nep-gth New Economics Papers
on Game Theory
Issue of 2012‒04‒03
eleven papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. The Power of Sunspots: An Experimental Analysis By Dietmar Fehr; Frank Heinemann; Aniol Llorente-Saguer
  2. Consumption and Investment in Stochastic Learning Games By Leonard J. Mirman; Marc Santugini
  3. Evolutionary beliefs and financial markets. By Jouini, Elyès; Viossat, Yannick; Napp, Clotilde
  4. What can the Big Five Personality Factors contribute to explain Small-Scale Economic Behavior? By Julia Muller; Christiane Schwieren
  5. "Agreeing to Disagree" Type Results under Ambiguity. By Lefort, Jean-Philippe; Dominiak, Adam
  6. Mechanism Design and Voting for Public-Good Provision By Felix Bierbrauer; Martin Hellwig
  7. The Free Rider Problem: a Dynamic Analysis By Marco Battaglini; Salvatore Nunnari; Thomas Palfrey
  8. Cooperation under Fear, Greed and Prison: the Role of Redistributive Inequality in the Evolution of Cooperation By César Andrés Mantilla
  9. Strategic Immunization and Group Structure By Andrea Galeotti; Brian W. Rogers
  10. Solidarity and uniform rules in bankruptcy problems By Peris, Josep E.; Jiménez-Gómez, José M.
  11. Testing a Forgotten Aspect of Akerlof's Gift Exchange Hypothesis: Relational Contracts with Individual and Uniform Wages By Kocher, Martin G.; Luhan, Wolfgang J.; Sutter, Matthias

  1. By: Dietmar Fehr (Social Science Research Center, Berlin (WZB)); Frank Heinemann (Technische Universität Berlin); Aniol Llorente-Saguer (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We present an experiment in which extrinsic information (signals) may generate sunspot equilibria. The underlying coordination game has a unique symmetric non-sunspot equilibrium, which is also risk-dominant. Other equilibria can be ordered according to risk dominance. We introduce salient but extrinsic signals on which subjects may condition their actions. By varying the number of signals and the likelihood that different subjects receive the same signal, we measure how strong these signals affect behavior. Sunspot equilibria emerge naturally if there are salient public signals. Highly correlated private signals may also cause sunspot-driven behavior, even though this is no equilibrium. The higher the correlation of signals and the easier they can be aggregated, the more powerful they are in dragging behavior away from the risk-dominant to risk-dominated strategies. Sunspot-driven behavior may lead to welfare losses and exert negative externalities on agents, who do not receive extrinsic signals.
    Keywords: coordination games, strategic uncertainty, sunspot equilibria, irrelevant information
    JEL: C92 C72 D84
    Date: 2011–12
  2. By: Leonard J. Mirman; Marc Santugini
    Abstract: We study investment and consumption decisions in a stochastic learning dynamic game. To that end, we extend the Great Fish War model of Levhari and Mirman (1980) to a learning environment in which agents not only extract a resource for consumption, but also invest to improve the future stock. Although the characterization of an infinite-horizon game with Bayesian dynamics (and without the assumption of adaptive learning) is generally intractable, we characterize the unique Cournot-Nash equilibrium for general distributions of the random variables. The addition of learning to a stochastic environment is shown to have a profound effect on the equilibrium.
    Keywords: Capital accumulation, Investment, Learning, Risk, Stochastic game
    JEL: C72 C73 D81 D83 L13 Q20
    Date: 2012
  3. By: Jouini, Elyès; Viossat, Yannick; Napp, Clotilde
    Keywords: Beliefs formation; heterogeneous beliefs; pessimism; risk premium; evolutionary game theory;
    JEL: G12 D03 D53 D81
    Date: 2012
  4. By: Julia Muller (Erasmus University Rotterdam); Christiane Schwieren (University of Heidelberg)
    Abstract: Growing interest in using personality variables in economic research leads to the question whether personality as measured by psychology is useful to predict economic behavior. Is it reasonable to expect values on personality scales to be predictive of behavior in economic games? It is undoubted that personality can influence large-scale economic outcomes. Whether personality variables can also be used to understand micro-behavior in economic games is however less clear. We discuss reasons in favor and against this assumption and test in our own experiment, whether and which personality factors are useful in predicting behavior in the trust or investment game. We can also use the trust game to understand how personality measures fare relatively in predicting behavior when situational constraints vary in strength. This approach can help economists to better understand what to expect from the inclusion of personality variables in their models and experiments, and where further research might be useful and needed.
    Keywords: Personality; Big Five; Five Factor Model; Incentives; Experiment; Trust Game
    JEL: C72 C91 D03
    Date: 2012–03–26
  5. By: Lefort, Jean-Philippe; Dominiak, Adam
    Abstract: In this paper we show that unlike in Bayesian frameworks asymmetric information does matter and can explain differences in common knowledge decisions due to ambiguous character of agents' private information. Agents share a common-but-not-necessarily-additive prior beliefs represented by capacities. It is shown that, if each agent's information partition is made up of unambiguous events in the sense of Nehring (1999, Mat. Soc. Sci. 38, 197-213), then it is impossible that the agents disagree on their commonly known decisions, whatever these decisions are : whether posterior beliefs or conditional expectations. Conversely, an agreement on conditional expectations, but not on posterior beliefs, implies that agents' private information must consist of Nehring-unambiguous events. The results obtained allow to attribute the existence of a speculative trade to the presence of agents' diverse and ambiguous information.
    Keywords: capacities; Ambiguity; No-Trade Theorem; Choquet expected utility theory; unambiguous events; Agreement Theorem; common knowledge; asymmetric information;
    JEL: D81 D82
    Date: 2011
  6. By: Felix Bierbrauer (Max Planck Institute for Research on Collective Goods, Bonn); Martin Hellwig (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We propose a new approach to the normative analysis of public-good provision. In addition to individual incentive compatibility, we impose conditions of robust implementability and coalition proofness. Under these additional conditions, participants' contributions can only depend on the level of public-good provision. For a public good that comes as a single indivisible unit, provision can only depend on the population share of people in favour of provision. Robust implementability and coalition proofness thus provide a foundation for the use of voting mechanisms. The analysis is also extended to a specifi cation with more than two public-good provision levels.
    Keywords: Mechanism Design, Public-good provision, Large Economy, Voting Mechanisms
    JEL: D82 H41 D70 D60
    Date: 2011–12
  7. By: Marco Battaglini; Salvatore Nunnari; Thomas Palfrey
    Abstract: We present a dynamic model of free riding in which n infinitely lived agents choose between private consumption and contributions to a durable public good g. We characterize the set of continuous Markov equilibria in economies with reversibility, where investments can be positive or negative; and in economies with irreversibility, where investments are non negative and g can only be reduced by depreciation. With reversibility, there is a continuum of equilibrium steady states: the highest equilibrium steady state of g is increasing in n, and the lowest is decreasing. With irreversibility, the set of equilibrium steady states converges to a unique point as depreciation converges to zero: the highest steady state possible with reversibility. In both cases, the highest steady state converges to the efficient steady state as agents become increasingly patient. In economies with reversibility there are always non-monotonic equilibria in which g converges to the steady state with damped oscillations; and there can be equilibria with no stable steady state, but a unique persistent limit cycle.
    JEL: D78 H41
    Date: 2012–03
  8. By: César Andrés Mantilla
    Abstract: This work offers an analysis of cooperation dilemmas making emphasis in the role of the unequal outcomes. Increases in the benefit from leaving mutual cooperation are associated to the greed dimension, while increases in the cost from leaving mutual defection are associated to fear dimension. The manipulation of these dimensions allows defining two cooperation dilemmas derived from the standard Prisoner’s Dilemma. Using two different frameworks, classical game theory and evolutionary game theory, is shown that the magnitude and the direction of these inequalities have an effect over the decision of cooperation.
    Date: 2012–02–29
  9. By: Andrea Galeotti; Brian W. Rogers
    Abstract: We consider the spread of a harmful state through a population that is divided into two groups. The groups interact with each other to an extent that is parameterized, capturing the full spectrum from perfectly positive to perfectly negative assortativity. We first consider a central planner who can immunize a fraction of the population to eradicate the harmful state. The optimal policy either divides equally the resources across groups, or concentrates entirely on one group, depending on whether there is positive or negative assortative matching, respectively. Furthermore, the value of the social planner learning the exact level of assortativity is zero when interactions are positively assortative, and is increasing in the intensity of negative assortativity. We then study a game in which agents can, at a cost, achieve immunity. Inter-group interactions generate large asymmetries across groups in many outcomes of interest, such as welfare and prevalence, even when groups are, ex-ante, very similar. Hence, a failing to account for the impact of inter-group interactions may lead to over-estimating underlying differences across groups, and to suboptimal immunization plans.
    Date: 2012–03–01
  10. 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: The idea of ensuring a guarantee (a minimum amount of the resources) to each agent has recently acquired great relevance, in both social and political terms. Furthermore, the notion of Solidarity has been treated frequently in redistribution problems to establish that any increment of the resources should be equally distributed taking into account some relevant characteristics. In this paper, we combine these two general concepts, guarantee and solidarity, to characterize the uniform rules in bankruptcy problems (Constrained Equal Awards and Constrained Equal Losses rules).
    Keywords: Constrained Equal Awards; Constrained Equal Losses; Lower bounds; Bankruptcy problems; Solidarity
    JEL: C71 D63 D71
    Date: 2012–03–23
  11. By: Kocher, Martin G. (University of Munich); Luhan, Wolfgang J. (Ruhr University Bochum); Sutter, Matthias (University of Innsbruck)
    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

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