nep-gth New Economics Papers
on Game Theory
Issue of 2011‒07‒21
thirteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. The Present and Future of Game Theory By Martin Shubik
  2. Achieving Pareto Optimality Through Distributed Learning By Jason R. Marden; H. Peyton Young; Lucy Y. Pao
  3. On the Evolution of Preferences By Astrid Gamba
  4. Core stable bidding rings in independent private value auctions with externalities By Biran, Omer
  5. Toward an Autonomous-Agents Inspired Economic Analysis By Shu-Heng Chen; Tina Yu
  6. Focal Points, Gender Norms and Reciprocation in Public Good Games By David Zetland; Marina Della Giusta
  7. General Conditions for Existence of Maximal Elements via the Uncovered Set By John Duggan
  8. Behavioral Responses to Natural Disasters By Marco Castillo; Michael Carter
  9. La teoría de juegos evolutivos, naturaleza y racionalidad By Elvio Accinelli
  10. Subjective expected utility without preferences By Denis Bouyssou; Thierry Marchant
  11. Agent-Based Modeling of the El Farol Bar Problem By Shu-Heng Chen; Umberto Gostoli
  12. Agent-Based Modeling of the Prediction Markets By Tongkui Yu; Shu-Heng Chen
  13. The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency By Etienne Farvaque; Alexander Mihailov; Alireza Naghavi

  1. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: A broad nontechnical coverage of many of the developments in game theory since the 1950s is given together with some comments on important open problems and where some of the developments may take place. The nearly 90 references given serve only as a minimal guide to the many thousands of books and articles that have been written. The purpose here is to present a broad brush picture of the many areas of study and application that have come into being. The use of deep techniques flourishes best when it stays in touch with application. There is a vital symbiotic relationship between good theory and practice. The breakneck speed of development of game theory calls for an appreciation of both the many realities of conflict, coordination and cooperation and the abstract investigation of all of them.
    Keywords: Game theory, Application and theory, Social sciences, Law, Experimental gaming, conflict, Coordination and cooperation
    JEL: C7 C9
    Date: 2011–07
  2. By: Jason R. Marden; H. Peyton Young; Lucy Y. Pao
    Abstract: We propose a simple payoff-based learning rule that is completely decentralized, and that leads to an efficient configuration of actions in any n-person game with generic payoffs. The algorithm requires no communication. Agents respond solely to changes in their own realized payoffs, which are affected by the actions of other agents in the system in ways that they do not generally understand. The method has potential application to the optimization of complex systems with many distributed components, such as the routing of information in networks and the design and control of wind farms.
    Date: 2011
  3. By: Astrid Gamba (Max Planck Institute of Economics, Jena, Germany)
    Abstract: A common feature of the literature on the evolution of preferences is that evolution favors nonmaterialistic preferences only if preference types are observable at least to some degree. We argue that this result is due to the assumption that in each state of the evolutionary dynamics some Bayesian Nash equilibrium is played. We show that under unobservability of preference types, conditional on selecting some self-confirming equilibrium as a rule for mapping preference into behavior, non-selfish preferences may be evolutionarily successful.
    Keywords: evolution of preferences, altruism, learning, self-confirming equilibrium
    JEL: A13 C72 D64 D83
    Date: 2011–07–04
  4. By: Biran, Omer
    Abstract: We consider a second price auction between bidders with independently and identically distributed valuations, where a losing bidder suffers a negative direct externality. Considering ex-ante commitments to form bidding rings we study the question of core stability of the grand coalition, namely: is there a subset of bidders that prefers forming a small bidding ring rather than participating in the grand cartel? We show that in the presence of direct externalities between bidders the grand coalition is not necessarily core stable, as opposed to the zero externality case, where the stability of the grand coalition is a known result. Finally, we study collusion in auctions as a mechanism design problem, insisting on the difficulty to compare ex-ante and interim commitments. In particular, we show that there are situations in which bidders prefer colluding before privately learning their types.
    Keywords: Auctions; collusion; externalities; Bayesian games; core; partition function game; mechanism design.
    JEL: C71 D44 C72
    Date: 2011–03
  5. By: Shu-Heng Chen; Tina Yu
    Abstract: This paper demonstrates the potential role of autonomous agents in economic theory. We first dispatch autonomous agents, built by genetic programming, to double auction markets. We then study the bargaining strategies discovered by them, and from there an autonomous-agent-inspired economic theory with regard to the optimal procrastination is derived.
    Keywords: Agent-Based Double Auction Markets, Autonomous Agents, Genetic Programming, Bargaining Strategies, Monopsony, Procrastination Strategy
    Date: 2011
  6. By: David Zetland (Department of Economics, Wageningen University); Marina Della Giusta (Department of Economics, University of Reading)
    Abstract: We examine the impact of information regarding other people’s choices on individual choice in a public good experiment with two separate treatments. In the implicit treatment, subjects do not see the average contribution of others in their group, but they can calculate it from the information available. In the explicit treatment, subjects see the average contribution of others in their group. If subjects are rational calculating agents as suggested in mainstream economic theory there should be no difference in observed behavior across treatments: agents should use all available information to make decisions. What we see instead is quite different and consistent with the presence of social norms: first, players change their behavior in response to the change in displayed information; second, changes in individual behavior produce identical group outcomes, in terms of total payoffs or efficiency across the two treatments. How does this happen? The display of the average contribution of others results in behavior consistent with a focal point (Schelling, 1960), i.e., more subjects behave as reciprocators (conditioning their contributions on the contributions of others), and fewer behave as cooperators or free-riders (unconditionally contributing a lot or a little, respectively). This change in behavior differs by gender: women behave similarly to men when they see the average contribution by others; when they cannot, they behave differently, favoring unconditional strategies of free-riding or cooperation. Men’s behavior, in contrast to women’s adaption, does not adjust to social cues, as suggested by Croson and Gneezy (2009).
    Keywords: public goods, focal points, social norms, gender, experiments
    JEL: D0
    Date: 2011–06–01
  7. By: John Duggan (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158)
    Abstract: This paper disentangles the topological assumptions of classical results (e.g., Walker (1977)) on existence of maximal elements from rationality conditions. It is known from the social choice literature that under the standard topological conditions-with no other restrictions on preferences-there is an element such that the upper section of strict preference at that element is minimal in terms of set inclusion, i.e., the uncovered set is non-empty. Adding a condition that weakens known acyclicity and convexity assumptions, each such uncovered alternative is indeed maximal. A corollary is a result that weakens the semi-convexity condition of Yannelis and Prabhakar (1983).
    Date: 2011–07
  8. By: Marco Castillo (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Michael Carter (Agricultural and Resource Economics, University of California - Davis)
    Abstract: Catastrophic events can dramatically alter existing social and economic relationships. The consequences can be long-lasting and give rise to heterogeneity of behavior across populations. We investigate the impact of a large negative shock on altruism, trust and reciprocity in 30 small Honduran communities diversely affected by Hurricane Mitch in 1998. We conduct a survey of communities and behavioral experiments three and four years after the event. We find that the mean and variance of behavior are nonlinearly related to the severity of the weather shock affecting the community. Also, there is a substitution away from formal local organizations to informal arrangements.
    Keywords: noncooperative games, experimental economics, norms
    JEL: C72 C92 C93
    Date: 2011–06
  9. By: Elvio Accinelli
    Abstract: Analiza las soluciones a los conflictos desde la perspectiva de la teoría de juegos. Incluye un análisis de la relación entre los equilibrios de Nash y los equilibrios dinámicos, y su estabilidad. La teoría económica encuentra en la teoría de juegos evolutivos un instrumento válido para analizar aquellas situaciones donde los agentes no se comportan totalmente como individuos racionales o en la que aprenden la racionalidad
    JEL: A1 B4
    Date: 2011
  10. By: Denis Bouyssou (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - CNRS : UMR7024 - Université Paris Dauphine - Paris IX); Thierry Marchant (Department of Data Analysis - Ghent University)
    Abstract: This paper proposes a theory of subjective expected utility based on primitives only involving the fact that an act can be judged either "attractive" or "unattractive". We give conditions implying that there are a utility function on the set of consequences and a probability distribution on the set of states such that attractive acts have a subjective expected utility above some threshold. The numerical representation that is obtained has strong uniqueness properties.
    Keywords: Subjective Expected Utility ; Conjoint Measurement
    Date: 2011–06–14
  11. By: Shu-Heng Chen; Umberto Gostoli
    Abstract: In this paper, we study the self-coordination problem as demonstrated by the well-known El Farol problem (Arthur, 1994), which has later become what is known as the minority game in the econophysics community. While the El Farol problem or the minority game has been studied for almost two decades, existing studies are mostly only concerned with efficiency. The equality issue, however, has been largely neglected. In this paper, we build an agent-based model to study both efficiency and equality and ask whether a decentralized society can ever possibly self-coordinate a result with the highest efficiency while also maintaining the highest degree of equality. Our agent-based model shows the possibility of achieving this social optimum. The two key determinants to make this happen are social preferences and social networks. Hence, not only doe institutions (networks) matter, but individual characteristics (preferences) also matter. The latter are open to human-subject experiments for further examination.
    Keywords: El Farol Bar problem, Social Preferences, Social Networks, Self-Organization, Emergence of Coordination.
    Date: 2011
  12. By: Tongkui Yu; Shu-Heng Chen
    Abstract: We propose a simple agent-based model of the political election prediction market which reflects the intrinsic feature of the prediction market as an information aggregation mechanism. Each agent has a vote, and all agents’ votes determine the election result. Some of the agents participate in the prediction market. Agents form their beliefs by observing their neighbors’ voting disposition, and trade with these beliefs by following some forms of the zero-intelligence strategy. In this model, the mean price of the market is used as a forecast of the election result. We study the effect of the radius of agents’ neighborhood and the geographical distribution of information on the prediction accuracy. In addition, we also identify one of the mechanisms which can replicate the favorite-longshot bias, a stylized fact in the prediction market. This model can then provide a framework for further analysis on the prediction market when market participants have more sophisticated trading behavior.
    Keywords: Prediction market, Agent-based simulation, Information aggregation mechanism, Prediction accuracy, Zero-intelligence agents, Favorite-longshot bias
    Date: 2011
  13. By: Etienne Farvaque (Department of Economics, University of Lille 1); Alexander Mihailov (Department of Economics, University of Reading); Alireza Naghavi (Department of Economics, Unioversity of Bologna)
    Abstract: This paper aims to explain the rise and fall of communism by exploring the interplay between economic incentives and social preferences in different economic systems. We introduce inequality-averse and inefficiency-averse agents responding to economic incentives and transmitting their ideology as they are affected by evolving outcomes. We analyze their conflict through the interaction between leaders with economic power and followers with ideological determination. The socioeconomic dynamics of our model generate a pendulum-like switch from markets to a centrally-planned economy abolishing private ownership, and back to restoring market incentives. The grand experiment of communism is thus characterized to have led to the discovery of a trade-off between equality and efficiency at the scale of alternative economic systems.
    Keywords: capitalism, communism, inequality, inefficiency, ideological transmission, economic transititions
    JEL: C72 D31 D63 D74 D83 P51
    Date: 2011–06–30

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