nep-gth New Economics Papers
on Game Theory
Issue of 2012‒10‒27
eleven papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Universality of Nash Components By Dieter Balkenborg; Dries Vermeulen
  2. Associated Consistency Characterization of Two Linear Values for TU Games by Matrix Approach By Genjiu Xu; René van den Brink; Gerard van der Laan; Hao Sun
  3. Network Games under Strategic Complementarities By Mohamed Belhaj; Yann Bramoullé; Frédéric Deroian
  4. Trust, Values and False Consensus By Jeffrey Butler; Paola Giuliano; Luigi Guiso
  5. An Economic Mechanism to Regulate Multispecies Fisheries By Sébastien ROUILLON (GREThA, CNRS, UMR 5113)
  6. A Game Theoretic Foundation of Competitive Equilibria with Adverse Selection By Nick Netzer; Florian Scheuer
  7. A single-item continuous double auction game By Ruijgrok, Matthijs
  8. Truth-Telling: A Representative Assessment By Abeler, Johannes; Becker, Anke; Falk, Armin
  9. Strategic behavior in regressions: an experimental By Javier Perote; Juan Perote-Peña; Marc Vorsatz
  10. Protectionism during the crisis: Tic-for-tac or chicken-games? By Mauro Boffa; Marcelo Olarreaga
  11. Canonical Correlation and Assortative Matching: a remark By Arnaud Dupuy; Alfred Galichon

  1. By: Dieter Balkenborg (Department of Economics, University of Exeter); Dries Vermeulen (Department of Quantitative Economics, University Maastricht)
    Abstract: We show that Nash equilibrium components are universal for the collection of connected polyhedral sets. More precisely for every polyhedral set we construct a so-called binary game — a common interest game whose common payoff to the players is at most equal to one—whose success set (the set of strategy profiles where the maximal payoff of one is indeed achieved) is homeomorphic to the given polyhedral set. Since compact semi-algebraic sets can be triangulated, a similar result follows for the collection of connected compact semi-algebraic sets.
    Keywords: Strategic form games, Nash equilibrium, Nash component, topology.
    JEL: C72 D44
    Date: 2012
  2. By: Genjiu Xu (Northwestern Polytechnical University, Xi'an, P.R. China); René van den Brink (VU University Amsterdam); Gerard van der Laan (VU University Amsterdam); Hao Sun (Northwestern Polytechnical University, Xi'an, P.R. China)
    Abstract: Hamiache (2001) assigns to every TU game a so-called associated game and then shows that the Shapley value is characterized as the unique solution for TU games satisfying the inessential game property, continuity and associated consistency. The latter notion means that for every game the Shapley value of the associated game is equal to the Shapley value of the game itself. In this paper we show that also the EANS-value as well as the CIS-value are characterized by these three properties for appropriately modified notions of the associated game. This shows that these three values only differ with respect to the associated game. The characterization is obtained by applying the matrix approach as the pivotal technique for characterizing linear values of TU games in terms of associated consistency.
    Keywords: TU games; Shapley value; EANS-value; CIS-value; associated consistency; matrix approach
    JEL: C71
    Date: 2012–10–08
  3. By: Mohamed Belhaj (Centrale Marseille (Aix-Marseille School of Economics), CNRS & EHESS); Yann Bramoullé (Department of Economics, Université Laval and Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS); Frédéric Deroian (Department of Economics, Université Laval and Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: We study network games with linear best-replies and strategic complementarities. We assume that actions are continuous but bounded from above. We show that there is always a unique equilibrium. We find that two key features of these games under small network effects may not hold when network effects are large. Action may not be aligned with network centrality and the interdependence between agents' actions may be broken.
    Keywords: Network Games, Strategic Complementarities, Supermodular Games, Bonacich Centrality.
    Date: 2012–10
  4. By: Jeffrey Butler (EIEF); Paola Giuliano (University of California-Los Angeles, NBER, CEPR and IZA); Luigi Guiso (EIEF and CEPR)
    Abstract: Trust beliefs are heterogeneous across individuals and, at the same time, persistent across generations. We investigate one mechanism yielding these dual patterns: false consensus. In the context of a trust game experiment, we show that individuals extrapolate from their own type when forming trust beliefs about the same pool of potential partners - i.e., more (less) trustworthy individuals form more optimistic (pessimistic) trust beliefs - and that this tendency continues to color trust beliefs after several rounds of game-play. Moreover, we show that one’s own type/trustworthiness can be traced back to the values parents transmit to their children during their upbringing. In a second closely-related experiment, we show the economic impact of mis-calibrated trust beliefs stemming from false consensus. Miscalibrated beliefs lower participants’ experimental trust game earnings by about 20 percent on average.
    Date: 2012
  5. By: Sébastien ROUILLON (GREThA, CNRS, UMR 5113)
    Abstract: We study the management of a multispecies fishery, exploited under a non-selective harvesting technology. We construct an economic mechanism to regulate the fishery. Under a large class of models, capable of accounting for imperfect competition, congestion externalities, pro-social motivations and/or resource amenities, we show that any (stationary Markovian) Nash equilibrium of the differential game induced by our economic mechanism implements an optimal utilization of the resource. Using a specification of the general model, which adapts Clemhout and Wan (1985) and can be solved explicitly, we exhibit a (stationary Markovian) Nash equilibrium of the differential game, proving existence of (stationary Markovian) Nash equilibria within this environment.
    Keywords: Natural resource; Fish war; Multispecies; Differential game; Mechanism design.
    Date: 2012
  6. By: Nick Netzer; Florian Scheuer
    Abstract: We construct a fully specified extensive form game that captures competitive markets with adverse selection. In particular, it allows firms to offer any finite set of contracts, so that cross-subsidization is not ruled out. Moreover, firms can withdraw from the market after initial contract offers have been observed. We show that a subgame perfect equilibrium always exists and that, in fact, when withdrawal is costless, the set of subgame perfect equilibrium outcomes may correspond to the entire set of feasible contracts. We then focus on robust equilibria that exist both when withdrawal costs are zero and when they are arbitrarily small but strictly positive. We show that the Miyazaki-Wilson contracts are the unique robust equilibrium outcome of our game. This outcome is always constrained efficient and involves cross-subsidization from low to high risk agents that is increasing in the share of low risks in the population under weak conditions on risk preferences.
    JEL: C73 D02 D82 D86 G22 H1 L1
    Date: 2012–10
  7. By: Ruijgrok, Matthijs
    Abstract: A double auction game with an infinite number of buyers and sellers is introduced. All sellers posses one unit of a good, all buyers desire to buy one unit. Each seller and each buyer has a private valuation of the good. The distribution of the valuations define supply and demand functions. One unit of the good is auctioned. At successive, discrete time instances, a player is randomly selected to make a bid (buyer) or an ask (seller). When the maximum of the bids becomes larger than the minimum of the asks, a transaction occurs and the auction is closed. The players have to choose the value of their bid or ask before the auction starts and use this value when they are selected. Assuming that the supply and demand functions are known, expected profits as functions of the strategies are derived, as well as expected transaction prices. It is shown that for linear supply and demand functions, there exists at most one Bayesian Nash equilibrium. Competitive behaviour is not an equilibrium of the game. For linear supply and demand functions, the sum of the expected profit of the sellers and the buyers is the same for the Bayesian Nash equilibrium and the market where players behave competitively. Connections are made with the ZI-C traders model and the $k$-double auction.
    Keywords: Continuous double auction; supply and demand; Bayesian Nash equilibrium; ZI-C model; k-double auction
    JEL: D44 C72
    Date: 2012–10–19
  8. By: Abeler, Johannes (University of Oxford); Becker, Anke (University of Bonn); Falk, Armin (University of Bonn)
    Abstract: A central assumption of the canonical cheap talk literature is that people misreport their private information if this is to their material benefit. Recent evidence from laboratory experiments with student subjects suggests, however, that while many people do report the payoff-maximizing outcome, some report their private information truthfully or at least do not lie maximally. We measure truth-telling outside the laboratory by calling a representative sample of the German population at home. In our setup, participants have a strong monetary incentive to misreport, misreporting cannot be detected, and reputational concerns are negligible. Yet, we find that aggregate reporting behavior closely follows the expected truthful distribution. Our results underline the importance of lying costs and raise questions regarding the influence of the decision-making environment and the elicitation mode on reporting behavior.
    Keywords: private information, cheap talk, honesty, lying costs, representative experiment
    JEL: C93 D01 D82 D83
    Date: 2012–10
  9. By: Javier Perote; Juan Perote-Peña; Marc Vorsatz
    Abstract: We study experimentally in the laboratory the situation when individuals have to report their private information (that is commonly known to be the sum of an observable and a random component) to a public authority that then makes inference about the true value hold by each of the individuals. It is assumed that individuals prefer this inferred or predicted value to be as close as possible to the their true value. Consistent with the theoretical literature, we show that the participants in our experiment misrepresent their private information more under the OLS than under the resistant line estimator (which extends the median voter theorem to the two{dimensional setting). Moreover, only the resistant line estimator is empirically unbiased and subjects earn signicantly less if the OLS estimator is applied.
    Date: 2012–10
  10. By: Mauro Boffa; Marcelo Olarreaga
    Abstract: During the recent financial crisis many countries resorted to protectionist measures to try to boost demand for domestically-produced goods. In this paper we explore the extent to which the adoption of protectionist measures led to retaliation by other countries undermining the increase in demand. We found no evidence of retaliation. On the contrary, there is strong evidence of chicken-games being played. Indeed, the probability of a protectionist measure being imposed on a trading partner’s export bundle is significantly smaller when the partner imposes a protectionist measure on home exports.
    Keywords: Trade Retaliation, Chicken-games, Financial Crisis.
    Date: 2012–03
  11. By: Arnaud Dupuy (Reims Management School, Maastricht School of Management and IZA. Address: Reims Management School (RMS), 59, rue Pierre Taittinger - 51100 Reims, France. Email:; Alfred Galichon (Sciences Po Paris, Department of Economics, Address: 28 rue des Saint-Pères, 75007 Paris, France. E-mail:
    Abstract: In the context of the Beckerian theory of marriage, when men and women match on a single-dimensional index that is the weighted sum of their respective multi- variate attributes, many papers in the literature have used linear canonical correlation, and related techniques, in order to estimate these weights. We argue that this estimation technique is inconsistent and suggest some solutions.
    Keywords: matching, marriage, assignment, assortative matching, canonical correlation.
    JEL: C78 D61 C13
    Date: 2012–10

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