nep-gth New Economics Papers
on Game Theory
Issue of 2012‒07‒08
fifteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. A Discounted Stochastic Game with No Stationary Equilibria: The Case of Absolutely Continuous Transitions By Yehuda (John) Levy
  2. Sequential decisions in the Diamond-Dybvig banking model By Markus Kinateder; Hubert Janos Kiss
  3. Strategic Reasoning in Hide-and-Seek Games: A Note By Timo Heinrich; Irenaeus Wolff
  4. Optimal transport and Cournot-Nash equilibria By Adrien Blanchet; Guillaume Carlier
  5. Retaliation and the Role for Punishment in the Evolution of Cooperation By Irenaeus Wolff
  6. Heterogeneous Reactions to Hoterogneity in Returns from Public Goods By Urs Fischbacher; Simeon Schudy; Sabrina Teyssier
  7. Multi-Item Vickery-English-Dutch Auctions By Andersson, Tommy; Erlanson, Albin
  8. International emissions trading in a noncooperative climate policy game By Bjart Holtsmark og Dag Einar Sommervoll
  9. Game theory model for European government bonds market stabilization: a saving-State proposal By Carfì, David; Musolino, Francesco
  10. Approximate truth of perfectness: An experimental test By Berninghaus, Siegfried; Güth, Werner; Li, King King
  11. Public projects benefiting some and harming others: three experimental studies By Werner Güth; Anastasios Koukoumelis; M. Vittoria Levati; Matteo Ploner
  12. Risk Attitude, Beliefs, and Information in a Corruption Game - An Experimental Analysis By Siegfried K. Berninghaus; Sven Haller; Tyll Krüger; Thomas Neumann; Stephan Schosser; Bodo Vogt
  13. Stochastic Target Games with Controlled Loss By Bruno Bouchard; Ludovic Moreau; Marcel Nutz
  14. Interactive and Moral Reasoning: A Comparative Study of Response Times By Pablo Branas-Garza; Debrah Meloso; Luis Miller
  15. On social and economic spheres: an observation of the “gantangan” Indonesian tradition By Situngkir, Hokky; Prasetyo, Yanu Endar

  1. By: Yehuda (John) Levy
    Abstract: We present a discounted stochastic game with a continuum of states, finitely many players and actions, such that although all transitions are absolutely continuous w.r.t. a fixed measure, it possesses no stationary equilibria. This absolute continuity condition has been assumed in many equilibrium existence results, and the game presented here complements a recent example of ours of a game with no stationary equilibria but which possess deterministic transitions. We also show that if one allows for compact action spaces, even games with state-independent transitions need not possess stationary equilibria.
    Date: 2012–06
  2. By: Markus Kinateder (Dpto. Economía); Hubert Janos Kiss (Universidad Autónoma de Madrid)
    Abstract: We study the Diamond-Dybvig model of financial intermediation (JPE, 1983) under theassumption that depositors have information about previous decisions. Depositors decidesequentially whether to withdraw their funds or continue holding them in the bank. If depositorsobserve the history of all previous decisions, we show that there are no bank runs in equilibriumindependently of whether the realized type vector selected by nature is of perfect or imperfectinformation.JEL classification numbers:
    Keywords: Bank Run, Imperfect Information, Perfect Bayesian Equilibrium
    JEL: C72 D82 G21
    Date: 2012–06
  3. By: Timo Heinrich (University of Duisburg-Essen, Department of Economics, Germany); Irenaeus Wolff (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany)
    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 behaviour 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
    JEL: C72 C91
    Date: 2012–03–19
  4. By: Adrien Blanchet (GREMAQ - Groupe de recherche en économie mathématique et quantitative - CNRS : UMR5604 - Université des Sciences Sociales - Toulouse I - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - INRA : UMR); Guillaume Carlier (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine)
    Abstract: We study a class of games with a continuum of players for which Cournot-Nash equilibria can be obtained by the minimisation of some cost, related to optimal transport. This cost is not convex in the usual sense in general but it turns out to have hidden strict convexity properties in many relevant cases. This enables us to obtain new uniqueness results and a characterisation of equilibria in terms of some partial differential equations, a simple numerical scheme in dimension one as well as an analysis of the inefficiency of equilibria.
    Keywords: Cournot-Nash equilibria ; mean-field games ; optimal transport ; externalities ; Monge-Amp\ère equations ; convexity along generalised geodesics
    Date: 2012–06–25
  5. By: Irenaeus Wolff (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany)
    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 defecting types and, under positive mutation rates, foster the cooperation level in this equilibrium by prompting reluctant cooperators to cooperate. However, 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, Counterpunishment
    JEL: C73 C72 H41
    Date: 2012–06–29
  6. By: Urs Fischbacher (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany); Simeon Schudy (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany); Sabrina Teyssier (Thurgau Institute of Economics at the University of Konstanz, Department of Economics, Germany)
    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
    JEL: C91 C72 H41
    Date: 2012–03–31
  7. By: Andersson, Tommy (Department of Economics, Lund University); Erlanson, Albin (Department of Economics, Lund University)
    Abstract: Assuming that bidders wish to acquire at most one item, this paper defines a polynomial time multi-item auction that locates the VCG prices in a finite number of iterations for any given starting prices. This auction is called the Vickrey-English-Dutch auction and it contains the Vickrey-English auction (J.K. Sankaran, Math. Soc. Sci. 28:143-150, 1994) and the Vickrey-Dutch auction (D. Mishra and D. Parkes, Games Econ. Behav. 66:326-347, 2009) as special cases. Several properties of this iterative auction are provided. It is, for example, demonstrated that the number of iterations from the starting prices to the VCG prices can be calculated using a measure based on the Chebyshev metric. By means of numerical experiments, it is showed that when the auctioneer knows the bidders' value distributions, the Vickrey-English-Dutch auction is weakly faster than the Vickrey-English auction and the Vickrey-Dutch auction in 89 percent and 99 percent, respectively, of the investigated problems.
    Keywords: Polynomial time algorithms; Multi-item auctions; Unit-demand bidders; Iterations
    JEL: C71 C78 D63 D71 D78
    Date: 2012–06–21
  8. By: Bjart Holtsmark og Dag Einar Sommervoll (Statistics Norway)
    Abstract: Using a non cooperative climate policy game applied in the literature, we find that an agreement with international emissions trading leads to increased emissions and reduced efficiency.
    Keywords: Climate change; international environmental agreements; emissions trading; non-cooperative game theory.
    JEL: C7 Q2 Q4
    Date: 2012–06
  9. By: Carfì, David; Musolino, Francesco
    Abstract: The aim of this paper is to present a proposal regarding the possible stabilization of the rapid variations on the value of government bonds issued by the States, using the ``Game Theory". In particular, we focus our attention on three players: a large bank that has immediate access to the market of government bonds (hereinafter called Speculator, our first player), the European Central Bank (ECB, the second player) and the State in economic difficulty (our third player). We propose on financial transactions the introduction of a tax (cashed directly by the State in economic difficulty), which hits only the speculative profits. We show that the above tax would probably be able to avert the speculation, and, even in case of speculation on its government bonds, the State manages to pull itself out of the crisis. Finally, we also propose a cooperative solution that enables all economic actors involved (the Speculator, the ECB and the State) to obtain a profit.
    Keywords: Game theory; Government bonds; European Central Bank; Spread; Tax; Speculation
    JEL: G1 G2 C7 E4
    Date: 2012–03
  10. By: Berninghaus, Siegfried; Güth, Werner; Li, King King
    Abstract: Approximate truth refers to the principle that border cases should be analyzed by solving generic cases and solving border cases as limits of generic ones (Brennan et al., 2008). Our study experimentally explores whether this conceptual principle is also behaviorally appealing. To do so, we focus on perfectness (Selten, 1975) and use his example game with (no) multiplicity of (perfect) equilibria. Distinguishing three uniform perturbation levels, we check for monotonicity (all players react monotonically to the perturbation level) and then explore the behavioral relevance of approximate truth. --
    Keywords: experimental games,trembling hand perfectness,perturbed strategies
    JEL: C70 C72 C91
    Date: 2012
  11. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Anastasios Koukoumelis (Max Planck Institute of Economics, Strategic Interaction Group, Jena); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group, Jena, and Department of Economics, University of Verona); Matteo Ploner (DECO-CEEL, University of Trento)
    Abstract: Based on an axiomatically derived provision rule allowing community members to endogenously determine which, if any, public project should be provided, we perform experiments where (i) not all parties benefit from provision, and (ii) the projects' "costs" can be negative. In the tradition of legal mechanism design, the proposed provision rule is widely applicable. Additionally, it relies on intuitive fairness and profitability requirements. Our results indicate that the provision rule is conducive to efficiency, despite its multiplicity of equilibria and un- derbidding incentives. The only condition is that the cost of the most efficient project is positive.
    Keywords: Public project, Bidding behavior, Procedural fairness
    JEL: C72 C92 D63 H44
    Date: 2012–07–02
  12. By: Siegfried K. Berninghaus (Karlsruhe Institute of Technology (KIT), Institute for Economic Theory and Statistics); Sven Haller (Otto-von-Guericke-University Magdeburg, Faculty of Economics and Management); Tyll Krüger (University of Bielefeld, Research Center BiBoS); Thomas Neumann (Otto-von-Guericke-University Magdeburg, Faculty of Economics and Management); Stephan Schosser (Otto-von-Guericke-University Magdeburg, Faculty of Economics and Management); Bodo Vogt (Otto-von-Guericke-University Magdeburg, Faculty of Economics and Management)
    Abstract: For our experiment on corruption, we designed a coordination game to model the influence of risk attitudes, beliefs, and information on behavioral choices and determined the equilibria. We observed that the participants' risk attitudes failed to explain their choices between corrupt and non-corrupt behavior. Instead, beliefs appeared to be a better predictor of whether or not they would opt for the corrupt alternative. Furthermore, varying the quantity of information available to players (modeled by changing the degree of uncertainty) provided additional insight into the players' propensity to engage in corrupt behavior. The experimental results show that a higher degree of uncertainty in the informational setting reduces corruption.
    Keywords: Corruption, game theory, experiment, risk attitude, beliefs
    JEL: D73 K42 C91 C92
    Date: 2012–07–02
  13. By: Bruno Bouchard; Ludovic Moreau; Marcel Nutz
    Abstract: We study a stochastic game where one player tries to find a strategy such that the state process reaches a target of controlled-loss-type, no matter which action is chosen by the other player. We provide, in a general setup, a relaxed geometric dynamic programming for this problem and derive, for the case of a controlled SDE, the corresponding dynamic programming equation in the sense of viscosity solutions. As an example, we consider a problem of partial hedging under Knightian uncertainty.
    Date: 2012–06
  14. By: Pablo Branas-Garza; Debrah Meloso; Luis Miller
    Abstract: We use response time (RT) and behavioral data from two different but related games to test the hypothesis that individuals use introspection when confronted with a new strategic situation. Our results confirm that the need to reflect about the possible behavior of the other player (interactive thought) has an important role in the mental processes present in strategic interactions. We also find that players with longer response times have distributions of behavior that are more dispersed than for faster players. This suggests that the longest RTs across games correspond to thought dedicated to the resolution of moral dilemmas and not to guessing the likely behavior of other players in order to maximize own payoff.
    Date: 2012
  15. By: Situngkir, Hokky; Prasetyo, Yanu Endar
    Abstract: Indonesian traditional villagers have a tradition for the sake of their own social and economic security named “nyumbang”. There are wide variations of the traditions across the archipelago, and we revisit an observation to one in Subang, West Java, Indonesia. The paper discusses and employs the evolutionary game theoretic insights to see the process of “gantangan”, of the intertwining social cohesion and economic expectation of the participation within the traditional activities. The current development of the “gantangan” tradition is approached and generalized to propose a view between the economic and social sphere surrounding modern people. The interaction between social and economic sphere might be seen as a kind of Lokta-Volterra’s predator-prey-like interaction, where both are conflicting yet in a great necessity one another for the sustainability of the social life. While some explanations due to the current development of “gantangan” is drawn, some aspects related to traditional views complying the modern life with social and economic expectations is outlined.
    Keywords: social and economic sphere; traditional village ecology; evolutionary game theory; social security
    JEL: C78 I0 B52 H0 J0 A14
    Date: 2012–06–22

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.