nep-gth New Economics Papers
on Game Theory
Issue of 2011‒04‒02
nine papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Forward Induction in Arms Races By L. Lambertini
  2. Temporal stability and psychological foundations of cooperation preferences By Volk, Stefan; Thoeni, Christian; Ruigrok, Winfried
  3. On the feedback solution of a differential oligopoly game with capacity adjustment By D. Dragone; L. Lambertini; A. Palestini
  4. An Experimental Dynamic Public Goods Game with Carryover By Kurtis Swope; Pamela Schmitt; John Cadigan; Patrick Wayland
  5. Recursive methods for incentive problems By Matthias Messner; Nicola Pavoni; Christopher Sleet
  6. Regulating Environmental Externalities through Public Firms: A Differential Game By D. Dragone; L. Lambertini; A. Palestini
  7. Cooperation limitations under a one-time threat of expulsion and punishment By Aaron Lowen; Pamela Schmitt
  8. Procedurally Fair Provision of Public Projects An axiomatic characterization By Werner Güth; Hartmut Kliemt
  9. Defensive Weapons and Star Wars: A Supergame with Optimal Punishments By G. Giacomello; L. Lambertini

  1. By: L. Lambertini
    Abstract: I investigate a two-country non cooperative game where the status quo ante is asymmetric as one country is endowed with nuclear weapons while the other is not and is evaluating the opportunity of build up a nuclear arsenal. After identifying the conditions on payoffs such that the resulting reduced form is a coordination game with two symmetric equilibria, I resort to forward induction to show that the implicit signalling mechanism in it may lead countries to select the peaceful equilibrium in a symmetric environment where both are endowed with analogous arsenals
    JEL: C72 F50
    Date: 2011–03
  2. By: Volk, Stefan; Thoeni, Christian; Ruigrok, Winfried
    Abstract: A core element of economic theory is the assumption of stable preferences. We test this assumption in public goods games by repeatedly eliciting cooperation preferences in a fixed subject pool over a period of five months. We find that cooperation preferences are very stable at the aggregate level, but less so at the individual level. Nevertheless, individual preferences are sufficiently stable to predict future behavior fairly accurately. Our results also provide evidence on the psychological foundations of cooperation preferences. The personality dimension 'Agreeableness' is closely related to both the type and the stability of cooperation preferences.
    Keywords: Social preferences, preference stability, conditional cooperation, free riding, personality, Big-Five.
    JEL: C91 C72 H41
    Date: 2011–01
  3. By: D. Dragone; L. Lambertini; A. Palestini
    Abstract: We propose a simple method for characterising analytically the feedback solution of oligopoly games with capital accumulation à la Solow-Swan. As a result, it becomes possible to contrast the feedback equilibrium against the corresponding one generated by open-loop information. Our method accomodates extensions of the stripped down oligopoly model in several directions. As an example, we expand the setup to include environmental effects and Pigouvian taxation.
    JEL: C73 L13 Q55
    Date: 2011–03
  4. By: Kurtis Swope (United States Naval Academy); Pamela Schmitt (United States Naval Academy); John Cadigan (Gettysburg College); Patrick Wayland (United States Navy)
    Abstract: We examine voluntary contributions in a two-stage public good experiment with ‘carryover.’ In two treatments, each subject’s second stage endowment is determined by the return from the public good in the first stage. We manipulate payoffs across these treatments so that, relative to our no-carryover baseline, earnings from either Nash play or Pareto Optimal play are held constant. The remaining two treatments maintain a constant endowment in each stage, but vary the marginal per capita return (MPCR) to contributions in the second stage. Our results indicate that carryover increases first stage contributions. Our implementation of carryover enables us to examine the effects of changing endowments and MPCR’s with a wider variety of parameter values than in the existing literature. Consistent with these studies, we find that MPCR and endowment effects are important determinants of subject contributions to the group account. While stage 1 contributions tend to increase in the presence of carryover, efficiency levels across both stages fall relative to the baseline due to the high potential payoffs from complete contribution in the second stage (due to higher endowments or MPCR levels).
    Date: 2011–02
  5. By: Matthias Messner; Nicola Pavoni; Christopher Sleet
    Abstract: Many separable dynamic incentive problems have primal recursive formulations in which utility promises serve as state variables. We associate families of dual recursive problems with these by selectively dualizing constraints. We make transparent the connections between recursive primal and dual approaches, relate value iteration under each and give conditions for it to be convergent to the true value function.
    Date: 2011
  6. By: D. Dragone; L. Lambertini; A. Palestini
    Abstract: We investigate the possibility of using public firms to regulate polluting emissions in a Cournot oligopoly where production takes place at constant returns to scale and entails a negative environmental externality. We model the problem as a differential game and investigate (i) the Cournot-Nash game among profit-seeking firms; (ii) the Markov Perfect Nash equilibrium under social planning, where the industry output is entirely controlled by a benevolent planner aiming at the maximisation of social welfare; and (iii) the Markov Perfect Nash equilibrium in a mixed setup where at least one firm is public, while the others remain profit-seeking agents. Our analysis identifies the conditions whereby having a mixed market as a regulatory instrument suffices to drive the industry to the same output, externality and social welfare as under planning, both along the optimal path and in steady state.
    JEL: C73 D43 D62 L13 L32 Q50
    Date: 2011–03
  7. By: Aaron Lowen (Grand Valley State University); Pamela Schmitt (United States Naval Academy)
    Abstract: We examine the role one-time threats of expulsion and punishment have on voluntary contributions in a public goods game. This paper extends the work of Cinyabuguma, Page, and Putterman (2005), who find that the threat of expulsion in every period raises contributions to near Pareto Optimal levels. In our experiments, participants played in 15-round sessions where they were allowed to vote to remove other subjects only after round 5 and in one design also voted whether to punish the remaining subjects after round 10. We find that the additional threat of punishment not only increased the contributions of participants before the punishment vote, but also resulted in the expulsion of participants who had contributed more than in the no punishment treatment. Efficiency with expulsion is 58.07% without punishment, and 57.13% with punishment, including the cost for voting and punishment. Our findings indicate that the threat of expulsion as a sanctioning mechanism may not be helpful for public good provision unless expulsion can occur in every period, the threat of costly punishment increases contributions with little impact on efficiency, and that standards for inclusion rise when later punishment is available.
    Date: 2011–03
  8. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Hartmut Kliemt
    Abstract: Unanimous voting as the fundamental procedural source of political legitimacy grants veto power to each individual. We present an axiomatic characterization of a class of bidding processes to spell out the underlying egalitarian values for collective projects of a "productive state". At heart of such procedures is the determination of payments for all possible bid vectors such that equal "profits" according to bids emerge. Along with other intuitive requirements this characterizes procedurally fair bidding rules for advantageous projects of a collectivity.
    Keywords: Unanimity in Collective Decision Making, Buchanan, Wicksell
    JEL: H4 H61 D62 D63 D71
    Date: 2011–03–22
  9. By: G. Giacomello; L. Lambertini
    Abstract: We model the perspective faced by nuclear powers involved in a supergame where nuclear deterrence is used to stabilise peace. This setting allows us to investigate the bearings of defensive weapons on the effectiveness of deterrence and peace stability, relying on one-shot optimal punishments. We find that the sustainability of peace is unaffected by defensive shields if both countries have them, while a unilateral endowment of such weapons has destabilising consequences.
    JEL: C73 F51
    Date: 2011–03

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