|
on Game Theory |
|
Issue of 2011‒05‒14
fifteen papers chosen by Laszlo A. Koczy Hungarian Academy of Sciences and Obuda University |
| By: | UNO, Hiroshi (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium) |
| Abstract: | This paper introduces the notion of nested best-response potentials for complete in- formation games. It is shown that a unique maximizer of such a potential is a Nash equilibrium that is robust to incomplete information in the sense of Kajii and Morris (1997, mimeo). |
| Keywords: | incomplete information, potential games, robustness, refinements |
| JEL: | C72 C73 |
| Date: | 2011–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2011009&r=gth |
| By: | Schipper, Burkhard C. (University of CA, Davis) |
| 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. |
| JEL: | C70 C72 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-5&r=gth |
| By: | Heifetz, Aviad (Open University of Israel); Meier, Martin (Institute for Advanced Studies, Vienna); Schipper, Burkhard C. (University of CA, Davis) |
| 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. |
| JEL: | C70 C72 D80 D82 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-4&r=gth |
| By: | Wu, Haoyang |
| Abstract: | Bayesian implementation concerns decision making problems when agents have incomplete information. This paper proposes that the traditional sufficient conditions for Bayesian implementation shall be amended by virtue of a quantum Bayesian mechanism. In addition, by using an algorithmic Bayesian mechanism, this amendment holds in the macro world. More importantly, we find that the revelation principle is not always right by using the quantum and algorithmic Bayesian mechanisms. |
| Keywords: | Quantum game theory; Mechanism design; Bayesian implementation; Revelation principle. |
| JEL: | D71 D80 C72 |
| Date: | 2011–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:30653&r=gth |
| By: | Christian Ewerhart |
| Abstract: | Using an expanded notion of concavity, the N-fi rm Cournot model is reviewed to obtain generalized and unifi ed conditions for existence of a pure strategy Nash equilibrium. The main theorem imposes independent conditions on inverse demand (generalized concavity) and cost functions (monotonicity). No separate assumption for large outputs is needed. We also find new conditions for strict quasiconcavity and equilibrium uniqueness. |
| Keywords: | Cournot competition, existence and uniqueness of Nash equilibrium, generalized concavity, supermodular games. |
| JEL: | L13 C72 C62 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:016&r=gth |
| By: | Reddy, P.V.; Engwerda, J.C. (Tilburg University, Center for Economic Research) |
| Abstract: | In this article we derive necessary and sufficient conditions for the existence of Pareto optimal solutions for infinite horizon cooperative differential games. We consider games defined by non autonomous and discounted autonomous systems. The obtained results are used to analyze the regular indefinite linear quadratic infinite horizon differential game. For the scalar case, we present an algorithm, with mild conditions on the control space, to find all the Pareto optimal solutions. |
| Keywords: | Pareto Efficiency;Cooperative Differential Games;Infinite Horizon Optimal Control;LQ theory. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011041&r=gth |
| By: | Laurens CHERCHYE; Thomas DEMUYNCK; Bram DE ROCK |
| Abstract: | We present a revealed preference analysis of the testable implications of the Nash bargaining solution. Our specific focus is on a two-player game involving consumption decisions. We consider a setting in which the empirical analyst has information on both the threat points bundles and the bargaining outcomes. We first establish a revealed preference characterization of the Nash bargaining solution. This characterization implies conditions that are both necessary and sufficient for consistency of observed consumption behavior with the Nash bargaining model. However, these conditions turn out to be nonlinear in unknowns and therefore difficult to verify. Given this, we subsequently present necessary conditions and sufficient conditions that are linear (and thus easily testable). We illustrate the practical usefulness of these conditions by means of an application to experimental data. Such an experimental setting implies a most powerful analysis of the empirical goodness of the Nash bargaining model for describing consumption decisions. To our knowledge, this provides a first empirical test of the Nash bargaining model on consumption data. Finally, we consider the possibility that threat point bundles are not observed. This obtains testable conditions for the Nash bargaining model that can be used in non-experimental (e.g. household consumption) settings, which often do not contain information on individual consumption bundles in threat points. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces11.07&r=gth |
| By: | Heifetz, Aviad (Open University of Israel); Meier, Martin (Institute for Advanced Studies, Vienna); Schipper, Burkhard C. (University of CA, Davis) |
| Abstract: | We define generalized extensive-form games which allow for mutual unawareness of actions. We extend Pearce's (1984) notion of extensive-form (correlated) rationalizability to this setting, explore its properties and prove existence. |
| JEL: | C70 C72 D80 D82 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-3&r=gth |
| By: | James Andreoni; Laura K. Gee |
| Abstract: | We present and experimentally test a mechanism that provides a simple, natural, low cost, and realistic solution to the problem of compliance with socially determined efficient actions, such as contributing to a public good. We note that small self-governing organizations often place enforcement in the hands of an appointed leader–the department chair, the building superintendent, the team captain. This hired gun, we show, need only punish the least compliant group member, and then only punish this person enough so that the person would have rather been the second least compliant. We show experimentally this mechanism, despite having very small penalties out of equilibrium, reaches the full compliance equilibrium almost instantly. |
| JEL: | C72 C91 C92 D7 H41 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17032&r=gth |
| By: | Luc LAUWERS; Peter VALLENTYNE |
| Abstract: | We address how the value of risky options should be assessed in the case where the sum of the probability-weighted payoffs is not absolutely convergent and thus dependent on the order in which the terms are summed (e.g., as in the Pasadena Paradox). We develop and partially defend a proposal according to which options should be evaluated on the basis of agreement among admissible (e.g., convex and quasi-symmetric) covering sequences of the constituents of value (i.e., probabilities and payoffs). |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces11.04&r=gth |
| By: | Birkeland d.y., Sigbjørn (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | The effect of possible third party settlement on negotiation behaviour is studied in an economic bargaining experiment. The bargaining phase is preceded by a production phase that allows for different fairness principles to guide the division of the total production value. The experimental results show that a possible third party settlement lowers the dispute costs by reducing the number of rounds of alternating offers. In the presence of a third party, negotiators make first offers that are more strongly related to their production, which reduces the number of rounds of bargaining. The production phase has an effect on the distributional property of the settlements. In negotiations where third party settlement is an option, the negotiation outcome shifts towards a more unequal outcome, more in line with each person's contribution. |
| Keywords: | Arbitration; Bargaining effciency; Experiment. |
| JEL: | C78 D63 J52 |
| Date: | 2010–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2011_006&r=gth |
| By: | Kirill Borissov |
| Abstract: | A model of economic growth with many agents and borrowing constraints is considered under the assumption that wages are paid ex ante. It is shown that, in contrast to the traditional case where wages are paid ex post, the convergence of equilibrium paths to a steady-state equilibrium occurs regardless of specifications of technology. |
| Keywords: | economic growth, heterogeneous agents, stability |
| JEL: | D91 O41 C61 |
| Date: | 2011–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:eus:wpaper:ec0511&r=gth |
| By: | Schipper, Burkhard C. (University of CA, Davis) |
| Abstract: | Morris (1996, 1997) introduced preference-based definitions of knowledge of belief in standard state-space structures. This paper extends this preference-based approach to unawareness structures (Heifetz, Meier, and Schipper, 2006, 2008). By defining unawareness and knowledge in terms of preferences over acts in unawareness structures and showing their equivalence to the epistemic notions of unawareness and knowledge, we try to build a bridge between decision theory and epistemic logic. Unawareness of an event is behaviorally characterized as the event being null and its negation being null. |
| JEL: | C70 C72 D80 D82 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-6&r=gth |
| By: | James Andreoni; Laura K. Gee |
| Abstract: | This paper compares two methods to encourage socially optimal provision of a public good. We compare the efficacy of vigilante justice, as represented by peer-to-peer punishment, to delegated policing, as represented by the “hired gun” mechanism, to deter free riding and improve group welfare. The “hired gun” mechanism (Andreoni and Gee, 2011) is an example of a low cost device that promotes complete compliances and minimal enforcement as the unique Nash equilibrium. We find that subjects are willing to pay to hire a delegated policing mechanism over 70% of the time, and that this mechanism increases welfare between 15% to 40%. Moreover, the lion’s share of the welfare gain comes because the hired gun crowds out vigilante peer-to-peer punishments. |
| JEL: | C72 C91 C92 D7 H41 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17033&r=gth |
| By: | GRANDJEAN, Gilles (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium) |
| Abstract: | Evidence suggests that in developing countries, agents rely on mutual insurance agreements to deal with income or expenditure shocks. This paper analyzes which risk-sharing networks can be sustained in the long run when individuals are far- sighted, in the sense that they are able to forecast how other agents would react to their choice of insurance partners. In particular, we study whether the farsightedness of the agents leads to a reduction of the tension between stability and efficiency that arises when individuals are myopic. We find that for extreme values of the cost of establishing a mutual insurance agreement, myopic and farsighted agents form the same risk-sharing networks. For intermediate costs, farsighted agents form efficient networks while myopic agents don't. |
| Keywords: | risk-sharing, networks, farsighted agents, stability, efficiency |
| JEL: | C70 D85 |
| Date: | 2011–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2011014&r=gth |