nep-gth New Economics Papers
on Game Theory
Issue of 2012‒01‒10
seven papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Bargaining with random arbitration: an experimental study By Nejat Anbarci; Nick Feltovich
  2. How sensitive are bargaining outcomes to changes in disagreement payoffs? By Nejat Anbarci; Nick Feltovich
  3. Efficient Coordination in Weakest-Link Games By Riedl, Arno; Rohde, Ingrid M.T.; Strobel, Martin
  4. Implementation in adaptive better-response dynamics: Towards a general theory of bounded rationality in mechanisms. By Cabrales, Antonio; Serrano, Roberto
  5. Stochastically stable implementation. By Cabrales, Antonio; Serrano, Roberto
  6. Infinite dimensional mixed economies with asymmetric information By Bhowmik, Anuj; Cao, Jiling
  7. It is Hobbes, not Rousseau: an experiment on voting and redistribution. By Cabrales, Antonio; Nagel, Rosemarie; Rodríguez Mora, José V.

  1. By: Nejat Anbarci; Nick Feltovich
    Abstract: We use a laboratory experiment to study bargaining in the presence of random arbitration. Two players make simultaneous demands; if compatible, each receives the amount demanded as in the standard Nash demand game. If bargainers’ demands are incompatible, then rather than bargainers receiving their disagreement payoffs with certainty, they receive them only with exogenous probability 1−q. With probability q, there is random arbitration instead, with one bargainer randomly selected to receive his/her demand and the other bargainer receiving the remainder. The bargaining set is asymmetric, with one bargainer favoured over the other. We set disagreement payoffs to zero, and vary q over several values ranging from zero to one. Our main experimental results support the directional predictions of standard game theory (though the success of its point predictions is mixed). In the spirit of typical results for conventional arbitration, we observe a strong chilling effect on bargaining for values of q near one, with extreme demands and low agreement rates in these treatments. For the most part, increases in q reinforce the built-in asymmetry of the game, further benefiting the favoured player at the expense of the unfavoured player. The effects we find are non-uniform in q: over some fairly large ranges, increases in q have minimal effect on bargaining outcomes, but for other values of q, a small additional increase in q leads to sharp changes in results.
    Keywords: Nash demand game, random arbitration, chilling effect, equilibrium selection,experiment.
    JEL: C78 D74 C72
    Date: 2011–12
  2. By: Nejat Anbarci; Nick Feltovich
    Abstract: We use a human–subjects experiment to investigate how bargaining outcomes are affected by changes in bargainers’disagreement payoffs. Subjects bargain against changing opponents, with an asymmetric disagreement outcome that varies over plays of the game. Both bargaining parties are informed of both disagreement payoffs (and the cake size) prior to bargaining. We find that bargaining outcomes do vary with the disagreement outcome, but subjects severely under–react to changes in their own disagreement payoff and to changes in the opponent’s disagreement payoff, relative to the risk–neutral prediction. This effect is observed in a standard Nash demand game and a related unstructured bargaining game, and for two different cake sizes varying by a factor of four. We show theoretically that standard models of expected utility maximisation are unable to account for this under–responsiveness – even when risk aversion is introduced. We also show that other–regarding preferences can explain our main results.
    Keywords: Nash demand game, unstructured bargaining, disagreement, experiment, risk aversion, social preference, other–regarding behaviour, bargaining power.
    JEL: C78 C72 D81 D74
    Date: 2011–12
  3. By: Riedl, Arno (Maastricht University); Rohde, Ingrid M.T. (Istanbul Bilgi University); Strobel, Martin (Maastricht University)
    Abstract: Existing experimental research on behavior in weakest-link games shows overwhelmingly the inability of people to coordinate on the efficient equilibrium, especially in larger groups. We hypothesize that people are able to coordinate on efficient outcomes, provided they have sufficient freedom to choose their interaction neighborhood. We conduct experiments with medium sized and large groups and show that neighborhood choice indeed leads to coordination on the fully efficient equilibrium, irrespective if group size. This leads to substantial welfare effects. Achieved welfare is between 40 and 60 percent higher in games with neighborhood choice than without neighborhood choice. We identify exclusion as the simple but very effective mechanism underlying this result. In early rounds, high performers exclude low performers who in consequence 'learn' to become high performers.
    Keywords: efficient coordination, weakest-link, minimum effort, neighborhood choice, experiment
    JEL: C72 C92 D02 D03 D85
    Date: 2011–12
  4. By: Cabrales, Antonio; Serrano, Roberto
    Abstract: We study the classic implementation problem under the behavioral assumption that agents myopically adjust their actions in the direction of better-responses or bestresponses. First, we show that a necessary condition for recurrent implementation in better-response dynamics (BRD) is a small variation of Maskin monotonicity, which we call quasimonotonicity. We also provide a mechanism for implementation in BRD if the rule is quasimonotonic and excludes worst alternatives – no worst alternative (NWA). Quasimonotonicity and NWA are both necessary and sufficient for absorbing implementation in BRD. Moreover, they characterize implementation in strict Nash equilibria. Under incomplete information, incentive compatibility is necessary for any kind of stable implementation in our sense, while Bayesian quasimonotonicity is necessary for recurrent implementation in interim BRD. Both conditions are also essentially sufficient for recurrent implementation, together with a Bayesian NWA. A characterization of implementation in strict Bayesian equilibria is also provided. Partial implementation results are also obtained.
    Keywords: Robust implementation; Bounded rationality; Evolutionary dynamics; Mechanisms;
    JEL: C72 D70 D78
    Date: 2011–03–21
  5. By: Cabrales, Antonio; Serrano, Roberto
    Abstract: Restricting attention to economic environments, we study implementation under perturbed better-response dynamics (BRD). A social choice function (SCF) is implementable in stochastically stable strategies of perturbed BRD whenever the only outcome supported by the stochastically stable strategies of the perturbed process is the outcome prescribed by the SCF. For uniform mistakes, we show that any ε-secure and strongly efficient SCF is implementable when there are at least five agents. Extensions to incomplete information environments are also obtained.
    Keywords: Robust implementation; Bounded rationality; Evolutionary dynamics; Mechanisms; Stochastic stability;
    JEL: C72 D70 D78
    Date: 2011–04–18
  6. By: Bhowmik, Anuj; Cao, Jiling
    Abstract: In this paper, we study asymmetric information economies consisting of both non-negligible and negligible agents and having ordered Banach spaces as their commodity spaces. In answering a question of Herves-Beloso and Moreno-Garcia in [17], we establish a characterization of Walrasian expectations allocations by the veto power of the grand coalition. It is also shown that when an economy contains only negligible agents a Vind's type theorem on the private core with the exact feasibility can be restored. This solves a problem of Pesce in [20].
    Keywords: Asymmetric information; Exactly feasible; Ex-post core; mixed economy; NY-fine core; NY-private core; Robustly efficient allocation; NY-strong fine core; RW-fine core; Walrasian expectations allocation
    JEL: C71 D41 D82 D51 D43
    Date: 2011–12–28
  7. By: Cabrales, Antonio; Nagel, Rosemarie; Rodríguez Mora, José V.
    Abstract: We perform an experiment which provides a laboratory replica of some important features of the welfare state. In the experiment, all individuals in a group decide whether to make a costly effort, which produces a random (independent) outcome for each one of them. The group members then vote on whether to redistribute the resulting and commonly known total sum of earnings equally amongst themselves. This game has two equilibria, if played once. In one of them, all players make effort and there is little redistribution. In the other one, there is no effort and nothing
    Keywords: Redistribution; Political equilibrium; Voting; Multiple equilibria; Experiments;
    Date: 2011–09

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