nep-gth New Economics Papers
on Game Theory
Issue of 2012‒03‒21
seventeen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. The sequential equal surplus division for sharing a river By Béal, Sylvain; Rémila, Eric; Solal, Philippe
  2. The value of Repeated Games with an informed controller. By Renault, Jérôme
  3. Threshold public good games and impulse balance theory By Federica Alberti; Edward J. Cartwright; Anna Stepanova
  4. Inferring preferences from choices under uncertainty By Christoph Kuzmics
  5. Allocation Rules on Networks By Rahmi Ilkiliç; Çâatay Kayi
  6. Identification and estimation of dynamic games when players' beliefs are not in equilibrium By Victor Aguirregabiria; Arvind Magesan
  7. Lyapunov stability in an evolutionary game theory model of the labor market By Araujo, Ricardo Azevedo; Moreira, Helmar Nunes
  8. Lottery versus All-Pay Auction Contests – A Revenue Dominance Theorem By Jörg Franke; Christian Kanzow; Wolfgang Leininger; Alexandra Schwartz
  9. Towards an understanding of the endogenous nature of group identification in games By Smith, John; Bezrukova, Katerina
  10. M-stability: A reformulation of Von Neumann-Morgenstern stability By Peris, Josep E.; Subiza, Begoña
  11. An experiment investigating the spill-over effects of voicing outrage By Anastasios Koukoumelis; M. Vittoria Levati
  12. Asymmetrically fair rules for an indivisible good problem with a budget constraint By Paula Jaramillo; Çâatay Kayi; Flip Klijn
  13. On integration policies and schooling By José Alcalde Pérez; Begoña Subiza Martínez
  14. Premuneration Values and Investments in Matching Markets By George Mailath; Andrew Postlewaite; Larry Samuelson
  15. Mechanism design and intentions By Felix Bierbrauer; Nick Netzer
  16. Cultural Diversity, Cooperation,and Anti-social Punishment By Faillo, Marco; Grieco, Daniela; Zarri, Luca
  17. Testing a forgotten aspect of Akerlof’s gift exchange hypothesis: Relational contracts with individual and uniform wages By Martin G. Kocher; Wolfgang J. Luhan; Matthias Sutter

  1. By: Béal, Sylvain; Rémila, Eric; Solal, Philippe
    Abstract: We introduce the sequential equal surplus division for sharing the total welfare resulting form the cooperation of agents along a river with a delta. This allocation rule can be seen as a generalization of the contribution vectors introduced by Ju, Borm and Ruys (2007) in the context of TU-games. We provide two axiomatic characterizations of the sequential equal surplus division.
    Keywords: Amalgamation ; Consistency ; Fairness ; Sequential Equal Surplus Division ; Sharing a river
    JEL: D63 C71 D74 Q56 Q25
    Date: 2012–03–14
  2. By: Renault, Jérôme
    Date: 2012–02
  3. By: Federica Alberti (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Edward J. Cartwright (School of Economics, University of Kent, Canterbury); Anna Stepanova (School of Economics, University of Kent, Canterbury)
    Abstract: We propose and develop a model of behavior in threshold public good games. The model draws on learning direction theory and impulse balance theory. We find good support for the model and demonstrate that it can explain the success rates observed in threshold public good experiments. The model is applied in a variety of dierent settings : we compare games with a full refund to those with no refund, consider changes in relative endowment, and consider changes in the step return and net reward.
    Keywords: Public good, threshold, learning direction theory, impulse balance theory, counterfactual thinking
    JEL: C72 H41 C92
    Date: 2012–01–06
  4. By: Christoph Kuzmics (Institute of Mathematical Economics, Bielefeld University)
    Abstract: If a decision maker, in a world of uncertainty a la Anscombe and Aumann (1963), can choose acts according to some objective probability distribution (by throwing dice for instance) from any given set of acts, then there is no set of acts that allows an experimenter to test more than the Axiom of EUOL (that the DM evaluates objective lotteries with an expected utility function). In fact there is no (common) experimental design that allows an experimenter to test more than EUOL. For any decision problem (or set of decision problems), for any preference relation that satisfies the Axiom EUOL, and for any optimal choice (or collection of choices) given this preference relation, there is another preference relation that satisfies EUOL plus the Savage axioms, for which this choice is also optimal.
    Keywords: ambiguity, decision theory, Knightian uncertainty, experiments
    JEL: C72 C81 C90 D01 D03 D81
    Date: 2012–03
  5. By: Rahmi Ilkiliç; Çâatay Kayi
    Abstract: ABSTRACT: When allocating a resource, geographical and infrastructural constraints have to be taken into account. We study the problem of distributing a resource through a network from sources endowed with the resource to citizens with claims. A link between a source and an agent depicts the possibility of a transfer from the source to the agent. Given the supplies at each source, the claims of citizens, and the network, the question is how to allocate the available resources among the citizens. We consider a simple allocation problem that is free of network constraints, where the total amount can be freely distributed. The simple allocation problem is a claims problem where the total amount of claims is greater than what is available. We focus on consistent and resource monotonic rules in claims problems that satisfy equal treatment of equals. We call these rules fairness principles and we extend fairness principles to allocation rules on networks. We require that for each pair of citizens in the network, the extension is robust with respect to the fairness principle. We call this condition pairwise robustness with respect to the fairness principle. We provide an algorithm and show that each fairness principle has a unique extension which is pairwise robust with respect to the fairness principle. We give applications of the algorithm for three fairness principles: egalitarianism, proportionality and equal sacrice.
    Date: 2012–03–11
  6. By: Victor Aguirregabiria; Arvind Magesan
    Abstract: This paper deals with the identification and estimation of dynamic games when players' beliefs about other players' actions are biased, i.e., beliefs do not represent the probability distribution of the actual behavior of other players conditional on the information available. First, we show that a exclusion restriction, typically used to identify empirical games, provides testable nonparametric restrictions of the null hypothesis of equilibrium beliefs. Second, we prove that this exclusion restriction, together with consistent estimates of beliefs at several points in the support of the special state variable (i.e., the variable involved in the exclusion restriction), is sufficient for nonparametric point-identification of players' payoff and belief functions. The consistent estimates of beliefs at some points of support may come either from an assumption of unbiased beliefs at these points in the state space, or from available data on elicited beliefs for some values of the state variables. Third, we propose a simple two-step estimation method and a sequential generalization of the method that improves its asymptotic and finite sample properties. We illustrate our model and methods using both Monte Carlo experiments and an empirical application of a dynamic game of store location by retail chains. The key conditions for the identification of beliefs and payoffs in our application are the following: (a) the previous year's network of stores of the competitor does not have a direct effect on the profit of a firm, but the firm's own network of stores at previous year does affect its profit because the existence of sunk entry costs and economies of density in these costs; and (b) firms' beliefs are unbiased in those markets that are close, in a geographic sense, to the opponent's network of stores, though beliefs are unrestricted, and potentially biased, for unexplored markets which are farther away from the competitors' network. Our estimates show significant evidence of biased beliefs.
    Keywords: Dynamic games; Rational behavior; Rationalizability; Identification; Estimation; Market entry-exit.
    JEL: C18 C51 C72 L13
    Date: 2012–03–14
  7. By: Araujo, Ricardo Azevedo; Moreira, Helmar Nunes
    Abstract: In this paper the existence and stability of equilibria in an evolutionary game theory model of the labor market is studied by using the Lyapunov method. The model display multiple equilibria and it is shown that the Nash Equilibria of the static game are evolutionary stable equilibria in the game theory evolutionary set up. In this vein a complete characterization of the dynamics of an evolutionary model of the labor market is provided.
    Keywords: Evolutionary game theory approach, labour market, informal economy, Lyapunov function
    JEL: C73 J23
    Date: 2011–03
  8. By: Jörg Franke; Christian Kanzow; Wolfgang Leininger; Alexandra Schwartz
    Abstract: We allow a contest organizer to bias a contest in a discriminatory way, that is, she can favor specific contestants through the choice of contest success functions in order to maximize total equilibrium effort (resp. revenue). The scope for revenue enhancement through biasing is analyzed and compared for the two predominant contest regimes; i.e. all-pay auctions and lottery contests. Our main result reveals that an appropriately biased all-pay auction revenue dominates the optimally biased lottery contest for all levels of heterogeneity among contestants. Moreover, such a biased all-pay auction will never make use of the celebrated exclusion principle advanced by Baye et al. (1993).
    Keywords: All-pay auction; lottery contest; bias; revenue
    JEL: C72 D72
    Date: 2012–02
  9. By: Smith, John; Bezrukova, Katerina
    Abstract: It is commonly assumed that identification with a social group is constant throughout the play of a one-shot game in the absence of feedback. We provide evidence which challenges this assumption. We direct subjects to play one of two versions of the prisoner's dilemma game. These versions are distinguished by the relative attractiveness of the uncooperative action. We refer to the version with a relatively attractive uncooperative action as the Easy Game and the other as the Difficult Game. We find that for the subjects who play the Difficult Game, their change in group identification is significantly related to their action selected. No such relationship exists within the Easy Game. Additionally, we find that the change primarily occurs after the action is selected rather than upon inspection of the game. We discuss the implications of our findings to settings both inside and outside of the laboratory.
    Keywords: Group Identification; Experimental Game Theory; Endogenous Preferences; Social Identity; Decision Difficulty
    JEL: Z10 C91 C72
    Date: 2012–03–14
  10. By: Peris, Josep E. (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica); Subiza, Begoña (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica)
    Abstract: The notion of a stable set (introduced by von Neumann and Morgenstern, 1944) is an important tool in the field of Decision Theory. However, unfortunately, the stable set has some disadvantages: it is not unique, it may select too many alternatives and, most importantly, it may fail to exist. Other stability notions have been introduced in the literature in order to solve the non-existence but, in some cases, they may fail to select "optimal outcomes", in the sense that they can select dominated alternatives although non dom-inated ones exist. We propose a new notion (M-stability) and compare it with previous proposals. Moreover, we analyze some properties (existence, uniqueness, optimality, unions and intersections, ...) of the different notions of stable set.
    Keywords: stable set; generalized-stable; socially-stable; m-stable; admissible set
    JEL: D11
    Date: 2012–03–07
  11. By: Anastasios Koukoumelis (Max Planck Institute of Economics, Jena); M. Vittoria Levati (Max Planck Institute of Economics, Jena, and Department of Economics, University of Verona)
    Abstract: We report on an experiment designed to explore whether and how anger affects future levels of cooperation. Participants play three consecutive one-shot games. In between two identical two-person public goods games there is a mini dictator game that, depending on the treatment, either gives or does not give the recipient the opportunity to scold the dictator via a text message. We find that the recipients that receive an unfair offer contribute significantly less in the second public goods game. Yet, such contribution cuts are less frequent and notably smaller when messaging is allowed for. We conclude that although anger has a lasting negative effect on cooperation, giving voice to it helps to curtail selfishness.
    Keywords: Dictator minigame, Public goods game, Emotions, Cooperation
    JEL: C72 C91 C92 D63
    Date: 2012–03–07
  12. By: Paula Jaramillo; Çâatay Kayi; Flip Klijn
    Abstract: Abstract:We study a particular restitution problem where there is an indivisible good (land or property) over which two agents have rights: the dispossessed agent and the owner. A third party, possibly the government, seeks to resolve the situation by assigning rights to one and compensate the other. There is also a maximum amount of money available for the compensation. We characterize a family of asymmetrically fair rules that are immune to strategic behavior, guarantee minimal welfare levels for the agents, and satisfy the budget constraint.
    Date: 2012–03–11
  13. By: José Alcalde Pérez (Universidad de Alicante); Begoña Subiza Martínez (Universidad de Alicante)
    Abstract: This paper proposes a reform for school allocation procedures in order to help integration policies reach their objective. For this purpose, we suggest the use of a natural two-step mechanism. The (stable) first step is introduced as an adaptation of the deferred-acceptance algorithm designed by Gale and Shapley (1962), when students are divided into two groups. The (efficient) second step captures the idea of exchanging places inherent to Gale’s Top Trading Cycle. This latter step could be useful for Municipal School Boards when implementing some integration policies.
    Keywords: Integration Policy, School Allocation, Affirmative Action
    JEL: C72 I28 J18
    Date: 2012–02
  14. By: George Mailath (Department of Economics, University of Pennsylvania); Andrew Postlewaite (Department of Economics, University of Pennsylvania); Larry Samuelson (Department of Economics, Yale University)
    Abstract: We examine markets in which agents make investments and then match into pairs, creating surpluses that depend on their investments and that can be split between the matched agents. In general, each of the matched agents would ”own" part of the surplus in the absence of interagent transfers. Most of the work in the large bargaining-and matching literature ignores this initial ownership of the surplus. We show that when investments are not observable to potential partners, initial ownership affects the efficiency of equilibrium investments and affects the agents' payoffs. In particular, it is possible that reallocating initial ownership could increase welfare on both sides of the match.
    Keywords: Directed search, matching, premuneration value, prematch investments, search
    JEL: C78 D40 D41 D50 D83
    Date: 2012–03–12
  15. By: Felix Bierbrauer; Nick Netzer
    Abstract: We introduce intentions-based social preferences into a Bayesian mechanism design framework. If social preferences are observable, any tension between material efficiency, incentive compatibility, and voluntary participation can be resolved. Hence, the classical impossibility results that the conventional mechanism design literature has established are turned into possibility results. We also investigate different possibilities how to incorporate kindness sensations into assessments of welfare. For the case of unobservable social preferences, we suggest a notion of psychological robustness. Psychologically robust mechanisms can be implemented without any need to acquire information about the intensity of social preferences. We show that the mechanisms which have been the focus of the conventional mechanism design literature need to be modified only slightly to achieve psychological robustness.
    Keywords: Mechanism design, psychological games, social preferences, intentions, reciprocity, revelation principle
    JEL: C70 C72 D02 D03 D82 D86
    Date: 2012–03
  16. By: Faillo, Marco (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Grieco, Daniela (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Zarri, Luca (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: Is culture an important variable to explain whether groups can successfully provide public goods? A wealth of empirical evidence on both industrialized and developing countries shows that cooperation levels decrease in the presence of ethnic divisions. Although several laboratory works deal with cultural differences, so far most studies restrict their attention to cross-cultural comparisons among internally homogeneous societies. We depart from these contributions and conduct an intercultural public goods game with punishment experiment in Italy, a country where immigration is a quite recent, but politically hot phenomenon. We investigate the effects of introducing a varying number of foreign participants within a homogeneous pool of native subjects. Our results indicate that foreigners contribute significantly less than natives, natives react lowering their own contribution levels, and, consequently, the degree of cultural diversity negatively affects the overall level of cooperation. In terms of sanctioning, we observe no difference in the overall amount of assigned and received punishment points; however, behaving mostly as free-riders, foreigners are more likely to use anti-social punishment. In the absence of institutional restrictions ruling out anti-social punishment, this might amplify the documented detrimental effect on cooperation.
    Keywords: Experimental Economics; Public Good Games; Cooperation; Cultural Diversity; Anti-social Punishment
    JEL: C72 C91 C92 D64 D71
    Date: 2012–03–12
  17. By: Martin G. Kocher; Wolfgang J. Luhan; Matthias Sutter
    Abstract: Empirical work on Akerlof’s theory of gift exchange in labor markets has concentrated on the fair wage-effort hypothesis. In fact, however, the theory also contains a social component that stipulates that homogenous agents that are employed for the same wage level will exert more effort, resulting in higher rents and higher market efficiency, than agents that receive different wages. We present the first test of this component, which we call the fair uniform-wage hypothesis. In our laboratory experiment, we establish the existence of a significant efficiency premium of uniform wages. However, it is not the consequence of a stronger level of reciprocity by agents, but of the retrenchment of sanctioning options on the side of principals with uniform wages. Hence, implementing limitations to contractual freedom can have efficiency-enhancing effects.
    Keywords: gift exchange, multiple agents, uniform contracts, collective wage, experiment
    JEL: C72 C91 C92 D21 J31 J50
    Date: 2012–03

This nep-gth issue is ©2012 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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