nep-gth New Economics Papers
on Game Theory
Issue of 2012‒07‒29
thirteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Coarse correlated Equilibria in Linear Duopoly Games By Indrajit Ray; Sonali Sen Gupta
  2. Using strong isomorphisms to construct game strategy spaces By Gagen, Michael
  3. Expected Behavior and Strategic Sophistication in the Dictator Game By Ismael Rodriguez-Lara; Pablo Brañas-Garza
  4. Gambling in Contests By Seel, Christian; Strack, Philipp
  5. A new stationary game equilibrium induced by stochastic group evolution and rational Individual choice By Dai, Darong; Shen, Kunrong
  6. Does the direct-response method induce guilt aversion in a trust game? By Amdur, David; Schmick, Ethan
  7. Social Influence in Trustors' Neighborhoods By Luigi Luini; Annamaria Nese; Patrizia Sbriglia
  8. Continuois Time Contests By Seel, Christian; Strack, Philipp
  9. Endogenising Detection in an Asymmetric Penalties Corruption Game By Dominic Spengler
  10. Leaderless Covert Networks: A Quantitative Approach By Husslage, B.G.M.; Lindelauf, R.; Hamers, H.J.M.
  11. More fair play in an ultimatum game after resettlement in Zimbabwe: A field experiment and a structural model By Kohler, Stefan
  12. Exposure Problem in Multi-unit Auctions By Hikmet Gunay; Xin Meng
  13. Reserve Price When Bidders are Asymmetric By Hikmet Gunay; Xin Meng; Mark Nagelberg

  1. By: Indrajit Ray; Sonali Sen Gupta
    Abstract: For duopoly models, we analyse the concept of coarse correlated equilibrium using simplesymmetric devices that the players choose to commit to in equilibrium. In a linear duopoly game, we prove that Nash-centric devices, involving a sunspot structure, are simple symmetric coarse correlated equilibria. Any small unilateral perturbation from such a structure fails to be an equilibrium.
    Keywords: Duopoly, Coarse Correlation, Simple devices, Sunspots
    Date: 2012–07
  2. By: Gagen, Michael
    Abstract: When applied to the same game, probability theory and game theory can disagree on calculated values of the Fisher information, the log likelihood function, entropy gradients, the rank and Jacobian of variable transforms, and even the dimensionality and volume of the underlying probability parameter spaces. These differences arise as probability theory employs structure preserving isomorphic mappings when constructing strategy spaces to analyze games. In contrast, game theory uses weaker mappings which change some of the properties of the underlying probability distributions within the mixed strategy space. In this paper, we explore how using strong isomorphic mappings to define game strategy spaces can alter rational outcomes in simple games, and might resolve some of the paradoxes of game theory.
    Keywords: non-cooperative games: isomorphic probability distributions: mixed strategy spaces
    JEL: C72
    Date: 2012–07–21
  3. By: Ismael Rodriguez-Lara (ERI-CES); Pablo Brañas-Garza (Universidad de Granada)
    Abstract: This paper provides novel results for the extensive literature on dictator games: recipients do not expect dictators to behave selfishly, but instead expect the equal split division. The predictions made by dictators are notably different: 45% predicted the zero contribution and 40% the equal split. These results suggest that dictators and recipients are heterogenous with regard to their degree of strategic sophistication and identify the dictator's decision power in a very different manner.
    Keywords: expectations, strategic sophistication, dictator game, equal, split, guessing
    JEL: C91 D63 D64
    Date: 2012–07
  4. By: Seel, Christian; Strack, Philipp
    Abstract: This paper presents a strategic model of risk-taking behavior in contests. Formally, we analyze an n-player winner-take-all contest in which each player decides when to stop a privately observed Brownian Motion with drift. A player whose process reaches zero has to stop. The player with the highest stopping point wins. Contrary to the explicit cost for a higher stopping time in a war of attrition, here, higher stopping times are riskier, because players can go bankrupt. We derive a closed-form solution of the unique Nash equilibrium outcome of the game. In equilibrium, the trade-off between risk and reward causes a non-monotonicity: highest expected losses occur if the process decreases only slightly in expectation.
    Keywords: Discontinuous games; Contests; Relative performance pay; Risktaking behavior
    JEL: C72 C73 D81
    Date: 2012–03
  5. By: Dai, Darong; Shen, Kunrong
    Abstract: In the present paper, a new approach to equilibrium selection for very general normal form games has been constructed by introducing stochastic optimal stopping theory into classical evolutionary game theory. That is, the new game equilibrium is induced by both stochastic group evolution and decentralized rational individual choice. Moreover, stability of the game equilibrium is confirmed from both time and space dimensions.
    Keywords: Stochastic replicator dynamics; Rational choice; Normal-form game equilibrium; Stability
    JEL: C70 C62
    Date: 2012–01–15
  6. By: Amdur, David; Schmick, Ethan
    Abstract: We compare the strategy and direct-response methods in a one-shot trust game with hidden action. In our experiment, the decision elicitation method affects neither participants' behavior nor their beliefs about this behavior. We conclude that the direct-response method does not, by itself, induce guilt aversion.
    Keywords: Trust; guilt aversion; strategy method; direct-response method; behavioral economics; experimental economics
    JEL: D03 A13 C91
    Date: 2012–06
  7. By: Luigi Luini; Annamaria Nese; Patrizia Sbriglia
    Abstract: The aim of this paper is to ascertain whether trust is affected by contagion and herding in small groups of trustors who can observe each other’s choices over time. We account for three important factors of trustors’preferences, namely: risk attitude, generosity and expected trustworthiness. Using our data, we test the basic hypothesis that an individual's propensity to trust recipients in the Trust Game may be affected by the observed behavior of other trustors. Our results confirm that trust is affected by contagion effects. Furthermore, we find that specific types of agents (generous or untrusting) frequently imitate the same type when placed in the same group. Finally, we find that untrusting individuals are less affected by their peers compared to generous individuals, and that they are less prone to imitation when placed in groups of agents who have the same characteristics.
    Keywords: trust game, experiments, social influence, imitation.
    JEL: C72 C91
    Date: 2012–07
  8. By: Seel, Christian; Strack, Philipp
    Abstract: This paper introduces a contest model in which each player decides when to stop a privately observed Brownian motion with drift and incurs costs depending on his stopping time. The player who stops his process at the highest value wins a prize. Applications of the model include procurement contests and competitions for grants. We prove existence and uniqueness of the Nash equilibrium outcome, even if players have to choose bounded stopping times. We derive the equilibrium distribution in closed form. If the noise vanishes, the equilibrium outcome converges to - and thus selects - the symmetric equilibrium outcome of an all-pay auction. For two players and constant costs, each player’s profits increase if costs for both players increase, variance increases, or drift decreases. Intuitively, patience becomes a more important factor for contest success, which reduces informational rents.
    Keywords: Contests; all-pay contests; silent timing games
    Date: 2012–03
  9. By: Dominic Spengler
    Abstract: We construct a one-shot corruption game with three players, a briber who can decide to bribe or not, an official who can reciprocate or not and an inspector who can decide to inspect or not. We employ four penalties that can be distributed asymmetrically, making it possible to punish bribing and bribe-taking as well as reciprocating and accepting considerations to different degrees. Penalties apply if corruption is detected. The probability of detection is endogenised, as it depends on inspection. The model differs from other inspection games in that the offence (corruption) can only be completed in a joint effort between two of the players. This leads to surprising results, especially in conjunction with asymmetric penalties. First, in contrast to Tsebelis' counterintuitive results, we find confirmed that with endogenous detection, higher penalties do reduce the overall rate of offence. Second, this result holds only if the penalty for reciprocating on the official is raised. Surprisingly, and unlike other asymmetric penalty prescriptions in the corruption literature, higher penalties on on the briber have the opposite effect. They may reduce the probability of bribery, but they also increase the probability of reciprocation to the extent that the overall probability of reciprocated bribery is increased.
    Keywords: Inspection game, Corruption, Asymmetric penalties, Endogenising detection
    JEL: K42 H00 C72 O17
    Date: 2012–07
  10. By: Husslage, B.G.M.; Lindelauf, R.; Hamers, H.J.M. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Lindelauf et al. (2009a) introduced a quantitative approach to investigate optimal structures of covert networks. This approach used an objective function which is based on the secrecy versus information trade-off these organizations face. Sageman (2008) hypothesized that covert networks organize according to leaderless principles, i.e., clear leaders can not be identified. This flat organizational structure is quite robust to destabilization tactics which target the most important persons in a network. There exist several centrality measures to express the importance of persons in a network. The most recent one introduced in the field of covert networks is a game theoretical centrality measure which takes into account both the structure of the covert network, which usually reflects a communication structure, as well as non-network features, which represent individual parameters like financial means or bomb building skills, see Lindelauf et al. (2011). The question we try to answer in this chapter is whether there is a relationship between the quality of a covert network based on their optimality with respect to the trade-off between secrecy and information and the variance of the game theoretic centrality measures of the respective individuals in the network. The leaderless hypothesis seems to suggest that good covert networks do not have a high distinction between centrality of the individuals, i.e., they are leaderless. We investigate this by looking at homogeneous networks and heterogeneous networks in which the links between individuals are weighted. We find that (approximate) optimal networks have low variance in game-theoretic centrality, i.e., we find evidence that supports the leaderless hypothesis. However, if the networks are heterogeneous in the sense that, for instance, certain individuals communicate much more often than others, we find that the variance increases significantly. Finally, we look at the Jemaah Islamiyah 2002 Bali bombing. We find that the operational network used to conduct and to coordinate the bombing not only facilitated both secrecy and efficiency but also adhered to the leaderless principle.
    Keywords: terrorism;network analysis;centrality;game theory.
    JEL: C71
    Date: 2012
  11. By: Kohler, Stefan
    Abstract: Zimbabwean villagers of distinct background have resettled in government organized land reforms for more than three decades. Against this backdrop, I assess the level of social cohesion in some of the newly established communities by estimating average preferences for fairness in a structural model of bounded rationality. The estimations are based on behavioral data from an ultimatum game field experiment played by 234 randomly selected households in six traditional and 14 resettled villages almost two decades after resettlement. In two out of three distinct resettlement schemes studied, the resettled villagers exhibit significantly higher degrees of fairness ($p ≤ 0.11$) and rationality ($p ≤ 0.04$) than those who live in traditional villages. Overall, villagers are similarly rational ($p = 0.30$) but the attitude toward fairness is significantly stronger in resettled communities ($p ≤ 0.01$). These findings are consistent with the idea of a raised need for cooperation required in recommencement.
    Keywords: Africa; behavioral economics; inequality aversion; land reform; impact evaluation; social change; social development; social preferences; structural estimation; quantal response model
    JEL: D03 Q15 C93
    Date: 2012–07–24
  12. By: Hikmet Gunay; Xin Meng
    Abstract: We characterize the optimal bidding strategies of local and global bidders for two heterogenous licenses in a multi-unit simultaneous ascending auction. The global bidder wants to win both licenses to enjoy synergies; therefore, she bids more than her stand-alone valuation of a license. This exposes her to the risk of losing money even when she wins all licenses. We determine the optimal bidding strategies in the presence of an exposure problem. By using simulation methods, first, we show the frequency of inefficient allocation in the simultaneous ascending auction. Then, we show that the Vickrey-Clarke-Groves (VCG) mechanism may generate more revenue than the simultaneous ascending auction.
    Date: 2012–07
  13. By: Hikmet Gunay; Xin Meng; Mark Nagelberg
    Abstract: We analyze the optimal reserve price in a second price auction when there are N types of bidders whose valuations are drawn from different distribution functions. The seller cannot determine the specific type of each bidder. First, we show that the number of bidders affects the reserve price. Second, we give the sufficient conditions for the uniqueness of the optimal reserve price. Third, we find that if a bidder is replaced by a stronger bidder, the optimal reserve price may decrease. Finally, we give sufficient conditions that ensure the seller will not use a reserve price; hence, the auction will be efficient.
    Date: 2012–07

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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