nep-gth New Economics Papers
on Game Theory
Issue of 2011‒03‒26
seven papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. An Efficient and Fair Solution for Communication Graph Games By Rene van den Brink; Anna Khmelnitskaya; Gerard van der Laan
  2. Top Guns May Not Fire: Best-Shot Group Contests with Group-Specific Public Good Prizes By Subhasish M. Chowdhury; Dongryul Lee; Roman M. Sheremeta
  3. Matching Markets with Mixed Ownership: The Case for A Real-life Assignment Mechanism By Guillen, Pablo; Kesten, Onur
  4. Collective Bargaining under Non-binding Contracts By Sabien Dobbelaere; Roland Iwan Luttens
  5. Racial Differences in Inequality Aversion: Evidence from Real World Respondents in the Ultimatum Game By Griffin, John; Nickerson, David; Wozniak, Abigail
  6. Probability Matching and Reinforcement Learning* By Javier Rivas
  7. Intra-firm bargaining and learning in a market equilibrium By Mikhail Drugov

  1. By: Rene van den Brink (VU University Amsterdam, the Netherlands); Anna Khmelnitskaya (Russian Academy of Sciences, St Petersburg, Russia); Gerard van der Laan (VU University Amsterdam)
    Abstract: We introduce an efficient solution for games with communication graph structures and show that it is characterized by efficiency, fairness and a new axiom called component balancedness. This latter axiom compares for every component in the communication graph the total payoff to the players of this component in the game itself to the total payoff of these players when applying the solution to the subgame induced by this component.
    Keywords: TU game; communication graph; Myerson value; fairness; efficiency
    JEL: C71
    Date: 2011–03–14
  2. By: Subhasish M. Chowdhury (School of Economics, University of East Anglia); Dongryul Lee (School of Technology Management, UNIST); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University)
    Abstract: We analyze a group contest in which n groups compete to win a group-specific public good prize. Group sizes can be different and any individual player may value the prize differently within and across groups. Players expend costly efforts simultaneously and independently. Only the highest effort (the best-shot) within each group represents the group effort and the winning group is determined by a contest success function. We fully characterize the set of equilibria and show that in any equilibrium at most one player in each group exerts strictly positive effort. There always exists an equilibrium in which only the highest value player in each active group expends positive effort and the contest is reduced to an individual contest between individual players. However, there may also be equilibria in which the highest value players completely free ride on others by exerting no effort. We provide conditions under which this can be avoided and discuss contest design implications.
    Keywords: Best-shot technology, Group contest, Group-specific public goods
    JEL: C72 D70 D72 H41
    Date: 2011–03–15
  3. By: Guillen, Pablo; Kesten, Onur
    Abstract: We consider a common indivisible good allocation problem in which agents have both social and private endowments. Popular applications include student assignment to on-campus housing, kidney exchange, and particular school choice problems. In a series of experiments Chen and Sönmez (American Economic Review 92: 1669-1686, 2002) have shown that a popular mechanism from recent theory, the Top Trading Cycles (TTC) mechanism, induces a significantly higher participation rate by agents with private endowments and leads to significantly more efficient outcomes than the most commonly used real-life mechanism, the Random Serial Dictatorship with Squatting Rights. We first show that a particular mechanism, the so-called New House 4 (NH4) mechanism, which has been in use at MIT since the 1980s, is in fact outcome-equivalent to a natural adaptation of the well-known Gale-Shapley mechanism of two-sided matching theory. This implies that the NH4 mechanism is the most efficient mechanism within the class of fair and individually rational mechanisms, and that it is essentially the only incentive compatible mechanism satisfying the two properties. We then experimentally compare NH4 and TTC. We find that under NH4, the participation rate is significantly higher than under TTC. We also propose a new efficiency test based on ordinal preference information and show that NH4 also outperforms TTC in terms of efficiency.
    Keywords: Deferred acceptance; Priority; House allocation; Matching
    Date: 2010–09
  4. By: Sabien Dobbelaere (VU University Amsterdam); Roland Iwan Luttens (Ghent University, CORE - Cath. University Louvain)
    Abstract: We introduce collective bargaining in a static framework where the firm and its risk-neutral employees negotiate over wages in a non-binding contract setting. Our main result is the equivalence between the non-binding collective equilibrium wage-employment contract and the equilibrium contract under binding risk-neutral efficient bargaining. We also demonstrate that our non-cooperative equilibrium wages and profits coincide with the Owen values of the corresponding cooperative game with the coalitional structure that follows from unionization.
    Keywords: Collective bargaining; union; firm; bargaining power; non-binding contract
    JEL: C71 J51 L20
    Date: 2011–02–18
  5. By: Griffin, John (University of Notre Dame); Nickerson, David (University of Notre Dame); Wozniak, Abigail (University of Notre Dame)
    Abstract: The distinct historical and cultural experiences of American blacks and whites may influence whether members of those groups perceive a particular exchange as fair. We investigate racial differences in fairness standards using preferences for equal treatment in the ultimatum game, where responders choose to allow a proposed division of a monetary amount or to block it. Although previous research has studied group differences in the ultimatum game, no study has been able to examine these across races in America. We use a sample of over 1600 blacks and whites drawn from the universe of registered voters in three states and merged with information on neighborhood income and racial composition. We experimentally vary proposed divisions as well as the implied race of the ultimatum game proposer. We find no overall racial differences in acceptance rates or aversion to inequality. However, we uncover racial differences in ultimatum game behavior on other dimensions. Many of these are driven by the lowest income group in our sample, which represents the 10th percentile of the black income distribution. We also find that blacks are more sensitive to unfair proposals from other blacks.
    Keywords: racial differences, inequality aversion, ultimatum game, artefactual experiments
    JEL: J15 D63 C72 C91
    Date: 2011–03
  6. By: Javier Rivas
    Abstract: Probability matching occurs when an action is chosen with a frequency equivalent to the probability of that action being the best choice. This sub-optimal behavior has been reported repeatedly by psychologist and experimental economist. We provide an evolutionary foundation for this phenomenon by showing that learning by reinforcement can lead to probability matching and, if learning occurs suffciently slowly, probability matching does not only occur in choice frequencies but also in choice probabilities. Our results are completed by proving that there exists no quasi-linear reinforcement learning specification such that behavior is optimal for all environments where counterfactuals are observed.
    Keywords: Probability Matching; Reinforcement Learning
    JEL: C73
    Date: 2011–03
  7. By: Mikhail Drugov
    Abstract: This paper introduces an agency relationship into a dynamic game with informational externalities. Two principals bargain with their respective agents about the production cost which is the private information of the agents and is correlated between them. We find that the agency relationship creates an incentive for simultaneous production, even if this involves an inefficient delay. As the commitment power of the principals decreases, this incentive becomes stronger. When principals compete, the effect of competition is decomposed into two parts. Inter-period competition (from past and future actions) pushes principals towards simultaneous actions, while intra-period competition (from concurrent actions) does the opposite.
    Keywords: Bargaining, Adverse selection, Learning, Information, Externalities, Delay
    JEL: C78 D82 D83 L10
    Date: 2011–03

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