nep-gth New Economics Papers
on Game Theory
Issue of 2012‒09‒30
eighteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. On Axiomatizations of the Shapley Value for Assignment Games By Rene van den Brink; Miklos Pinter
  2. Equilibrium Existence and Uniqueness In Network Games with Additive Preferences By Yann Rébillé; Lionel Richefort
  3. Equilibrium Selection in Experimental Games on Networks By Charness, Gary; Feri, Francesco; Meléndez-Jiménez, Miguel A.; Sutter, Matthias
  4. Evidential equilibria in static games By Sanjit Dhami; ali al-Nowaihi
  5. Codes of conduct, private information, and repeated games By Juan I. Block; David K. Levine
  7. Level-k reasoning and incentives By Larbi Alaoui; Antonio Penta
  8. Are tax-financed contributions to a public good completely crowded-out? Experimental evidence By Timothy J. Gronberg; R. Andrew Luccasen; Theodore L. Turocy; John B. Van Huyck
  9. Evolving to the impatience trap: the example of the farmer-sheriff game By David K. Levine; Salvatore Modica; Federico Weinschelbaum; Felipe Zurita
  10. Welfare Analysis in Games with substitutabilities By Yann Rébillé; Lionel Richefort
  11. Continuous Time and Communication in a Public-goods Experiment By Charness, Gary; Oprea, Ryan; Friedman, Dan
  12. Asymmetric flow networks By Olaizola Ortega, María Norma; Valenciano Llovera, Federico
  13. Do Social Networks Prevent Bank Runs? By Hubert Janos Kiss; Ismael Rodriguez-Lara; Alfonso Rosa-Garcia
  14. Trust and trustworthiness with singleton groups By Fabio Galeotti; Daniel John Zizzo
  15. Allocation of Transportation Cost & CO2 Emission in Pooled Supply Chains Using Cooperative Game Theory By Xiaozhou Xu; Shenle Pan; Eric Ballot
  16. Strategic Immunization and Group Structure By Andrea Galeotti; Brian W. Rogers
  17. Strategic information transmission and stochastic orders By Szalay, Dezsö
  18. Pre-marital Confinement of Women: A Signaling and Matching Approach By Birendra Rai; Kunal Sengupta

  1. By: Rene van den Brink (VU University Amsterdam); Miklos Pinter (Corvinus University)
    Abstract: We consider the problem of axiomatizing the Shapley value on the class of assignment games. We first show that several axiomatizations of the Shapley value on the class of all TU-games do not characterize this solution on the class of assignment games by providing alternative solutions that satisfy these axioms. However, when considering an assignment game as a communication graph game where the game is simply the assignment game and the graph is a corresponding bipartite graph buyers are connected with sellers only, we show that Myerson's component efficiency and fairness axioms do characterize the Shapley value on the class of assignment games. Moreover, these two axioms have a natural interpretation for assignment games. Component efficiency yields submarket efficiency stating that the sum of the payoffs of all players in a submarket equals the worth of that submarket, where a submarket is a set of buyers and sellers such that all buyers in this set hav e zero valuation for the goods offered by the sellers outside the set, and all buyers outside the set have zero valuations for the goods offered by sellers inside the set. Fairness of the graph game solution boils down to valuation fairness stating that only changing the valuation of one particular buyer for the good offered by a particular seller changes the payoffs of this buyer and seller by the same amount.
    Keywords: Assignment game; Shapley value; communication graph game; submarket efficiency; valuation fairness
    JEL: C71 C78
    Date: 2012–09–13
  2. By: Yann Rébillé (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Lionel Richefort (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: A directed network game of imperfect strategic substitutes with heterogeneous players is analyzed. We consider concave additive separable utility functions that encompass the quasi-linear ones. It is found that pure strategy Nash equilibria verify a non-linear complementarity problem. By requiring appropriate concavity in the utility functions, the existence of an equilibrium point is shown and equilibrium uniqueness is established with a P -matrix. Then, it appears that previous findings on network structure and sparsity hold for many more games.
    Keywords: network game ; additive preferences ; complementarity problem ; P -matrix ;
    Date: 2012–09–17
  3. By: Charness, Gary; Feri, Francesco; Meléndez-Jiménez, Miguel A.; Sutter, Matthias
    Abstract: We study behavior and equilibrium selection in experimental network games. We varytwo important factors: (a) actions are either strategic substitutes or strategic complements, and(b) subjects have either complete or incomplete information about the structure of a randomnetwork. Play conforms strongly to the theoretical predictions, providing an impressivebehavioral confirmation of the Galeotti, Goyal, Jackson, Vega-Redondo, and Yariv (2010)model. The degree of equilibrium play is striking, even with incomplete information. We findthat under complete information, subjects typically play the stochastically-stable (inefficient)equilibrium when the game involves strategic substitutes, but play the efficient one with strategiccomplements. Our results suggest that equilibrium multiplicity may not be a major concern.Subjects’ actions and realized outcomes under incomplete information depend strongly on boththe degree and the connectivity. When there are multiple equilibria, subjects begin by playing theefficient equilibrium, but eventually converge to the inefficient one.
    Keywords: Economics, General, Economics, Other, random networks, incomplete information, strategic substitutes, strategic complements, experiment
    Date: 2012–02–18
  4. By: Sanjit Dhami; ali al-Nowaihi
    Abstract: Under uncertainty about what others will do, evidence suggests that people often use evidential reasoning (ER), i.e., they assign diagnostic significance to their own actions in forming beliefs about the actions of others. ER successfully explains the evidence from many important games. We provide a formal theoretical framework for discussing ER by proposing evidential games and the relevant solution concept evidential equilibrium (EE). We derive the relation between a Nash equilibrium and an EE. We apply EE to several common games including the prisoners’ dilemma and oligopoly games.
    Keywords: Evidential and causal reasoning; evidential games; social projection functions; ingroups and outgroups; evidential equilibria and consistent evidential equilibria; Nash equilibria, common knowledge and epistemic foundations.
    Date: 2012–07
  5. By: Juan I. Block; David K. Levine
    Abstract: We examine self-referential games in which there is a chance of understanding an opponent’s intentions. Our main focus is on the interaction of two sources of information about opponents’ play: direct observation of the opponent’s code-of-conduct, and indirect observation of the opponent’s play in a repeated setting.
    Keywords: Game theory
    Date: 2012
  6. By: Bradley J. Ruffle (BGU); Oscar Volij (BGU)
    Abstract: Kingston (1976) and Anderson (1977) show that the probability that a given contestant wins a best-of-2k+1 series of asymmetric, zero-sum, binary-outcome games is, for a large class of assignment rules, independent of which contestant is assigned the advantageous role in each component game. We design a laboratory experiment to test this hypothesis for four simple role-assignment rules. Despite the fact that play does not uniformly conform to the equilibrium, our results show that the four assignment rules are observationally equivalent at the series level: the fraction of series won by a given contestant and all other series outcomes do not differ across the four rules.
    Keywords: experimental economics, two-sided competitions, best-of series
    JEL: C90 D02 L83
    Date: 2012
  7. By: Larbi Alaoui; Antonio Penta
    Abstract: Level-k theories are agnostic over whether individuals stop the iterated reasoning because of their own cognitive constraints, or because of their beliefs over the cognitive constraints of their opponents. In practice, individual level of play may be a function both of their own constraints and their beliefs over their opponents' reasoning process. Moreover, the rounds of introspection that players perform may depend on their incentives to think more deeply. We develop a theory which explicitly models players' reasoning procedure. The rounds of introspection that individuals perform and their actual level of play both follow endogenously. This model delivers testable implications as payoffs and opponents change, and it allows for comparisons across games. It also disentangles the cognitive bound of players for a given game from their beliefs about the play of their opponents. In conjunction with the framework, we present an experiment designed to test its predictions. We modify the Arad and Rubinstein (2012) `11-20' game to serve this precise purpose, and administer different treatments which vary beliefs over payoffs and opponents. The results of this experiment are consistent with the model, and appear to lend support to our theory. This experiment also confirms the central premise that individuals change their level of play as incentives to think more and beliefs over opponents vary.
    Keywords: beliefs, bounded rationality, cognitive cost , higher order beliefs, incentives, level-k reasoning, value of reasoning
    JEL: C72 C92 D80 D83
    Date: 2012–07
  8. By: Timothy J. Gronberg (Department of Economics, Texas A&M University); R. Andrew Luccasen (Mississippi University for Women); Theodore L. Turocy (School of Economics and CBESS, University of East Anglia); John B. Van Huyck (Department of Economics, Texas A&M University)
    Abstract: We report the results of a laboratory experiment on crowd-out in a voluntary contribution mechanism public goods game. In our setting, a standard argument states that a tax should not be effective in raising contributions, because agents respond by reducing voluntary contributions by the amount of the tax. Our experimental design focuses in on this intuition by abstracting away from several potential confounds. We use a specification for the payoff function in which there is a dominant strategy for own-earnings maximizing agents, located interior to and in the upper half of the strategy space. The dominant strategy ensures that changes in contributions are attributable to the tax directly, rather than second-order effects due to responses to out-of-equilibrium play by other agents. The dominant strategy is made more transparent by the use of a novel graphical decision interface. We find that individuals robustly choose at or above the own-earnings dominant strategy level. Even with the controls of the design, crowd-out is incomplete, but the degree of crowd-out is higher than in previous studies. Analysis of individual-level decisions provides evidence of different player types. Behavior of subjects not choosing the dominant or Pareto-efficient contributions is well-organized by a model of warm-glow giving with a logit decision error.
    Keywords: Public goods, crowd-out, warm-glow, logit choice
    Date: 2012–02–15
  9. By: David K. Levine; Salvatore Modica; Federico Weinschelbaum; Felipe Zurita
    Abstract: The literature on the evolution of impatience, focusing on one-person decision problems, finds that evolutionary forces favor the more patient individuals. This paper shows that in the context of a game, this is not necessarily the case. In particular, it offers a two- population example where evolutionary forces favor impatience in one group while favoring patience in the other. Moreover, not only evolution but also efficiency may prefer impatient individuals. In our example, it is efficient for one population to evolve impatience and for the other to develop patience. Yet, evolutionary forces move the wrong populations.
    Keywords: Microeconomics
    Date: 2012
  10. By: Yann Rébillé (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Lionel Richefort (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: This paper investigates the social optimum in network games of strategic substitutes and identifies how network structure shapes optimal policies. First, we show that the socially optimal profile is ob-tained through a combination of two opposite network effects, generated by the incoming and the outgoing weighted Bonacich centrality measures. Next, three different policies that restore the social optimum are derived, and the implications of the predecessor(s)-successor(s) relationship between the agents on each policy instrument are explored. Then, the link between optimal taxes and the density of the network is established.
    Keywords: network game ; social optimum ; Bonacich centrality ; opti- mal policy ; spectral radius.
    Date: 2012–09–17
  11. By: Charness, Gary; Oprea, Ryan; Friedman, Dan
    Abstract: We investigate the nature of continuous-time strategic interactions in public-goodsgames. In one set of treatments, four subjects make contribution decisions in continuous timewhile in another they make them only at discrete points of time. The effect of continuous timeis muted in public-goods games compared to simpler social dilemmas; the data suggest thatwidespread coordination problems are to blame. With a rich communication protocol, thesecoordination problems disappear and the median subject contributes fully to the public good,with no time decay. At the median, the same communication protocol is less than half aseffective in discrete time.
    Keywords: Economics, General, Economics, Other, public goods, voluntary contribution mechanism, continuous-time games
    Date: 2012–04–04
  12. By: Olaizola Ortega, María Norma; Valenciano Llovera, Federico
    Abstract: This paper provides a new model of network formation that bridges the gap between the two benchmark models by Bala and Goyal, the one-way flow model, and the two-way flow model, and includes both as particular extreme cases. As in both benchmark models, in what we call an "asymmetric flow" network a link can be initiated unilaterally by any player with any other, and the flow through a link towards the player who supports it is perfect. Unlike those models, in the opposite direction there is friction or decay. When this decay is complete there is no flow and this corresponds to the one-way flow model. The limit case when the decay in the opposite direction (and asymmetry) disappears, corresponds to the two-way flow model. We characterize stable and strictly stable architectures for the whole range of parameters of this "intermediate" and more general model. We also prove the convergence of Bala and Goyal's dynamic model in this context.
    Keywords: non-cooperative network formation, asymmetric flow, stability, efficiency, dynamics
    JEL: D20 A14 C72
    Date: 2012–06–22
  13. By: Hubert Janos Kiss (Eötvös Loránd University, Department of Economics); Ismael Rodriguez-Lara (ERI-CES); Alfonso Rosa-Garcia (Universidad de Murcia, Dpt. Analisis Economico)
    Abstract: We report experimental evidence on the effect of observability of actions on bank runs. We model depositors' decision-making in a sequential framework, with three depositors located at the nodes of a network. Depositors observe the other depositors' actions only if connected by the network. A sufficient condition to prevent bank runs is that the second depositor to act is able to observe the first one's action (no matter what is observed). Experimentally, we find that observability of actions affects the likelihood of bank runs, but depositors' choice is highly influenced by the particular action that is being observed. This finding suggests a new source for the ocurrence of bank runs. Observability of actions can provoke runs that cannot be explained neither by coordination nor by fundamental problems, the two main culprits identified by the literature.
    Keywords: bank runs, social networks, coordination failures, experimental evidence
    JEL: C70 C91 D80 D85 G21
    Date: 2012–06
  14. By: Fabio Galeotti (School of Economics, University of East Anglia); Daniel John Zizzo (School of Economics, University of East Anglia)
    Abstract: We present an experiment investigating the effects of having an individual identified as a singleton group. The presence of a singleton group reduces trustworthiness. The majority group members discriminate against the singled out group member when they are not responsible of the distinct status of this person. When the singleton group member is identified based on negative characteristics, he or she returns significantly less. Overall, having singleton groups has no benefits for trust and is potentially disruptive for trustworthiness.
    Keywords: Justification, trust games, groups, responsibility
    JEL: C72 C91 Z13
    Date: 2012–02–01
  15. By: Xiaozhou Xu (CGS - Centre de Gestion Scientifique - Mines ParisTech); Shenle Pan (CGS - Centre de Gestion Scientifique - Mines ParisTech); Eric Ballot (CGS - Centre de Gestion Scientifique - Mines ParisTech)
    Abstract: The sustainability of supply chain,both economical and ecological, has attracted intensive attentions of academic and industry. It is proven in former works that supply chain pooling given by horizontal cooperation among several independent supply chains create a new common supply chain network that could reduce the costs and the transport CO2 emissions. In this regard, this paper introduces a scheme to share in a fairly manner the savings. After a summary of the concept of pooled-supply-networks optimization and CO2 emission model, we use cooperative game theory as the cooperative mechanism for the implementation of the horizontal pooling. Since we proved the related pooling game to be super-additive, a fair and stable allocation of common gain in transportation cost and CO2 emission is calculated by Shapley Value concept. Through a case study, the results show that supply chains pooling can result in reductions of both transportation cost and carbon emissions, and that the increase of carbon-tax rate gives enterprises more incentives for the implementation of such pooling scheme.
    Date: 2012–05–23
  16. By: Andrea Galeotti; Brian W. Rogers
    Abstract: We consider the spread of a harmful state through a population divided into two groups. Interaction patterns capture the full spectrum of assortativity possibilities. We show that a central planner who aims for eradication optimally either divides equally the resources across groups, or concentrates entirely on one group, depending on whether there is positive or negative assortativity, respectively. We study a game in which agents can, at a cost, immunize. Negative assortative interactions generate highly asymmetric equilibrium outcomes between ex-ante identical groups. When groups have an underlying difference, even a small amount of inter-group contacts generates large asymmetries. We study the diffusion of a harmful state through a population. Immunity is available, but is costly. The state is meant to capture various kinds of choices or risky behaviors such as, for example, tobacco use, in which case immunity is interpreted as a commitment to avoid the temptation of smoking. The state can also capture the presence of an electronic virus on a computer network; in this case immunity represents the purchase of anti-virus software, or other costly measures taken to avoid the virus. But perhaps the most conventional interpretation is that the state represents human infection of various communicable diseases that spread through social contacts; in this case immunity captures a decision to vaccinate oneself.
    Date: 2012–07–25
  17. By: Szalay, Dezsö
    Abstract: I develop new results on uniqueness and comparative statics of equilibria in the Crawford and Sobel (1982) strategic information transmission game. For a class of utility functions, I demonstrate that logconcavity of the density implies uniqueness of equilibria inducing a given number of Receiver actions. I provide comparative statics results with respect to the distribution of types for distributions that are comparable in the likelihood ratio order, implying, e.g., that advice from a better informed Sender induces the Receiver to choose actions that are more spread out.
    Keywords: strategic information transmission; cheap talk; uniqueness; comparative statics; logconcavity; likelihood ratio order
    JEL: D82
    Date: 2012–09
  18. By: Birendra Rai; Kunal Sengupta
    Abstract: Parents in several cultures `discipline' their daughters to inculcate the supposedly feminine virtues and improve their prospects in the marriage market. This process invariably involves imposing restrictions on their behavior, movement, and social relations. We formalize the idea that pre-marital confinement of women can be understood as an equilibrium outcome of a game of asymmetric information between parents of girls and prospective suitors. The paper presents a parsimonious framework involving signaling followed by matching in a marriage market where transfers are possible. The framework encompasses the different theories proposed by social scientists and permits a discussion of how socio-economic factors like rules of descent, production technology, and wealth inequality affect the likelihood of observing a norm of pre-marital confinement.
    Keywords: Signaling, Matching, Norms, FGM
    JEL: C72 J16 Z13
    Date: 2012–09

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