nep-gth New Economics Papers
on Game Theory
Issue of 2011‒01‒03
fifteen papers chosen by
Laszlo A. Koczy
Obuda University

  1. Semivalues: power,potential and multilinear extensions By Carreras, Francesc; Giménez, José Miguel
  2. Every Symmetric 3 x 3 Global Game of Strategic Complementarities Is Noise Independent By Christian Basteck; Tijmen R. Daniëls
  3. Ambiguous games with contingent beliefs By De Marco, Giuseppe; Romaniello, Maria
  4. Bargaining in Legislatures: A New Donation Paradox By Maria Montero
  5. P-Stable Equilibrium : Definition and Some Properties By Desgranges, Gabriel; Ghosal, Sayantan
  6. Information and Beliefs in a Repeated Normal-form Game By Dietmar Fehr; Dorothea Kübler; David Danz
  7. A theory of dynamic tariff and quota retaliation By Naqvi, Nadeem
  8. Strategic Spending in Voting Competitions with Social Networks By Carlos Lever Guzmán
  9. Resisting Moral Wiggle Room: How Robust is Reciprocity? By van der Weele, Joël; Kulisa, Julija; Kosfeld, Michael; Friebel, Guido
  10. Altruistic Behavior and Correlated Equilibrium Selection By Giuseppe De Marco; Jacqueline Morgan
  11. An n-country model of strategic emissions abatement: feedback strategies and cooperation By Eric Bahel
  12. An Experimental Study of Bidding Behavior in Subcontract Auctions By Jun Nakabayashi; Naoki Watanabe
  14. Pareto Improvement and Agenda Control of Sequential Financial Innovations By Chiaki Hara
  15. Network Effects, Market Structure and Industry Performance By Rabah Amir; Natalia Lazzati

  1. By: Carreras, Francesc; Giménez, José Miguel
    Abstract: The notions of power and potential, both defined for any semivalue, give rise to two endomorphisms of the vector space of all cooperative games on a given player set. Several properties of these linear mappings are stated and their action on unanimity games is emphasized. We also relate in both cases the multilinear extension of the image game to the multilinear extension of the original game.
    Keywords: Cooperative game; Semivalue; Power; Potential; Multilinear extension
    JEL: C71
    Date: 2010–12–20
  2. By: Christian Basteck; Tijmen R. Daniëls
    Abstract: We prove that the global game selection in all 3 x 3 payoff-symmetric supermodular games is independent of the noise structure. As far as we know, all other proofs of noise independence of such games rely on the existence of a so-called monotone potential (MP) maximiser. Our result is more general, since some 3 x 3 symmetric supermodular games do not admit an MP maximiser. Moreover, a corollary is that noise independence does not imply the existence of an MP maximiser.
    Keywords: global games, noise independence
    JEL: C72 D82
    Date: 2010–12
  3. By: De Marco, Giuseppe; Romaniello, Maria
    Abstract: The Nash equilibrium concept combines two fundamental ideas. First, rational players choose the most preferred strategy given their beliefs about what other players will do. Second, it imposes the consistency condition that all players' beliefs are correct. This consistency condition has often been considered too strong and different solution concepts have been introduced in the literature in order to take into account ambiguous beliefs. In this paper, we show, by means of examples, that in some situation beliefs might be dependent on the strategy profile and that this kind of contingent ambiguity affects equilibrium behavior differently with respect to the existing models of ambiguous games. Hence we consider a multiple prior approach and subjective beliefs correspondences which depend on the strategy profile; we investigate existence of the equilibrium concepts corresponding to different attitudes towards ambiguity (namely optimism and pessimism). Finally we analyze particular beliefs correspondences: beliefs given by correlated equilibria and by ambiguity levels on events.
    Keywords: Noncooperative games; ambiguity; beliefs correspondence; equilibrium
    JEL: D81 C72
    Date: 2010–12–20
  4. By: Maria Montero (School of Economics, University of Nottingham)
    Abstract: It is well known that proposers have an advantage in the canonical model of bargaining in legislatures: proposers are sure of being part of the coalition that forms, and, conditional on being in a coalition, a player receives more as a proposer than as a coalition partner. In this paper I show that, if parties di¤er in voting weight, it is possible for a party to donate part of its proposing probability to another party and be better-o¤ as a result. This can happen even if the recipient never includes the donor in its proposals. Even though actually being the proposer is valuable, having a higher probability of being proposer may be harmful.
    Keywords: legislative bargaining, weighted majority games, voting paradoxes
    JEL: C78 D72
    Date: 2010–11
  5. By: Desgranges, Gabriel (Université de Cergy-Pontoise); Ghosal, Sayantan (University of Warwick)
    Abstract: We define a continuous index of strategic stability,p.stability, which requires equilibrium to be the unique outcome compatible with common knowledge of rationality and common knowledge of p.beliefs (beliefs that put probability at least p on the equilibrium profile). We show that every equilibrium (within a large class) is p-stable for some p < 1 and justify, in smooth settings, the intuition that the slope of the best response map is related to the stability of equilibrium. We show that adding incomplete information on fundamentals could decrease the degree of strategic stability. In two applications to large markets we (i) show that a unique equilibrium globally unstable (under tâtonnement dynamics) has, nevertheless, a measure of strategic stability, (ii) characterize the conditions under which enhanced equilibrium efficiency results in decreased strategic stability.
    Keywords: common knowledge ; strategic uncertainty ; rationalizability. JEL Classification: C70 ; D84
    Date: 2010
  6. By: Dietmar Fehr; Dorothea Kübler; David Danz
    Abstract: We study beliefs and choices in a repeated normal-form game. In addition to a baseline treatment with common knowledge of the game structure, feedback about choices in the previous period and random matching, we run treatments (i) with fixed matching, (ii) without information about the opponent’s payoffs, and (iii) without feedback about previous play. Using Stahl and Wilson’s (1995) model of limited strategic reasoning, we classify behavior with regard to its strategic sophistication and consider its development over time. In the treatments with feedback and full information about the game, we observe more strategic play, more best-responses to beliefs and more accurate beliefs over time. While feedback is the main driving force of learning to play strategically and for forming beliefs that accurately predict the behavior of the opponent, both incomplete information about the opponent’s payoffs or lack of feedback lead to a stagnation of best-response rates over time. <br> <br> <i>ZUSAMMENFASSUNG - (Information und Erwartungen in einem wiederholten Normalformspiel) <br>Wir untersuchen die Entwicklung von den Erwartungen über das Verhalten des anderen Spielers und den Entscheidungen in einem wiederholten Normalformspiel. Zusätzlich zum Haupttreatment mit common knowledge über das Spiel, Feedback über das Ergebnis in der vorigen Runde und zufälliger Zuordnung der Spieler, gibt es Kontrolltreatments mit (i) festen paarweisen Zuordnungen der Spieler, (ii) ohne Information über die Auszahlungen des anderen Spielers und (iii) ohne Feedback über das Ergebnis der vorigen Runde. Mit Hilfe von Stahl und Wilsons (1995) Modell begrenzten strategischen Verhaltens klassifizieren wir das Verhalten der Teilnehmer im Hinblick auf die strategische Sophistikation. In den Treatments mit Feedback und vollständiger Information über das Spiel nehmen strategisches Verhalten, beste Antworten auf die eigenen Erwartungen und die Akkuratheit der Erwartungen über die Zeit zu. Während Feedback der Hauptgrund dafür ist, dass die Teilnehmer lernen, sich strategisch zu verhalten und korrekte Erwartungen über das Verhalten des anderen Spielers zu bilden, führen sowohl unvollständige Information über die Auszahlungen des Gegenspielers als auch fehlendes Feedback zu einer Stagnation der Rate der besten Antworten über die Zeit.<i>
    Date: 2010–03
  7. By: Naqvi, Nadeem
    Abstract: This paper establishes relationships between static Nash equilibria and dynamic Markov perfect equilibria of tariff and quota retaliation games. In supermodular games where tariffs are strategic complements, the steady state of every, symmetric Markov perfect equilibrium must have lower tariffs than in the static equilibrium. If tariffs are strategic substitutes, tariffs in the dynamic game are higher than in the static equilibrium. The supermodular case is extended to quota competition. Instead of the well-known non-equivalence between tariff and quota retaliation outcomes under complete myopia, in some circumstances, free trade can be supported in the steady state of a Markov perfect equilibrium, regardless of whether policies employed are quotas or tariffs. We reach the conclusion that the effect of introducing dynamics crucially depends on whether the policy instruments employed by the countries are strategic substitutes or complements irrespective of whether they are tariffs or quotas.
    Keywords: Foreign trade policy; Tariff; Quota; Retaliation; Dynamic Game; Markov perfect equilibrium; Supermodular games
    JEL: F13 C73
    Date: 2010–12–23
  8. By: Carlos Lever Guzmán
    Abstract: This paper proposes a model of voting competitions (political campaigns and strategic lobbying) where voters are influenced by the opinion of their neighbors on a social network. In the unique pure strategy nash equilibrium, resources are targeted toward individuals with an influential position in the network. This finding contrasts with previous theories of strategic spending which predict that parties (or lobbies) should spend more on individuals who have a higher probability of being pivotal for the vote. The paper then tests the model using data on campaign contributions by interests groups in the US. House of Representatives. The estimations show that both network influence and pivotality are significant predictors of campaign contributions.
    Keywords: Network games, strategic spending, Colonel Blotto games, counteractive lobbying, Bonacich centrality
    JEL: D85 D72
    Date: 2010–12
  9. By: van der Weele, Joël (Goethe University Frankfurt); Kulisa, Julija (Goethe University Frankfurt); Kosfeld, Michael (Goethe University Frankfurt); Friebel, Guido (Goethe University Frankfurt)
    Abstract: Several studies have shown that dictator-game giving declines substantially if the dictator can exploit situational "excuses" for not being generous. In this experimental study we investigate if this result extends to more natural social interactions involving reciprocal behavior. We provide the second mover in a reciprocal game with an excuse for not reciprocating, an excuse which has previously been shown to strongly reduce giving in dictator games. We do not find that the availability of the excuse has any effect at all on reciprocal behavior, and conclude that reciprocity is a more stable disposition than dictator game generosity.
    Keywords: reciprocity, moral wiggle room
    JEL: C72 C9
    Date: 2010–12
  10. By: Giuseppe De Marco (Università di Napoli Parthenope); Jacqueline Morgan (Università di Napoli Federico II and CSEf)
    Abstract: This paper studies new refinement concepts for correlated equilibria based on altruistic behavior of the players and which generalize some refinement concepts introduced by the authors in previous papers for Nash equilibria. Effectiveness of the concepts, relations with the corresponding notions for Nash equilibria and with other correlated equilibrium refinements are investigated. The analysis of the topological properties of the set of solutions concludes the paper.
    Keywords: correlated equilibrium, altruistic behavior, refinement
    Date: 2010–12–13
  11. By: Eric Bahel
    Abstract: The present paper proposes a dynamic framework for the analysis of emissions abatement by different countries. Unlike many related works, it emphasizes the non-cooperative aspects of this issue. We derive the feedback Nash equilibrium as well as the cooperative emissions paths. Under the cooperative scenario, pollution is always lower: the international agency imposes lower emissions to the countries in early periods. Surprisingly enough, emissions might be higher in very distant periods under the cooperative scenario. A transfer scheme allowing to achieve global effciency is proposed.
    Keywords: emissions, strategic abatement, pollution stock, feedback (closed-loop) Nash equilibrium, cooperation, transfers.
    Date: 2010
  12. By: Jun Nakabayashi; Naoki Watanabe
    Abstract: It is commonly observed in practices that prime contractors solicit subcontract bids, prior to submitting their bids in procurement auctions: the auctioneers in subcontract auctions will become bidders in a procurement auction. This point is remarkably different from the standard theory of procurement auction. We presented a simple model of such subcontract auctions and conducted a laboratory experiment to examine the bidding behavior derived theoretically. We observed that in the subcontract auction, (1) subjects bid following the equilibrium bidding function derived theoretically, (2) the revenue equivalence between first-price and second-price mechanisms breaks down, and (3) the first-price mechanism more likely achieves ex post efficient allocations than the second-price mechanism.
    Date: 2010–12
  13. By: Benjamin Beranek (Department of Economics, Izmir University of Economics); Alper Duman (Department of Economics, Izmir University of Economics)
    Abstract: While the public good experiment has been used to analyze cooperation among various groups in Western Europe and North America, it has not been extensively used in other contexts such as Turkey. This project seeks to rectify that and explore how Turkish university students informally self govern. By employing the public good experiment among a cohort of students attending universities in Ýzmir, Turkey and Adýyaman, Turkey, we hope to quantitatively analyze the factors which lead to altruistic punishment, to antisocial punishment, and ultimately to enhanced cooperation in Turkish society.
    Keywords: Cooperation, Free Riding, Altruism, Punishment, Trust, Experimental Economics, Public Good Experiments
    JEL: C72 C91
    Date: 2010–10
  14. By: Chiaki Hara (Institute of Economic Research, Kyoto University)
    Abstract: In an exchange economy under uncertainty with two periods, one physical good, and nitely many states of the world, we show that for every (complete or incomplete) market span there exists a sequence of securities such that if they are introduced into markets one by one, the prices of any security is not affected by the subsequent introduction of newer securities and they together generate the given market span. Since these securities generate no pecuniary externalities, this result implies that every stage of such sequential nancial innovations is Pareto-improving. Its implications on nancial innovations via voting are also explored.
    Keywords: General equilibrium theory of incomplete security markets, nancial innovation, Pareto improvement, agenda control, Nash equilibrium, subgame perfect equilibrium.
    JEL: C72 C73 D51 D52 D61 G11
    Date: 2010–12
  15. By: Rabah Amir (University of Luxembourg and University of Arizona); Natalia Lazzati (University of Arizona)
    Abstract: This paper provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a firmr's rivals' total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria. We formalize the concept of industry viability and show that it is always enhanced by having more firms in the market and/or by technological improvements. We also characterize the e¤ects of market structure on industry performance, with an emphasis on departures from standard markets. The approach relies on lattice-theoretic methods, which allow for a unified treatment of various general results in the literature on network goods. Several illustrative examples with closed-form solutions are also provided.
    Keywords: Network effects, demand-side externalities, monotone comparative statics, Cournot oligopoly, supermodularity
    JEL: C72 D43 L13 L14
    Date: 2010

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