nep-gth New Economics Papers
on Game Theory
Issue of 2012‒11‒03
eleven papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Farsightedly Stable Matchings By N. Roketskiy
  2. Strategic commitment and cooperation in experimental games of strategic complements and substitutes By Embrey Matthew; Mengel Friederike; Peeters Ronald
  3. Specifying Nodes as Sets of Actions By Peter A. Streufert
  4. Game Theory in Oligopoly By Marx Boopathi
  5. The lowest-bid all-pay-auction as a fund-raising mechanism: Theoretically optimal but behaviorally fragile By Damianov Damian S.; Peeters Ronald
  6. Ordered Weighted Averaging in Social Networks. By Manuel Förster; Michel Grabisch; Agnieszka Rusinowska
  7. An Experiment on the Causes of Bank Run Contagions By Surajeet Chakravarty; Miguel A. Fonseca; Todd Kaplan
  8. Using Shapley’s asymmetric power index to measure banks’ contributions to systemic risk By Garratt, Rodney; Webber, Lewis; Willison, Matthew
  9. Canonical Correlation and Assortative Matching: A Remark By Dupuy, Arnaud; Galichon, Alfred
  10. Communication in Cournot Oligopoly By Maria Goltsman; Gregory Pavlov
  11. A Theory of Ex Post Inefficient Renegotiation By Herweg, Fabian; Schmidt, Klaus M.

  1. By: N. Roketskiy (Department of Economics, UCL)
    Abstract: We study the properties of von Neumann-Morgenstern farsightedly stable sets in application to matching models. We show that the result by Diamantoudi and Xue (2003) for hedonic games can be extended to a general matching with contracts framework: a collection of singleton stable sets constitutes a weak core of the matching with contracts game. We also show that singleton stable sets are invariant under different contractual languages.
    Keywords: farsighted stable sets
    JEL: C71
    Date: 2012–10
  2. By: Embrey Matthew; Mengel Friederike; Peeters Ronald (METEOR)
    Abstract: We study the impact of strategic commitment on cooperation in indefinitely repeated games ofstrategic substitutes (Cournot) and complements (Bertrand) using laboratory experiments. Overall,strategic commitment has no effect on cooperation with strategic substitutes and a negative onewith strategic complements. In the absence of strong strategic commitment, we find morecooperation in the complements game than in the substitutes game. However, when subjects are morecommitted to initial plans, a higher level of cooperation is achieved with strategic substitutes.These results cannot be explained by standard risk-dominance or renegotiation considerations, butare consistent with a notion of fear of miscoordination based on minmax regret.
    Keywords: microeconomics ;
    Date: 2012
  3. By: Peter A. Streufert (University of Western Ontario)
    Abstract: The nodes of an extensive-form game are commonly specified as sequences of actions. Rubinstein calls such nodes histories. We find that this sequential notation is superfl uous in the sense that nodes can also be specified as sets of actions. The only cost of doing so is to rule out games with absent-minded agents. Our set-theoretic analysis accommodates general finite-horizon games with arbitrarily large action spaces and arbitrarily configured information sets. One application is Streufert (2012),which specifies nodes as sets in order to formulate and prove new results about Kreps-Wilson consistency.
    Keywords: game tree; set tree; extensive-form game.
    JEL: C7 C72
    Date: 2012
  4. By: Marx Boopathi
    Abstract: The game theory techniques are used to find the equilibrium of a market. Game theory refers to the ways in which strategic interactions among economic agents produce outcomes with respect to the preferences (or utilities) of those agents, where the outcomes in question might have been intended by none of the agents. The oligopolistic market structures are taken and how game theory applies to them is explained.
    Date: 2012–10
  5. By: Damianov Damian S.; Peeters Ronald (METEOR)
    Abstract: We study the optimal design of mechanisms for the private provision of public goods in a simplesetting in which donors compete for a prize of commonly known value. The optimal mechanism in thismodel is the lowest-price all-pay auction – a mechanism in which the highest bidder wins but allbidders pay the lowest bid. The highest amount for the public good is generated in the unique,symmetric, mixed-strategy equilibrium of this mechanism. We derive the equilibrium distributionfunction in a closed form for any number of bidders. We then compare various all-pay auctions andlotteries in lieu of voluntary contributions with a battery of laboratory experiments. Theperformance of the optimal mechanism depends on the level of competition. The lowest-price all-payauction dominates the remaining auction formats with three competing bidders, but is inferior tothe own-pay auction and the lottery with only two bidders.
    Keywords: public economics ;
    Date: 2012
  6. By: Manuel Förster (Centre d'Economie de la Sorbonne & Université Catholique de Louvain - CORE); Michel Grabisch (Centre d'Economie de la Sorbonne - Paris School of Economics); Agnieszka Rusinowska (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: We study a stochastic model of influence where agents have yes-no inclinations on some issue, and opinions may change due to mutual influence among the agents. Each agent independently aggregates the opinions of the other agents and possibly herself. We study influence processes modelled by ordered weighted averaging operators. This allows to study situations where the influence process resembles a majority vote, which are not covered by the classical approach of weighted averaging aggregation. We provide an analysis of the speed of convergence and the probabilities of absoption by different terminal classes. We find a necessary and sufficient condition for convergence to consensus and characterize terminal states. Our results can also be used to understand more general situations, where ordered weighted averaging operators are only used to some extend. Furthermore, we apply our results to fuzzy linguistic quantifiers.
    Keywords: Social network, influence, convergence, speed of convergence, consensus, ordered weighted averaging operator, fuzzy linguistic quantifier.
    JEL: C7 D7 D85
    Date: 2012–08
  7. By: Surajeet Chakravarty (Department of Economics, University of Exeter); Miguel A. Fonseca (Department of Economics, University of Exeter); Todd Kaplan (Department of Economics, University of Exeter)
    Abstract: To understand the mechanisms behind bank run contagions, we conduct bank run experiments in a modified Diamond-Dybvig setup with two banks (Left and Right). The banks' liquidity levels are either linked or independent. Left Bank depositors see their bank's liquidity level before deciding. Right Bank depositors only see Left Bank withdrawals before deciding. We find that Left Bank depositors' actions signicantly affect Right Bank depositors' behavior, even when liquidities are independent. Furthermore, a panic may be a one-way street: an increase in Left Bank withdrawals can cause a panic run on the Right Bank, but a decrease cannot calm markets.
    Keywords: bank runs, contagion, experiment, multiple equilibria.
    JEL: C72 C92 D43
    Date: 2012
  8. By: Garratt, Rodney (University of California, Santa Barbara); Webber, Lewis (Bank of England); Willison, Matthew (Bank of England)
    Abstract: An individual bank can put the whole banking system at risk if its losses in response to shocks push losses for the system as a whole above a critical threshold. We determine the contribution of banks to this systemic risk using a generalisation of the Shapley value; a concept originating in co-operative game theory. An important feature of this approach is that the order in which banks fail in response to a shock depends on the composition of the banks’ asset portfolios and capital buffers. We show how these factors affect banks’ contributions to systemic risk, and the extent to which these contributions depend on the level of the critical threshold.
    Keywords: Shapley value; systemic risk; bank regulation
    JEL: C71 G01 G21 G28
    Date: 2012–10–26
  9. By: Dupuy, Arnaud (Reims Management School); Galichon, Alfred (Sciences Po, Paris)
    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 multivariate 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
  10. By: Maria Goltsman (University of Western Ontario); Gregory Pavlov (University of Western Ontario)
    Abstract: We study communication in a static Cournot duopoly model under the assumption that the firms have unverifiable private information about their costs. We show that cheap talk between the firms cannot transmit any information. However, if the firms can communicate through a third party, communication can be informative even when it is not substantiated by any commitment or costly actions. We exhibit a simple mechanism that ensures informative communication and interim Pareto dominates the uninformative equilibrium for the firms.
    Keywords: Cournot oligopoly; communication; information; cheap talk; mediation
    JEL: C72 D21 D43 D82 D83
    Date: 2012
  11. By: Herweg, Fabian; Schmidt, Klaus M.
    Abstract: We propose a theory of ex post inefficient renegotiation that is based on loss aversion. When two parties write a long-term contract that has to be renegotiated after the realization of the state of the world, they take the initial contract as a reference point to which they compare gains and losses of the renegotiated transaction. We show that loss aversion makes the renegotiated outcome sticky and materially inefficient. The theory has important implications for the optimal design of long-term contracts. First, it explains why parties often abstain from writing a beneficial long-term contract or why some contracts specify transactions that are never ex post efficient. Second, it shows under what conditions parties should rely on the allocation of ownership rights to protect relationship-specific investments rather than writing a specific performance contract. Third, it shows that employment contracts can be strictly optimal even if parties are free to renegotiate.
    Keywords: Renegotiation; Incomplete Contracts; Reference Points; Employment Contracts; Behavioral Contract Theory.
    JEL: C78 D03 D86
    Date: 2012–10–04

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.