nep-gth New Economics Papers
on Game Theory
Issue of 2013‒02‒03
nine papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. A strategic market game approach for the private provision of public goods By Marta Faias; Emma Moreno-garcía; Myrna Wooders
  2. Coordination and Cheap Talk in a Battle of the Sexes By Chirantan Ganguly; Indrajit Ray
  3. Coalitions, tipping points and the speed of evolution By Newton, Jonathan
  4. Matching with Contracts: An Efficient Marriage Market? By Chloe Qianzi Zeng
  5. Using or Hiding Private Information? An Experimental Study of Zero-Sum Repeated Games with Incomplete Information By Nicolas Jacquemet; Frédéric Koessler
  6. A Competitive Partnership Formation Process By Tommy Andersson; Jens Gudmundsson; Dolf Talman; Zaifu Yang
  7. A Simple Model of Conflict By Sebastian Ille
  8. Relational Incentive Contracts with Persistent Private Information By James Malcomson
  9. Competition in Posted Prices With Bargaining By David Gill; John Thanassoulis

  1. By: Marta Faias (Universidade Nova de Lisboa); Emma Moreno-garcía (Universidad de Salamanca); Myrna Wooders (Vanderbilt University)
    Abstract: Bergstrom, Blume and Varian (1986) provides an elegant gametheoretic model of an economy with one private good and one public good. Strategies of players consist of voluntary contributions of the private good to public good production. Without relying on first order conditions, the authors demonstrate existence of Nash equilibrium and an extension of Warr's neutrality result - any redistribution of endowment that left the set of contributors unchanged would induce a new equilibrium with the same total public good provision. The assumption of one-private good greatly facilities the results. We provide analogues of the Bergstrom, Blume and Varian results in a model allowing multiple private and public goods. In addition, we relate the strategic market game equilibrium to the private provision of equilibrium of Villanaci and Zenginobuz (2005), which provides a counter-part to the Walrasian equilibrium for a public goods economy. Our techniques follow those of Dubey and Geanakoplos (2003), which itself grows out of the seminal work of Shapley and Shubik (1977). Our approach also incorporates, into the strategic market game literature, economies with production, not previously treated and, as a by-product, establishes a new existence of private-provision equilibrium.
    Keywords: Public goods, market games, equilibrium, Nash equilibrium, privateprovision, voluntary contributions.
    JEL: H0 C7
    Date: 2012–12–02
  2. By: Chirantan Ganguly; Indrajit Ray
    Abstract: We consider a Battle of the Sexes game with incomplete information and allow cheap talk regarding players' private information before the game is played. We prove that the unique fully revealing symmetric cheap talk equilibrium has a desirable coordination property. Such coordination can also be obtained as a partially revealing cheap talk equilibrium. These outcomes can also be achieved using corresponding incentive compatible mechanisms, however, for different ranges of the prior probability.
    Keywords: Battle of the Sexes, Private Information, Cheap Talk, Coordination, Mechanism
    JEL: C72
    Date: 2013–01
  3. By: Newton, Jonathan
    Abstract: This study considers pure coordination games on networks and the waiting time for an adaptive process of strategic change to achieve efficient coordination. Although it is in the interest of every player to coordinate on a single globally efficient norm, coalitional behavior at a local level can greatly slow, as well as hasten convergence to efficiency. For some networks, parameter values exist at which the effect of coalitional behavior changes abruptly from a conservative effect to a reforming effect. These effects are confirmed for a variety of stylized and empirical social networks found in the literature. For coordination games in which the Pareto efficient and risk dominant equilibria differ, polymorphic states can be the only stochastically stable states.
    Keywords: social networks; networks; conservatism; reform; social norm; coalition; learning; Stochastic stability; Evolution
    Date: 2013–01
  4. By: Chloe Qianzi Zeng
    Abstract: This paper studies a marriage market with two-sided information asymmetry in whichthe gains from marriage are stochastic. Contracts specify divisions of ex-post realizedmarital surplus. I first study a game in which one side of the matching market offerscontracts. I show that when expected marital surplus is strictly monotonic in agents’types, no separating equilibrium that achieves matching efficiency exists. I then studya social planner’s problem, finding necessary and sufficient conditions for a truthful directrevelation mechanism to achieve matching efficiency. These conditions become morestringent as the number of agents in the matching market increases.
    Keywords: Matching, two-sided information asymmetry, endogenous sharing rule, marriage market, stochastic marital surplus
    JEL: C78 D82 J12 D13
    Date: 2012–11–26
  5. By: Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II); Frédéric Koessler (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA))
    Abstract: This paper studies the value of private information in strictly competitive interactions in which there is a trade-off between (i) the short-run gain of using information, and (ii) the long-run gain of concealing it. We implement simple examples from the class of zero-sum repeated games with incomplete information. While the empirical value of information does not always coincide with the theoretical prediction, the qualitative properties of the value of information are satisfied in the laboratory: (i) it is never negative, (ii) it decreases with the number of repetitions, (iii) it is bounded below by the value of the infinitely repeated game, and (iv) it is bounded above by the value of the one-shot game. In line with the theory, the empirical use of private information is almost complete when it should be, and decreases in longer interactions.
    Keywords: Concealment of information; Laboratory experiments; Value of information; Zero-sum repeated games
    Date: 2013
  6. By: Tommy Andersson; Jens Gudmundsson; Dolf Talman; Zaifu Yang
    Abstract: A group of heterogenous agents may form partnerships in pairs. All single agents as well as all partnerships generate values. If two agents choose to cooperate, they need to specify how to split their joint value among one another. In equilibrium, which may or may not exist, no agents have incentives to break up or form new partnerships. This paper proposes a dynamic competitive adjustment process that always either finds an equilibrium or exclusively proves the nonexistence of any equilibrium in finitely many steps. When an equilibrium exists, partnership and revenue distribution will be automatically and endogenously determined by the process. Moreover, several fundamental properties of the equilibrium solution and the model are derived.
    Keywords: Partnership formation, adjustment process, equilibrium, assignment market
    JEL: C62 C72 D02
    Date: 2013–01
  7. By: Sebastian Ille
    Abstract: This paper develops a simple dynamic, non-symmetric game between two player populations that can be generalised to a large variety of conflicts. One population attempts to re-write a current (social) contract in its favour, whereas the other prefers to maintain the status quo. In the modelùs initial set up, the free-rider problem obstructs the occurrence of a conflict, leading to a low probability of a successful turn-over. The normative and conventional framework, in which players interact, plays however a vital role in the evolution of conflicts. By relating the individual pay-off perceptions for each strategy to the type and frequency of norm violations, the free-rider effect can be considerably weakened, thus enabling the model to predict the existence of two stable equilibria; one with a high rate of conflict, and another in which no conflict arises. This second equilibrium is caused by a triggering event. The model provides an explanation of how and why these events may occur and under which conditions they can be observed more frequently. In addition, it is also shown which factors influence the equilibriaùs basin of attraction, i.e. the likelihood of a transition and hence the probability of a conflict.
    Keywords: Social Conflict, Social Change, Evolutionary Game, Stability of Equilibria
    Date: 2013–01–25
  8. By: James Malcomson
    Abstract: This paper investigates relational incentive contracts with a continuum of privatelyobservedagent types that are persistent over time. For a sufficiently productive relationship,a pooling contract exists in which all agent types continuing the relationshipchoose the same action. Necessary and sufficient conditions are given for some separationto be feasible; the parties can then do better than with full pooling. When futureactions are optimal, however, separation of all types is not possible; the finest separationachievable is into partitions each containing a non-degenerate interval of types.Separation always involves lower output initially than after separation has occurred.
    Keywords: Relational incentive contracts, private information, ratchet effect, dynamic enforcement
    JEL: C73 D82 D86
    Date: 2012–12–04
  9. By: David Gill; John Thanassoulis
    Abstract: In this paper we study price competition between firms when some consumers attempt tobargain while others buy at the public list or posted prices. Even though bargainers succeed innegotiating discounts off the list prices, their presence dampens competitive pressure in the marketby reducing the incentive to undercut a rival’s list price, thus raising all prices and increasingprofits. Welfare falls because of the uncertainty in the bargaining process, which generates somemisallocation of products to consumers. We also find that the bargainers facilitate collusion byreducing the market share that can be gained from a deviation.
    Keywords: Posted prices, list prices, collusion, bargaining, negotiation, haggling, discounts, outside option, price takers, Hotelling line
    JEL: C78 D43 L13
    Date: 2013–01–14

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