nep-gth New Economics Papers
on Game Theory
Issue of 2011‒11‒28
fourteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Decompositions of two player games: potential, zero-sum, and stable games By Sung-Ha Hwang; Luc Rey-Bellet
  2. Partially-honest Nash implementation: Characterization results By Lombardi, Michele; Yoshihara, Naoki
  3. Rarer Actions: Giving and Taking in Third-Party Punishment Games By Simon Halliday
  4. Pareto meets Olson: A note on Pareto-optimality and group size in linear public goods games By Pickhardt, Michael
  5. Signaling in deterministic and stochastic settings By Jeitschko, Thomas D.; Normann, Hans-Theo
  6. Equilibrium Selection with Payoff-Dependent Mistakes By Kang-Oh Yi
  7. Fair Contracts By Shingo Ishiguro
  8. Coordination under threshold uncertainty in a public goods game By Dannenberg, Astrid; Löschel, Andreas; Paolacci, Gabriele; Reif, Christiane; Tavoni, Alessandro
  9. Pareto-optimality in linear public goods games By Hokamp, Sascha; Pickhardt, Michael
  10. Essays on Dynamic Games. By Reddy, P.V.
  11. On the Release of Players to National Teams By Oliver Guertler; Markus Lang; Tim Pawlowski
  12. In vino veritas: Theory and evidence on social drinking By Haucap, Justus; Herr, Annika; Frank, Björn
  13. Smiling is a Costly Signal of Cooperation Opportunities: Experimental Evidence from a Trust Game By Centorrino, Samuele; Djemaï, Elodie; Hopfensitz, Astrid; Milinski, Manfred; Seabright, Paul
  14. Time Horizon and Cooperation in Continuous Time By M. Bigoni; M. Casari; A. Skrzypacz; G. Spagnolo

  1. By: Sung-Ha Hwang (Department of Economics, Sogang University, Seoul); Luc Rey-Bellet (Department of Mathematics and Statistics, University of Massachusetts Amherst, Lederle Graduate Research Tower, MA 01003-9305, U.S.A)
    Abstract: We introduce several methods of decomposition for two player normal form games. Viewing the set of all games as a vector space, we exhibit explicit orthonormal bases for the subspaces of potential games, zero-sum games, and their orthogonal com- plements which we call anti-potential games and anti-zero-sum games, respectively. Perhaps surprisingly, every anti-potential game comes either from the Rock-Paper- Scissors type games (in the case of symmetric games) or from the Matching Pennies type games (in the case of asymmetric games). Using these decompositions, we prove old (and some new) cycle criteria for potential and zero-sum games (as orthogonality relations between subspaces). We illustrate the usefulness of our decomposition by (a) analyzing the generalized Rock-Paper-Scissors game, (b) completely characteriz- ing the set of all null-stable games, (c) providing a large class of strict stable games, (d) relating the game decomposition to the decomposition of vector elds for the replicator equations, (e) constructing Lyapunov functions for some replicator dynam- ics, and (f) constructing Zeeman games -games with an interior asymptotically stable Nash equilibrium and a pure strategy ESS.
    Keywords: normal form games, evolutionary games, potential games, zero-sum games, orthogonal decomposition, null stable games, stable games, replicator dynamics, Zeeman games, Hodge decomposition.
    JEL: C72 C73
    Date: 2011
  2. By: Lombardi, Michele; Yoshihara, Naoki
    Abstract: This paper studies implementation problems in the wake of a recent trend of implementation of non-consequentialist nature, which draws on the evidence taken from experimental and behavioral economics. Specifically, following the seminal works by Matsushima (2008) and Dutta and Sen (2009), the paper considers implementation problems with partially-honest agents, which presume that there is at least one individual in society who concerns herself with not only outcomes but also honest behavior at least in a limited manner. Given this setting, the paper provides a general characterization of Nash implementation with partially-honest individuals. It also provides the necessary and sufficient condition for Nash implementation with partially-honest individuals bymechanisms with some types of strategyspace reductions. As a consequence, it shows that in contrast to the case of the standard framework, the equivalence between Nash implementation and Nash implementation with strategy space reduction no longer holds.
    Keywords: Nash implementation, canonical-mechanisms, s-mechanisms, partial-honesty, permissive results
    JEL: C72 D71
    Date: 2011–11
  3. By: Simon Halliday (SALDRU, School of Economics, University of Cape Town)
    Abstract: In attempting to understand cooperation, economists have used the methods of experimental economics to focus on spheres of human behavior in which humans display altruism, reciprocity, or other social preferences through giving and through punishment. Recent work has begun to examine whether allowing allocations in the negative domain, that is, allowing subjects to take (or steal) other subjects' endowments, might affect participants' behavior. If participants' behavior is a affected, then our understanding of experimental results generally, and social preferences specifically, should be affected too (List 2007, Bardsley 2008). In this paper we propose an experimental variation on the Dictator Game with third-party punishment (Fehr & Fischbacher 2004b). We examine, first, a basic Dictator Game with third-party punishment, after which we introduce a treatment allowing the dictator to take from the receiver, in the knowledge that the third party could punish them. The results conict. Many dictators choose the most self-interested option, while, when taking is introduced as an option for the dictator, third parties punish the most self-interested option more than in the baseline.
    Keywords: Experimental Economics, Social Norms, Punishment, Strong Reciprocity, Social Preferences, Third Party.
    JEL: C91 D63
    Date: 2011–06
  4. By: Pickhardt, Michael
    Abstract: In this paper I examine the relationship between Pareto-optimality and group size in linear public goods games or experiments. In particular, I use the standard setting of homogeneous linear public goods experiments and apply a recently developed tool to identify all Pareto-optimal allocations in such settings. It turns out that under any conceivable circumstances, ceteris paribus, small groups have a higher Pareto-ratio (Pareto-optimal allocations over total allocations) than large groups. Hence, if Pareto-optimality of an allocation is a property that makes such allocations acceptable and maintainable, small groups will find is easier to provide Pareto-optimal amounts of a public good than large groups. This is a novel reasoning for Mancur Olson's claim, in particular, with respect to what he has termed inclusive goods and inclusive groups. --
    Keywords: Olson,Pareto,public goods,Pareto-optimality,linear public goods experiments,inclusive groups
    JEL: H41 C90 B31
    Date: 2011
  5. By: Jeitschko, Thomas D.; Normann, Hans-Theo
    Abstract: We contrast a standard deterministic signaling game with one where the signal-generating mechanism is stochastic. With stochastic signals a unique equilibrium emerges that involves separation and has intuitive comparative-static properties as the degree of signaling depends on the prior type distribution. With deterministic signals both pooling and separating configurations occur. Laboratory data support the theory: In the stochastic variant, there is more signaling behavior than with deterministic signals, and less frequent types distort their signals relatively more. Moreover, the degree of congruence between equilibrium and subject behavior is greater in stochastic settings compared to deterministic treatments. --
    Keywords: experiments,learning,noise,signaling,stochastic environments
    JEL: C7 C9 D8
    Date: 2011
  6. By: Kang-Oh Yi (Department of Economics, Sogang University, Seoul)
    Abstract: This paper studies equilibrium selection via stochastic dynamics in the style of Young (Econometrica 61, 1993, 57-84), when the mistake probabilities are allowed to depend on their expected payoffs. Although any strict equilibrium can be selected with properly constructed state-dependent mistakes (Bergin and Lipman, Econometrica, 64, 1996, 943-956), reasonable assumptions on state dependence could produce a consistent equilibrium selection. The main analysis shows how payoff dependency and payoffs interact to determine a long-run equilibrium and characterizes the selection relating to the traditional notions of risk dominance, payoff dominance, and maxmin in 2x2 games
    Keywords: Equilibrium selection, stochastic stability, coordination game, payoff dependent mistake
    JEL: C70 C72 D70
    Date: 2011
  7. By: Shingo Ishiguro (Graduate School of Economics, Osaka University)
    Abstract: In this paper we present an axiomatic approach to characterize the optimal contracts, which we call gfair contracts,h in the general moral hazard model. The two main axioms we employ are incentive efficiency and no-envyness. The incentive efficiency requires that agents of organization select the Pareto efficient contracts among all possible incentive compatible contracts. No-envyness is equity requirement to ensure that each agent does not envy contracts of others in the same organization. We then show that, due to the tension between incentive efficiency and no-envyness, fair contracts have the very simple feature that risk averse agents are offered the fixed wage to choose only the least costly action.
    Keywords: Moral Hazard, Incentive Contracts, Fairness.
    JEL: D82 D86
    Date: 2011–11
  8. By: Dannenberg, Astrid; Löschel, Andreas; Paolacci, Gabriele; Reif, Christiane; Tavoni, Alessandro
    Abstract: We explored experimentally how threshold uncertainty affects coordination success in a threshold public goods game. Whereas all groups succeeded in providing the public good when the exact value of the threshold was known, uncertainty was generally detrimental for the public good provision. The negative effect of threshold uncertainty was particularly severe when it took the form of ambiguity, i.e. when players were not only unaware of the value of the threshold but also of its probability distribution. Early signaling of willingness to contribute and share the burden equitably helped groups in coping with threshold uncertainty. --
    Keywords: Public good,threshold uncertainty,ambiguity,experiment
    JEL: C72 C92 H41 Q54
    Date: 2011
  9. By: Hokamp, Sascha; Pickhardt, Michael
    Abstract: We derive a generalized method for calculating the total number of Paretooptimal allocations (NOPA) in typical linear public goods games. Among other things, the method allows researchers to develop new experimental designs for testing the relevance of Pareto-optimality in experimental settings, for investigating alternative causes of the decline of voluntary contributions, or for analyzing the contribution behavior of the rich and poor in heterogeneous income settings. Further findings include that the NOPA is related to the marginal per capita return (MPCR) of a contribution to the public good and that the maximum number of free-riders tolerated by the Paretooptimality concept is independent from the group size and income distribution. Finally, we apply our findings to a number of published linear public goods games, suggest an agenda for future research and provide a MATLAB code. --
    Keywords: linear public goods games,Pareto-optimality,public goods experiments,behavioral economics,free-rider,heterogeneous incomes,heterogeneous MPCRs
    JEL: C70 C90 H41
    Date: 2011
  10. By: Reddy, P.V. (Universiteit van Tilburg)
    Date: 2011
  11. By: Oliver Guertler (Department of Economics, University of Cologne); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Tim Pawlowski (Department of Sport Economics and Sport Management, German Sport University Cologne)
    Abstract: The release of players from a club to the national team often leads to a conflict concerning the duration of the players' stay with the national team. Based on a theoretical bargaining model, we examine whether intervention by a governing body in this conflict is desirable. We show that bargaining between club and national team yields a socially inefficient outcome if financial compensations are either prohibited or limited. If, however, unlimited financial compensations paid by the national team to the clubs are allowed, it is not necessary to intervene in the negotiations because the bargaining outcome will be socially optimal.
    Keywords: National team, release of players, compensation payment, bargaining, team sports
    JEL: C78 L83
    Date: 2011–11
  12. By: Haucap, Justus; Herr, Annika; Frank, Björn
    Abstract: It is a persistent phenomenon in many societies that a large proportion of alcohol consumption takes place in company of other people. While the phenomenon of social or public drinking is well discussed in disciplines as social psychology and anthropology, economists have paid little attention to the social environment of alcohol consumption. This paper tries to close this gap and explains social drinking as a trust facilitating device. Since alcohol consumption tends to make some people (unwillingly) tell the truth, social drinking can eventually serve as a signaling device in social contact games. Empirical support is obtained from a cross-country analysis of trust and a newly developed index of moderate alcohol consumption. --
    Keywords: social and public drinking,alcohol consumption,social contact games,trust,signaling
    JEL: C72 D71 L14
    Date: 2011
  13. By: Centorrino, Samuele; Djemaï, Elodie; Hopfensitz, Astrid; Milinski, Manfred; Seabright, Paul
    Abstract: We test the hypothesis that "genuine" or "convincing" smiling is a costly signal that has evolved to induce cooperation in situations requiring mutual trust. Potential trustees in a trust game made video clips for viewing by potential trusters before the latter decided whether to send them money. Ratings of the genuineness of smiles vary across clips; it is difficult to make convincing smiles to order. We argue that smiling convincingly is costly, because smiles from trustees playing for higher stakes are rated as significantly more convincing, so that rewards appear to induce effort. We show that it induces cooperation: smiles rated as more convincing strongly predict judgments about the trustworthiness of trustees, and willingness to send them money. Finally, we show that it is a honest signal: those smiling convincingly return more money on average to senders. Convincing smiles are to some extent a signal of the intrinsic character of trustees: less honest individuals find smiling convincingly more difficult. They are also informative about the greater amounts that trustees playing for higher stakes have available to share: it is harder to smile convincingly if you have less to offer.
    Date: 2011–04
  14. By: M. Bigoni; M. Casari; A. Skrzypacz; G. Spagnolo
    Abstract: When subjects interact in continuous time, their ability to cooperate may dramatically increase. In an experiment, we study the impact of different time horizons on cooperation in (quasi) continuous time prisoner's dilemmas. We find that cooperation levels are similar or higher when the horizon is deterministic rather than stochastic. Moreover, a deterministic duration generates different aggregate patterns and individual strategies than a stochastic one. For instance, under a deterministic horizon subjects show high initial cooperation and a strong end-of-period reversal to defection. Moreover, they do not learn to apply backward induction but to postpone defection closer to the end.
    JEL: C72 C73 C91 C92 D74
    Date: 2011–11

This nep-gth issue is ©2011 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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