nep-gth New Economics Papers
on Game Theory
Issue of 2011‒12‒19
fourteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Negotiation-proof correlated equilibrium By Nicholas Ziros
  2. The SD-prenucleolus for TU games. By Javier Arin; Ilya Katsev
  3. Games with synergistic preferences By Julian C. Jamison
  4. Distorted Voronoi Languages By Manuel Förster; Frank Riedel
  5. Robust Predictions in Games with Incomplete Information By Dirk Bergemann; Stephen Morris
  6. Timing of Messages and the Aumann Conjecture: A multiple-Selves Approach By Roi Zultan
  7. Which Way to Cooperate By Todd R. Kaplan; Bradley J. Ruffle Author-X-Name-Bradley J.
  8. The Washroom Game By Jan Heufer
  9. Tree, Web and Average Web Value for Cycle-Free Directed Graph Games By Khmelnitskaya, A.; Talman, A.J.J.
  10. Truth, trust, and sanctions: On institutional selection in sender-receiver games By Ronald Peeters; Marc Vorsatz; Markus Walzl
  11. Attractive evolutionary equilibria By Reinoud Joosten; Berend Roorda
  12. Self-Commitment-Institutions and Cooperation in Overlapping Generations Games By Francesco Lancia; Alessia Russo
  14. The economics of predation: What drives pricing when there is learning-by-doing? By Besanko, David; Doraszelski, Ulrich; Kryukov, Yaroslav

  1. By: Nicholas Ziros
    Abstract: This article characterizes the set of correlated equilibria that result from open negotiations, which players make prior to playing a strategic game. A negotiation-proof correlated equilibrium is defined as a correlated strategy in which the negotiation process among all of the players prevents the formation of any improving coalitional deviation. Additionally, this notion of equilibrium is adapted to general games with incomplete information.
    Keywords: Correlated equilibrium, coalitions, negotiation, incomplete information
    Date: 2011–12
  2. By: Javier Arin (UPV/EHU); Ilya Katsev (St. Petersbourg Institute for Economics and Mathematics)
    Abstract: We introduce and characterize a new solution concept for TU games. The new soluction is called SD-prenucleolus and is a lexicographic value although is not a weighted prenucleolus. The SD-prenucleolus satisfies several desirable poperties and is the only known solution that satisfies core stability, strong aggegate monotonicity and null player out property in the class of balanced games. The SD-prenucleolus is the only known solution that satisfies core stability continuity and is monotonic in the class of veto balanced games.
    Keywords: TU games, prenucleolus, per capita prenucleolus
    Date: 2011–12–12
  3. By: Julian C. Jamison
    Abstract: In economic situations a player often has preferences regarding not only his or her own outcome but also regarding what happens to fellow players, concerns that are entirely apart from any strategic considerations. While this can be modeled directly by simply writing down a player's final preferences, these are commonly unknown a priori. In many cases it is therefore both helpful and instructive to explicitly model these interactions. This paper, building on a model due to Bergstrom (1989, 1999), presents a simple structure in the context of game theory that incorporates the "synergies" between players. It is powerful enough to cover a wide range of such interactions and model many disparate experimental and empirical results, yet it is straightforward enough to be used in many applied situations where altruism, or a baser motive, is implied.
    Keywords: Human behavior ; Game theory ; Altruism
    Date: 2011
  4. By: Manuel Förster (Université Paris I); Frank Riedel (Institute of Mathematical Economics, Bielefeld University)
    Abstract: In a recent paper, Jäger, Metzger, and Riedel (2011) study communication games of common interest when signals are simple and types complex. They characterize strict Nash equilibria as so–called Voronoi languages that consist of Voronoi tesselations of the type set and Bayesian estimators on the side of receivers. In this note, we introduce conflicts of interest in the same setting. We characterize strict Nash equilibria as distorted Voronoi languages that use all messages. For large conflicts, such informative equilibria need not exist. If the bias is sufficiently small, however, these equilibria do exist. This establishes the robustness of the results in Jäger, Metzger, and Riedel (2011) to biased interests. We finally give examples of strict Nash equilibria, one of them using simulations to illustrate an equilibrium with many messages and non-uniformly distributed types.
    Keywords: Cheap Talk, Signaling Game, Communication Game, Voronoi tesselation, Conflict of Interest
    JEL: C72 D82 D83
    Date: 2011–12
  5. By: Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: We analyze games of incomplete information and offer equilibrium predictions which are valid for, and in this sense robust to, all possible private information structures that the agents may have. We completely characterize the set of Bayes correlated equilibria in a class of games with quadratic payoffs and normally distributed uncertainty in terms of restrictions on the first and second moments of the equilibrium action-state distribution. We derive exact bounds on how prior knowledge about the private information refines the set of equilibrium predictions. We consider information sharing among firms under demand uncertainty and find newly optimal information policies via the Bayes correlated equilibria. Finally, we reverse the perspective and investigate the identification problem under concerns for robustness to private information. The presence of private information leads to set rather than point identification of the structural parameters of the game.
    Keywords: Incomplete information, Correlated equilibrium, Robustness to private information, Moments restrictions, Identification, Information bounds
    JEL: C72 C73 D43 D83
    Date: 2011–09
  6. By: Roi Zultan (Department of Economics, Ben-Gurion University of the Negev, Beer-Sheva 84105, Israel)
    Abstract: The Aumann (1990) conjecture states that cheap-talk messages do not necessarily help to coordinate on efficient Nash equilibria. In an experimental test of Aumann’s conjecture, Charness (2000) found that cheap-talk messages facilitate coordination when they precede the action, but not when they follow the action. Standard game-theoretical modeling abstracts from this timing effect, and therefore cannot account for it. To allow for a formal analysis of the timing effect, I study the sequential equilibria of the signaling game in which the sender is modeled as comprising two selves: an acting self and a signaling self. I interpret Aumann’s argument in this context to imply that all of the equilibria in this game are ‘babbling’ equilibria, in which the message conveys no information and does not affect the behavior of the receiver. Using this framework, I show that a fully communicative equilibrium exists—only if the message precedes the action but not when the message follows the action. In the latter case, no information is transmitted in any equilibrium. This result provides a game-theoretical explanation for the puzzling experimental results obtained by Charness (2000). I discuss other explanations for this timing-of-message effect and their relationship to the current analysis.
    Keywords: pre-play communication, Nash equilibrium, coordination games, multiple selves
    JEL: A13 C72 C91 D82 D84
    Date: 2011
  7. By: Todd R. Kaplan (Department of Economics, University of Haifa, Israel.); Bradley J. Ruffle Author-X-Name-Bradley J. (Department of Economics, Ben-Gurion University, Beer Sheva, Israel.)
    Abstract: We introduce a two-player, binary-choice game in which both players have a privately known incentive to enter, yet the combined surplus is highest if only one enters. Repetition of this game admits two distinct ways to cooperate: turn taking and cutoffs, which rely on the player’s private value to entry. A series of experiments highlights the role of private information in determining which mode players adopt. If an individual’s entry values vary little (e.g., mundane tasks), taking turns is likely; if these potential values are diverse (e.g., difficult tasks that differentiate individuals by skill or preferences), cutoff cooperation emerges.
    JEL: C90 Z13
    Date: 2011
  8. By: Jan Heufer
    Abstract: This article analyses a game where players sequentially choose either to become insiders and pick one of finitely many locations or to remain outsiders. They will only become insiders if a minimum distance to the next player can be assured; their secondary objective is to maximise the minimal distance to other players. This is illustrated by considering the strategic behaviour of men choosing from a set of urinals in a public lavatory. However, besides very similar situations (e.g. settling of residents in a newly developed area, the selection of food patches by foraging animals, choosing seats in waiting rooms or lines in a swimming pool), the game might also relevant to the problem of placing billboards attempting to catch the attention of passers-by or similar economic situations. In the non-cooperative equilibrium, all insiders behave as if they cooperated with each other and minimised the total number of insiders. It is shown that strategic behaviour leads to an equilibrium with substantial underutilization of available locations. Increasing the number of locations tends to decrease utilization. The removal of some locations which leads to gaps can not only increase relative utilization but even absolute maximum capacity.
    Keywords: Efficient design of facilities; location games; privacy concerns; strategic entry prevention; unfriendly seating arrangement; urinal problem
    JEL: C70 H89 R12
    Date: 2011–11
  9. By: Khmelnitskaya, A.; Talman, A.J.J. (Tilburg University, Center for Economic Research)
    Abstract: On the class of cycle-free directed graph games with transferable utility solution concepts, called web values, are introduced axiomatically, each one with respect to some specific choice of a management team of the graph. We provide their explicit formula representation and simple recursive algorithms to calculate them. Additionally the effciency and stability of web values are studied. Web values may be considered as natural extensions of the tree and sink values as has been defined correspondingly for rooted and sink forest graph games. In case the management team consists of all sources (sinks) in the graph a kind of tree (sink) value is obtained. In general, at a web value each player receives the worth of this player together with his subordinates minus the total worths of these subordinates. It implies that every coalition of players consisting of a player with all his subordinates receives precisely its worth. We also define the average web value as the average of web values over all management teams in the graph. As application the water distribution problem of a river with multiple sources, a delta and possibly islands is considered.
    Keywords: TU game;cooperation structure;Myerson value;efficiency;deletion link property;stability
    JEL: C71
    Date: 2011
  10. By: Ronald Peeters; Marc Vorsatz; Markus Walzl
    Abstract: We conduct a laboratory experiment to investigate the impact of institutions and institutional choice on truth-telling and trust in sender-receiver games. We find that in an institution with sanctioning opportunities, receivers sanction predominantly after having trusted lies. Individuals who sanction are responsible for truth-telling beyond standard equilibrium predictions and are more likely to choose the sanctioning institution. Sanctioning and non-sanctioning institutions coexist if their choice is endogenous and the former shows a higher level of truth-telling but lower material payoffs. It is shown that our experimental findings are consistent with the equilibrium analysis of a logit agent quantal response equilibrium with two distinct groups of individuals: one consisting of subjects who perceive non-monetary lying costs as senders and non-monetary costs when being lied to as receivers and one consisting of payoff maximizers.
    Keywords: Experiment, Sender-receiver games, Strategic information transmission, Institutional selection
    JEL: C91 C92
    Date: 2011–12
  11. By: Reinoud Joosten; Berend Roorda
    Abstract: We present attractiveness, a reÂ…nement criterion for evolutionary equilibria. Equilibria surviving this criterion are robust to small perturbations of the underlying payoff system or the dynamics at hand. Furthermore, certain attractive equilibria are equivalent to others for certain evolutionary dynamics. For instance, each attractive evolutionarily stable strategy is an attractive evolutionarily stable equilibrium for certain barycentric ray-projection dynamics, and vice versa.
    Keywords: attractive evolutionary equilibria, evolutionary dynam- ics, evolutionary, dynamic & structural stability
    JEL: C62 C72 C73
    Date: 2011–12–15
  12. By: Francesco Lancia; Alessia Russo
    Abstract: This paper focuses on a two-period OLG economy with public imperfect observability over the intergenerational cooperative dimension. Individual endowment is at free disposal and perfectly observable. In this environment we study how a new mechanism, we call Self-Commitment-Institution (SCI), outperforms personal and community enforcement in achieving higher ex-ante e¢ ciency. Social norms with and without SCI are characterized. If social norms with SCI are implemented, agents might freely dispose of their endowment. As long as they reduce their marginal gain from deviation in terms of current utility, they also credibly self-commit on intergenerational cooperation. Under quite general conditions we .nd that, even if individual strategies are still characterized by behavioral uncertainty, the introduction of SCI relaxes the inclination toward opportunistic behavior and sustains higher e¢ ciency compared to social norms without SCI. We quantify the value of SCI and investigate the role of memory with di¤erent social norms. Finally, applications on intergenerational public good games and transfer games with productive SCI are provided
    Keywords: Cooperation; Free disposal; Imperfect public monitoring; Memory; Overlapping generation game; Self-Commitment Institution;
    JEL: C70 D70 H40
    Date: 2011–11
  13. By: Roi Zultan (Department of Economics, Ben-Gurion University of the Negev, Beer-Sheva 84105, Israel)
    Abstract: Pre-play face-to-face communication is known to facilitate cooperation. Various explanations exist for this effect, varying in their dependence on the strategic content of the communication. Previous studies have found similar communication effects regardless of whether strategic communication is available. These results were so far taken to support a social-preferences based explanation of the communication effects. The current experiment provides a replication and extension of previous results to show that different processes come into play, depending on the communication protocol. Specically, pre-play communication in an ultimatum game was either restricted to nongame- related content or unrestricted. The results show that strategic, but not social, communication affects responders' strategies. Thus, the existing results are cast in a new light. I conclude that pre-play communication effects may be mediated by qualitatively dierent processes, depending on the social context.
    JEL: C90 Z13
    Date: 2011
  14. By: Besanko, David; Doraszelski, Ulrich; Kryukov, Yaroslav
    Abstract: Predatory pricing--a deliberate strategy of pricing aggressively in order to eliminate competitors--is one of the more contentious areas of antitrust policy and its existence and efficacy are widely debated. The purpose of this paper is to formally characterize predatory pricing in a modern industry dynamics framework. We endogenize competitive advantage and industry structure through learning-by-doing. We first show that predation-like behavior arises routinely in our model. Equilibria involving predation-like behavior typically coexist with equilibria involving much less aggressive pricing. To disentangle predatory pricing from mere competition for efficiency on a learning curve we next decompose the equilibrium pricing condition. Our decomposition provides us with a coherent and flexible way to develop alternative characterizations of a firm’s predatory pricing incentives, some of which are motivated by the existing literature while others are novel. We finally measure the impact of the predatory pricing incentives on industry structure, conduct, and performance. We show that forcing a firm to ignore these incentives in setting its price can have a large impact and that this impact stems from eliminating equilibria with predation-like behavior. Along with the predation-like behavior, however, a fair amount of competition for the market is eliminated. Overall, the distinction between predatory pricing and pricing aggressively to pursue efficiency is closely related to the distinction between the advantage-building and advantage-denying motives that our decomposition of the equilibrium pricing condition isolates and measures.
    Keywords: competition policy; industry dynamics; predatory pricing
    JEL: C73 L13 L44
    Date: 2011–12

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.