot reinvest these funds in future periods. We find that potential expropriation decreases the overall volume of credit as lenders offer smaller loans in initial periods. Borrowers are more likely to default in earlier periods of the relationship when expropriation is possible, especially when they receive large loans. Together these results suggest that relational contracts may be particularly difficult to establish in markets where the expropriation of funds is feasible. This finding is relevant to credit markets in which lenders’ rights are weak, but also to sovereign lending, as well as to foreign direct investment in countries with weak investor protection.
    Keywords: Relational contracts;Investor protection;Banking;Sovereign debt;Foreign direct investment.
    JEL: C73 G21 O16 F21 F34
    Date: 2010

This nep-gth issue is ©2010 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.