nep-gth New Economics Papers
on Game Theory
Issue of 2012‒03‒28
seventeen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. On Uniform Conditions for the Existence of Mixed Strategy Equilibria By Pavlo Prokopovych; Nicholas C. Yannelis
  2. Cycles with Anonymous Actions and Generalized Rock-Paper-Scissors Games By Eric Bahel; Hans Haller
  3. Implementing Efficient Graphs in Connection Networks By Ruben Juarez; Rajnish Kumar
  4. Strategic Reasoning in Hide-and-Seek Games: A Note By Timo Heinrich; Irenaeus Wolff
  5. Implementing quotas in university admissions: An experimental analysis By Sebastian Braun, Nadja Dwenger, Dorothea Kübler, Alexander Westkamp
  6. The Strategic Formation of Networks: Experimental Evidence By Carrillo, Juan D; Gaduh, Arya
  7. Fuzzy Rejective Core of Satiated Economies with Unbounded Consumption Sets By Nizar Allouch; Monique Florenzano
  8. Stability, efficiency and monotonicity in two-sided matching By Salem, Sherif Gamal
  9. Retaliation and the role for punishment in the evolution of cooperation By Irenaeus Wolff
  10. Crossing the Point of No Return: A Public Goods Experiment By Urs Fischbacher; Sabrina Teyssier; Simeon Schudy
  11. Stable sets: a descriptive and comparative analysis By Peris, Josep E.; Subiza, Begoña
  12. Can issue linkage help mitigate externalities and enhance cooperation By Pham Do, Kim Hang; Dinar, Ariel; McKinney, Daene
  13. Motives for Sharing in Social Networks By Ligon, Ethan; Schechter, Laura
  14. Group Strategyproof Cost Sharing: The Role of Indifferences By Ruben Juarez
  15. Homo Moralis-Preference evolution under incomplete information and assortative matching By Alger, Ingela; Weibull, Jörgen
  16. A Proportional Approach to Bankruptcy Problems with a guaranteed minimum. By Peris, Josep E.; Jiménez-Gómez, José M.
  17. Efficient Cheap Talk in Directed Search: On the Non-essentiality of Commitment in Market Games By Kim, Kyungmin; Kircher, Philipp

  1. By: Pavlo Prokopovych (Kyiv School of Economics, Kyiv Economic Institute); Nicholas C. Yannelis (University of Iowa/ The University of Manchester)
    Abstract: Embarking from the concept of uniform payoff security (Monteiro P.K., Page F.H, J Econ Theory 134: 566-575, 2007), we introduce two other uniform conditions and then study the existence of mixed strategy Nash equilibria in games where the sum of the payoff functions is not necessarily upper semicontinuous.
    Keywords: Discontinuous game; Diagonally transfer continuous game; Payoff secure game; Mixed strategy equilibrium; Transfer lower semicontinuity
    JEL: C65 C72
    Date: 2012–03
  2. By: Eric Bahel; Hans Haller
    Abstract: The present paper examines zero-sum games that are based on a cyclic preference relation deï¬ned over anonymous actions. For each of these games, the set of Nash equilibria is characterized. When the number of actions is odd, a unique Nash equilibrium is always obtained. On the other hand, in the case of an even number of actions, every such game exhibits an inï¬nite number of Nash equilibria. As a special case, a proof of the uniqueness of the Nash equilibrium for the Rock-Paper-Scissors game obtains.
    Keywords: cycle, Nash equilibrium, minimax theorem.
    Date: 2012
  3. By: Ruben Juarez (Department of Economics, University of Hawaii at Manoa); Rajnish Kumar (Department of Economics, Louisiana State University)
    Abstract: We consider the problem of sharing the cost of a network that meets the connection demands of a set of agents. The agents simultaneously choose paths in the network connecting their demand nodes. A mechanism splits the total cost of the network formed among the participants. We introduce two new properties of implementation. The first property, Pareto Nash Implementation (PNI), requires that the ecient outcome always be implemented in a Nash equilibrium and that the efficient outcome Pareto dominates any other Nash equilibrium. The average cost mechanism (AC) and other asymmetric variations are the only rules that meet PNI. These mechanisms are also characterized under Strong Nash Implementation. The second property, Weakly Pareto Nash Implementation (WPNI), requires that the least inefficient equilibrium Pareto dominates any other equilibrium. The egalitarian mechanism (EG), a variation of AC that meets individual rationality, and other asymmetric mechanisms are the only rules that meet WPNI and Individual Rationality. PNI and WPNI provide the first economic justification of the Price of Stability (PoS), a seemingly natural measure in the computer science literature but one not easily embraced in economics. EG minimizes the PoS across all individually rational mechanisms.
    Keywords: Cost-sharing, Implementation, Average Cost, Egalitarian Mechanism
    JEL: C70 C72 D71 D85
    Date: 2012–02–01
  4. By: Timo Heinrich; Irenaeus Wolff
    Abstract: Aggregate behavior in two-player hide-and-seek games deviates systematically from the mixed-strategy equilibrium prediction of assigning all actions equal probabilities (Rubinstein and Tversky, 1993, Rubinstein et al., 1996, Rubinstein, 1999). As Crawford and Iriberri (2007) point out, this deviation can be explained by strategic level-k reasoning. Here we provide empirical evidence that, indeed, it is non-equilibrium beliefs that lead to the behavior observed in the earlier studies: when a player's opponent is forced to play the equilibrium strategy, the player's choices are uniformly spread over the action space. At the same time, we find robust evidence of an unexpected framing effect.
    Keywords: Salience, level-k reasoning, cognitive hierarchy, hide-and-seek game, framing effect
    Date: 2012
  5. By: Sebastian Braun, Nadja Dwenger, Dorothea Kübler, Alexander Westkamp
    Abstract: Quotas for special groups of students often apply in school or university admission procedures. This paper studies the performance of two mechanisms to implement such quotas in a lab experiment. The first mechanism is a simplified version of the mechanism currently employed by the German central clearinghouse for university admissions, which first allocates seats in the quota for top-grade students before allocating all other seats among remaining applicants. The second is a modified version of the student-proposing deferred acceptance (SDA) algorithm, which simultaneously allocates seats in all quotas. Our main result is that the current procedure, designed to give top-grade students an advantage, actually harms them, as students often fail to grasp the strategic issues involved. The modified SDA algorithm significantly improves the matching for top-grade students and could thus be a valuable tool for redesigning university admissions in Germany
    Keywords: College admissions, experiment, quotas, matching, Gale-Shapley mechanism, Boston mechanism
    JEL: C78 C92 D78 I20
    Date: 2012–03
  6. By: Carrillo, Juan D; Gaduh, Arya
    Abstract: We use a laboratory experiment to explore dynamic network formation in a six-player game where link creation requires mutual consent. The analysis of network outcomes suggests that the process tends to converge to the pairwise-stable (PWS) equilibrium when it exists and not to converge at all when it does not. When multiple PWS equilibria exist, subjects tend to coordinate on the high-payoff one. The analysis at the single choice level indicates that the percentage of myopically rational behavior is generally high. Deviations are more prevalent when actions are reversible, when marginal payoff losses are smaller and when deviations involve excessive links that can be removed unilaterally later on. There is, however, some heterogeneity across subjects.
    Keywords: Laboratory experiments; Myopic rationality; Pairwise stable equilibria; Social networks
    JEL: C73 C92 D85
    Date: 2012–01
  7. By: Nizar Allouch (Queen Mary, University of London); Monique Florenzano (Paris School of Economics)
    Abstract: For an exchange economy, under assumptions which did not bring about the existence of equilibrium with dividends as yet, we prove the non-emptiness of the fuzzy rejective core. Then, via Konovalov (1998, 2005)'s equivalence result, we solve the equilibrium with dividends existence problem. Adding to the same assumptions a weak non-satiation condition which differs from the weak non-satiation assumption introduced by Allouch-Le Van (2009), we show in a last section the existence of a Walrasian quasiequilibrium. This result, which fits with exchange economies whose consumers' utility functions are not assumed to be upper semicontinuous, complements the one obtained by Martins-da-Rocha and Monteiro (2009).
    Keywords: Exchange economy, Satiation, Equilibrium with dividends, Rejective core, Fuzzy rejective core, Core equivalence
    JEL: D50
    Date: 2012–03
  8. By: Salem, Sherif Gamal
    Abstract: we propose a fairness property called P-monotonicity that we would like a matching mechanism to satisfy. We show that it is impossible to have a mechanism which is both stable and P- monotonic. Moreover, we show that it is impossible to have a mechanism which is both efficient and P-monotonic.
    Keywords: Stability; Efficiency; Monotonicity; Two-Sided Matching
    JEL: C78
    Date: 2012–03–09
  9. By: Irenaeus Wolff
    Abstract: Models of evolutionary game theory have shown that punishment may be an adaptive behaviour in environments characterised by a social-dilemma situation. Experimental evidence closely corresponds to this finding but questions the cooperation-enhancing effect of punishment if players are allowed to retaliate against their punishers. This study provides a theoretical explanation for the existence of retaliating behaviour in the context of repeated social dilemmas and analyses the role punishment can play in the evolution of cooperation under these conditions. We show a punishing strategy can pave the way for a partially-cooperative equilibrium of conditional cooperators and de- fecting types and, under positive mutation rates, foster the cooperation level in this equilibrium by prompting reluctant cooperators to cooperate. How- ever, when rare mutations occur, it cannot sustain cooperation by itself as punishment costs favour the spread of non-punishing cooperators.
    Keywords: Public goods, Prisoner's Dilemma, Strong reciprocity, Counter-punishment
    Date: 2012
  10. By: Urs Fischbacher; Sabrina Teyssier; Simeon Schudy
    Abstract: In many cases individuals benefit differently from the provision of a public good. We study in a laboratory experiment how heterogeneity in returns and uncertainty affects unconditional and conditional contribution behavior in a linear public goods game. The elicitation of conditional contributions in combination with a within subject design allows us to investigate belief-independent and type-specific reactions to heterogeneity. We find that, on average, heterogeneity in returns decreases unconditional contributions but does not affects conditional contributions only weakly. Uncertainty in addition to heterogeneity reduces conditional contributions slightly. Individual reactions to heterogeneity differ systematically. Selfish subjects and one third of conditional cooperators do not react to heterogeneity whereas the reactions of the remaining conditional cooperators vary. A substantial part of heterogeneity in reactions can be explained by inequity aversion which accounts for different reference groups subjects compare to.
    Keywords: public goods, social preferences, conditional cooperation, heterogeneity
    Date: 2012
  11. 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. Since then, some alternative definitions have appeared in the literature: the admissible set (Kalai and Schmeidler, 1977), the generalized stable set (van Deemen, 1991), the M-stable set (Peris and Subiza, 2006), among others. Now, we are interested in obtaining the existence and the precise form of these stability notions, by according to the type of preference relation we have: total order, partial order, acyclic, tournament or weak-tournament.
    Keywords: stable; g-stable; B-stable; admissible set
    JEL: D71
    Date: 2012–03–16
  12. By: Pham Do, Kim Hang; Dinar, Ariel; McKinney, Daene
    Abstract: Managing transboundary river basins is never easy and usually involves conflicts. This paper introduces a special class of games with externalities and issue linkage to promote cooperation on transboundary water resources. The paper analyzes whether issue linkages can be used as a form of negotiations on sharing benefits and mitigating conflicts. It is shown that whenever opportunities for linkages exist, countries may indeed contribute towards cooperation. In particular, if the linked games are convex, the grand coalition is the only optimal level of social welfare
    Keywords: games with externalities; convexity; s-core; transboundary rivers; issue linkage; international water sharing agreement
    JEL: D62 C71 D74 C72
    Date: 2011–06
  13. By: Ligon, Ethan; Schechter, Laura
    Abstract: What motivates people in rural villages to share? We first elicit a baseline level of sharing using a standard, anonymous dictator game. Then using variants of the dictator game that allow for either revealing the dictator's identity or allowing the dictator to choose the recipient, we attribute variationin sharing to three different motives. The first of these, directed altruism, is related to preferences, while the remaining two are incentive-related(sanctions and reciprocity). We observe high average levels of sharing in ourbaseline treatment, while variation across individuals depends importantlyon the incentive-related motives. Finally, variation in measured reciprocity within the experiment predicts observed 'real-world' gift-giving, while other motives measured in the experiment do not predict behavior outside the experiment.
    Keywords: Social Sciences, General, Economics
    Date: 2011–12–01
  14. By: Ruben Juarez (Department of Economics, University of Hawaii at Manoa)
    Abstract: Every agent reports his willingness to pay for one unit of good. A mechanism allocates goods and cost shares to some agents. We characterize the group strategyproof (GSP) mechanisms under two alternative continuity conditions interpreted as tie-breaking rules. With the maximalist rule (MAX) an indierent agent is always served. With the minimalist rule (MIN) an indierent agent does not get a unit of good. GSP and MAX characterize the cross-monotonic mechanisms. These mechanisms are appropriate whenever symmetry is required. On the other hand, GSP andMIN characterize the sequential mechanisms. These mechanisms are appropriate whenever there is scarcity of the good. Our results are independent of an underlying cost function; they unify and strengthen earlier results for particular classes of cost functions.
    Keywords: Cost sharing, Mechanism design, Group strategyproof, Tie-breaking rule
    JEL: C72 D44 D71 D82
    Date: 2012–02–01
  15. By: Alger, Ingela; Weibull, Jörgen
    Abstract: What preferences will prevail in a society of rational individuals when preference evolution is driven by their success in terms of resulting payoffs? We show that when individuals’ preferences are their private information, a convex combinations of selfishness and morality stand out as evolutionarily stable. We call individuals with such preferences homo moralis. At one end of the spectrum is homo oeconomicus, who acts so as to maximize his or her material payoff. At the opposite end is homo kantiensis, who does what would be “the right thing to do,” in terms of material payoffs, if all others would do likewise. We show that the stable degree of morality - the weight placed on the moral goal - equals the index of assortativity in the matching process. The motivation of homo moralis is arguably compatible with how people often reason, and the induced behavior agrees with pro-social behaviors observed in many laboratory experiments.
    JEL: C73 D03
    Date: 2012–02
  16. By: Peris, Josep E. (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica); Jiménez-Gómez, José M. (Universitat Rovira i Virgili, Department d'Economia CREIP and GRODE)
    Abstract: In a distribution problem, and speci fically in bankruptcy issues, the Proportional (P) and the Egalitarian (EA) divisions are two of the most popular ways to resolve the conflict. The Constrained Equal Awards rule (CEA) is introduced in bankruptcy literature to ensure that no agent receives more than her claim, a problem that can arise when using the egalitarian division. We propose an alternative modi fication, by using a convex combination of P and EA. The recursive application of this new rule fi nishes at the CEA rule. Our solution concept ensures a minimum amount to each agent, and distributes the remaining estate in a proportional way.
    Keywords: Bankruptcy problems; Proportional rule; Equal Awards; Convex combination of rules; Lorenz dominance
    JEL: C71 D63 D71
    Date: 2012–03–22
  17. By: Kim, Kyungmin; Kircher, Philipp
    Abstract: Directed search models are market games in which each firm announces a wage commitment to attract a worker. Miscoordination among workers generates search frictions, yet in equilibrium more productive firms post more attractive wage commitments to fill their vacancies faster, which yields constrained efficient outcomes. We show that commitment is not essential: Exactly the same efficient allocation can be sustained when announcements are pure cheap talk followed by a suitable subsequent wage-formation stage. The insights from existing commitment models extend unchanged to such a cheap-talk environment, even when workers differ in outside opportunities or observable common productivity.
    Keywords: cheap talk; commitment; competitive search; directed search
    JEL: C72 D82 D83
    Date: 2012–01

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