nep-gth New Economics Papers
on Game Theory
Issue of 2011‒06‒04
nine papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Internal Hierarchy and Stable Coalition Structures By Massimo Morelli; In-Uck Park
  2. Externalities in the games over electrical power transmission networks By László Á. Kóczy; Dávid Csercsik
  3. Communication, commitment, and deception in social dilemmas: experimental evidence By G. Camera; M. Casari; M. Bigoni
  4. Sequential Contests with Synergy and Budget Constraints By Megidish, Reut; Sela, Aner
  5. Cupid's Invisible Hand: Social Surplus and Identification in Matching Models By Bernard Salanié; Alfred Galichon
  6. Racial Differences in Inequality Aversion: Evidence from Real World Respondents in the Ultimatum Game By John D. Griffin; David Nickerson; Abigail K. Wozniak
  7. Transparency, Efficiency and the Distribution of Economic Welfare in Pass-Through Investment Trust Games By Thomas A. Rietz; Roman M. Sheremeta; Timothy W. Shields; Vernon L. Smith
  8. The Algorithmic Revolution in the Social Sciences: Mathematical Economics, Game Theory and Statistical Inference By K. Vela Velupillai
  9. More than outcomes: A cognitive dissonance-based explanation of other-regarding behavior By Astrid Matthey; Tobias Regner

  1. By: Massimo Morelli; In-Uck Park
    Abstract: When an agent decides whether to join a coalition or not, she must consider both i) the expected strength of the coalition and ii) her position in the vertical structure within the coalition. We establish that there exists a positive relationship between the degree of inequality in remuneration across ranks within coalitions and the number of coalitions to be formed. When coalition size is unrestricted, in all stable systems the endogenous coalitions must be mixed and balanced in terms of members' abilities, with no segregation. When coalitions must have a fixed finite size, stable systems display segregation by clusters while maintaining the aforesaid feature within clusters.
    Keywords: Stable Systems, Abilities, Hierarchy, Cyclic Partition
    JEL: C71 D71
    Date: 2011
  2. By: László Á. Kóczy (Óbuda University); Dávid Csercsik
    Abstract: An electrical transmission network consists of producers, consumers and the power lines connecting them. We build an ideal (lossless) DC load ow model as a cooperative game over a graph with the producers and consumers located at the nodes, each described by a maximum supply or desired demand and the power lines represented by the edges, each with a given power transmission capacity and admittance value describing its ability to transmit electricity. Today's transmission networks are highly interconnected, but or- ganisationally partitioned into several subnetworks, the so-called bal- ancing groups with balanced production and consumption. We study the game of balancing group formation and show that the game con- tains widespread externalities that can be both negative and positive. We study the stability of the transportation network using the recur- sive core. While the game is clearly cohesive, we demonstrate that it is not necessarily superadditive. We argue that subadditivity may be a barrier to achieve full cooperation. Finally the model is extended to allow for the extension of the underlying transmission network.
    Keywords: Energy transmission networks, Coop- erative game theory, Partition function form games, Externalities; Energy transmission networks, Coop- erative game theory, Partition function form games, Externalities
    Date: 2011
  3. By: G. Camera; M. Casari; M. Bigoni
    Abstract: Social norms of cooperation are studied under several forms of communication. In an experiment, strangers could make public statements before playing a prisoner’s dilemma. The interaction was repeated indefinitely, which generated multiple equilibria. Communication could be used as a tool to either signal intentions to coordinate on Pareto-superior outcomes, to deceive others, or to credibly commit to actions. Some forms of communication did not promote the incidence of efficient Nash play, and sometimes reduced it. Surprisingly, cooperation suffered when subjects could publicly commit to actions.
    JEL: C70 C90 D80
    Date: 2011–05
  4. By: Megidish, Reut; Sela, Aner
    Abstract: We study a sequential Tullock contest with two stages and two identical prizes. The players compete for one prize in each stage and each player may win either one or two prizes. The players have either decreasing or increasing marginal values for the prizes, which are commonly known, and there is a constraint on the total effort that each player can exert in both stages. We analyze the players' allocations of efforts along both stages when the budget constraints (effort constraints) are either restrictive, nonrestrictive or partially restrictive. We show that when the players are either symmetric or asymmetric and the budget constraints are restrictive, independent of the players' values for the prizes, each player allocates his effort equally along both stages of the contest.
    Keywords: budget constraints; sequential contests; Tullock contests
    JEL: D44 O31 O32
    Date: 2011–05
  5. By: Bernard Salanié (Columbia University - Department of Economics); Alfred Galichon (Ecole Polytechnique - Department of Economics)
    Abstract: We investigate a matching game with transferable utility when some of the characteristics of the players are unobservable to the analyst. We allow for a wide class of distributions of unobserved heterogeneity, subject only to a separability assumption that generalizes Choo and Siow (2006). We first show that the stable matching maximizes a social gain function that trades of two terms. The rst term is simply the average surplus due to the observable characteristics; and the second one can be interpreted as a generalized entropy function that reflects the impact of the unobserved characteristics. We use this result to derive simple closed-form formulæ that identify the joint surplus in every possible match and the equilibrium utilities of all participants, given any known distribution of unobserved heterogeneity. Moreover, we show that if transfers are observed, then the pre-transfer utilities of both partners are also identified. We conclude by discussing some empirical approaches suggested by these results for the study of marriage markets, hedonic prices, and the market for CEOs.
    Date: 2011
  6. By: John D. Griffin; David Nickerson; Abigail K. Wozniak
    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 unequal divisions. However, we uncover racial differences in the response to pecuniary returns conditional on inequality of the division. This is driven by the lowest income group in our sample, which represents the 10th percentile of the black income distribution. The racial differences are robust across gender and age groups. We also find that blacks are more sensitive to unfair proposals from other blacks.
    JEL: J15
    Date: 2011–05
  7. By: Thomas A. Rietz (Henry B. Tippie College of Business, University of Iowa); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University); Timothy W. Shields (Argyros School of Business and Economics, Chapman University); Vernon L. Smith (Economic Science Institute, Chapman University)
    Abstract: We design an experiment to examine welfare and behavior in a multi-level trust game representing a pass through investment in an intermediated market. In a repeated game, an Investor invests via an Intermediary who lends to a Borrower. A pre-experiment one-shot version of the game serves as a baseline and to type each subject. We alter the transparency of exchanges between non-adjacent parties. We find transparency of the exchanges between the investor and intermediary does not significantly affect welfare. However, transparency regarding exchanges between the intermediary and borrower promotes trust on the part of the investor, increasing welfare. Further, this has asymmetric effects: borrowers and intermediaries achieve greater welfare benefits than investors. We discuss implications for what specific aspects of financial market transparency may facilitate more efficiency.
    Keywords: financial intermediation, financial market transparency, pass through securities, multi-level trust games, experiments
    JEL: C72 C91 D72 G14 G21
    Date: 2011
  8. By: K. Vela Velupillai
    Abstract: The digital and information technology revolutions are based on algorithmic mathematics in many of their alternative forms. Algorithmic mathematics per se is not necessarily underpinned by the digital or the discrete only; analogue traditions of algorithmic mathematics have a noble pedigree, even in economics. Constructive mathematics of any variety, computability theory and non-standard analysis are intrinsically algorithmic at their foundations. Economic theory, game theory and mathematical finance theory, at many of their frontiers, appear to have embraced the digital and information technology revolutions via strong adherences to experimental, behavioural and so-called computational aspects of their domains - without, however, adapting the mathematical formalisms of their theoretical structures. Recent advances in mathematical economics, game theory, probability theory and statistics suggest that an algorithmic revolution in the social sciences is in the making. In this paper I try to trace the origins of the emergence of this revolution and suggest, via examples in mathematical economics, game theory and the foundations of statistics, where the common elements are and how they may define new frontiers of research and visions. Essentially, the conclusion is that the algorithmic social sciences are unified by an underpinning in Diophantine Decision Problems as their paradigmatic framework
    Keywords: Algorithmic Economics, Algorithmic Game Theory, Algorithmic Statistics, Algorithmic Social Science
    Date: 2010
  9. By: Astrid Matthey (Max Planck Institute of Economics, Jena, Germany); Tobias Regner (Max Planck Institute of Economics, Jena, Germany)
    Abstract: Recent research has cast some doubt on the general validity of outcome-based models of social preferences. We develop a model based on cognitive dissonance that focuses on the importance of self-image. An experiment (a dictator game variant) tests the model. First, we find that subjects whose choices involve two psychologically inconsistent cognitions indeed report higher levels of experienced conflict and take more time for their decisions (our proxies for cognitive dissonance). Second, we find support for the main model components. An individual's self-image, the sensitivity to cognitive dissonance, and expected behavior of others have a positive effect on other-regarding behavior.
    Keywords: social preferences, other-regarding behavior, self-image, experiments,,cognitive dissonance, social norms, normative beliefs, expectations
    JEL: C72 C91 D80
    Date: 2011–05–27

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