nep-gth New Economics Papers
on Game Theory
Issue of 2011‒11‒21
fourteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Coalition structures induced by the strength of a graph By Michel Grabisch; Alexandre Skoda
  2. The Language Game: A Game-Theoretic Approach to Language Contact. By Nagore Iriberri; José Ramón Uriarte
  3. Solution Concepts for Games with General Coalitional Structure (Replaces CentER DP 2011-025) By Koshevoy, G.A.; Talman, A.J.J.
  4. Common Agency with Informed Principals: Menus and Signals By Simone Galperti
  5. Fairness in Bargaining and the Kalai-Smorodinsky Solution By Rachmilevitch, Shiran
  6. A model of influence based on aggregation functions By Michel Grabisch; Agnieszka Rusinowska
  7. Unawareness, Beliefs, and Speculative Trade By Heifetz, Aviad; Meier, Martin; Schipper, Burkhard
  8. Strategic Ignorance in Bargaining By Conrads, Julian; Irlenbusch, Bernd
  9. Belief Elicitation: A Horse Race among Truth Serums By Trautmann, S.T.; Kuilen, G. van de
  10. Voting Chances Instead of Voting Weights By Paolo Di Giannatale, Francesco Passarelli
  11. Coordination and Cooperation in Investment Timing with Externalities ? By Etienne Billette De Villemeur; Richard Ruble; Bruno Versaevel
  12. Forbearance in Optimal Multilateral Trade Agreements By Bowen, Renee
  13. The Visible Hand: Finger Ratio (2D:4D) and Competitive Bidding By Pearson, Matthew; Schipper, Burkhard C.
  14. Menstrual Cycle and Competitive Bidding By Pearson, Matthew; Schipper, Burkhard C.

  1. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Alexandre Skoda (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: We study cooperative games associated with a communication structure which takes into account a level of communication between players. Let us consider an undirected communication graph : each node represents a player and there is an edge between two nodes if the corresponding players can communicate directly. Moreover we suppose that a weight is associated with each edge. We compute the so-called strength of this graph and use the corresponding partition to determine a particular coalition structure. The strength of a graph is a measure introduced in graph theory to evaluate the resistance of networks under attacks. It corresponds to the minimum on all subsets of edges of the ratio between the sum of the weights of the edges and the number of connected components created when the set of edges is suppressed from the graph. The set of edges corresponding to the minimum ratio induces a partition of the graph. We can iterate the calculation of the strength on the subgraphs of the partition to obtain refined partitions which we use to define a hierarchy of coalition structures. For a given game on the graph, we build new games induced by these coalition structures and study the inheritance of convexity properties, and the Shapley value associated with them.
    Keywords: Communication networks, coalition structure, cooperative game.
    Date: 2011–07
  2. By: Nagore Iriberri (Universitat Pompeu Fabra); José Ramón Uriarte (UPV/EHU)
    Abstract: We study a society inside which two official languages, the majority language A and the minority language B, are in contact and compete for the same social functions. We propose a non-cooperative game to capture some features of this competitive situation. In the game, there are two types of players: the bilingual one who speaks both A and B and the monolingual one who speaks only A. The information about which type is each player is private. A real life situation captured by the game is that in many interactions bilingual players must decide under incomplete information about which language to use. One implication of this information structure is that while A satisfies the main properties of a public good, B does not. Another implication is that it may have dangerous consequences on the language diversity of the society. We show that in many equilibria bilingual players fail to coordinate in their preferred language and end up using the majority language A.
    Date: 2011–11–15
  3. By: Koshevoy, G.A.; Talman, A.J.J. (Tilburg University, Center for Economic Research)
    Abstract: We introduce a theory on marginal values and their core stability for cooperative games with arbitrary coalition structure. The theory is based on the notion of nested sets and the complex of nested sets associated to an arbitrary set system and the M-extension of a game for this set. For a set system being a building set or partition system, the corresponding complex is a polyhedral complex, and the vertices of this complex correspond to maximal strictly nested sets. To each maximal strictly nested set is associated a rooted tree. Given characteristic function, to every maximal strictly nested set a marginal value is associated to a corresponding rooted tree as in [9]. We show that the same marginal value is obtained by using the M-extension for every permutation that is associated to the rooted tree. The GC-solution is defined as the average of the marginal values over all maximal strictly nested sets. The solution can be viewed as the gravity center of the image of the vertices of the polyhedral complex. The GC-solution differs from the Myerson-kind value defined in [2] for union stable structures. The HS-solution is defined as the average of marginal values over the subclass of so-called half-space nested sets. The NT-solution is another solution and is defined as the average of marginal values over the subclass of NT-nested sets. For graphical buildings the collection of NT-nested sets corresponds to the set of spanning normal trees on the underlying graph and the NT-solution coincides with the average tree solution. We also study core stability of the solutions and show that both the HS-solution and NT-solution belong to the core under half-space supermodularity, which is a weaker condition than convexity of the game. For an arbitrary set system we show that there exists a unique minimal building set containing the set system. As solutions we take the solutions for this building covering by extending in a natural way the characteristic function to it by using its Möbius inversion.
    Keywords: Core;polytope;building set;nested set complex;Möbius inversion;permutations;normal fan;average tree solution;Myerson value.
    JEL: C71
    Date: 2011
  4. By: Simone Galperti
    Abstract: I analyze common agency games in which the principals, and possibly the agent,have private information. I distinguish between games in which the principals delegate the fi…nal decisions to the agent, and games in which they retain some decision power after offering their mechanisms. I show that,in contrast with mechanism design models with one informed Myerrson's Inscrutability Principle fails when there are many informed principals. I also …find that, in contrast with common agency models with uninformed principals, the Delegation Principle (Menu Theorem) fails when principals are informed. I then focus on Perfect Bayesian Equilibria in which principals offer their mechanisms without randomizing. I characterize the outcomes of arbitrary games with delegation as outcomes of a new game in which principals offer menus and send cheap-talk signals. Next, I characterize the outcomes of arbitrary games without delegation as outcomes of a new game in which principals offer menus of direct revelation mechanisms, to which they truthfully report their types. JEL Code: C18, C53, D89
    Keywords: Common agency, informed principals, Inscrutability Principle, Delegation Principle, menus, signals, direct revelation mechanisms.
    Date: 2011–30–31
  5. By: Rachmilevitch, Shiran (Department of Economics, University of Haifa)
    Abstract: A bargaining solution guarantees minimal equity if each player's payoff is at least as large as the minimum of the payoffs assigned to him by the equal-gain (i.e., egalitarian) and equal-loss solutions. The Kalai-Smorodinsky solution is the unique scale-invariant 2-person solution with this property. There does not exist a scale-invariant n-person solution with this property.
    Keywords: Bargaining; fairness; Kalai-Smorodinsky solution
    JEL: D63 D71
    Date: 2011–11–03
  6. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: The paper concerns a dynamic model of influence in which agents have to make a yes-no decision. Each agent has an initial opinion, which he may change during different phases of interaction, due to mutual influence among agents. The influence mechanism is assumed to be stochastic and to follow a Markov chain. In the paper, we investigate a model of influence based on aggregation functions. Each agent modifies his opinion independently of the others, by aggregating the current opinion of all agents, possibly including himself. We provide a general analysis of convergence in the aggregation model and give more practical conditions based on influential players. We show that the process of influence converges always to one of the two consensus states, and there may exist other terminal classes, which are either cyclic or union of Boolean lattices. We give sufficient conditions for avoiding these additional terminal classes, based on properties of the graph of influence and influential players. We also introduce the notion of influential coalition and show that it can fully describe terminal classes. Some important families of aggregation functions are discussed.
    Keywords: Influence, aggregation function, convergence, terminal class, influential coalition, social network.
    Date: 2011–10
  7. By: Heifetz, Aviad (Open University of Israel); Meier, Martin (Institute of Advanced Studies, Vienna); Schipper, Burkhard (University of CA, Davis)
    Abstract: We define a generalized state-space model with interactive unawareness and probabilistic beliefs. Such models are desirable for potential applications of asymmetric unawareness. Applying our unawareness belief structures, we show that the common prior assumption is too weak to rule out speculative trade in all states. Yet, we prove a generalized "No-speculative-trade" theorem according to which there can not be common certainty of strict preference to trade. Moreover, we prove a generalization of the "No-agreeing-to-disagree" theorem. Finally, we show the existence of a universal unawareness belief type space.
    JEL: C70 C72 D53 D80 D82
    Date: 2011–10
  8. By: Conrads, Julian (University of Cologne); Irlenbusch, Bernd (University of Cologne)
    Abstract: In his classic article "An Essay on Bargaining" Schelling (1956) argues that ignorance might actually be strength rather than weakness. We test and confirm Schelling's conjecture in a simple take-it-or-leave bargaining experiment where the proposer can choose between two possible offers. Option A always gives the proposer a higher payoff than option B. The payoff of the responder depends on the (randomly determined) state of nature, i.e., in state s2 payoffs of the two players are aligned while they are not in state s1. The responder is always informed about the actual state. The proposer knows the actual state in our first treatment but not in the second. We find that proposers indeed benefit from ignorance because the responders accept almost all offers (even the unfavorable ones) if the payoffs of the responder have not been transparent for the proposer. In additional treatments we investigate situations where the proposer can deliberately remain ignorant. One could assume that remaining ignorant on purpose would be punished by the responder at least if an unfavorable outcome results. Surprisingly, we find that strategically remaining ignorant tends to be beneficial for the proposer particularly if the responder does not know with certainty whether it was the proposer's intention to remain ignorant or whether it was not her intention.
    Keywords: strategic ignorance, bargaining, intentions, experiment
    JEL: C72 C78 C91 D63 D82 D83
    Date: 2011–10
  9. By: Trautmann, S.T.; Kuilen, G. van de (Tilburg University, Center for Economic Research)
    Abstract: In survey studies, probabilistic expectations about uncertain events are typically elicited by asking respondents for their introspective beliefs. If more complex procedures are feasible, beliefs can be elicited by incentive compatible revealed preference mechanisms (“truth serumsâ€). Various mechanisms have been proposed in the literature, which differ in the degree to which they account for respondents’ deviations from expected value maximization. In this paper, we pit non-incentivized introspection against five truth serums, to elicit beliefs in a simple two-player game. We test the internal validity (additivity and predictive power for own behavior), and the external validity (predictive power for other players’ behavior, or accuracy) of each method. We find no differences among the truth serums. Beliefs from incentivized methods are better predictors of subjects’ own behavior compared to introspection. However, introspection performs equally well as the truth serums in terms of accuracy and additivity.
    Keywords: belief measurement;subjective probability;scoring rules;outcome matching;probability matching;internal validity;external validity.
    JEL: D81 C91
    Date: 2011
  10. By: Paolo Di Giannatale, Francesco Passarelli
    Abstract: We study political distortions that emerge in situations where agents' political power is disproportionate with respect to their economic power. We provide a precise definition which adopts the same measure unit, the Shapley value, to evaluate both the economic and the political power. We show that usual weighted majority voting cannot prevent political distortions from emerging in a huge mass of situations. We propose an alternative voting method based on random assignments of voting rights. Agents are given chances to vote instead of weights. If chances are computed according to a specific formula, no political distortion occurs. As an application, we analyze the rotation voting system recently adopted by the European Central Bank. We find that this system yields an enormous amount of political distortion. Then we compute the voting chances that should be assigned to countries in order to eliminate it.
    Keywords: Voting power, Economic power, Political distortions, Voting rules, Weighted votes, Shapley value, Shapley Shubik index, European Central Bank
    JEL: C71 D71 D72
    Date: 2011–11
  11. By: Etienne Billette De Villemeur (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université des Sciences et Technologies de Lille - Lille I); Richard Ruble (EMLYON RECHERCHE - EMLYON Business School, GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Bruno Versaevel (EMLYON RECHERCHE - EMLYON Business School, GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)
    Abstract: We characterize sequential (preemption) and simultaneous (coordination) equilibria, as well as joint-value maximizing (cooperation) solutions, in a model of investment timing allowing for externalities in both flow pro...ts and investment costs. For two ex-ante symmetric ...rms, either preemption or attrition occur depending on the size of the investment externality. Coordination is less likely with more discounting, as in a repeated game, and more likely with higher growth and volatility. Optimal cooperation involves either monopoly or duopoly investment, the latter being either symmetric or asymmetric. Finally, these characterizations are validated by applications to standard speci...cations of capacity accumulation and of R&D investment. In the former setup, coordination is likelier if installed capacities and lumpy investments are both large. With R&D input choices, if investment synergies are large, coordination and cooperation result in the same outcomes.
    Keywords: Investment Timing; Real Options; Simultaneous Equilibrium; Joint-Value Maximization; Cooperation; Investment Externalities
    Date: 2011
  12. By: Bowen, Renee (Stanford University)
    Abstract: I present a theory of optimal multilateral trade agreements with public political shocks. I first show that "forbearance"-- where one country withholds retaliation when its trading partner receives a shock-- is a feature of an optimal agreement. This provides a rationale for countries not acting on retaliatory rights granted under GATT. Second I show that there is a limit to forbearance allowable in a self-enforcing agreement. This limit is increasing in the number of countries in the agreement, increasing in the common discount factor, and increasing in the size of the export sector.
    JEL: C73 D74 F10
    Date: 2011–11
  13. By: Pearson, Matthew (University of CA, Davis); Schipper, Burkhard C. (University of CA, Davis)
    Abstract: In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values and 400 subjects, we scan also the right hand of each subject. We study how the ratio of the length of the index and ring fingers (2D:4D) of the right hand, a measure of prenatal hormone exposure, is correlated with bidding behavior and total profits. 2D:4D has been reported to predict competitiveness in sports competition (Manning and Taylor, 2001, and Hoenekopp, Manning, and Mueller, 2006), risk aversion in lottery tasks (Dreber and Hoffman, 2007, Garbarino et al., 2010), and the average profitability of high-frequency traders in financial markets (Coates, Gurnell, and Rustichini, 2009). We do not find any significant correlation between 2D:4D on either bidding or profits. However, there might be racial differences in the correlation between 2D:4D and bidding and profits.
    JEL: C72 C91 C92 D44 D81 D87
    Date: 2011–10
  14. By: Pearson, Matthew (University of CA, Davis); Schipper, Burkhard C. (University of CA, Davis)
    Abstract: In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values and 400 participants, we collected information on the female participants' menstrual cycles and the use of hormonal contraceptives. We find that naturally cycling women bid significantly higher than men and earn significantly lower profits than men except during the midcycle when fecundity is highest. We suggest an evolutionary hypothesis according to which women are predisposed by hormones to generally behave more riskily during their fecund phase of their menstrual cycle in order to increase the probability of conception, quality of offspring, and genetic variety. We also find that women on hormonal contraceptives bid significantly higher and earn substantially lower profits than men. This may be due to progestins contained in hormonal contraceptives or a selection effect. We discuss how our study differs from Chen, Katuscak, and Ozdenoren (2009).
    JEL: C72 C91 C92 D44 D81 D87
    Date: 2011–11

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