nep-gth New Economics Papers
on Game Theory
Issue of 2013‒01‒12
seven papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Mixed Equilibrium: When Burning Money is Rational By Souza, Filipe; Rêgo, Leandro
  2. Collaborative Dominance: When Doing Unto Others As You Would Have Them Do Unto You Is Reasonable. By Souza, Filipe; Rêgo, Leandro
  3. Three-Player Trust Game with Insider Communication By Sheremeta, Roman; Zhang, Jingjing
  4. Implementing quotas in university admissions: An experimental analysis By Kübler, Dorothea; Braun, Sebastian; Dwenger, Nadja; Westkamp, Alexander
  5. Information and Learning in Oligopoly: an Experiment By M. Bigoni; M. Fort
  6. You Can’t Put Old Wine in New Bottles: The Effect of Newcomers on Coordination in Groups By McCarter, Matthew; Sheremeta, Roman
  7. An Experiment on Decision Making under Risk and Uncertainty By Archavski, V. Yu.; Okulov, V. L.

  1. By: Souza, Filipe; Rêgo, Leandro
    Abstract: We discuss the rationality of burning money behavior from a new perspective: the mixed Nash equilibrium. We support our argument analyzing the first-order derivatives of the mixed equilibrium expected utility of the players with respect to their own utility payoffs in a 2x2 normal form game. We establish necessary and sufficient conditions that guarantee the existence of negative derivatives. In particular, games with negative derivatives are the ones that create incentives for burning money behavior since such behavior in these games improves the player’s mixed equilibrium expected utility. We show that a negative derivative for the mixed equilibrium expected utility of a given player i occurs if, and only if, he has a strict preference for one of the strategies of the other player. Moreover, negative derivatives always occur when they are taken with respect to player i’s highest and lowest game utility payoffs.
    Keywords: Mixed Nash Equilibrium; Burning Money; Collaborative Dominance; Security Dilemma
    JEL: C7
    Date: 2012–02–10
  2. By: Souza, Filipe; Rêgo, Leandro
    Abstract: In this article, we analyze how reasonable it is to play according to some Nash equilibria if players have a preference for one of their opponents’ strategies. For this, we propose the concepts of collaborative dominance and collaborative equilibrium. First we prove that, when the collaborative equilibrium exists it is always efficient, what can be seen as a focal property. Further we argue that a reason for players choosing not to collaborate is if they are focusing in security instead of efficiency, in which case they would prefer to play maximin strategies. This argument allows us to reduce the hall of reasonable equilibria for games where a collaborative equilibrium exists. Finally, we point out that two-player zero-sum games do not have collaborative equilibrium and, moreover, if there exists a strategy profile formed only by collaboratively dominated actions it is a Nash equilibrium in such kind of game.
    Keywords: Nash Equilibrium; Collaborative Dominance; Two-Players Zero-Sum Games
    JEL: C7
    Date: 2012–11–20
  3. By: Sheremeta, Roman; Zhang, Jingjing
    Abstract: We examine behavior in a three-player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%.
    Keywords: three-player trust games; experiments; reciprocity; communication
    JEL: C72 C91
    Date: 2013–01–02
  4. By: Kübler, Dorothea; Braun, Sebastian; Dwenger, Nadja; Westkamp, Alexander
    Abstract: Quotas for special groups of students often apply in school or university admission procedures. This paper studies the performance of two mechanisms to implement such quotas in a lab experiment. The fi rst mechanism is a simplifi ed version of the mechanism currently employed by the German central clearinghouse for university admissions, which first allocates seats in the quota for top-grade students before allocating all other seats among remaining applicants. The second is a modifi ed version of the student-proposing deferred acceptance (SDA) algorithm, which simultaneously allocates seats in all quotas. Our main result is that the current procedure, designed to give top-grade students an advantage, actually harms them, as students often fail to grasp the strategic issues involved. The modi ed SDA algorithm signifi cantly improves the matching for top-grade students and could thus be a valuable tool for redesigning university admissions in Germany. --
    JEL: C78 C92 I20
    Date: 2012
  5. By: M. Bigoni; M. Fort
    Abstract: This paper presents an experiment on learning in repeated games, which complements the analysis of players' actual choices with data on the information acquisition process they follow. Subjects play a repeated Cournot oligopoly, with limited a priori information. The econometrics hinges on a model built upon Experience Weighted Attraction learning, and the simultaneous analysis of data on the information gathered and on actions taken by the subjects. Results suggest that learning is a composite process, in which different components coexist. Adaptive learning emerges as the leading element, but when subjects look at the strategies individually adopted by their competitors they tend to imitate the most successful behavior, which makes markets more competitive. Reinforcement learning also plays a role, as subjects favor strategies that have yielded higher profits in the past.
    JEL: L13 C92 C72
    Date: 2013–01
  6. By: McCarter, Matthew; Sheremeta, Roman
    Abstract: A common finding in social sciences is that member change hinders group functioning and performance. However, questions remain as to why member change negatively affects group performance and what are some ways to alleviate the negative effects of member change on performance? To answer these questions we conduct an experiment in which we investigate the effect of newcomers on a group’s ability to coordinate efficiently. Participants play a coordination game in a four-person group for the first part of the experiment, and then two members of the group are replaced with new participants, and the newly formed group plays the game for the second part of the experiment. Our results show that the arrival of newcomers decreases trust among group members and this decrease in trust negatively affects group performance. Knowing the performance history of the arriving newcomers mitigates the negative effect of their arrival, but only when newcomers also know the oldtimers performance history. Surprisingly, in groups that performed poorly prior to the newcomers’ arrival, the distrust generated by newcomers is mainly between oldtimers about each other rather than about the newcomers.
    Keywords: coordination; group performance; oldtimers; newcomers; trust; experiments
    JEL: C72 C91
    Date: 2013–01–02
  7. By: Archavski, V. Yu.; Okulov, V. L.
    Abstract: We asked the participants of our controlled experiment to solve the Newsboy Problem. In this work we describe the design of the experiment. We analyze results of the experiment and emphasize the difference between the theoretical solution and the solution chosen by our subjects. We test sever-al hypotheses including the hypothesis of learning. We also suggest a pos-sible algorithm that could have been used by the participants. Using the assumptions of the probabilistic algorithm we compute the stationary distribution of the solutions. Executive summary is available on p.39 (in English).
    Keywords: Newsboy (Newsvendor) Problem, random demand, economic experiment, uncertainty, risk, algorithm decision, steady-state distribution,
    Date: 2012

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