nep-gth New Economics Papers
on Game Theory
Issue of 2013‒01‒07
sixteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Consistency, Population Solidarity, and Egalitarian Solutions for TU-Games By Rene van den Brink; Youngsub Chun; Yukihiko Funaki; Boram Park
  2. On the coevolution of social norms in primitive societies By L. Bagnoli; G. Negroni
  3. Learning in Network Games By Romero, José Gabriel; Kovarik, Jaromir; Mengel, Friederike
  4. Mathematical Institutional Economics By Martin Shubik
  5. Everyone Wants a Chance: Initial Positions and Fairness in Ultimatum Games By Gianluca Grimalda; Anirban Kar; Eugenio Proto
  6. Growing groups, cooperation, and the rate of entry By Eva Ranehill; Frédéric Schneider; Roberto A. Weber
  7. Beliefs and Public Good Provision with Anonymous Contributors By Wilfredo L. Maldonado; José A. Rodrigues-Neto
  8. Co-action equilibria and strategy switchings in a stochastic minority game By V. Sasidevan; Deepak Dhar
  9. Mutual Insurance Networks in Communities By Pascal Billand; Christophe Bravard; Sudipta Sarangi
  10. Informational Loss in Bundled Bargainings By Ying Chen; Hülya Eraslan
  11. WP 124: Conditions and motives for voluntary sharing. Results of a solidarity game experiment By Paul Beer; Maarten Berg
  12. Market Power in Bilateral Oligopoly Markets with Nonexpandable Infrastructures By Yukihiko Funaki; Harold Houba; Evgenia Motchenkova
  13. Heartbeat and Economic Decisions: Observing Mental Stress among Proposers and Responders in the Ultimatum Bargaining Game By Uwe Dulleck; Markus Schaffner; Benno Torgler
  14. A new analysis of a simple model of fair allocation By Juan D. Moreno-Ternero
  15. Coalition Formation and Environmental Policies in International Oligopoly Markets By Cavagnac, Michel; Cheikbossian, Guillaume
  16. Supply Function Equilibria in Networks with Transport Constraints By Holmberg, Pär; Philpott, Andrew

  1. By: Rene van den Brink (VU University Amsterdam); Youngsub Chun (Seoul National University); Yukihiko Funaki (Waseda University); Boram Park (Rutgers University)
    Abstract: A (point-valued) solution for cooperative games with transferable utility, or simply TU-games, assigns a payoff vector to every TU-game. In this paper we discuss two classes of equal surplus sharing solutions, one consisting of all convex combinations of the equal division solution and the CIS-value, and its dual class consisting of all convex combinations of the equal division solution and the ENSC-value. We provide several characterizations using either population solidarity or a reduced game consistency in addition to other standard properties.
    Keywords: TU-game; equal division solution; CIS-value; ENSC-value; population solidarity; consistency
    JEL: C71
    Date: 2012–12–07
  2. By: L. Bagnoli; G. Negroni
    Abstract: Two parties bargaining over a pie, the size of which is determined by their previous investment decisions. The bargaining rule is sensitive to investment behavior. Two games are considered. In both, bargaining proceeds according to the Nash Demand Game when a symmetric investments pro?le is observed. When, on the other hand, an asymmetric investments pro?le is observed, we assume that bargaining proceeds according to the Ultimatum Game in one case and according to a Dictator Game in the other. We hereby show that in both games when a unique stochastically stable outcome exists it supports an homogeneous behavior in the whole population both at the investment stage and at the distribution stage. A norm of investment and a norm of division must therefore coevolve in the two games, supporting both the efficient investment pro?le and the egalitarian distribution of the surplus, respectively. The two games differ depending on the conditions needed for the two norms to coevolve. The games are proposed to explain the social norms used in modern hunter-gatherer societies.
    JEL: C78 D83 L14 Z13
    Date: 2012–12
  3. By: Romero, José Gabriel; Kovarik, Jaromir; Mengel, Friederike
    Abstract: We report the findings of an experiment designed to study how people learn and make decisions in network games. Network games offer new opportunities to identify learning rules, since on networks (compared to e.g. random matching) more rules differ in terms of their information requirements. Our experimental design enables us to observe both which actions participants choose and which information they consult before making their choices. We use this information to estimate learning types using maximum likelihood methods. There is substantial heterogeneity in learning types. However, the vast majority of our participants' decisions are best characterized by reinforcement learning or (myopic) best-response learning. The distribution of learning types seems fairly stable across contexts. Neither network topology nor the position of a player in the network seem to substantially affect the estimated distribution of learning types.
    Keywords: experiments, game theory, heterogeneity, learning, maximum likelihood method, networks
    JEL: C72 C90 C91 D85
    Date: 2012–11–23
  4. By: Martin Shubik (Cowles Foundation, Yale University)
    Abstract: An overview is given of the utilization of strategic market games in the development of a game theory based theory of money and financial institutions.
    JEL: C72 C73 E44
    Date: 2012–12
  5. By: Gianluca Grimalda (LEE & Economics Department, Universitat Jaume I, Castellón, Spain); Anirban Kar (Delhi School of Economics, University of Delhi, India); Eugenio Proto (Department of Economics, University of Warwick, UK)
    Abstract: We investigate experimentally the modification of initial chances to acquire advantaged positions in bargaining problems. In the baseline case players have equal opportunities to acquire the advantaged position. Chances become increasingly unequal across three treatments. We find: (1) The more unequal initial chances, the lower acceptance rates of a given split; consequently inequality decreases. (2) Players react significantly to being assigned a purely symbolic 1% chance of occupying the advantaged position compared to having no chance; (3) Players respond to the way opportunities are distributed across periods of time. These results confirm and extend cross-national survey evidence concerning the relevance of procedural fairness for redistributive preferences.
    Keywords: Procedural fairness, Initial opportunities, Symbolic opportunity, Ultimatum Game
    JEL: C99 C78 D63
    Date: 2012
  6. By: Eva Ranehill; Frédéric Schneider; Roberto A. Weber
    Abstract: We study the stability of voluntary cooperation to entry by individuals coming from groups with low cooperation rates. We investigate the effect of varying entry rates on sustained cooperation. In a finitely-repeated public good game with economies of scale, we initially allot participants to small, “High-cooperation” groups and large, “Low-cooperation” groups. We then study movement from the “Low” groups into the “High” groups under two main treatment conditions that vary the rate of movement. We find that fast growth disrupts efficient public good provision; but when moved in slowly, members of “failed” groups adapt to contribution levels in cooperative groups. This behavior is generally consistent with a belief-driven explanation similar to Fischbacher and Gächter (2010). In a third condition, in which participants in the “High” group decide on the rate of entry by voting, growth generally occurs slowly but stops short of the efficient group size. Interestingly, newcomers, not incumbents, veto further entry. We conclude that the right rate of entry can greatly facilitate cooperation, but that overly cautious expansion may limit the realization of potential gains from growth.
    Keywords: Voluntary cooperation, experiment, public good game
    JEL: C92 C72
    Date: 2012–12
  7. By: Wilfredo L. Maldonado; José A. Rodrigues-Neto
    Abstract: We analyze a static game of public good contributions where finitely many anonymous players have heterogeneous preferences about the public good and heterogeneous beliefs about the distribution of preferences. In the unique symmetric equilibrium, the only individuals who make positive contributions are those who most value the public good and who are also the most pessimistic; that is, according to their beliefs, the proportion of players who value the most the public good is smaller than it would be according to any other possible belief. We predict whether the aggregate contribution is larger or smaller than it would be in an analogous game with complete information (and heterogeneous preferences), by comparing the beliefs of contributors with the true distribution of preferences. A tradeoff between preferences and beliefs arises if there is no individual who simultaneously has the highest preference type and the most pessimistic belief. In this case, there is a symmetric equilibrium, and multiple symmetric equilibria occur only if there are more than two preference types.
    JEL: C72 H41
    Date: 2012–12
  8. By: V. Sasidevan; Deepak Dhar
    Abstract: We study a variation of the minority game, in which each agent uses a probabilistic strategy, and tries to optimize her total expected weighted future payoff, the weight of the payoff after $\tau$ days being $(1 - \lambda) \lambda^\tau$, with $\lambda < 1$. We show that standard Nash equilibrium concept is unsatisfactory in this case, and propose an alternative, called co-action equilibrium. We study the co-action equilibrium steady state of the system as $\lambda$ is varied from 0 to 1, and show that it gives a higher expected payoff than the Nash equilibrium for all agents. Parameters of the optimal strategy depend on $\lambda$, and can change discontinuously as $\lambda$ is varied, even for a finite number of agents. We analyse in detail the optimal strategies when the number of agents $N \leq 7$, and they decide selfishly, using only previous day's outcome.
    Date: 2012–12
  9. By: Pascal Billand (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Christophe Bravard (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Sudipta Sarangi (Department of Economics, Louisiana State University - Department of Economics, Louisiana State University)
    Abstract: We study the formation of mutual insurance networks in a model where every agent who obtains more resources gives a -xed amount of resources to all agents who have obtained less resources. The low resource agent must be directly linked to the high resource agent to receive this transfer. We identify the pairwise stable networks and e-cient networks. Then, we extend our model to situations where agents di-er in their generosity with regard to the transfer scheme. We show that there exist conditions under which in a pairwise stable network agents who provide the same level of transfers are linked together, while there are no links between agents who provide high transfers and agents who provide low transfers.
    Keywords: Mutual insurance networks; Pairwise stable networks; Effi cient networks
    Date: 2012–12–21
  10. By: Ying Chen; Hülya Eraslan
    Abstract: We analyze a legislative bargaining game over an ideological and a distributive issue. Legislators are privately informed about their ideological positions. Communication takes place before a proposal is offered and majority rule voting determines the outcome. We compare the outcome of the ``bundled bargaining" game in which the legislators negotiate over both issues together to that of the ``separate bargaining" game in which the legislators negotiate over the issues one at a time. Although bundled bargaining allows the proposer to use transfers as an instrument for compromise on the ideological issue, we identify two disadvantages of bundled bargaining under asymmetric information: (i) risk of losing the surplus (failure to reach agreement on ideology results in the dissipation of the surplus under bundled bargaining, but not under separate bargaining); (ii) informational loss (the legislators may convey less information in the bundled bargaining game). Even when there is no risk of losing the surplus, the informational loss from bundling can be sufficiently large that it makes the proposer worse off.
    Date: 2012–12
  11. By: Paul Beer (AIAS, Universiteit van Amsterdam); Maarten Berg (AIAS, Universiteit van Amsterdam)
    Abstract: This paper studies experimentally the conditions and motives for voluntary solidarity, following a game theoretical approach. The ‘solidarity game’ that is used in this study consists of groups of four players and is based on the solidarity game of Selten and Ockenfels (1998). In each group, two winners, which are either randomly selected or on the basis of their performance on a quiz, distribute 20 credits each (reflecting real money). We tested four hypotheses regarding the effect of various conditions on voluntary sharing, related to the motives for solidary behaviour, viz. self-interest, fairness, neediness and meritocracy. For most of our hypotheses the experiments provided support, although there are a few exceptions. Players share more with others in the first round of the four shots game than in the one shot game, but their gifts decrease quickly as the game progresses, which confirms that they act largely out of self-interest. Players give more to a player from whom they have received money in the previous rounds (fairness, resulting in direct reciprocity). However, players do not give more to co-players who have been generous to others in the previous round, which would have been proof of indirect reciprocity. Players do not give more to a loser than to a winner in the current round, and, consequently, do not equalize the differences in revenue. However, they give more to players who have received relatively little in previous rounds, which suggests that neediness of the potential beneficiary is also a motive. Finally, winners give more in the random based conditions, when they do not really ‘deserve’ to be a winner, than in the performance based conditions, which offers support for the meritocracy hypothesis. The motives that the subjects expressed themselves for their sharing behaviour in answering some post-hoc questions, mirrors their actual behaviour pretty well. Additionally, we also analyse the effect of some personal characteristics, and the party preferences and media use of the players.
    Date: 2012–12
  12. By: Yukihiko Funaki (Waseda University); Harold Houba (VU University Amsterdam); Evgenia Motchenkova (VU University Amsterdam)
    Abstract: We consider price-fee competition in bilateral oligopolies with perfectly-divisible goods, non-expandable infrastructures, concentrated agents on both sides, and constant marginal costs. We define and characterize stable market outcomes. Buyers exclusively trade with the supplier with whom they achieve maximal bilateral joint welfare. Prices equal marginal costs. Threats to switch suppliers set maximal fees. These also arise from a negotiation model that extends price competition. Competition in both prices and fees necessarily emerges. It improves welfare compared to price competition, but consumer surpluses do not increase. The minimal infrastructure achieving maximal aggregate welfare differs from the one that protects buyers most.
    Keywords: Assignment Games; Infrastructure; Negotiations; Non-linear pricing; Market Power; Countervailing power
    JEL: C78 L10 L14 D43 R10
    Date: 2012–12–14
  13. By: Uwe Dulleck; Markus Schaffner; Benno Torgler
    Abstract: In line with experimental economics' goal of better understanding human economic decision making, early research on the ultimatum bargaining game (see Güth Schmittberger, and Schwarze 1982) demonstrated that motives other than pure monetary reward play a role. More recently, the development of of neuroeconomic research techniques has allowed physiological reactions to be recorded as signals of emotional response. In this study, we apply heart rate variability (HRV) to explore the behaviour and physiological reactions during the ultimatum bargaining game of not only responders but also proposers. Because this technology is small and non-intrusive, we are able to run our experiment using a standard experimental economic setup. We find that low offers by a proposer cause signs of mental stress in both the proposer and the responder; that is, both exhibit high ratios of low to high frequency activity in the HRV spectrum.
    Date: 2012–12
  14. By: Juan D. Moreno-Ternero (Department of Economics, Universidad Pablo de Olavide; CORE, Université catholique de Louvain)
    Abstract: In a recent article, Fragnelli and Gagliardo [Cooperative models for allocating an object, Economics Letters 117 (2012) 227-229] propose several procedures to solve a basic problem of fair allocation. We scrutinize their proposal and contextualize it into recent developments of the literature on bankruptcy problems. Our analysis supports two of the procedures they propose; namely, the Shapley and Talmud rules.
    Keywords: Fair allocation, Bankruptcy problems, Lower bounds, Upper bounds, Shapley, Talmud, Concede-and-Divide
    JEL: D63
    Date: 2012–12
  15. By: Cavagnac, Michel; Cheikbossian, Guillaume
    Abstract: This paper analyzes the problem of international environmental cooperation as a coalition formation game. For this purpose, we develop a simple model with three countries of unequal size. Strate- gic interactions between those countries come from the imperfect competition among producers in global markets and from the transboundary pollution generated by the ?rms. To capture e¢ ciency gains from coordinating policies, countries can join a coalition and sign an international environmental agreement. The equilibrium coalition structure then depends on the country-size asymmetry and on the marginal environmental damage. Interestingly, we show that the grand coalition is less likely to emerge as an equi- librium outcome once two countries form a subcoalition. Furthermore, the further enlargement of the initial subcoalition can be blocked either by the outsider or by the insiders.
    Keywords: Tax coordination, Transboundary Pollution, International Trade, Oligopoly, Coalition Formation
    JEL: F55 H23
    Date: 2012–04
  16. By: Holmberg, Pär (Research Institute of Industrial Economics (IFN)); Philpott, Andrew (Department of Engineering Science)
    Abstract: Transport constraints limit competition and arbitrageurs' possibilities of exploiting price differences between goods in neighbouring markets, especially when storage capacity is negligible. We analyse this in markets where strategic producers compete with supply functions, as in wholesale electricity markets. For networks with a radial structure, we show that existence of supply function equilibria (SFE) is ensured if demand shocks are suffciently evenly distributed, and solve for SFE in symmetric radial networks with uniform multi-dimensional nodal demand shocks. An equilibrium offer in such networks is identical to an SFE offer in an isolated node where the symmetric number of firms has been scaled by a market integration factor, the expected number of nodes that are completely integrated with a node in the symmetric network. The analysis can be extended to mesh networks (as in electricity systems) although the resulting models do not simplify as in the radial case.
    Keywords: Transmission network; Graph theory; Market integration; Wholesale electricity markets
    JEL: C72 D43 D44 L91
    Date: 2012–12–18

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