nep-gth New Economics Papers
on Game Theory
Issue of 2011‒03‒12
thirteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Average Testing and the Efficient Boundary By Itai Arieli; Yakov Babichenko
  2. Remarks on Bargaining and Cooperation in Strategic Form Games By Zhigang Cao
  3. Miscounts, Duverger's Law and Duverger's Hypothesis By Matthias Messner; Mattias K. Polborn
  4. Bargaining and Negotiations What should experimentalists explore more thoroughly? By Werner Güth
  5. Endogenous Timing in Pollution Control: Stackelberg versus Cournot-Nash Equilibria By Melanie Heugues
  6. Not so cheap talk: Costly and discrete communication By Hertel, Johanna; Smith, John
  7. Trade in bilateral oligopoly with endogenous market formation By Alex Dickson; Roger Hartley
  8. Meaningful talk By Jorge M. Streb; Gustavo Torrens
  9. A strategic mediator who is biased into the same direction as the expert can improve information transmission By Lydia Mechtenberg; Johannes Münster
  10. It’s Now or Never: Deadlines and cooperation By Kaz Miyagiwa
  11. An optimal Voting System when Voting is costly By Bognar, Katalin; Börgers, Tilman; Meyer-ter-Vehn, Moritz
  12. The efficient provision of public goods through non-distortionary tax contests By Thomas Giebe; Paul Schweinzer
  13. Bringing the Four-Eyes-Principle to the Lab By Schickora, Jan Theodor

  1. By: Itai Arieli; Yakov Babichenko
    Abstract: We propose a simple adaptive procedure for playing strategic games: average testing. In this procedure each player sticks to her current strategy if it yields a payoff that exceeds her average payoff by at least some fixed \epsilon > 0; otherwise she chooses a strategy at random. We consider generic two-person games where both players play according to the average testing procedure on blocks of k-periods. We demonstrate that for all k large enough, the pair of time-average payoffs converges (almost surely) to the 3\epsilon-Pareto efficient boundary.
    JEL: K13
    Date: 2011–02
  2. By: Zhigang Cao
    Abstract: Although possessing many beautiful features, the Hart and Mas-Colell bargaining model is not flawless: the concept of threat in this model may behave quite counter-intuitive, and its SP equilibrium expected payoff vector may not be the same as the min-max solution payoff vector in zero-sum games. If we postpone realizations of all threats to the end of the game, the two problems can be solved simultaneously. This is exactly the 2(a) model suggested by Hart and Mas-Colell in the last section of their paper. I show that the new model, unfortunately, can only guarantee the existence of an SP equilibrium in the two player case. For the original model, I reduce the computation of an SP equilibrium to a system of linear inequalities. Quantitative efficiency and symmetric SP equilibria are also discussed.
    JEL: K13
    Date: 2011–01
  3. By: Matthias Messner; Mattias K. Polborn
    Abstract: In real-life elections, vote-counting is often imperfect. We analyze the consequences of such imperfections in plurality and runoff rule voting games. We call a strategy profile a robust equilibrium if it is an equilibrium if the probability of a miscount is positive but small. All robust equilibria of plurality voting games satisfy Duverger's Law: In any robust equilibrium, exactly two candidates receive a positive number of votes. Moreover, robust- ness (only) rules out a victory of the Condorcet loser. All robust equilibria under runoff rule satisfy Duverger's Hypothesis: First round votes vare (almost always) dispersed over more than two alternatives. Robustness has strong implications for equilibrium outcomes under runoff rule: For large parts of the parameter space, the robust equilibrium outcome is unique.
    Date: 2011
  4. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: A long time ago most economists would have limited themselves to stating that agreements should be individually rational and efficient and that selecting a specific agreement from that set depends on bargaining and negotiation power whatever that may be. Nowadays hardly any economist will argue that way. The change has been brought about by the strategic approach to bargaining and cooperation and the parallel experimental studies of bargaining and negotiation. When arguing what should be explored more thoroughly, we will point out directions where previous efforts may have been misdirected, where importing new methods may be helpful or even needed, and where new research questions need to be asked and answered.
    Keywords: (un)bounded rationality, (non-)cooperative game theory, bargaining and negotiation (theory and experiments)
    JEL: C90 C92 C93 D63 D64 D71 D74
    Date: 2011–03–07
  5. By: Melanie Heugues
    Abstract: In the framework of international cooperation on climate change to control greenhouse gas emissions<br /> (GHG), this paper aims to shed new light on the eventuality of the emergence of a country (or a group<br /> of countries) behaving as a leader in the implementation of its environmental policy. The sequence of<br /> moves in the existing literature is usually an exogenous assumption, – known as the Cournot<br /> assumption (if countries take action simultaneously) and the Stackelberg assumption (if they act<br /> sequentially, the latter observing the strategy of the former). The main purpose here is to make the<br /> timing endogenous. To do so, we introduce a pre-play stage in the basic two-country game. Then we<br /> provide different sets of minimal conditions – on the benefit and damage functions linked to GHG<br /> emissions into the atmosphere, yielding respectively the simultaneous and the two sequential modes of<br /> play. While the results essentially confirm the prevalence of the former, they also indicate that the<br /> latter are natural under some robust conditions: a leader can emerge endogenously when<br /> implementing its environmental policy. Finally we provide sufficient conditions for a specific leader<br /> to appear. All the results come with an analysis in terms of global emissions and global welfare. No<br /> extraneous assumptions such as concavity, existence, or uniqueness of equilibria are needed, and the<br /> analysis makes crucial use of the basic results from the theory of supermodular games.<br />
    Keywords: Climate change; non cooperative game; global pollution; strategic interactions; endogenous timing; supermodular game theory
    Date: 2011–03
  6. By: Hertel, Johanna; Smith, John
    Abstract: We model an interaction between an informed sender and an uninformed receiver. As in the classic cheap talk setup, the informed player sends a message to an uninformed receiver who is to take an action which affects the payoffs of both players. However, in our model the sender can communicate only through the use of discrete messages. The messages are ordered by the cost incurred by the sender upon its transmission. We characterize the resulting equilibria under a weak out-of-equilibrium condition. We apply the stronger no incentive to seperate (NITS) condition to our model. We show that if the sender and receiver have aligned preferences regarding the action of the receiver then NITS only admits the most informative equilibrium. When the preferences between players are not aligned, we show that NITS does not guarantee uniqueness and we provide an example where an increase in communication costs can improve communication. As we show this improvement can occur to such an extent that an equilibrium outperforms the Goltsman et. al. (2009) upper bound for payoffs in mediated communication.
    Keywords: information transmission; cheap talk; equilibrium selection
    JEL: D82 D83 C72
    Date: 2011–02–18
  7. By: Alex Dickson (Department of Economics, University of Strathclyde); Roger Hartley (Department of Economics, University of Manchester)
    Abstract: We study a strategic market game in which traders are endowed with both a good and money and can choose whether to buy or sell the good. We derive conditions under which a non-autarkic equilibrium exists and when the only equilibrium is autarky. Autarky is ‘nice’ (robust to small perturbations in the game) when it is the only equilibrium, and ‘very nice’ (robust to large perturbations) when no gains from trade exist. We characterize economies where autarky is nice but not very nice; that is, when gains from trade exist and yet no trade takes place.
    Keywords: Bilateral oligopoly, strategic market game, trade.
    JEL: C72 D43 D51 L13
    Date: 2010–02
  8. By: Jorge M. Streb; Gustavo Torrens
    Abstract: In economics, the standard approach to language is that talk is cheap. Here, instead, language is a social convention that a¤ects utility. Unless language is used in its ordinary sense, it cannot help to coordinate actions because there is no way of decoding it. This points to a unique informative equilibrium where words are used in their ordinary sense in natural language. Misrepresentation costs may eliminate uninformative, babbling, equilibria. More generally, meaningful talk provides a concrete mechanism through which consistent expectations are generated in Nash equilibria. Classification-JEL: D8, C7
    Keywords: cheap talk, symbols, meaning, encoding-decoding, common priors, Nash equilibria
    Date: 2011–02
  9. By: Lydia Mechtenberg; Johannes Münster
    Abstract: This note reconsiders communication between an informed expert and an uninformed decision maker with a strategic mediator in a dis- crete Crawford and Sobel (1982) setting. We show that a strategic mediator may improve communication even when he is biased into the same direction as the expert. The mediator improves communica- tion, however, only if some information transmission is possible with unmediated communication.
    Keywords: Communication, Information, Cheap talk, Mediation
    JEL: C72 D82 D83
    Date: 2011–03
  10. By: Kaz Miyagiwa
    Abstract: Cooperation among opportunistic agents often breaks down when agents cannot observe one another’s actions. The standard remedy for such a problem is a two-mode approach pioneered by Green and Porter (1984), where agents switch back and forth between cooperation and punishment mode. Here, I consider use of a deadline as an alternative. I find that, under certain conditions, imposing a deadline can induce cooperation with unobservable actions, and that the optimal deadline can payoffdominates the optimal two-mode strategy.
    Date: 2011–02
  11. By: Bognar, Katalin; Börgers, Tilman; Meyer-ter-Vehn, Moritz
    Abstract: We consider the design of an optimal voting system when voting is costly. For a private values model with two alternatives we show the optimality of a voting system that combines three elements: (i) there is an arbitrarily chosen default decision and non-participation is interpreted as a vote in favor of the default; (ii) voting is sequential; (iii) not all voters are invited to participate in the vote. We show the optimality of such a voting system by first arguing that it is first best, that is, it maximizes welfare when incentive compatibility constraints are ignored, and then showing that individual incentives and social welfare are sufficiently aligned to make the first best system incentive compatible. The analysis in this paper involves some methods that are new to the theory of mechanism design, and it is also a purpose of this paper to explore these new methods.
    Keywords: Voting; mechanism design; committees.
    JEL: D70
    Date: 2010–10
  12. By: Thomas Giebe (Humboldt University at Berlin, School of Business and Economics); Paul Schweinzer (University of York)
    Abstract: We use a simple balanced budget contest to collect taxes on a private good in order to finance a pure public good. We show that—with an appropriately chosen structure of winning probabilities—this contest can provide the public good efficiently and without distorting private consumption. We provide extensions to multiple public goods and private taxation sources, asymmetric preferences, and show the mechanism’s robustness across these settings.
    Keywords: Taxation, Contests, Efficiency
    JEL: C7 D7
    Date: 2011–03
  13. By: Schickora, Jan Theodor
    Abstract: The ‘Four-Eyes-Principle’ is considered as one of the most potent measures against corruption although it lacks both theoretical and empirical justification. We show in a laboratory experiment using a standard corruption game that introducing the 4EP increases corrupt behaviour, casting doubt on its usefulness as a general recommendation. Combining data on final choices with observations on the decision making processes in teams, including a content analysis of exchanged messages, provides insights into the dynamics of team decision making and shows that the individual profit maximizing motive dominates group decision making and crowds out altruistic arguments.
    Keywords: Corruption; Laboratory Experiments; Group Decision Making
    JEL: C72 C92 D73
    Date: 2011–03–01

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