
on Game Theory 
Issue of 2012‒09‒03
thirteen papers chosen by Laszlo A. Koczy Hungarian Academy of Sciences and Obuda University 
By:  Barbos, Andrei 
Abstract:  We study an optimal timing decision problem where an agent endowed with a risky investment opportunity trades the benefits of waiting for additional information against a potential loss in firstmover advantage. The players' clocks are desynchronized in that they learn of the investment opportunity at different times. Previous literature has uncovered an invertedU shaped relationship between a player's equilibrium expected expenditures and the measure of his competitors. This result no longer holds when the increase in the measure of players leads to a decrease in the degree of clock synchronization in the game. We show that the result reemerges if information arrives only at discrete times, and thus, a player's strategic beliefs are updated between decision times in a measurably meaningful way. 
Keywords:  Clock Games; Timing Games; Preemption 
JEL:  D90 D80 
Date:  2012–05–31 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:40846&r=gth 
By:  Derks Jean; Peters Hans; Sudhölter Peter (METEOR) 
Abstract:  We consider several related set extensions of the core and the anticore of games with transferableutility. An efficient allocation is undominated if it cannot be improved, in a specific way, bysidepayments changing the allocation or the game. The set of all such allocations is called theundominated set, and we show that it consists of finitely many polytopes with a corelikestructure. One of these polytopes is the L1center, consisting of all efficient allocations thatminimize the sum of the absolute values of the excesses. Theexcess Pareto optimal set contains the allocations that are Pareto optimal in the set obtained byordering the sums of the absolute values of the excesses of coalitions and the absolute values ofthe excesses of their complements. The L1center is contained in the excess Pareto optimal set,which in turn is contained in the undominated set. For threeperson games all these sets coincide.These three sets also coincide with the core for balanced games and with the anticore forantibalanced games. We study properties of these sets and provide characterizations in terms ofbalanced collections of coalitions. We also propose a singlevalued selection from the excessPareto optimal set, the minprenucleolus, which is defined as the prenucleolus ofthe minimum of a game and its dual. 
Keywords:  microeconomics ; 
Date:  2012 
URL:  http://d.repec.org/n?u=RePEc:dgr:umamet:2012003&r=gth 
By:  Rtischev, Dimitry 
Abstract:  Evolution of preferences models often assume that all agents display and observe preferences costlessly. Instead, we endogenize mindsight (to observe preferences) and transparency (to show preferences) as slightly costly mechanisms that agents may or may not possess. Unlike in the costless models, we show that universal rulerationality, mindsight and transparency do not constitute an equilibrium but universal actrationality, mindblindness, and opaqueness do. We also find that rulerationality, mindsight, and transparency may exist in evolved populations, albeit only in a portion of the population whose size fluctuates along an orbit around a focal point. We apply our results to Ultimatum and Trust games to explore how costly and optional mindsight may affect economic performance in interactions among evolved agents. 
Keywords:  evolution of preferences; actrationality; rulerationality; ultimatum game; trust game 
JEL:  D83 C73 D87 
Date:  2012–08–10 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:40890&r=gth 
By:  Robson, Alex 
Abstract:  When there are three parties, it is well known that the Coase Theorem may not hold even when there are no transaction costs, due to the emptiness of the core of the corresponding cooperative game [Aivazian and Callen (1981)]. We show that the standard Coasean bargaining game involving three parties is strategically equivalent to an asymmetric three player majority game. Hence, when there are three parties, the Coase Theorem fails if and only if the core of the corresponding three player majority game is empty. We use this equivalence result to derive all instances in which the Coase Theorem will and will not hold with three parties, and show that the Coase Theorem will actually hold most (over 80 per cent) of the time. We also demonstrate, in contrast to Aivazian and Callen (2003), that it is always possible to find a set of transaction costs which, when introduced into a frictionless bargaining situation, will cause an empty core to become nonempty. In other words, with suitably designed transaction costs, it is possible for the Coase Theorem to hold in cases where, in the absence of those transaction costs, it would fail to hold. When there are three parties, rather than hindering agreements, transaction costs can encourage Coasean bargaining. 
Keywords:  Coase Theorem; externalities; transaction costs; cooperative games 
JEL:  D23 D62 C78 C71 K00 
Date:  2012–08 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:40892&r=gth 
By:  Quingmin Liu (Dept. of Economics, Columbia University); George J. Mailath (Dept. of Economics, University of Pennsylvania); Andrew Postlewaite (Dept. of Economics, University of Pennsylvania); Larry Samuelson (Cowles Foundation, Yale University) 
Abstract:  A large literature uses matching models to analyze markets with twosided heterogeneity, studying problems such as the matching of students to schools, residents to hospitals, husbands to wives, and workers to firms. The analysis typically assumes that the agents have complete information, and examines core outcomes. We formulate a notion of stable outcomes in matching problems with onesided asymmetric information. The key conceptual problem is to formulate a notion of a blocking pair that takes account of the inferences that the uninformed agent might make from the hypothesis that the current allocation is stable. We show that the set of stable outcomes is nonempty in incomplete information environments, and is a superset of the set of completeinformation stable outcomes. We provide sufficient conditions for incompleteinformation stable matchings to be efficient. 
Keywords:  Matching, Stability, Stable outcome, Incomplete information, Core 
JEL:  C71 C78 D5 D8 
Date:  2012–08 
URL:  http://d.repec.org/n?u=RePEc:cwl:cwldpp:1870&r=gth 
By:  Philip A. Curry (Department of Economics, University of Waterloo); John E. Roemer (Departments of Political Science and Economics, Yale University) 
Abstract:  In Nash equilibrium, agents are autarchic in their optimization protocol, whereas in Kantian equilibrium, they optimize in an interdependent way. Typically, researchers into the evolution of homo economicus treat preferences as being determined by selective adaptation, but hold fixed the optimization protocol as autarchic. Here, we ask whether natural selection might choose the optimizing protocol to be either autarchic or interdependent. That is, will Kantian players, for whom the stable concept is Kantian equilibrium drive Nash players (for whom the stable concept is Nash equilibrium) to extinction, or otherwise? The answer depends upon whether players can signal their type to others. 
JEL:  C73 C62 D64 
Date:  2012–04 
URL:  http://d.repec.org/n?u=RePEc:wat:wpaper:1206&r=gth 
By:  Haomiao Yu (Department of Economics, Ryerson University, Toronto, Canada) 
Abstract:  In this paper, I characterize pointrationalizability in large nonanonymous games with three dierent formulations of societal responses, and also propose an implicit dynamic process that is informed by Guesnerie's eductive notions. Given the introspection and 'mentalizing' that the pointrationalizability notions presuppose, a motivation behind the work is to examine their viability in situations where the terms rationality and full information can be given a more parsimonious, and thereby more analytically viable, expression. 
Keywords:  Large games, Nash equilibria, pointrationalizability, closed under rational behavior (curb), societal response, distribution, integration, transformed statistics. 
JEL:  C62 C72 D50 D80 
Date:  2012–08 
URL:  http://d.repec.org/n?u=RePEc:rye:wpaper:wp030&r=gth 
By:  Ronald Peeters; Marc Vorsatz; Markus Walzl 
Abstract:  We conduct a laboratory experiment with a constantsum senderreceiver game to investigate the impact of individuals' first and secondorder beliefs on truthtelling. While senders are more likely to lie if they expect the receiver to trust their message, they are more likely to tell the truth if they belief the receiver expects them to tell the truth. Our results therefore indicate that secondorder beliefs are an important component of the motives for individuals in strategic information transmission. 
Keywords:  Experiment, Senderreceiver games, Strategic information transmission, Guiltfromblame, letdown aversion 
JEL:  C70 C91 D03 
Date:  2012–08 
URL:  http://d.repec.org/n?u=RePEc:inn:wpaper:201217&r=gth 
By:  Vostroknutov Alexander (METEOR) 
Abstract:  A model of belief dependent preferences in finite multistage games with observable actions isproposed. It combines two dissimilar approaches: incomplete information (Levine, 1998) andintentionality (Dufwenberg and Kirchsteiger, 2004; Falk and Fischbacher, 2006). Incompleteinformation is important because social preferences are not directly observable; intentions arefound to be indispensable in explaining behavior in games (Falk, Fehr, and Fischbacher, 2008). Inthe model it is assumed that the players have social attitudes that define their socialpreferences. In addition, players care differently about the payoffs of other players depending ontheir beliefs about their social attitude and possibly on the beliefs of higher orders. As thegame unfolds players update their beliefs about the types of other players. An action of a playershows intention when she chooses it anticipating future belief updating by others. A reasoningprocedure is proposed that allows players to understand how to update beliefs by constructing asequence of logical implications. 
Keywords:  microeconomics ; 
Date:  2012 
URL:  http://d.repec.org/n?u=RePEc:dgr:umamet:2012015&r=gth 
By:  Friedman, Daniel; Cason, Timothy N; Hopkins, Ed 
Keywords:  Economics, experiments, learning, mixed equilibrium, continuous time 
Date:  2012–07–19 
URL:  http://d.repec.org/n?u=RePEc:cdl:ucscec:qt6947v2f5&r=gth 
By:  Tsakas Elias (METEOR) 
Abstract:  We consider agents whose language can only express probabilistic beliefs that attach a rationalnumber to every event. We call these probability measures rational. We introduce the notion of arational belief hierarchy, where the first order beliefs are described by a rational measure overthe fundamental space of uncertainty, the second order beliefs are described by a rational measureover the product of the fundamental space of uncertainty and the opponent''s first order rationalbeliefs, and so on. Then, we derive the corresponding (rational) type space model, thus providinga Bayesian representation of rational belief hierarchies. Our first main result shows that thistypebased representation violates our intuitive idea of an agent whose language expresses onlyrational beliefs, in that there are rational types associated with nonrational beliefs over thecanonical state space. We rule out these types by focusing on the rational types that satisfycommon certainty in the event that everybody holds rational beliefs over the canonical statespace. We call these types universally rational and show that they are characterized by a boundedrationality condition which restricts the agents'' computational capacity. Moreover, theuniversally rational types form a dense subset of the universal type space. Finally, we show thatthe strategies rationally played under common universally rational belief in rationalitygenerically coincide with those satisfying correlated rationalizability. 
Keywords:  microeconomics ; 
Date:  2012 
URL:  http://d.repec.org/n?u=RePEc:dgr:umamet:2012004&r=gth 
By:  Eric Smith (Santa Fe Institute); Martin Shubik (Cowles Foundation, Yale University) 
Abstract:  The basic twononcooperativeequilibriumpoint model of Diamond and Dybvig is considered along with the work of Morris and Shin utilizing the possibility of outside noise to select a unique equilibrium point. Both of these approaches are essentially nondynamic. We add an explicit replicator dynamic from evolutionary game theory to provide for a sensitivity analysis that encompasses both models and contains the results of both depending on parameter settings. 
Keywords:  Multiple equilibria, Runs, Replicator dynamics, Sensitivity analysis 
JEL:  C73 D84 E59 
Date:  2012–08 
URL:  http://d.repec.org/n?u=RePEc:cwl:cwldpp:1869&r=gth 
By:  Luis GUIJARRO (UPV  Universitat Politecnica de Valencia  Universitat Politécnica de Valencia); Vicent PLA (UPV  Universitat Politecnica de Valencia  Universitat Politécnica de Valencia); Bruno Tuffin (INRIA  IRISA  DIONYSOS  INRIA  Université de Rennes 1); Patrick MAILLÉ (RSM  Département Réseaux, Sécurité et Multimédia  Institut Télécom  Télécom Bretagne  Université européenne de Bretagne); Pierre COUCHENEY (INRIA  IRISA  DIONYSOS  INRIA  Université de Rennes 1) 
Abstract:  In recent years, there has been a rising concern about the policy of major search engines, and more specifically about their ranking in socalled organic results corresponding to keywords searches. The associated proposition is that their behavior should be regulated. The concern comes from search bias, which refers to search rankings based on some principle different from the expected automated relevance. In this paper, we analyze one behavior that results in search bias: the payment by content providers to the search engine in order to improve the chances to be located and accessed by a search engine user. A simple game theorybased model is presented where both a search engine and a content provider interact strategically, and the aggregated behavior of users is modeled by a demand function. The utility of each stakeholder when the search engine is engaged in such a nonneutral behavior is compared with the neutral case when no such side payment is present. 
Keywords:  Search engine, Neutrality, Nash equilibrium, User welfare 
Date:  2012 
URL:  http://d.repec.org/n?u=RePEc:hal:journl:hal00725180&r=gth 