nep-gth New Economics Papers
on Game Theory
Issue of 2011‒02‒19
sixteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Heterogeneous Network Games: Conflicting Preferences By Penelope Hernandez; Edson Manuel Muñoz Herrera; Angel Sanchez
  2. The Average Tree Solution for Multi-choice Forest Games By Béal, Sylvain; Lardon, Aymeric; Rémila, Eric; Solal, Philippe
  3. Endogenous preferences in games with type indeterminate players By Ariane Lambert-Mogiliansky
  4. A value for cooperative games with a coalition structure By Emilio Calvo; Esther Gutierrez
  5. On evolutionarily stable strategies and replicator dynamics in asymmetric two-population games By Elvio Accinelli; Edgar J. Sánchez Carrera
  6. How to play the games? Nash versus Berge behavior rules By Pierre Courtois; Rabia Nessah; Tarik Tazdaït
  7. Using or Hiding Private Information ? An Experimental Study of Zero-Sum Repeated Games with Incomplete Information By Nicolas Jacquemet; Frédéric Koessler
  8. On the Strategic Disclosure of Feasible Options in Bargaining By Geoffroy de Clippel; Kfir Eliaz
  9. Tensión diplomática entre Colombia y Ecuador durante 2006-2009: una mirada desde la teoría de juegos. By Arroyo, Santiago; Bolaños, Juan
  10. Inference of Signs of Interaction Effects in Simultaneous Games with Incomplete Information, Second Version By Aureo de Paula; Xun Tang
  11. Perfect Bayesian Equilibrium: Part II: Epistemic Foundations By Bonanno, Giacomo
  12. "Upping the ante": How to design efficient auctions with entry? By Laurent Lamy
  13. Bayesian and Dominant Strategy Implementation Revisited By Alex Gershkov; Benny Moldovanu; Xianwen Shi
  14. On the Number of alpha-Pivotal Players By Johannes Gerd Becker
  15. The Profitability of Small Horizontal Mergers with Nonlinear Demand Functions By H. Esfahani; L. Lambertini
  16. Crédibilité en matière de ciblage d'inflation By Gürbüz Beşek, Yeşim

  1. By: Penelope Hernandez (ERI-CES); Edson Manuel Muñoz Herrera (ERI-CES); Angel Sanchez (University Carlos III)
    Abstract: We propose a model of network games with heterogeneity introduced by endowing players with types that generate preferences among their choices. We study two classes of games: strategic complements or substitutes in payoffs. The payoff function depends on the network structure, and we ask how does heterogeneity shape players' decision making, what is its effect on equilibria, conditions of stability, and welfare. Heterogeneity in players' type establishes the existence of thresholds which determine the Nash equilibrium conditions in a network game. Network configurations in equilibrium can be satisfactory if each player chooses the action corresponding to her type or frustrated when at least one player is not. Also, equilibria can be specialized if all players are choosing the same action (only in strategic complements), or hybrid when both actions coexist. A refinement of the Nash equilibria through stochastic mutations of pairs of neighbors limits multiplicity to a subset of Stable Equilibrium Configurations. The absorbing state networks lead, in most cases, to a frustrated hybrid configuration. This class corresponds to the risk dominant equilibrium
    Keywords: Heterogeneity, Networks, Nash Equilibrium, Stability
    JEL: C72 D85 L14 Z13
    Date: 2011–02
  2. By: Béal, Sylvain; Lardon, Aymeric; Rémila, Eric; Solal, Philippe
    Abstract: In this article we study cooperative multi-choice games with limited cooperation possibilities, represented by an undirected forest on the player set. Players in the game can cooperate if they are connected in the forest. We introduce a new (single-valued) solution concept which is a generalization of the average tree solution defined and characterized by Herings et al. [2008] for TU-games played on a forest. Our solution is characterized by component efficiency, component fairness and independence on the greatest activity level. It belongs to the precore of a restricted multi-choice game whenever the underlying multi-choice game is superadditive and isotone. We also link our solution with the hierarchical outcomes (Demange, 2004) of some particular TU-games played on trees. Finally, we propose two possible economic applications of our average tree solution.
    Keywords: Average tree solution; Communication graph; (pre-)Core; Hierarchical outcomes; Multi-choice games.
    JEL: C71
    Date: 2011–02–08
  3. By: Ariane Lambert-Mogiliansky (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The Type Indeterminacy model is a theoretical framework that uses some elements of quantum formalism to model the constructive preference perspective suggested by Kahneman and Tversky. In this paper we extend the TI-model from simple to strategic decision-making and show that TI-games open a new field of strategic interaction. We first establish an equivalence result between static games of incomplete information and static TI-games. We next develop a new solution concept for non-commuting dynamic TI-games. The updating rule captures the novelty brought about by Type Indeterminacy namely that in addition to affecting information and payoffs, the action of a player impacts on the profile of types. We provide an example showing that TI-game predictions cannot be obtained as Bayes Nash equilibrium of the corresponding classical game.
    Keywords: type indeterminacy ; games ; endogeneous preferences
    Date: 2010–06
  4. By: Emilio Calvo (ERI-CES); Esther Gutierrez (University Pais Vasco)
    Abstract: A value for games with a coalition structure is introduced, where the rules guiding the cooperation among the members of the same coalition are different from the interaction rules among coalitions. In particular, players inside a coalition exhibit a greater degree of solidarity than they are willing to use with players outside their coalition. The Shapley value [Shapley, 1953] is therefore used to compute the aggregate payoffs of the coalitions, and the Solidarity value [Nowak and Radzik, 1994] to obtain the payoffs of the players inside each coalition.
    Keywords: Coalitional value, Shapley value, Owen value, Solidarity value
    JEL: C71
    Date: 2011–02
  5. By: Elvio Accinelli (Facultad de Economía, Universidad Autónoma de san Luis Potosí. Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Edgar J. Sánchez Carrera (Department of Economics at the University of Siena.)
    Abstract: We analyze the main dynamical properties of the evolutionarily stable strategy ESS for asymmetric two-population games of finite size in its corresponding replicator dynamics. We introduce a defnition of ESS for two-population asymmetric games and a method of symmetrizing such an asymmetric game. Then, we show that every strategy profile of the asymmetric game corresponds to a strategy in the symmetric game, and that every Nash equilibrium (NE) of the asymmetric game corresponds to a (symmetric) NE of the symmetric version game. So, we study (standard) replicator dynamics for the asymmetric game and define corresponding (non-standard) dynamics of the symmetric game.
    Keywords: Asymmetric game; Evolutionary games; ESS; Replicator dynamics.
    JEL: C72 C73 C79
    Date: 2010–07
  6. By: Pierre Courtois; Rabia Nessah; Tarik Tazdaït
    Abstract: Social interactions regularly lead to mutually beneficial transactions that are sometimes puzzling. The prisoner’s dilemma and the chicken and trust games prove to be less perplexing than Nash equilibrium predicts. Moral preferences seem to complement self-oriented motivations and their relative predominance in games is found to vary according to the individuals, their environment, and the game. This paper examines the appropriateness of Berge equilibrium to study several 2×2 game situations, notably cooperative games where mutual support yields socially better outcomes. We consider the Berge behavior rule complementarily to Nash: individuals play one behavior rule or another, depending on the game situation. We then define non-cooperative Berge equilibrium, discuss what it means to play in this fashion, and argue why individuals may choose to do so. Finally, we discuss the relationship between Nash and Berge notions and analyze the rationale of individuals playing in a situational perspective.
    Date: 2011–05
  7. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Frédéric Koessler (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris)
    Abstract: This paper studies experimentally the value of private information in strictly competitive interactions with asymmetric information. We implement in the laboratory three examples from the class of zero-sum repeated games with incomplete information on one side and perfect monitoring. The stage games share the same simple structure, but differ markedly on how information should be optimally used once they are repeated. Despite the complexity of the optimal strategies, the empirical value of information coincides with the theoretical prediction in most instances. In particular, it is never negative, it decreases with the number of repetitions, and it is nicely bounded below by the value of the infinitely repeated game and above by the value of the one-shot game. Subjects are unable to completely ignore their information when it is optimal to do so, but the use of information in the lab reacts qualitatively well to the type and length of the game being played.
    Keywords: Concavification, laboratory experiments, incomplete information, value of information, zero-sum repeated games.
    Date: 2011–01
  8. By: Geoffroy de Clippel; Kfir Eliaz
    Abstract: Most of the economic literature on bargaining has focused on situations where the set of possible outcomes is taken as given. This paper is concerned with situations where decision-makers rst need to identify the set of feasible outcomes before they bargain over which of them is selected. Our objective is to understand how dier- ent bargaining institutions aect the incentives to disclose possible solutions to the bargaining problem, where ineciency may arise when both parties withold Pareto superior options. We take a rst step in this direction by proposing a simple, stylized model that captures the idea that bargainers may strategically withhold informa- tion regarding the existence of feasible alternatives that are Pareto superior. We characterize a partial ordering of \regular" bargaining solutions (i.e., those belonging to some class of \natural" solutions) according to the likelihood of disclosure that they induce. This ordering identies the best solution in this class, which favors the \weaker" bargainer subject to the regularity constraints. We also illustrate our result in a simple environment where the best solution coincides with Nash, and where the Kalai-Smorodinsky solution is ranked above Raia's simple coin-toss solution. The analysis is extended to a dynamic setting in which the bargainers can choose the timing of disclosure.
    Date: 2011
  9. By: Arroyo, Santiago; Bolaños, Juan
    Abstract: This paper centres his analysis on the diplomatic tension between Colombia and Ecuador during the period 2006-2009. For it, is studied from the game theory,the diplomatic tension that both countries faced, product the air fumigations that Colombia realized in the zone of border with the Ecuador an territory, as well as the assault trealized by the Colombian army to the camp of the revolutionary Armed forces of colombia (Farc), where Raúl Reyes was brought down. Of particular form, modelling a Not cooperative game of complete information, which proved an Efficient Nash Equilibrium for pure actions, where every country understands that the tension between both, it is affecting the importance of the binational agenda.
    Keywords: Game Theory; diplomatic relations
    JEL: F50 K42 C72
    Date: 2010–09–21
  10. By: Aureo de Paula (Department of Economics, University of Pennsylvania); Xun Tang (Department of Economics, University of Pennsylvania)
    Abstract: This paper studies the inference of interaction effects (impacts of players' actions on each other's payoffs) in discrete simultaneous games with incomplete information. We propose an easily implementable test for the signs of state-dependent interaction effects that does not require parametric specifications of players' payoffs, the distributions of their private signals or the equilibrium selection mechanism. The test relies on the commonly invoked assumption that players' private signals are independent conditional on observed states. The procedure is valid in (but does not rely on) the presence of multiple equilibria in the data-generating process (DGP). As a by-product, we propose a formal test for multiple equilibria in the DGP. We also show how to extend our arguments to identify signs of interaction effects when private signals are correlated. We provide Monte Carlo evidence of the test's good performance in finite samples. We then implement the test using data on radio programming of commercial breaks in the U.S., and infer stations' incentives to synchronize their commercial breaks. Our results support the earlier finding by Sweeting (2009) that stations have stronger incentives.
    Keywords: identification, inference, multiple equilibria, incomplete information games
    JEL: C01 C72
    Date: 2010–06–29
  11. By: Bonanno, Giacomo (University of CA, Davis)
    Abstract: In a companion paper we introduced a general notion of perfect Bayesian equilibrium which can be applied to arbitrary extensive-form games. The essential ingredient of the proposed definition is the qualitative notion of AGM-consistency. In this paper we provide an epistemic foundation for AGM-consistency based on the AGM theory of belief revision.
    Date: 2011–01
  12. By: Laurent Lamy (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: In the symmetric independent private value model, we revisit auctions with entry by adding two additional ingredients: difficulties to commit to the announced mechanism, in particular not to update the reserve price after bidders took their entry decisions, and seller's ex ante uncertainty on her reservation value which calls for flexibility. Shill bidding or ex post rights to cancel the sale may provide some valuable flexibility in second price auctions. However, both fail to be efficient since the seller may keep the good while it would be efficient to allocate it to the highest bidder. The English auction with jump bids and cancelation rights is shown to implement the first best in large environments. On the positive side, special emphasis is put on the equilibrium analysis of auctions with shill bidding and on a variety of associated new insights including counterintuitive comparative statics and a comparison with posted-prices.
    Keywords: auctions ; auctions with entry ; shill bidding ; commitment failure ; hold-up ; posted-price ; cancelation rights ; jump bids ; bilateral asymmetric information
    Date: 2010–06
  13. By: Alex Gershkov; Benny Moldovanu; Xianwen Shi
    Abstract: We consider a standard social choice environment with linear utility and one-dimensional types. We show by counterexample that, when there are at least three physical alternatives, Bayes-Nash Incentive Compatibility (BIC) and Dominant Strategy Incentive Compatibility (DIC) need no longer be equivalent. The example with three alternatives is minimal since we do obtain a general equivalence result for settings with only two social alternatives. Our negative result does not mathematically contradict the Manelli and Vincent (2010) equivalence obtained in a one-object auction setting, but it shows that BIC-DIC equivalence is only valid in restrictive environments. Our insights are based on mathematical results about the existence of monotone measures with given monotone marginals.
    Keywords: Bayesian Implementation, Dominant Strategy Implementation, Equivalence
    JEL: D80 D82
    Date: 2011–02–10
  14. By: Johannes Gerd Becker (ETH Zurich, Switzerland)
    Abstract: We show that bounds like those of Al-Najjar and Smorodinsky (J. Econ. Theory, 2000) as well as of Gradwohl et al. (Math. Oper. Res., 2009) on the number of alpha-pivotal agents can be obtained by decomposition of variance. All these bounds have a similar asymptotic behaviour, up to constant factors. Our bound is weaker than that of Al-Najjar and Smorodinsky, but we require only pairwise independent—rather than independent—types. Our result strengthens the bound of Gradwohl et al.
    Keywords: alpha-pivotal agent, influence, direct mechanism, decomposition of variance
    JEL: D62 D89
    Date: 2011–02
  15. By: H. Esfahani; L. Lambertini
    Abstract: We want to take a differential game approach with price dynamics to conduct an investigation into the consequences of horizontal merger of firms where the demand function is nonlinear. We take into consideration the open-loop equilibrium. We show that in relation to the fact that the demand is nonlinear and prices follow some stickiness an incentive for small merger exists, while it does not appear under the standard approach using a linear demand function.
    JEL: C73 D43 G34 L13
    Date: 2011–02
  16. By: Gürbüz Beşek, Yeşim (Galatasaray University Economic Research Center)
    Abstract: Le ciblage d’inflation est une politique basée sur l’annonce d’une cible d’inflation et un engagement à respecter à cette cible annoncée par la Banque Centrale et sur une stratégie de communication et de transparence, d’où la cible d’inflation est l’objectif final de la politique monétaire. C’est aussi une politique qui permet de résoudre le problème de la crédibilité. Dans ce travail, on essaye de voir en quoi la politique de ciblage d’inflation consiste à améliorer le degré de la crédibilité. Pour ce faire, à la lumière de la revue de la littérature sur la crédibilité, on montre théoriquement qu’il s’agit d’une politique monétaire qui évite le biais inflationniste et qui combine différentes mesures permettant l’amélioration de la crédibilité.
    Keywords: Politique monétaire; ciblage d’inflation; crédibilité; jeux non coopératifs
    JEL: C72 E31 E52 E58
    Date: 2011–02–08

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