nep-gth New Economics Papers
on Game Theory
Issue of 2010‒12‒23
seventeen papers chosen by
Laszlo A. Koczy
Obuda University

  1. Generosity in bargaining: Fair or fear? By Breitmoser, Yves; Tan, Jonathan H.W.
  2. Quasicontinuity and Nash Equilibrium in Compact and Convex Games By Rabia Nessah; Tarik Tazdait
  3. The Robustness of ‘Enemy-of-My-Enemy-is-My-Friend’ Alliances By Dan Kovenock; Michael J. Mauboussin; Brian Roberson
  4. Some results on stability concepts for matching models By Ester Camiña Centeno
  5. Bagwell's paradox, forward induction and outside option games By José Luis Ferreira
  6. Amalgamating players, symmetry and the Banzhaf value By André Casajus
  7. Stability and Fairness in Models with a Multiple Membership By Michel Le Breton; Juan D. Moreno-Ternero; Alexei Savvateev; Shlomo Weber
  8. Existence of Equilibrium in Minimax Inequalities, Saddle, Points, Fixed Points, and Games without Convexity Sets By Rabia Nessah; Tarik Tazdait
  9. Network Formation with Adaptive Agents By Schuster, Stephan
  10. Directed Generosity and Network Formation: Network Dimension Matters By D'Exelle, Ben; Riedl, Arno
  11. A coalitional procedure leading to a family of bankruptcy rules By Juan D. Moreno-Ternero
  12. Price Spikes in Electricity Markets: A Strategic Perspective By Joseph Mullins; Liam Wagner; John Foster
  13. Bounded Rationality In Finite Automata By Ioannou, Christos A; Nompelis, Ioannis
  14. Resolution of Financial Distress under Chapter 11 By Amira Annabi; Michèle Breton; Pascal François
  15. International Environmental Agreements under Uncertainty: Does the Veil of Uncertainty Help? By Finus, Michael; Pintassilgo, Pedro
  16. What is the strategic value of investments in alternative local energy supply? By Gerd KUPPER
  17. Good standing and cooperation By Sergio Beraldo

  1. By: Breitmoser, Yves; Tan, Jonathan H.W.
    Abstract: Are "generous" bargaining offers made out of fairness or in fear of rejection? We disentangle risk and social references by analyzing experimental behavior in three majority bargaining games: (1) a random-proposer game with infinite time horizon; 2) a one round proposer game with disagreement payoffs equal to the infinite horizon continuation payoffs; and, (3) a demand commitment game. Inequity aversion predicts very differently across these games, but risk aversion does not. Observed strategies violate neither stationarity nor truncation consistency. This allows us to use structural models of bargaining behavior to estimate the latent type shares of subjects with CES, inequity averse, and Prospect theoretic preferences. The Prospect theoretic, i.e. reference-dependent, model of utility explains the observations far better than any mixture of alternative models.
    Keywords: coalitional bargaining; non-cooperative modeling; random utility model; quantal response equilibrium; laboratory experiment
    JEL: C78 D78 C72
    Date: 2010–12–14
  2. By: Rabia Nessah (IÉSEG School of Management, LEM-CNRS (UMR 8179),); Tarik Tazdait (CNRS-EHESS-CIRED)
    Keywords: Strong Berge equilibrium, Pareto efficiency, strong Nash equilibrium, KyFan inequality
    Date: 2010–01
  3. By: Dan Kovenock; Michael J. Mauboussin; Brian Roberson
    Abstract: This article examines a two-stage model of asymmetric conflict based on the classic Colonel Blotto game in which players have, in the first stage, the ability to increase the number of battlefields contested. It thereby endogenizes the “dimensionality” of conflict. In equilibrium, if the asymmetry in the players’ resource endowments exceeds a threshold, the weak player chooses to add battlefields, while the strong player never does. Adding battlefields spreads the strong player’s forces more thinly, increasing the incidence of favorable strategic mismatches for the weak player.
    Keywords: Asymmetric Conflict, Multi-battle Conflict, Colonel Blotto Game, Stochastic Guerilla Warfare, Endogenous Dimensionality
    JEL: C72 D74
    Date: 2010–12
  4. By: Ester Camiña Centeno (Departamento de Fundamentos del Análisis Económico II. Fac. Ciencias Económicas. Universidad Complutense)
    Abstract: We consider a general class of two-sided matching markets, called many-to-one matching markets with money. For a special case of these markets, where each seller owns di¤erent objects, we prove that stable outcomes cannot be characterized by the non-existence of unsatis…ed pairs. Moreover, we restore the dual lattice structure in markets with more than one seller using a connection with an assignment game.
    Keywords: Matching, Assignment, Stability.
    JEL: C71 C78
    Date: 2010
  5. By: José Luis Ferreira
    Abstract: In Stackelberg-like games there is an advantage of moving first. However, Bagwell (1995) shows that this result may not hold if the second player can make only imperfect observations. We explore whether this paradox also holds when the advantage comes from forward induction arguments in the class of outside option games.
    Keywords: Bagwell's paradox, Commitment, Observability, Noise, Outside option games, Forward induction
    JEL: C72
    Date: 2010–12
  6. By: André Casajus (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We suggest new characterizations of the Banzhaf value without the symmetry axiom, which reveal that the characterizations by Lehrer (1988, International Journal of Game Theory 17, 89-99) and Nowak (1997, International Journal of Game Theory 26, 127-141) as well as most of the characterizations by Casajus (2010, Theory and De- cision, forthcoming) are redundant. Further, we explore symmetry implications of Lehrer's 2-efficiency axiom.
    Keywords: Banzhaf value, amalgamation, symmetry, 2-efficiency
    JEL: C71
    Date: 2010–12
  7. By: Michel Le Breton (Universit de Toulouse 1, GREMAQ and IDEI, Toulouse, France); Juan D. Moreno-Ternero (U. de Mlaga, U. Pablo de Olavide y CORE, Universit catholique de Louvain); Alexei Savvateev (New Economic School, Moscow, Russia); Shlomo Weber (Southern Methodist University, USA, and the New Economic School, Moscow, Russia)
    Abstract: This article studies a model of coalition formation for the joint production (and finance) of public projects, in which agents may belong to multiple coalitions. We show that, if projects are divisible, there always exists a stable (secession-proof) structure, i.e., a structure in which no coalition would reject a proposed arrangement. When projects are indivisible, stable allocations may fail to exist and, for those cases, we resort to the least core in order to estimate the degree of instability. We also examine the compatibility of stability and fairness in metric environments with indivisible projects, where we also explore the performance of well-known solutions, such as the Shapley value and the nucleolus.
    Keywords: Stability, Fairness, Membership, Coalition Formation
    JEL: C71
    Date: 2010–12
  8. By: Rabia Nessah (IÉSEG School of Management, LEM-CNRS (UMR 8179),); Tarik Tazdait (CNRS-EHESS-CIRED)
    Keywords: minimax inequality, saddle points, fixed points, coincidence points, discontinuity, non-quasiconcavity, non-convexity, and non-compactness
    Date: 2010–11
  9. By: Schuster, Stephan
    Abstract: In this paper, a reinforcement learning version of the connections game first analysed by Jackson and Wolinsky is presented and compared with benchmark results of fully informed and rational players. Using an agent-based simulation approach, the main nding is that the pattern of reinforcement learning process is similar, but does not fully converge to the benchmark results. Before these optimal results can be discovered in a learning process, agents often get locked in a state of random switching or early lock-in.
    Keywords: agent-based computational economics; strategic network formation; network games; reinforcement learning
    JEL: C63 D85
    Date: 2010
  10. By: D'Exelle, Ben (University of East Anglia); Riedl, Arno (Maastricht University)
    Abstract: We explore network effects on generosity for different network dimensions. To this end we elicit multiple network dimensions (friendship, social support, economic exchange, etc.) in a rural village in the Southern hemisphere and measure generosity with a sequence of dictator games conducted in the field. We find that networks of different dimensions differ substantially in density, clustering, and centrality. When relating generosity to networks we observe that social distance only matters for friendship ties but that structural network variables are important in all network dimensions. Importantly, these effects are not invariant across different network dimensions. We also find that individual characteristics are unrelated with generosity per se but that they have strong explanatory power for network formation.
    Keywords: networks, generosity, network formation, experiments
    JEL: C72 C90 D64 L14 Z13
    Date: 2010–12
  11. By: Juan D. Moreno-Ternero (U. de Málaga, U. Pablo de Olavide y CORE, Université catholique de Louvain)
    Abstract: We provide a general coalitional procedure that characterizes a family of rules for bankruptcy problems inspired by the Talmud.
    Keywords: bankruptcy, coalitions, claims, Talmud.
    JEL: D63 C71
    Date: 2010–12
  12. By: Joseph Mullins (School of Economics, The University of Queensland); Liam Wagner (School of Economics, The University of Queensland); John Foster (School of Economics, The University of Queensland)
    Abstract: This paper aims to analyze the issue of price spikes in electricity markets through the lens of noncooperative game theory. The case we consider is Australia’s long established National Electricity Market (NEM). Specifically, we adapt von der Fehr and Harbord’s multi-unit auction model to settings that more closely reflect the structure of the NEM, showing that price spikes can be related to a specifiable threshold in demand.
    Keywords: Electricity Markets, Spot Price Behaviour, Non-Cooperative Game Theory.
    JEL: C72 Q40
    Date: 2010–12
  13. By: Ioannou, Christos A; Nompelis, Ioannis
    Abstract: A model of adaptive learning and innovation is used to simulate the evolution of finite automata in the repeated Prisoner's Dilemma stage-game. The automata are prone to two types of errors: (a) implementation errors and (b) perception errors. The computational experiments incorporate different levels of errors in an effort to assess whether and how the distribution of outcomes and structures in the population changes. Under the proposed framework, the incorporation of implementation and perception errors is sufficient to reduce cooperative outcomes. In addition, the study identifies a threshold error-level. At and above the threshold error-level, the prevailing structures converge to the open-loop (history-independent) automaton Always-Defect. On the other hand, below the threshold, the prevailing structures are closed-loop (history-dependent) and diverse. The diversity thus impedes our inferential projections on the superiority of a particular automaton. Yet, the analysis still identifies some broad characteristics of the automata that work "reasonably well" in such environments. In particular, the complexity of the automata is decreasing in the probability of errors. Furthermore, the prevailing structures tend to exhibit low reciprocal cooperation and low tolerance to defections. These results show that the evolution of cooperative automata is considerably weaker than expected; and the change in the model is ecologically plausible: errors are common in strategic situations. <br><br> Keywords; Automata, Repeated Games, PrisonerÂ’s Dilemma, Bounded Rationality, Algorithms. <br><br> JEL Classification: C72, C80, C90
    Date: 2010–12–01
  14. By: Amira Annabi; Michèle Breton; Pascal François
    Abstract: We develop a contingent claims model of a firm in financial distress with a formal account for renegotiations under the Chapter 11 bankruptcy procedure. Shareholders and two classes of creditors (senior and junior) alternatively propose a reorganization plan subject to a vote. The bankruptcy judge can intervene in any renegotiation round to impose a plan. The multiple-stage bargaining process is solved in a non-cooperative game theory setting. The calibrated model yields liquidation rate, Chapter 11 duration and percentage of deviations from the Absolute Priority Rule that are consistent with empirical evidence.
    Keywords: Credit risk, Chapter 11, Game theory, Dynamic programming
    JEL: C61 C7 G33 G34
    Date: 2010
  15. By: Finus, Michael (Exeter Business School); Pintassilgo, Pedro (CIEO - Research Centre for Spatial and Organizational Dynamics)
    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 result. In the light of intensified research efforts worldwide to reduce uncertainty about the environmental impact of emissions and the cost of reducing them, the result 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, that is, three different scenarios of uncertainty dissipation. Second, we test whether the result 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: 2010–10–29
  16. By: Gerd KUPPER
    Abstract: This paper studies strategic incentives to invest in electricity generation capacity using a local fuel like renewables or coal. It shows that investing in this capacity, even if not used, improves the bargaining position of a power producing firm that also imports another fuel such as gas. When several importers are considered, the paper finds that investment has a positive strategic effect on all other importers’ bargaining position. A government energy policy that forces utilities to invest in capacity based on particular fuels can be justified not only for environmental but also for strategic reasons.
    JEL: C78 Q40 Q48 Q50
    Date: 2010–02
  17. By: Sergio Beraldo
    Abstract: Indirect reciprocity is generally considered one of the leading mechanisms to explain how cooperation may emerge by natural selection. The basic intuition is that establishing a reputation of being a helpful individual increases the probability of being in turn helped. Two models have been proposed to describe how indirect reciprocity may work: the standing model (Sugden, 1986/2004) and the image-scoring model (Nowak and Sigmund, 1998a,b). Although there is evidence that the former model would perform better under a wide set of circumstances, it is often maintained that it requires individuals with an implausibly large capacity of processing recursive information. In this paper I argue that this is not actually the case. I then suggest that the information needed by the image-scoring model, under reasonable assumptions, may be sufficient for the standing model to work. Finally I emphasize that even if the hypothesis of indirect reciprocity is unable to give a fair account of the ecological bases of cooperation, it has inspired a deal of research precious to social sciences.
    Keywords: Cooperation, Indirect reciprocity, Good standing, Image-Scoring.
    JEL: C73 L14
    Date: 2010–12

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