nep-gth New Economics Papers
on Game Theory
Issue of 2012‒12‒10
ten papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Sequential vs Collusive Payoffs in Symmetric Duopoly Games By Marco Marini; Giorgio Rodano
  2. An axiomatization of the nucleolus of the assignment game By Francesc Llerena (Universitat Rovira i Virgili - CREIP); Marina Nunez (Universitat de Barcelona); Carles Rafels (Universitat de Barcelona)
  3. Majority Rules and Coalition Stability By Sergio Currarini; Marco Marini
  4. Second-order BSDEs with general reflection and Dynkin games under uncertainty By Anis Matoussi; Lambert Piozin; Dylan Possamai
  5. Asymptotic relations in Cournot's game By Guerrazzi, Marco
  6. Investment behavior in a constrained dictator game By Coenen, Michael; Jovanovic, Dragan
  7. Efficient structure of noisy communication networks By Breitmoser, Yves; Vorjohann, Pauline
  8. Bayesian Nash Equilibrium in ''Linear'' Cournot Models with Private Information About Cost By Sjaak Hurkens
  9. Tuition Exchange By Umut Mert Dur; M. Utku Ünver
  10. Performance of a reciprocity model in predicting a positive reciprocity decision By Bhirombhakdi, Kornpob; Potipiti, Tanapong

  1. By: Marco Marini (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Giorgio Rodano (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")
    Abstract: In many strategic settings comparing the payo¤s obtained by players under full cooperation to those obtainable at a sequential (Stackelberg) equilibrium can be crucial to determine the nal outcome of the game. This happens, for instance, in repeated games in which players can break cooperation by acting sequentially, as well as in merger games in which rms are allowed to sequence their actions. Despite the relevance of these and other applications, no fully-edged comparisons betwen collusive and sequential payo¤s have been performed so far. In this paper we show that even in symmetric duopoly games the ranking of cooperative and sequential payo¤s can be extremely variable, particularly when the consuete linear demand assumption is relaxed. Not surprisingly, the degree of strategic complementarity and substitutability of playersactions (and, hence, the slope of their best-replies) appears decisive to determine the ranking of collusive and sequential payo¤s. Some applications to endogenous timing are discussed.
    Keywords: Sequential Payoffs; Collusion; Duopoly Games
    Date: 2012–06
  2. By: Francesc Llerena (Universitat Rovira i Virgili - CREIP); Marina Nunez (Universitat de Barcelona); Carles Rafels (Universitat de Barcelona) (Universitat de Barcelona)
    Abstract: On the domain of two-sided assignment markets, the nucleolus is axiomatized as the unique solution that satisfies derived consistency (Owen, 1992) and complaint mono- tonicity on sectors size. As a consequence, we obtain a geometric characterization of the nucleolus by means of a strong form of the bisection property that characterizes the inter- section between the core and the kernel of a coalitional game in Maschler et al (1979).
    Keywords: core, assignment games, nucleolus, cooperative games
    JEL: C71 C78
    Date: 2012
  3. By: Sergio Currarini (Department of Economics, Universita' degli Studi di Venezia & University of Bristol); Marco Marini (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza")
    Abstract: We consider a class of symmetric games with externalities across coalitions and show that, under certain regularity conditions, restricting the deviating power to majority guarantees the existence of core-stable allocations. We also show that if majorities can extract resources from minorities, stability requires a supermajority rule, whose threshold is increasing in the extraction power.
    Keywords: Majority Rule, Supermajority, Externalities, Core
    Date: 2012–01
  4. By: Anis Matoussi; Lambert Piozin; Dylan Possamai
    Abstract: The aim of this paper is twofold. First, we extend the results of [32] concerning the existence and uniqueness of second-order reflected 2BSDEs to the case of upper obstacles. Then, under some regularity assumptions on one of the barriers, similar to the ones in [9], and when the two barriers are completely separated, we provide a complete wellposedness theory for doubly reflected second-order BSDEs. We also show that these objects are related to non-standard optimal stopping games, thus generalizing the connection between DRBSDEs and Dynkin games first proved by Cvitani\'c and Karatzas [10]. More precisely, we show that the second order DRBSDEs provide solutions of what we call uncertain Dynkin games and that they also allow us to obtain super and subhedging prices for American game options (also called Israeli options) in financial markets with volatility uncertainty.
    Date: 2012–12
  5. By: Guerrazzi, Marco
    Abstract: In this note, I derive the asymptotic relation verified by oligopolists' iso-profit curves within Cournot's game. Thereafter, I provide an economic rationale for such a mathematical relation. The results of this exploration suggest that for each firm the asymptotes of the iso-profit curves convey the boundaries beyond which output competitors become net purchasers of the good supplied in the market.
    Keywords: Cournot's Game; Nash Equilibrium; Asymptotes
    JEL: C72
    Date: 2012–11
  6. By: Coenen, Michael; Jovanovic, Dragan
    Abstract: We analyze a constrained dictator game in which the dictator splits a pie which will be subsequently created through simultaneous investments by herself and the recipient. We consider two treatments by varying the maximum attainable size of the pie leading to either high or low investment incentives. We find that constrained dictators and recipients invest less than a model with self-interested players would predict. While the splitting decisions of constrained dictators correspond to the theoretical predictions when investment incentives are high, they are more selfish when investment incentives are low. Overall, team productivity is negatively affected by lower investment incentives. --
    Keywords: Bargaining Game,Dictator Game,Investment Incentives,Team Production
    JEL: C72 C91 D01
    Date: 2012
  7. By: Breitmoser, Yves; Vorjohann, Pauline
    Abstract: In the canonical network model, the connections model, only three specific network structures are generically efficient: complete, empty, and star networks. This renders many plausible network structures inefficient. We show that requiring robustness with respect to stochastic transmission failures rehabilitates incomplete, circular network structures. Specifically, we show that near the "bifurcation" where both star and complete network are efficient in the standard connections model, star and complete network are generally inefficient as transmission failures become possible. As for four-player networks, we additionally show that the circle network is uniquely efficient and robust near this bifurcation.
    Keywords: communication network; information flow; stochastics; robustness; efficiency; connections model
    JEL: C70 D85
    Date: 2012–11–26
  8. By: Sjaak Hurkens
    Abstract: Calculating explicit closed form solutions of Cournot models where firms have private information about their costs is, in general, very cumbersome. Most authors consider therefore linear demands and constant marginal costs. However, within this framework, the nonnegativity constraint on prices (and quantities) has been ignored or not properly dealt with and the correct calculation of all Bayesian Nash equilibria is more complicated than expected. Moreover, multiple symmetric and interior Bayesian equilibria may exist for an open set of parameters. The reason for this is that linear demand is not really linear, since there is a kink at zero price: the general ''linear'' inverse demand function is P (Q) = max{a - bQ, 0} rather than P (Q) = a - bQ.
    Keywords: Cournot, Private Information, Bayesian Nash equilibrium
    JEL: C72 D43 D82
    Date: 2012–12–03
  9. By: Umut Mert Dur (University of Texas at Austin); M. Utku Ünver (Boston College)
    Abstract: We introduce a new class of matching problems that mimics the tuition exchange programs employed by colleges in the US to enable the dependents of their eligible faculty to use their tuition benefits at other participating institutions. Each participating college has to maintain a balance between exported and imported students; a negative balance with exports exceeding imports is generally penalized by suspension from the program. On the other hand, these programs function through decentralized markets that make it difficult to sustain a balance. We show that any unbalanced market equilibrium respecting stability causes a race to the bottom by discouraging negative–balance colleges from exchange. To correct this failure, we propose a new centralized mechanism, two–sided top trading cycles (2S-TTC), a variant of the well–known TTC mechanism. This is the first time a one–sided matching mechanism has been modified for a two–sided market. This mechanism selects a balanced–efficient matching that cannot be manipulated by students and it respects internal priority bylaws of colleges regarding dependent eligibility. Moreover, it makes full participation a dominant strategy for colleges, thus encouraging exchange. We also show that 2S-TTC is the unique optimal mechanism fulfilling these objectives. There also exist tuition co-ops where maintaining a one–to–one balance is not the first objective. For these programs, to minimize imbalance while respecting stability, we also propose a new flexible mechanism with desirable properties.
    Keywords: Market Design, Matching Theory, Tuition Exchange, Balanced Exchange, Two–sided Matching, Two–sided Top Trading Cycles
    JEL: C71 C78 D71 D78
    Date: 2012–11–25
  10. By: Bhirombhakdi, Kornpob; Potipiti, Tanapong
    Abstract: This study experimentally tests the performance in predicting decisions of a reciprocity model that was proposed by Dufwenberg et al. (2004). By applying a new approach, the study directly and individually predicts a subject's future decision from his past decision. The prediction performance is measured by the rate of correct predictions (accuracy) and the gain in the rate of the correct predictions (informativeness). Six scenarios of trust game are used to test the model's performance. Further, we compare the performance of the model with two other prediction methods; one method uses a decision in a dictator game to predict a decision in a trust game; the other uses personal information including IQ-test scores, personal attitudes and socio-economic factors. Seventy-nine undergraduate students participated in this hand-run experimental study. The results show that the reciprocity model has the best performance when compared with other prediction methods.
    Keywords: Reciprocity; Kindness; Performance; Trust Game
    JEL: C71 C91
    Date: 2012–10–29

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