nep-gth New Economics Papers
on Game Theory
Issue of 2012‒12‒22
twelve papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Cournot tatonnement and potentials By Kukushkin, Nikolai S.
  2. Cooperation and the common enemy effect By Kris De Jaegher; Britta Hoyer
  3. The Tragedy of the Commons in a Violent World By Petros G. Sekeris
  4. On the Exhaustiveness of Truncation and Dropping Strategies in Many-to-Many Matching Markets By Paula Jaramillo; Cagatay Kay; Flip Klijn
  5. The evolution of the mixed conjectures in the rent-extraction game By Paulo Brito, Bipasa Datta and Huw Dixon
  6. Who are the Voluntary Leaders? Experimental Evidence from a Sequential Contribution Game. By Raphaële Préget; Phu Nguyen-Van; Marc Willinger
  7. China-Japan-Korea (CJK)'s FTA Strategy towards ASEAN Countries: A Game Theoretical Approach By Fithra Faisal Hastiadi
  8. Bargaining in River Basin Committees: Rules Versus Discretion By Le Breton, Michel; Thomas, Alban; Zaporozhets, Vera
  9. Divided Majority and Information Aggregation: Theory and Experiment By Bouton, Laurent; Castanheira, Micael; Llorente-Saguer, Aniol
  10. Lotteries vs. All-Pay Auctions in Fair and Biased Contests By Epstein, Gil S.; Mealem, Yosef; Nitzan, Shmuel
  11. The value of private information in the physician-patient relationship: a game-theoretic account By Kris De Jaegher
  12. The Robustness of Exclusion in Multi-dimensional Screening By Paulo Barelli; Suren Basov; Mauricio Bugarin; Ian King

  1. By: Kukushkin, Nikolai S.
    Abstract: We study what topological assumptions should be added to the acyclicity of individual best response improvements in order to ensure the existence of a (pure strategy) Nash equilibrium as well as the possibility to reach a Nash equilibrium in the limit of a best response improvement path.
    Keywords: Cournot tatonnement; Cournot potential; game with structured utilities; aggregative game
    JEL: C72
    Date: 2012–12–09
  2. By: Kris De Jaegher; Britta Hoyer
    Abstract: This paper presents a game-theoretic rationale for the beneficial effect of a common enemy on cooperation. In a defence game against a common natural threat, the value of the public good of defence is equal to the sum of the players' defensive efforts. The game therefore takes the form of a prisoner's dilemma, leading to free-riding. When the same defence game is played against a common enemy, the value of the public good of defence is equal to the smallest defensive effort. The game now takes the form of a stag hunt, so that a cooperative equilibrium becomes possible. For this reason, an informed and benevolent government may not want to inform the public that it is facing a common natural threat rather than a common enemy. At the same time, the common enemy has an incentive to mimic nature, and perform only random rather than targeted attacks.
    Keywords: Common Enemy Effect; Defence Games; Prisoner's Dilemma; Stag Hunt.
    JEL: D74 H41 C72
    Date: 2012–12
  3. By: Petros G. Sekeris (Center for Research in the Economics of Development, University of Namur)
    Abstract: Earlier research has shown that the tragedy of the commons may be resolved by Folk theorems for dynamic games. In this article we graft on a standard natural-resource exploitation game the possibility to appropriate the resource through violent means. Because conflict emerges endogenously as resources get depleted, the threat supporting the cooperative outcome is no longer subgame perfect, and thus credible. The unique equilibrium is such that players exploit non-cooperatively the resource when it is abundant and they revert to conflict when it becomes scarce. The players' utility is shown to be lower even if conflict wastes no resources.
    Keywords: Tragedy of the Commons, Conflict, Dynamic Game
    JEL: C73 D74 Q2
    Date: 2012–12
  4. By: Paula Jaramillo; Cagatay Kay; Flip Klijn
    Abstract: We consider two-sided many-to-many matching markets in which each worker may work for multiple firms and each firm may hire multiple workers. We study individual and group manipulations in centralized markets that employ (pairwise) stable mechanisms and that require participants to submit rank order lists of agents on the other side of the market. We are interested in simple preference manipulations that have been reported and studied in empirical and theoretical work: truncation strategies, which are the lists obtained by removing a tail of least preferred partners from a preference list, and the more general dropping strategies, which are the lists obtained by only removing partners from a preference list (i.e., no reshuffling). We study when truncation / dropping strategies are exhaustive for a group of agents on the same side of the market, i.e., when each match resulting from preference manipulations can be replicated or improved upon by some truncation / dropping strategies. We prove that for each stable mechanism, truncation strategies are exhaustive for each agent with quota (Theorem 1). We show that this result cannot be extended neither to group manipulations (even when all quotas equal 1 { Example 1), nor to individual manipulations when the agent's quota is larger than 1 (even when all other agents' quotas equal 1 { Example 2). Finally, we prove that for each stable mechanism, dropping strategies are exhaustive for each group of agents on the same side of the market (Theorem 2), i.e., independently of the quotas.
    Date: 2012–10–22
  5. By: Paulo Brito, Bipasa Datta and Huw Dixon
    Abstract: This paper adopts an evolutionary perspective on the rent-extraction model with conjectural variations (CV) allowing for mixed-strategies. We analyze the dynamics of the model with n CVs under the replicator equation. We find that the end points of the evolutionary dynamics include the pure-strategy consistent CVs. However, there are also mixed-strategy equilibria that occur: these are on the boundaries between the basins of attraction of the pure-strategy sinks. Further, we develop a more general notion of consistency which applies to mixed-strategy equilibria. In a three conjecture example, by conducting a global dynamics analysis, we prove that in contrast to the pure-strategy equilibria, the mixed-strategy equilibria are not ESS: under the replicator dynamics, there are three or four mixed equilibria that may either be totally unstable (both eigenvalues positive), or saddle-stable (one stable eigenvalue). There also exist heteroclinic orbits that link equilibria together. Whilst only the pure-strategies can be fully consistent, we find a lower bound for the probability that mixed strategy conjectures will be ex post consistent.
    Keywords: Rent-extraction, evolutionary dynamics, consistent conjectures, global dynamics, mixed-strategy
    JEL: D03 L15 H0
    Date: 2012–12
  6. By: Raphaële Préget; Phu Nguyen-Van; Marc Willinger
    Abstract: We show that the preference to act as a leader rather than as a follower is related to subjects’ behavioral type. We rely on the methodology proposed by Fischbacher et al. (2001) and Fischbacher and Gächter (2010) in order to identify subjects’ behavioral types. We then link the likelihood to act as a leader in a repeated public goods game to the elicited behavioral types. The leader in a group is defined as the subject who voluntarily decides in the first place about his contribution. The leader’s contribution is then reported publicly to the remaining group members who are requested to take their contribution decisions simultaneously. Our main findings are that leaders emerge in almost all rounds and that conditional cooperators are more likely to act as leaders compared to free riders. We also find that voluntary leaders, irrespective of their behavioral type, contribute more than the followers. However leadership does not prevent the decay that is commonly observed in linear public goods experiments.
    Keywords: Public Goods, Experimental Economics, Voluntary Contribution Mechanism, Leadership.
    JEL: H41 C92
    Date: 2012
  7. By: Fithra Faisal Hastiadi (Waseda University and University of Indonesia)
    Abstract: This paper analyzes the FTA strategies of China, Japan and Korea (CJK) toward ASEAN countries using a three-player game. It explores the implications of China, Japan, and/or Korea participating in an FTA with ASEAN and the corresponding rewards in a payoff matrix. The Nash equilibrium occurs when China, Korea and Japan all choose to participate in an FTA with ASEAN. Dominant strategies and response functions for each country are analyzed using Error Correction Mechanism (ECM) and Vector Auto Regression (VAR) models. The paper also finds that Japan’s action to create FTA will be the most effective for regional settings. Although the game analysis is backward looking, it is a useful benchmark for understanding future FTA policies in East Asia.
    Keywords: FTA, Game Theory, Error Correction Mechanism, Vector Auto Regressive
    JEL: F13 C70 C22
    Date: 2012–10
  8. By: Le Breton, Michel; Thomas, Alban; Zaporozhets, Vera
    Date: 2012–07–18
  9. By: Bouton, Laurent; Castanheira, Micael; Llorente-Saguer, Aniol
    Abstract: This paper both theoretically and experimentally studies the properties of plurality and approval voting when the majority is divided as a result of information imperfections. The minority backs a third alternative, which the majority views as strictly inferior. The majority thus faces two problems: aggregating information and coordinating to defeat the minority candidate. Two types of equilibria coexist under plurality: either voters aggregate information, but this requires splitting their votes, or they coordinate but cannot aggregate information. With approval voting, expected welfare is strictly higher, because some voters multiple vote to achieve both goals at once. In the laboratory, we observe both types of equilibrium under plurality. Which one is selected depends on the size of the minority. Approval voting vastly outperforms plurality. Finally, subject behavior suggests the need to study asymmetric equilibria.
    Keywords: Approval Voting; Experiments; Multicandidate Elections; Plurality
    JEL: C72 C92 D70 P16
    Date: 2012–11
  10. By: Epstein, Gil S. (Bar-Ilan University); Mealem, Yosef (Netanya Academic College); Nitzan, Shmuel (Bar-Ilan University)
    Abstract: The form of contests for a single fixed prize can be determined by a designer who maximizes the contestants' efforts. This paper establishes that, under common knowledge of the two asymmetric contestants' prize valuations, a fair Tullock-type endogenously determined lottery is always superior to an all-pay-auction; it yields larger expected efforts (revenues) for the contest designer. If the contest can be unfair (structural discrimination is allowed), then the designer's payoff under the optimal lottery is equal to his expected payoff under the optimal all-pay auction.
    Keywords: contest design, efforts (revenue) maximization, discrimination, endogenous lottery, all-pay auction
    JEL: D70 D71 D72
    Date: 2012–11
  11. By: Kris De Jaegher
    Abstract: This paper presents a game-theoretical model of the physician-patient relationship. There is a conflict of interest between physician and patient, in that the physician prefers the patient to always obtain a particular treatment, even if the patient would not consider this treatment in his interest. The patient obtains imperfect cues of whether or not he needs the treatment. The effect is studied of an increase in the quality of the patient's information improves in this sense, he may either become better off or worse off. The precise circumstances under which either result is obtained, are derived.
    Keywords: physician-patient relationship, value of private information.
    JEL: I11 D82 C72
    Date: 2012–12
  12. By: Paulo Barelli (University of Rochester); Suren Basov (La Trobe University); Mauricio Bugarin (Insper Institute); Ian King (University of Melbourne)
    Abstract: We extend Armstrong’s result on exclusion in multi-dimensional screening models in two key ways, providing support for the view that this result holds true in a large class of models and is applicable to many different markets. First, we relax the strong technical assumptions he imposed on preferences and consumer types. Second, we extend the result beyond the monopolistic market structure to some oligopoly settings. We illustrate the results with several examples and applications.
    JEL: C72 D42 D43 D82
    Date: 2012–12

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