nep-gth New Economics Papers
on Game Theory
Issue of 2012‒04‒23
twenty papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Effects of exclusion on social preferences By Sven Fischer; Werner Güth
  2. On the Limit Equilibrium Payoff Set in Repeated and Stochastic Games By Johannes Horner; Satoru Takahashi; Nicolas Vieille
  3. The Nash Bargaining Solution and Interpersonal Utility Comparisons By Rachmilevitch, Shiran
  4. River Sharing and Water Trade By Erik Ansink; Michael Gengenbach; Hans-Peter Weikard
  5. Discounted Stochastic Games with Voluntary Transfers By Sebastian Kranz
  6. Core Equivalences for Equilibria Supported by Non-linear Prices By Achille Basile; Maria Gabriella Graziano
  7. All-Pay Auctions vs. Lotteries as Provisional Fixed-Prize Fundraising Mechanisms By John Duffy
  8. Cooperation in Large Societies By Francesc Dilmé
  9. Exclusive Dealing and Market Foreclosure: Further Experimental Results By Landeo, Claudia; Spier, Kathryn
  10. Harm on an Innocent Outsider as a Lubricant of Cooperation – An Experiment By Christoph Engel; Lilia Zhurakhovska
  11. A Portfolio of Dilemmas: Experimental Evidence on Choice Bracketing in a Mini-Trust Game By Jieyao Ding
  12. Assuring Adequate Deterrence in Tort: A Public Good Experiment By Theodore Eisenberg; Christoph Engel
  13. A New Approach for Bounding Awards in Bankruptcy Problems By Jiménez Gómez, José Manuel; Marco Gil, M. Carmen
  14. Explicit versus Implicit Contracts for Dividing the Benefits of Cooperation By Marco Casari; Timothy N. Cason
  15. Playing against an Apparent Opponent: Incentives for Care, Litigation, and Damage Caps under Self-Serving Bias By Landeo, Claudia; Nikitin, Maxim; Izmalkov, Sergei
  16. Quota Manipulation and Fair Voting Rules in Committees By František Turnovec
  17. The Allocation of a Prize By Pradeep K. Dubey; Siddhartha Sahi
  18. Incentives for Experimenting Agents By Johannes Horner; Larry Samuelson
  19. Every man for himself. Gender, Norms and Survival in Maritime Disasters By Elinder, Mikael; Erixson, Oscar
  20. Communication With Multiple Senders and Multiple Dimensions: An Experiment By Alistair J. Wilson; Emanuel Vespa

  1. By: Sven Fischer (Max Planck Institute for Research on Collective Goods, Bonn); Werner Güth (Max Planck Institute of Economics, Jena)
    Abstract: In three party ultimatum games the proposer can first decide whether to exclude one responder, what increases the available pie. The experiments control for intentionality of exclusion and veto power of the third party. We do not find evidence for indirect reciprocity of the remaining responder after exclusion of the other. Similarly, not excluding the second responder is only insignificantly reciprocated by him. Overall, we find little evidence that intentional exclusion affects response behavior.
    Keywords: Exclusion, bargaining, ultimatum game, social preferences, experiment
    JEL: C91 J52
    Date: 2011–12
  2. By: Johannes Horner; Satoru Takahashi; Nicolas Vieille
    Date: 2012–04–13
  3. By: Rachmilevitch, Shiran (Department of Economics, University of Haifa)
    Abstract: Bargaining theory has a conceptual dichotomy at its core: according to one view, the utilities in the bargaining problem are meaningless numbers (v-N.M utilities), while according to another view they do have concrete meaning (willingness to pay). The former position is assumed by the Nash and Kalai-Smorodinsky solutions, and the latter is assumed by the egalitarian, utilitarian, and equal-loss solutions. In this paper I describe a certain form of equivalence between the set consisting of the former solutions and the set consisting of the latter. This equivalence is the result of an attempt to bridge the gap between the aforementioned views; utilizing this equivalence, I derive a new axiomatization of the Nash solution.
    Keywords: Bargaining; interpersonal utility comparisons; Nash solution
    JEL: D63 D71
    Date: 2012–02–06
  4. By: Erik Ansink (Institute for Environmental Studies (IVM), VU University Amsterdam); Michael Gengenbach (Department of Social Sciences, Wageningen University); Hans-Peter Weikard (Department of Social Sciences, Wageningen University)
    Abstract: We analyse river sharing games in which a set of agents located along a river shares the available water. Using coalition theory, we find that the potential benefits of water trade may not be sufficient to make all agents in the river cooperate and acknowledge property rights as a prerequisite for trade. Specifically, a complete market for river water may not emerge if there are four or more agents along the river. Instead, a partial market may emerge where a subset of agents trades river water, with the possibility that other agents take some of the river water that passes their territory.
    Keywords: River Sharing, Water Trade, Market Emergence, Property Rights, Coalition Stability
    JEL: C72 D74 H23 Q25
    Date: 2012–03
  5. By: Sebastian Kranz
    Date: 2012–04–13
  6. By: Achille Basile (Università di Napoli Federico II and CSEF); Maria Gabriella Graziano (Università di Napoli Federico II and CSEF)
    Abstract: The goal of this paper is to provide some new cooperative characterizations and optimality properties of competitive equilibria supported by non-linear prices. The general framework is that of economies whose commodity space is an ordered topological vector space which need not be a vector lattice. The central notion of equilibrium is the one of personalized equilibrium introduced by Aliprantis, Tourky and Yannelis (2001). Following Herves-Beloso and Moreno-Garcia (2008), the veto power of the grand coalition is exploited in the original economy and in a suitable family of economies associated to the original one. The use of Aubin coalitions allows us to connect results with the arbitrage free condition due to non-linear supporting prices. The use of rational allocations allows us to dispense with Lyapunov convexity theorem. Applications are provided in connection with strategic market games and economies with asymmetric information.
    Keywords: Non-linear supporting prices, ordered vector spaces, personalized equilibrium, rational allocation, Edgeworth equilibrium, Aubin core, robustly efficient allocation
    JEL: C62 C71 D46 D51 D61
    Date: 2012–04–11
  7. By: John Duffy
    Abstract: We study two provisional fixed-prize mechanisms for funding public goods: an all-pay auction and a lottery. In our setting, the public good is provided only if the participants' contributions are greater than the fixed-prize value; otherwise contributions are refunded. We prove that in this provisional fixed prize setting, lotteries can outperform all-pay auctions in terms of expected public good provision. Specifically, we state conditions under which the provisional fixed prize all-pay auction mechanism generates zero public good provision, while the provisional fixed prize lottery mechanism generates positive public good provision. We test these predictions in a laboratory experiment where we vary the number of participants, the marginal per capita return (mpcr) on the public good and the mechanism for awarding the prize, either a lottery or an all-pay auction. Consistent with the theory, we find that the mpcr matters for contribution amounts under the lottery mechanism. However, inconsistent with the theory bids are always significantly higher than predicted and there is no significant difference in public good contributions under either mechanism. We suggest how a non-expected utility approach involving probability weighting can help to explain over-bidding in our experiment.
    JEL: C72 D44 H41
    Date: 2011–11
  8. By: Francesc Dilmé (Department of Economics, University of Pennsylvania)
    Abstract: Consider the following situation involving two agents who belong to a large society. One of the agents needs help to avoid a big loss. The other agent may either incur a low cost to help him or do nothing. If agents do not recognize each other, providing incentives for socially optimal behavior (helping) is, in general, very difficult. We use a repeated anonymous random matching setting in a large society to understand how, in the previous situation, help may take place in equilibrium. We find explicit equilibria that, unlike other models proposed in the literature, feature smooth aggregate behavior over time and robustness to many perturbations, such as the presence of behavioral types or trembles. We consider the joint limit of increasing the size of the society and making it more interactive (or patient.) Under this limit, our equilibria resemble the tit-for-tat strategy for the prisoner’s dilemma, introducing some small probability of forgiveness. The model is also applied to bilateral trade, where the mechanism used to spread deviations is transmissive instead of contagious. The smooth evolution of the aggregate variables over time makes the model suitable for empirical work.
    Keywords: Cooperation, Many Agents, Repeated Game, Unilateral Help
    JEL: D82 C73 D64
    Date: 2012–03–26
  9. By: Landeo, Claudia (University of Alberta, Department of Economics); Spier, Kathryn (Harvard Law School)
    Abstract: This paper reports further experimental results on exclusive dealing contracts. We extend Landeo and Spier’s [2009] work by studying Naked Exclusion in a strategic environment that involves a four-player, two-stage game. In addition to the roles of seller and buyers, our experimental environment includes the role of a potential entrant (a fourth passive player). Our findings are as follows. First, payoff endogeneity increases the likelihood of exclusion. Second, communication between the potential entrant and the buyers increases buyers’ coordination on their preferred equilibrium (equilibrium with entry) and hence, reduces the likelihood of exclusion. Entrant-buyers communication also induces more generous offers.
    Keywords: exclusive dealing; market foreclosure
    JEL: C72 C91 D62 D86 K12
    Date: 2012–04–01
  10. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Lilia Zhurakhovska (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: If two players of a simultaneous symmetric one-shot prisoner’s dilemma hold standard preferences, the fact that choosing the cooperative move imposes harm on a passive outsider is immaterial. Yet if participants hold social preferences, one might think that they are reticent to impose harm on the outsider. This is not what we find, however severe the externality. A within-subjects measure of reticence to impose harm does not explain cooperation. But the externality makes participants more pessimistic. However conditional on their beliefs participants are more, not less cooperative if cooperation entails harm on an outsider, again however severe the externality.
    Keywords: externality, prisoner’s dilemma, Modified Dictator Game, Beliefs
    JEL: C72 C91 D03 H23
    Date: 2012–01
  11. By: Jieyao Ding (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Bracketing is a mental procedure about how people deal with multiple tasks. If a decision maker handles all the tasks at the same time, it is called broad bracketing. If she handles the tasks separately, e.g., one or a few tasks each time, it is called narrow bracketing. This paper experimentally investigates the effect of broad versus narrow bracketing in the context of a mini-trust game. The result shows that, in the narrow bracketing treatment, the investor (first mover) is more likely to place trust on others, but the receiver (second mover) is less likely to fulfill the trust under the same condition. The effect is partly conditional on beliefs in others' behavior.
    Keywords: meta-study, self-control, general theory of crime
    JEL: K42 D03 K14 C13
    Date: 2012–03
  12. By: Theodore Eisenberg (Cornell University, Cornell Law School); Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: To explore damage rules’ deterrent effect, we use a public good experiment to tailor allowable punishment to rules used in actual civil litigation. The experimental treatments are analogous to: (1) damages limited to harm to an individual litigant, (2) damages limited to harm to a group available in aggregate litigation, such as class actions, and (3) damages allowed beyond actual harm to victims, such as punitive damages. The treatment with damages limited to harm to an individual does not prevent the deterioration in cooperation over time commonly found in public good experiments without punishment or with too low punishment. In the class action damages treatment, cooperation is stable over time. In the damages-beyond-harm treatment, cooperation approaches the optimal level, but concerns of socially unjust punishment arise. In all treatments, a money maximising agent would be expected to completely freeride and make no contribution to the public good. Our results can thus not be explained by an incentive effect. Rather we find that social preferences interact with the severity of sanctions, even if imposing the sanction is not altruistic, but instead financially benefits the sanctioning authority. The results persist in a variation of the three treatments in which the player imposing damages has the option to not retain them for herself but to have them forfeited with no benefit to her. We can therefore rule out that the beneficial effect of sanctions hinges on the participants knowing that the player imposing sanctions cannot intend to enrich herself. The methodology we develop could be used to assess the social welfare benefit of many damages rules, such as treble damages in antitrust cases and caps on damages common in medical malpractice cases and punitive damages cases.
    Keywords: Deterrence, Public Good Experiment, Class actions, Tort, Damages, Punitive damages
    JEL: K13 K4 C73 K0
    Date: 2012–04
  13. By: Jiménez Gómez, José Manuel; Marco Gil, M. Carmen
    Abstract: The solution for the ‘Contested Garment Problem’, proposed in the Babylonic Talmud, suggests that each agent should receive at least some part of the resources whenever the demand overcomes the available amount. In this context, we propose a new method to define lower bounds on awards, an idea that has underlied the theoretical analysis of bankruptcy problems from its beginning (O’Neill, 1982) to present day (Dominguez and Thomson, 2006). Specifically, starting from the fact that a society establishes its own set of ‘Commonly Accepted Equity Principles’, our proposal ensures to each agent the smallest amount she gets according to all the admissible rules. As in general this new bound will not exhaust the estate, we analyze its recursive application for different sets of equity principles. Keywords: Bankruptcy problems, Bankruptcy rules, Lower bounds, Recursive process
    Keywords: Fallida, 33 - Economia,
    Date: 2012
  14. By: Marco Casari; Timothy N. Cason
    Abstract: Experimental evidence has accumulated highlighting the limitations of formal and explicit contracts in certain situations, and has identified environments in which informal and implicit contracts are more efficient. This paper documents the superior performance of explicit over implicit contracts in a new partnership environment in which both contracting parties must incur effort to generate a joint surplus, and one (“strong”) agent controls the surplus division. In the treatment in which the strong agent makes a non-binding, cheap talk “bonus” offer to the weak agent, this unenforceable promise doubles the rate of joint high effort compared to a baseline with no promise. The strong agents most frequently offered to split the gains of the high effort equally, but actually delivered this amount only about onequarter of the time. An explicit and enforceable contract offer performs substantially better, increasing the frequency of the most efficient outcome by over 200 percent relative to the baseline.
    Keywords: Experiments; laboratory; social preferences; inequity aversion; reciprocity; trust.
    JEL: C70 D03
    Date: 2012–04
  15. By: Landeo, Claudia (University of Alberta, Department of Economics); Nikitin, Maxim (International College of Economics and Finance); Izmalkov, Sergei (New Economics School)
    Abstract: This paper presents a strategic model of incentives for care and litigation under asymmetric information and self-serving bias, and studies the effects of damage caps. We contribute to the behavioral economics literature by generalizing the perfect Bayesian equilibrium concept to environments with biased litigants. Our main findings are as follows. First, our results suggest that self-serving bias might be welfare-reducing. The negative impact of this cognitive bias on social welfare is explained by the reduction in the level of care, and the increase in the likelihood of disputes. We also find that self-serving bias helps litigants commit to tough negotiation positions. However, it is economically self-defeating for the informed plaintiff. Second, our findings indicate that caps on non-economic damages might reduce the level of care. Importantly, we find that the positive effect of damage caps on lowering the likelihood of disputes, commonly attributed to caps, does not necessarily hold in environments with biased litigants: Caps might induce higher likelihood of disputes. Our findings are aligned with empirical and experimental evidence.
    Keywords: settlement; litigation; incentives for care; caps on non-economic damages; self-serving bias; asymmetric information; apparent opponents; perfect Bayesian equilibrium; motivated reasoning; divergent beliefs; universal divinity refinement; motivated anchoring; non-cooperative games; disputes; pretrial bargaining
    JEL: C72 D82 J52 J58 K13 K41
    Date: 2012–04–12
  16. By: František Turnovec (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
    Abstract: The concept of fairness is being discussed related to the distribution of voting power among different actors of voting. We are using the following, intuitively natural principle of fairness: each unit of resources (shares, seats) should yield the same voting power (influence). Voting power is not directly observable: as a proxy for it voting weights are used. Therefore, fairness is usually defined in terms of voting weights (e.g. voting weights are proportional to the results of an election). Assuming that a principle of fair distribution of voting weights is selected, we are addressing the question of how to achieve equality of relative voting power (at least approximately) to relative voting weights.
    Keywords: Fairness, optimal quota, simple weighted committee, strict proportional power, voting and power indices.
    JEL: C71 D72 H77
    Date: 2012–03
  17. By: Pradeep K. Dubey; Siddhartha Sahi
    Date: 2012–04–13
  18. By: Johannes Horner; Larry Samuelson
    Date: 2012–04–13
  19. By: Elinder, Mikael (Department of Economics); Erixson, Oscar (Department of Economics)
    Abstract: Since the sinking of the Titanic, there has been a widespread belief that the social norm of ‘women and children first’ gives women a survival advantage over men in maritime disasters, and that captains and crew give priority to passengers. We analyze a database of 18 maritime disasters spanning three centuries, covering the fate of over 15,000 individuals of more than 30 nationalities. Our results provide a new picture of maritime disasters. Women have a distinct survival disadvantage compared to men. Captains and crew survive at a significantly higher rate than passengers. We also find that the captain has the power to enforce normative behavior, that the gender gap in survival rates has declined, that women have a larger disadvantage in British shipwrecks, and that there seems to be no association between duration of a disaster and the impact of social norms. Taken together, our findings show that behavior in life-and-death situation is best captured by the expression ‘Every man for himself’.
    Keywords: Social norms; Disaster; Women and children first; Mortality; High stakes
    JEL: C70 D63 D81 J16
    Date: 2012–04–10
  20. By: Alistair J. Wilson; Emanuel Vespa
    Abstract: We implement the Battaglini (2002) model of multi-sender-multi-dimension cheap talk in the laboratory, analyzing the effects of sender competition on information transmission. Our results indicate that competing senders provide enough information for close to full revelation, but receiver`s ability to use this information crucially depends on senders` biases. Receivers are close to full extraction when biases identify an ex-ante trustworthy sender. When there is no ex-ante trustworthy source, fully exploiting sent messages requires information to be inferred across dimensions. However, receivers seem to treat dimensions as separate choices, and are much closer to best-responding within each separate dimension.
    Keywords: Multiple Senders, Strategic Information Transmission, Experiment, Recommendations
    JEL: C72 C92 D83 D84
    Date: 2012–04

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