nep-gth New Economics Papers
on Game Theory
Issue of 2011‒04‒30
eight papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Strategic control of myopic best reply in repeated games By Schipper, Burkhard C
  2. Strategic communication networks By Jeanne Hagenbach; Frédéric Koessler
  3. Prudent rationalizability in generalized extensive-form games By Heifetz, Aviad; Meier, Martin; Schipper, Burkhard C
  4. Subgame perfect implementation: A new result By Wu, Haoyang
  5. Computations on Simple Games using REL VIEW By Rudolf Berghammer; Agnieszka Rusinowska; Harrie De Swart
  6. Currency Speculation in a Game-Theoretic Model of International Reserves By Carlos J. Perez; Manuel S. Santos
  7. A study of the dynamic of influence through differential equations By Emmanuel Maruani; Michel Grabisch; Agnieszka Rusinowska
  8. Gambling for the Upper Hand - Settlement Negotiations in the Lab By Topi Miettinen; Olli Ropponen; Pekka Sääskilahti

  1. By: Schipper, Burkhard C
    Abstract: How can a rational player strategically control a myopic best reply player in a repeated two-player game? We show that in games with strategic substitutes or strategic complements the optimal control strategy is monotone in the initial action of the opponent, in time periods, and in the discount rate. As an interesting example outside this class of games we present a repeated ``textbook-like'' Cournot duopoly with non-negative prices and show that the optimal control strategy involves a cycle.
    Keywords: strategic teaching; learning; adaptive heuristics; dynamic optimization; strategic substitutes; strategic complements; myopic players
    JEL: C70 C72 C73
    Date: 2011–04–05
  2. By: Jeanne Hagenbach (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Université Panthéon Sorbonne - Paris 1 - Université Panthéon-Sorbonne - Paris I); 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, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: In this paper, we consider situations in which individuals want to choose an action close to others' actions as well as close to a payoff relevant state of nature with the ideal proximity to the common state varying across the agents. Before this coordination game with heterogeneous preferences is played, a cheap talk communication stage is offered to players who decide to whom they reveal the private information they hold about the state. The strategic information transmission taking place in the communication stage is characterized by a strategic communication network. We provide a direct link between players' preferences and the strategic communication network emerging at equilibrium, depending on the strength of the coordination motive and the prior information structure. Equilibrium strategic communication networks are characterized in a very tractable way and compared in term of efficiency. In general, a maximal strategic communication network may not exist and communication networks cannot be ordered in the sense of Pareto. However, expected social welfare always increases when the communication network expands. Strategic information transmission can be improved when group or public communication is allowed, and/or when information is certifiable.
    Keywords: cheap talk ; coordination ; partially verifiable types ; public and private communication
    Date: 2011–04–18
  3. By: Heifetz, Aviad; Meier, Martin; Schipper, Burkhard C
    Abstract: We define an extensive-form analogue of iterated admissibility, called Prudent Rationalizability (PR). In each round of the procedure, for each information set of a player a surviving strategy of hers is required to be rational vis-a-vis a belief system with a full-support belief on the opponents' previously surviving strategies that reach that information set. Somewhat surprisingly, prudent rationalizable strategies may not refine the set of Extensive-Form Rationalizable (EFR) strategies (Pearce 1984). However, we prove that the paths induced by PR strategy-profiles (weakly) refine the set of paths induced by EFR strategies. PR applies also to generalized extensive-form games which model mutual unawareness of actions (Heifetz, Meier and Schipper, 2011a). We demonstrate the applicability of PR in the analysis of verifiable communication, and show that it yields the same, full information unraveling prediction as does the unique sequential equilibrium singled out by Milgrom and Roberts (1986); yet, we also show that under unawareness full unraveling might fail.
    Keywords: Prudent rationalizability; caution; extensive-form rationalizability; extensive-form games; unawareness; verifiable communication
    JEL: C70 D82 D80 C72
    Date: 2011–03–30
  4. By: Wu, Haoyang
    Abstract: This paper concerns what will happen if quantum mechanics is concerned in subgame perfect implementation. The main result is: When additional conditions are satisfied, the traditional characterization on subgame perfect implementation shall be amended by virtue of a quantum stage mechanism. Furthermore, by using an algorithmic stage mechanism, this amendment holds in the macro world too.
    Keywords: Mechanism design; Subgame perfect implementation; Quantum game theory.
    JEL: D71
    Date: 2011–04–13
  5. By: Rudolf Berghammer (Institut für Informatik - Universitat Kiel); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Harrie De Swart (Department of Philosophy - Erasmus University Rotterdam)
    Abstract: Simple games are a powerful tool to analyze decision-making and coalition formation in social and political life. In this paper we present relational models of simple games and develop relational algorithms for solving some game-theoretic basic problems. The algorithms immediately can be transformed into the language of the Computer Algebra system RelView and, therefore, the system can be used to solve the problems and to visualize the results of the computations. As an example, we consider the German parliament after the 2009 election.
    Keywords: Simple games, relation algebra, RelView.
    Date: 2011–03
  6. By: Carlos J. Perez (Universidad Carlos III de Madrid); Manuel S. Santos (Department of Economics, University of Miami)
    Abstract: This paper is concerned with the ability of speculation to gener- ate a currency crisis. We consider a game-theoretic setting between a unit mass of speculators and a government that holds foreign currency reserves. We analyze conditions under which the speculators may be able to force the government to devaluate the currency. Among these conditions, we analyze the role of heterogeneous beliefs, transaction costs, the level of international reserves, and the widening of cur- rency bands. The explicit consideration of international reserves in our model makes speculators’ actions to be strategic substitutes— rather than strategic complements. This is a main analytical depar- ture with respect to related global games of currency speculation not including reserve holdings (e.g., Morris and Shin, 1998). Our sim- ple framework with international reserves becomes suitable to review some long-standing policy issues.
    Keywords: Currency speculation, international reserves, currency crises, global games, asymmetric information.
    JEL: F31 D8
    Date: 2011
  7. By: Emmanuel Maruani (Nomura International - Nomura International); Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: The paper concerns a model of influence in which agents make their decisions on a certain issue. It is assumed that each agent is inclined to make a particular decision, but due to a possible influence of the others, his final decision may be different from his initial inclination. Since in reality the influence does not necessarily stop after one step, but may iterate, we present a model which allows us to study the dynamic of influence. The use of continuous variable permits the application of differential equations systems to the analysis of the convergence of agents' decisions in long-time. In particular, by applying the approach based on differential equations of the influence model, we recover the results of the discrete model on classical influence functions and the results on the boss and approval sets for the command games equivalent to some influence functions.
    Keywords: Social network, inclination, decision, influence function, differential equations.
    Date: 2011–04
  8. By: Topi Miettinen (Hanken School of Economics, Dept of Economics, Helsinki; and SITE, Stockholm School of Economics); Olli Ropponen (Government Institute for Economic Research, Helsinki); Pekka Sääskilahti (Nokia Corporation)
    Abstract: We exploit a controlled frameless laboratory experiment to study settlement negotiations and the plainti' decision to raise a lawsuit in case of an impasse. We find that greater variance in court outcomes increases the litigation rate and lowers the settlement rate. This latter finding goes against the received wisdom and earlier experimental evidence (Ashenfelter et al. 1992) that greater risk in arbitration outcomes increases the settlement rate. We find that self-serving biases about the protagonist' course of action are accountable for the lower settlement rate, while an impasse payo inferior to that of the defendant induces the plaintis to excessive risk-taking in an attempt to narrow the gap.
    Keywords: bargaining, litigation, loss aversion, self-serving bias, settlement
    JEL: C72 C9 K41
    Date: 2011–04–19

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