nep-gth New Economics Papers
on Game Theory
Issue of 2010‒09‒18
seventeen papers chosen by
Laszlo A. Koczy
Obuda University

  1. The emergence of reciprocally beneficial cooperation By Sergio Beraldo; Robert Sugden
  2. Finitely Repeated Prisoners' Dilemma with Small Fines: Penance Contract By Hitoshi Matsushima
  3. Size Matters (in Output-Sharing Groups): Voting to End the Tragedy of the Commons By Cherry, Josh; Salant, Stephen; Uler, Neslihan
  4. On the Multi-Dimensional Controller and Stopper Games By Erhan Bayraktar; Yu-Jui Huang
  5. A class of evolutionary models for participation games with negative feedback By Pietro Dindo; Jan Tuinstra
  6. Applying relational algebra and RelView to measures in a social network By Rudolf Berghammer; Agnieszka Rusinowska; Harrie De Swart
  7. Partnership, Reciprocity and Team Design By Giuseppe De Marco; Giovanni Immordino
  8. A note on the inefficiency of bargaining over the price of a share By Athanassoglou, Stergios; Brams, Steven J.; Sethuraman, Jay
  9. Free-riding on Communication: An Experimental Study By Andersson, Ola; Holm, Håkan J.
  10. Group Membership, Competition, and Altruistic versus Antisocial Punishment: Evidence from Randomly Assigned Army Groups By Lorenz Goette; David Huffman; Stephan Meier; Matthias Sutter
  11. Chaos and Unraveling in Matching Markets By Songzi Du; Yair Livne
  12. How to arrange a Singles Party By Mullat, Joseph E.
  13. Catching-up with the “locomotive”: a simple theory By Tristan Boyer; Nicolas Jonard
  14. Prospects after the voting reform of the Lisbon Treaty By László Á. Kóczy
  15. Does Bargaining Matter in the Small Firm Matching Model? By L'Haridon, Olivier; Malherbet, Franck; Pérez-Duarte, Sébastien
  16. Transboundary Pollution and abatement By Luisito Bertinelli; Benteng Zou
  17. Political institutions and policy outcomes : effects of presidential vetoes on budget making By Kawanaka, Takeshi

  1. By: Sergio Beraldo; Robert Sugden
    Abstract: This paper offers a new and robust model of the emergence and persistence of cooperation. In the model, interactions are anonymous, the population is well-mixed, and the evolutionary process selects strategies according to material payoffs. The cooperation problem is modelled as a game similar to Prisoner’s Dilemma, but there is an outside option of nonparticipation and the payoff to mutual cooperation is stochastic; with positive probability, this payoff exceeds that from cheating against a cooperator. Under mild conditions, mutually beneficial cooperation occurs in equilibrium. This is possible because the non-participation option holds down the equilibrium frequency of cheating.
    Keywords: Cooperation; voluntary participation; random payoffs.
    JEL: C73
    Date: 2010–07
  2. By: Hitoshi Matsushima (Faculty of Economics, University of Tokyo)
    Abstract: We investigate the finitely repeated prisoners' dilemma with explicit contractual devices. We show that full collusion can be achieved by incentivizing the players' final period of play with small fines. Our incentivizing modality is the penance contract, by which a player is penalized if (and only if) he deviates from the penance strategy in the final period. We show that using this contractual agreement brings the penance strategy profile into unique subgame perfect equilibrium and achieves full collusion without being overturned by renegotiation.
    Date: 2010–03
  3. By: Cherry, Josh; Salant, Stephen; Uler, Neslihan
    Abstract: Individuals extracting common-pool resources in the field sometimes form output-sharing groups to avoid costs of crowding. In theory, if the right number of groups forms, Nash equilibrium aggregate effort should fall to the socially optimal level. Whether individuals manage to form the efficient number of groups and to invest within the chosen groups as theory predicts, however, has not been previously determined. We investigate these questions experimentally. We find that subjects do vote in most cases to divide themselves into the optimal number of output-sharing groups, and in addition do decrease the inefficiency significantly (by 50% to 71%). We did observe systematic departures from the theory when the group sizes are not predicted to induce socially optimal investment. Without exception these are in the direction of the socially optimal investment, confirming the tendency noted elsewhere in public goods experiments for subjects to be more “other-regarding” than purely selfish.
    Keywords: catch-sharing, common-pool resources, efficient private provision, free-riding, laboratory experiment, partnership solution
    Date: 2010–09–08
  4. By: Erhan Bayraktar; Yu-Jui Huang
    Abstract: We consider a zero-sum stochastic differential controller-and-stopper game in which the state process is a controlled jump-diffusion evolving in a multi-dimensional Euclidean space. In this game, the controller affects both the drift and the volatility terms of the state process. Under appropriate conditions, we show that the lower value function of this game is a viscosity solution to an obstacle problem for a Hamilton-Jacobi-Bellman equation, by generalizing the weak dynamic programming principles in [3].
    Date: 2010–09
  5. By: Pietro Dindo; Jan Tuinstra
    Abstract: We introduce a framework to analyze the interaction of boundedly rational heterogeneous agents repeatedly playing a participation game with negative feedback. We assume that agents use different behavioral rules prescribing how to play the game conditionally on the outcome of previous rounds. We update the fraction of the population using each rule by means of a general class of evolutionary dynamics based on imitation, which contains both replicator and logit dynamics. Our model is analyzed by a combination of formal analysis and numerical simulations and is able to replicate results from the experimental and computational literature on these types of games. In particular, irrespective of the specific evolutionary dynamics and of the exact behavioral rules used, the dynamics of the aggregate participation rate is consistent with the symmetric mixed strategy Nash equilibrium, whereas individual behavior clearly departs from it. Moreover, as the number of players or speed of adjustment increase the evolutionary dynamics typically becomes unstable and leads to endogenous fluctuations around the steady state. These fluctuations are robust with respect to behavioral rules that try to exploit them.
    Keywords: Participation games, Heterogeneous behavioral rules, Revision protocol, Replicator Dynamics Logit Dynamics, Nonlinear dynamics
    JEL: C72 C73
    Date: 2010–09–02
  6. By: Rudolf Berghammer (Computer-Aided Program Development - Institute of Computer Science - Christian-Albrechts-Universität zu Kiel); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Harrie De Swart (Faculteit Wijsbegeerte-Logica en taalanalyse - Universiteit van Tilburg)
    Abstract: We present an application of relation algebra to measure agents' `strength' in a social network with influence between agents. In particular, we deal with power, success, and influence of an agent as measured by the generalized Hoede-Bakker index and its modifications, and by the influence indices. We also apply relation algebra to determine followers of a coalition and the kernel of an influence function. This leads to specifications, which can be executed with the help of the BDD-based tool RelView after a simple translation into the tool's programming language. As an example we consider the present Dutch parliament.
    Keywords: RelView; relation algebra; social network; Hoede-Bakker index; influence index
    Date: 2010–04–01
  7. By: Giuseppe De Marco (Università di Napoli Parthenope); Giovanni Immordino (Università di Salerno and CSEF)
    Abstract: This paper studies the impact of intention-based reciprocity preferences on the free-riding problem arising in partnerships. Our results suggest a tendency of efficient partnerships to consist of members whose sensitivity to reciprocity is -- individually or jointly -- sufficiently high. Sufficient conditions for the implementation of the efficient strategy profile require a reciprocity based sharing rule such that each partner gets a fraction of the output that is a percentage of his own reciprocity with respect to the overall reciprocity in the team. Finally, we introduce the concept of psychological strong Nash equilibrium and show that it allows for the unique and collusion-proof implementation of the efficient strategy profile.
    Keywords: Reciprocity, partnership, psychological games
    JEL: C72 J41
    Date: 2010–07–31
  8. By: Athanassoglou, Stergios; Brams, Steven J.; Sethuraman, Jay
    Abstract: We study the problem of dissolving a partnership when agents have unequal endowments. Agents bid on the price of the entire partnership. The highest bidder is awarded the partnership and buys out her partners' shares at a per-unit price that is a function of the two highest bids. We show that there exists no price-setting mechanism satisfying certain mild regularity properties that is ex-post efficient, for any common prior of valuations. This result sharply contrasts the equal-endowment case in which efficient dissolution of the sort we are examining is possible through a simple k-double auction, as suggested by Cramton, Gibbons, and Klemperer (Econometrica, 1987).
    Keywords: Partnership Dissolution; Double Auction; Ex-Post Efficiency
    JEL: C78 C72
    Date: 2010–08–01
  9. By: Andersson, Ola (Department of Economics, Stockholm School of Economics); Holm, Håkan J. (Department of Economics, Lund University)
    Abstract: We use data from a bargaining experiment with communication to investigate free-riding behavior on communication cost in a coordination game. We find strong indications of free-riding. Firstly, the subjects tend to wait for the other to send a message when communication is costly, which does not happen when communication is costless. Secondly, the proportion of games where no communication takes place is much higher when communication is costly compared to when it is free. Thirdly, the form of communication also strongly suggest free-riding.
    Keywords: Free-riding; Communication; Coordination
    JEL: C72 C91 D43
    Date: 2010–09–01
  10. By: Lorenz Goette; David Huffman; Stephan Meier; Matthias Sutter
    Abstract: We investigate how group boundaries, and the economic environment surrounding groups, affect altruistic cooperation and punishment behavior. Our study uses experiments conducted with 525 officers in the Swiss Army, and exploits random assignment to platoons. We find that, without competition between groups, individuals are more prone to cooperate altruistically in a prisoner's dilemma game with in-group as opposed to out-group members. They also use a costly punishment option to selectively harm those who defect, encouraging a norm of cooperation towards the group. Adding competition between groups causes even stronger in-group cooperation, but also a qualitative change in punishment: punishment becomes anti-social, harming cooperative and defecting out-group members alike. These findings support recent evolutionary models and have important organizational implications.
    Keywords: Cooperation, Punishment, Army, Experiment
    JEL: C72 C91
    Date: 2010–09
  11. By: Songzi Du; Yair Livne
    Abstract: We study how information perturbations can destabilize two-sided matching markets. In our model, agents arrive on the market over two periods, while agents in the first period do not know the types of those arriving later. Agents already present in the market may match early or wait for the small group of new entrants. Despite the lack of discounting or risk aversion, this perturbation creates incentives to match early and leave the market before the new agents arrive. These incentives do not disappear as the market gets large. Moreover, we identify a new adverse phenomenon in this setting: as markets get large the probability of \emph{chaos} -- where no early matching scheme for existing agents is robust to pairwise deviations -- approaches 1. These results are independent of the distribution of agents' types and robust to asymmetries between the two sides of the market. Our findings thus suggest that matching markets are extremely sensitive to institutional details and uncertainty.
    Date: 2010–09
  12. By: Mullat, Joseph E.
    Abstract: The study addresses important question regarding the computational aspect of coalition formation. Almost as well known to find payoffs (imputations) belonging to a core, is prohibitively difficult, NP-hard task even for modern super-computers. In addition to the difficulty, the task becomes uncertain as it is unknown whether the core is non-empty. Following Shapley (1971), our Singles Party Game is convex, thus the presence of non-empty core is fully guaranteed. The article introduces a concept of coalitions, which are called nebulouses, adequate to critical coalitions, Mullat (1979). Nebulouses represent coalitions minimal by inclusion among all coalitions assembled into a semi-lattice of sets or kernels of "Monotone System," Mullat (1971,1976,1995), Kuznetsov et al. (1982). An equivalent property to convexity, i.e., the monotonicity of the singles game allowed creating an effective procedure for finding the core by polynomial algorithm, a version of P-NP problem. Results are illustrated by MS Excel spreadsheet.
    Keywords: stability conditions; game theory; coalition formation
    JEL: C71 C63 C62
    Date: 2010–09–07
  13. By: Tristan Boyer; Nicolas Jonard (CREA, University of Luxembourg)
    Abstract: In this paper we study the conditions under which efficient behavior can spread from a finite initial seed group to an infinite population living on a network. We formulate conditions on payoffs and network structure under which overall contagion occurs in arbitrary regular networks. Central in this process is the communication pattern among players who are confronted with the same decision, i.e. who are at the same distance from the initial seed group. The extent to which these agents interact among themselves (rather than with players who already have faced or subsequently will face the decision problem) is critical in the Prisoner’s Dilemma. In the Coordination Game the key element is the cohesion of the efficient cluster, a property which is different from the one identified in the Prisoner’s Dilemma. Additional results are obtained when we distinguish the interaction and information neighborhoods. Specifically, we find that contagion tends to be favored by fast neighborhood growth if an assumption of conservative behavior is made. We discuss our findings in relation to the notions of clustering, transitivity and cohesion.
    Keywords: imitation, contagion, regular graphs, local interaction game
    JEL: C72 C73 D70
    Date: 2010
  14. By: László Á. Kóczy (Óbuda University)
    Abstract: The European Union used to make decisions by unanimity or near unanimity. After a series of extensions, with 27 member states the present decision making mechanisms have become very slow and assigned power to the members in an arbitrary way. The new decision rules accepted as part of the Lisbon Treaty did not only make decision making far easier, but streamlined the process by removing the most controversial element: the voting weights. The new system relies entirely on population data. We look at the immediate impact of the reform as well as the long term effects of the different demographic trends in the 27 member states. We find that the Lisbon rules benefit the largest member states, while medium sized countries, especially Central Eastern European countries suffer the biggest losses.
    Keywords: European Union, Council of Ministers, qualied majority voting, Banzhaf index, Shapley-Shubik index, a priori voting power, demographics.
    Date: 2010
  15. By: L'Haridon, Olivier (HEC Paris); Malherbet, Franck (University of Rouen); Pérez-Duarte, Sébastien (European Central Bank)
    Abstract: In this article, we use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. We apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm’s matching model of unemployment. To the best of our knowledge, this is the first attempt that has been made to implement and systematically compare these solutions in search-matching economies. Our results are twofold. First from the theoretical/methodological viewpoint, we extend a somewhat flexible search-matching economy to alternative bargaining solutions. In particular, we prove that the Egalitarian and the Kalai-Smorodinsky solutions are easily implementable and mathematically tractable within search-matching economies. Second, our results show that even though the traditional results of bargaining theory apply in this context, they are generally qualitatively different and quantitatively weaker than expected. This is of particular relevance in comparison with the results established in the earlier literature.
    Keywords: search and matching models, bargaining theory, Nash, Egalitarian, Kalai-Smorodinsky
    JEL: C71 C78 J20 J60
    Date: 2010–09
  16. By: Luisito Bertinelli (CREA, University of Luxembourg); Benteng Zou (CREA, University of Luxembourg)
    Abstract: Adopting clean technologies is a long term process which requires structural changes in production and consumption habits. In the present paper, we focus more on short term issues related to pollution reduction and analyze a pollution abatement game in a 2-country dynamic model. Transboundary pollution is treated as a common state variable while pollution reduction is reached via abatement rather than the adoption of cleaner technologies. Symmetric open-loop and Markovian Nash equilibrium are studied and compared as well as the analysis of Markovian strategies of more than two countries case around the steady state.
    Date: 2010
  17. By: Kawanaka, Takeshi
    Abstract: The article examines how the power distribution between the executive and the legislature under the Presidential system affects policy outcomes. We focus in particular on the presidential veto, both package and partial. Using a simple game theory model, we show that the presidential partial veto generally yields a result in favor of the President, but that such effects vary depending on the reversion points of the package veto and the Congress's possible use of sanctions against the President. The effects of the Presidential partial veto diminish if the reversion point meets certain conditions, or if the Congress has no power to impose sufficient sanctions on the President when the President revises the outcome ex-post. To clarify and explain the model, we present the case of budget making in the Philippines between 1994 and 2008. In the Philippines, the presidential partial veto has been bringing expenditure programs closer to the President's ideal point within what may be called the Congress's indifference curve. The Congress, however, has not always passed budget bills and from time to time has carried over the previous year's budget, in years when the budget deficit increased. This is the situation that the policy makers cannot retrieve from the reversion point.
    Keywords: Philippines, Internal politics, Budget and accounts, Institutions, Democracy, Policy, Budget
    Date: 2010–06

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.
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