nep-gth New Economics Papers
on Game Theory
Issue of 2013‒03‒16
thirty papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Sharing the costs of cleaning a river: the Upstream Responsibility rule By Jorge Alcalde-Unzu; Maria Gomez-Rua; Elena Molis
  2. Solutions For Games With General Coalitional Structure And Choice Sets By Koshevoy, G.A.; Suzuki, T.; Talman, A.J.J.
  3. Auctioning the right to play ultimatum games and the impact on equilibrium selection By Jason Shachat; J. Todd Swarthout
  4. Evolutionary stability in finite stopping games under a fast best-reply dynamics By Zibo Xu
  5. Evolutionary stability in general extensive-form games of perfect information By Zibo Xu
  6. A Competitive Approach to Leadership in Public Good Games By Centorrino, Samuele; Concina, Laura
  7. Ordinal equivalence of values and Pigou-Dalton transfers in TU-games By Chameni Nembua, Célestin; Demsou, Themoi
  8. A Comparison of NTU values on a Certain Class of Games By Chaowen Yu
  9. Representation of constitutions under incomplete information By Bezalel Peleg; Shmuel Zamir
  10. The instability of backward induction in evolutionary dynamics By Zibo Xu
  11. Robust Equilibria in Location Games By Berno Buechel; Nils Röhl
  12. On the Efficient Provision of Public Goods by Means of Lotteries By Jörg Franke; Wolfgang Leininger
  13. Invader Strategies in the War of Attrition with Private Information By Lars Peter Metzger
  14. Communication and Output Sharing in Common Pool Resource Environments By Neil J. Buckley; Stuart Mestelman; R. Andrew Muller; Stephan Schott; Jingjing Zhang
  15. Identification of discrete choice models for bundles and binary games By Jeremy Fox; Natalia Lazzati
  16. Network Design under Local Complementarities By Mohamed Belhaj; Sebastian Bervoets; Frédéric Deroïan
  17. Two Folk Manipulability Theorems in the General One-to-one Two-sided Matching Markets with Money By David Pérez-Castrillo; Marilda Sotomayor
  18. Testing for Differences across Genders: A Replication of Ultimatum Game at International Islamic University, Islamabad By HASAN, HAMID; EJAZ, NAUMAN
  19. Does Truth Win When Teams Reason Strategically? By Jeanette Brosid-Koch; Timo Heinrich; Christoph Helbach
  20. Information feedback and contest structure in rent-seeking games By Francesco Fallucchi; Elke Renner; Martin Sefton
  21. Strategic signaling or emotional sanctioning? An experimental study of ex post communication in a repeated public goods game. By Adam Zylbersztejn
  22. Change in risk and bargaining game By Hailin Sun; Sanxi Li; Tong Wang
  23. Asymmetries in Rent-Seeking By Giuseppe Dari-Mattiacci; Eric Langlais; Bruno Lovat; Francesco Parisi
  24. Bargaining position, bargaining power, and the property rights approach By Schmitz, Patrick W.
  25. Asymmetric Information and Rationalizability By Gabriel Desgranges; Stéphane Gauthier
  26. Cross-Subsidization and Matching Design By Renato Gomes; Alessandro Pavan
  27. Conditional Expected Utility By AMARANTE, Massimiliano
  28. Commitment Problems and War in International Bargaining By Erwin Amann; Nadine Leonhardt
  29. Nobody's innocent: the role of customers in the doping dilemma By Buechel, Berno; Emrich, Eike; Pohlkamp, Stefanie
  30. Environmental Catastrophes Under Time-inconsistent Preferences By Michielsen, T.O.

  1. By: Jorge Alcalde-Unzu (Public University of Navarre, Department of Economics.); Maria Gomez-Rua (University of Vigo, Department of Statistics and Operations Research.); Elena Molis (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: The cleaning up of waste present in transboundary rivers, which re- quires the cooperation of dierent authorities, is a problematic issue, espe- cially when responsibility for the discharge of the waste is not well-dened. Following Ni and Wang [12] we assume that a river is a segment divided into several regions from upstream to downstream. We show that when the transfer rate of the waste is unknown, the clean-up cost vector provides useful information for estimating some limits in regard to the responsi- bility of each region. We propose a cost allocation rule, the Upstream Responsibility rule, which takes into account these limits in distributing costs \fairly" and we provide an axiomatic characterization of this rule via certain properties based on basic ideas concerning the responsibility of regions.
    Keywords: Cost allocation; waste river; responsibility; characterization
    JEL: C71 D61
    Date: 2013–02–27
  2. By: Koshevoy, G.A.; Suzuki, T.; Talman, A.J.J. (Tilburg University, Center for Economic Research)
    Abstract: In this paper we introduce the concept of quasi-building set that may underlie the coalitional structure of a cooperative game with restricted communication between the players. Each feasible coalition, including the set of all players, contains a nonempty subset called the choice set of the coalition. Only players that are in the choice set of a coalition are able to join to feasible subcoalitions to form the coalition and to obtain a marginal contribution. We demonstrate that all restricted communication systems that have been studied in the literature take the form of a quasi-building set for an appropriate set system and choice set. Every quasi-building set determines a nonempty collection of maximal strictly nested sets and each such set induces a rooted tree satisfying that every node of the tree is a player that is in the choice set of the feasible coalition that consists of himself and all his successors in the tree. Each tree corresponds to a marginal vector of the underlying game at which each player gets as payo his marginal contribution when he joins his successors in the tree. As solution concept of a quasi-building set game we propose the average marginal vector (AMV) value, being the average of the marginal vectors that correspond to the trees induced by all maximal strictly nested sets of the quasi-building set. Properties of this solution are also studied. To establish core stability we introduce appropriate convexity conditions of the game with respect to the underlying quasi-building set. For some speci cations of quasi-building sets, the AMV-value coincides with solutions known in the literature, for example, for building set games the solution coincides with the gravity center solution and the Shapley value recently de ned for this class. For graph games it therefore diers from the well-known Myerson value. For a full communication system the solution coincides with the classical Shapley value.
    Keywords: Set system;nested set;rooted tree;chain;core;convexity;marginal vector;Shapley value
    JEL: C71
    Date: 2013
  3. By: Jason Shachat; J. Todd Swarthout
    Abstract: We conduct an experiment in which we auction the scarce rights to play the Proposer and Responder positions in subsequent ultimatum games. As a control treatment, we randomly allocate these rights and then charge exogenous participation fees according to the auction price sequences observed in the auction treatment. With endogenous selection into ultimatum games via auctions, we find that play converges to a session-specific Nash equilibrium and auction prices emerge which support this equilibrium by the principle of forward induction. With random assignment and exogenous participation fees, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. The Nash equilibrium observed within a session results in low ultimatum game offers, but the subgame perfect Nash equilibrium is never observed.
    Keywords: Ultimatum Bargaining, Auction, Forward Induction
    JEL: C92 C78 D44
    Date: 2013–02
  4. By: Zibo Xu
    Abstract: We consider a fast evolutionary dynamic process on finite stopping games, where each player at each node has at most one move to continue the game. A state is evolutionarily stable if its long-run relative frequency of occurrence is bounded away from zero as the mutation rate decreases to zero. The fast dynamic process allows each individual in each population to change its strategy at every stage. We define a robustness index of backward induction and show examples where the backward induction equilibrium component is not evolutionarily stable for large populations. We show some sufficient conditions for evolutionary stability, which are different from the ones for the conventional evolutionary model. Even for this fast dynamic process, the transition between any two Nash equilibrium components may take very long time.
    Date: 2013–01
  5. By: Zibo Xu
    Abstract: We consider a basic dynamic evolutionary model with rare mutation and a best-reply (or better-reply) selection mechanism. A state is evolutionarily stable if its long-term relative frequency of occurrence is bounded away from zero as the mutation rate decreases to zero. We prove that, for all finite extensive-form games of perfect information, only Nash equilibria are evolutionarily stable. We show that, in games where a player may play at more than one node along some path, even when the populations increase to infinity, there may be some evolutionarily stable states which are not part of the backward induction equilibrium component. We give a sufficient condition for evolutionary stability and show how much extra value is needed in the terminal payoffs to make an equilibrium evolutionarily stable.
    Date: 2013–01
  6. By: Centorrino, Samuele; Concina, Laura
    Abstract: We show that introducing a competitive preliminary stage in a sequential public good game helps select one of the more cooperative leaders in the group. Using a modified second price auction, we find that bids have a strong positive predictive power on individual contributions. Moreover, evidence is provided that trust can explain voluntary and cooperative leadership. However, followers reaction to voluntary leaders may rise free riding behaviour, with uncertain effect on total public good provision.
    Keywords: Public good experiment Leadership Self-selection Cooperation Trust Public good provision.
    JEL: A13 C72 C92 H41 Z13
    Date: 2013–02
  7. By: Chameni Nembua, Célestin; Demsou, Themoi
    Abstract: The paper studies the ordinal equivalence of Linear, Efficient and Symmetry (LES) values in TU-games. It demonstrates that most of the results obtained by Carreras F, Freixas J (2008) in the case of semivalues and simple games are transposable on LES values and the whole TU-games set. In particular, linear and weakly linear games are analyzed. We characterize both values which are ordinal equivalent in all TU-games. Pigou-Dalton transfers are introduced for social comparison of values and to shed light on the way payoffs are redistributed from a value to another.
    Keywords: Cooperative games; desirability relation; linear values; linear games; Pigou-Dalton transfers; concentration, Lorenz dominance.
    JEL: C71 D63
    Date: 2013–03–09
  8. By: Chaowen Yu (Graduate School of Economics, Keio University)
    Abstract: The Maschler-Owen value and the NTU Shapley value are two well-known ex- tensions of the TU Shapley value. In this paper, we compare a set of axioms that these values satisfy on the domain of games consisting of all monotonic hyperplane games and all monotonic prize games (Hart [1994]). The axiomatization of these two values on this domain are also given.
    Date: 2013–03
  9. By: Bezalel Peleg; Shmuel Zamir
    Abstract: We model constitutions by effectivity functions. We assume that the constitution is common knowledge among the members of the society. However, the preferences of the citizen are private information. We investigate whether there exist decision schemes (i. e., functions that map profiles of (dichotomous) preferences on the set of outcomes to lotteries on the set of social states), with the following properties: i) The distribution of power induced by the decision scheme is identical to the effectivity function under consideration; and ii) the (incomplete information) game associated with the decision scheme has a Bayesian Nash equilibrium in pure strategies. If the effectivity function is monotonic and superadditive, then we find a class of decision schemes with the foregoing properties. When applied to n-person games in strategic form, a decision scheme d is a mapping from profiles of (dichotomous) preferences on the set of pure strategy vectors to probability distributions over outcomes (or equivalently, over pure strategy vectors). We prove that for any feasible and individually rational payoff vector of a strategic game, there exists a decision scheme that yields that payoff vector as a (pure) Nash equilibrium payoff in the game induced by the strategic game and the decision scheme. This can be viewed as a kind of purification result.
    Date: 2013–01
  10. By: Zibo Xu
    Abstract: This paper continues the work initiated in [19]. We adopt the same model as in [19]. We show that the non-backward-induction equilibrium component may be evolutionarily stable for any population size in a finite stopping game where the two equilibrium components are terminated by different players. A surprising result is that the backward induction equilibrium component may not be evolutionarily stable for large populations. Finally, we study the evolutionary stability result in a different limiting process where the expected number of mutations per generation is bounded away from both zero and infinity.
    Date: 2013–01
  11. By: Berno Buechel (University of Hamburg); Nils Röhl (University of Paderborn)
    Abstract: In the framework of spatial competition, two or more players strategically choose a location in order to attract consumers. It is assumed standardly that consumers with the same favorite location fully agree on the ranking of all possible locations. To investigate the necessity of this questionable and restrictive assumption, we model heterogeneity in consumers' distance perceptions by individual edge lengths of a given graph. A profile of location choices is called a ``robust equilibrium'' if it is a Nash equilibrium in several games which differ only by the consumers' perceptions of distances. For a finite number of players and any distribution of consumers, we provide a full characterization of all robust equilibria and derive structural conditions for their existence. Furthermore, we discuss whether the classical observations of minimal differentiation and inefficiency are robust phenomena. Thereby, we find strong support for an old conjecture that in equilibrium firms form local clusters.
    Keywords: spatial competition, Hotelling-Downs, networks, graphs, Nash equilibrium, median, minimal differentiation
    JEL: C72 D49 P16 D43
    Date: 2013–02
  12. By: Jörg Franke; Wolfgang Leininger
    Abstract: We provide a solution to the free-rider problem in the provision of a public good. To this end we define a biased indirect contribution game which provides the efficient amount of the public good in non-cooperative Nash equilibrium. No confiscatory taxes or other means of coercion are used. We rather extend the model of Morgan (2000), who used fair raffles as voluntary contribution schemes, to unfair or biased raffles, which we show to be equivalent to fair raffles whose tickets are sold to consumers at different individual prices. We give a detailed account of the solution for the case of two different consumers and discuss its implications for the general case of many consumers.
    Keywords: Public good provision; biased lotteries; charities
    JEL: C72 D72 H41
    Date: 2013–01
  13. By: Lars Peter Metzger
    Abstract: Second price allpay auctions (wars of attritions) have an evolutionarily stable equilibrium in pure strategies if valuations are private information. I show that for any level of uncertainty there exists a pure deviation strategy close to the equilibrium strategy such that for some valuations the equilibrium strategy has a selective disadvantage against the deviation if the population mainly plays the deviation strategy. There is no deviation strategy with this destabilizing property for all valuations if the distribution of valuations has a monotonic hazard rate. I argue that in the Bayesian game studied here, a mass deviation can be caused by the entry of a small group of agents. Numeric calculations indicate that the closer the deviation strategy to the equilibrium strategy, the less valuations are destabilizing. I show that the equilibrium strategy does not satisfy continuous stability.
    Keywords: Continuous strategies; evolutionary stability; war of attrition; strict equilibrium; neighborhood invader strategy; continuous stability; evolutionary robustness
    JEL: C72 C73 D44
    Date: 2013–02
  14. By: Neil J. Buckley; Stuart Mestelman; R. Andrew Muller; Stephan Schott; Jingjing Zhang
    Abstract: We study cheap-talk communication in common pool resource environments with and without output-sharing groups. Communication in groups of 12 does not improve efficiency over the non-cooperative Nash outcome without communication. Organizing subjects into output-sharing groups of four players introduces sufficient free-riding incentives to achieve full efficiency. Within-group communication decreases efficiency by countervailing the free-riding incentives induced by output sharing and enhancing between-group competition. The effects are stronger when output-sharing groups have repeated fixed membership. Adding public communication reduces the efficiency-reducing effects of within-group communication. Restricting private communication within social groups that do not share output increases efficiency to almost 100%.
    Keywords: Common pool resources, communication, competition, group behavior, partners and strangers, experiments
    JEL: Q20 C92 C72
    Date: 2013–03
  15. By: Jeremy Fox (Institute for Fiscal Studies and University of Michigan); Natalia Lazzati
    Abstract: We study nonparametric identification of single-agent discrete choice models for bundles and binary games of complete information. We provide conditions under which we can recover both the interaction effects and the distributions of potentially correlated unobservables across goods in single-agent models and across players in games. We establish similarities in identification between these two models. Strengthening our assumptions for games, we provide an equivalence relation between discrete choice models for bundles and binary games that relies on the theory of potential games. Potential games are particularly useful for games of three or more players.
    Date: 2013–02
  16. By: Mohamed Belhaj (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)); Sebastian Bervoets (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM)); Frédéric Deroïan (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM))
    Abstract: We consider agents playing a linear network game with strategic complementarities. We analyse the problem of a policy maker who can change the structure of the network in order to increase the aggregate efforts of the individuals and/or the sum of their utilities, given that the number of links of the network has to remain fixed. We identify some link reallocations that guarantee an improvement of aggregate efforts and/or aggregate utilities. With this comparative statics exercise, we then prove that the networks maximising both aggregate outcomes (efforts and utilities) belong to the class of Nested-Split Graphs.
    Keywords: Network; Linear Interaction; Bonacich Centralities; Strategic Complementarity; Nested Split Graphs
    Date: 2013–02
  17. By: David Pérez-Castrillo; Marilda Sotomayor
    Abstract: We prove a "General Manipulability Theorem" for general one-to-one two-sided matching markets with money. This theorem implies two folk theorems, the Manipulability Theorem and the General Impossibility Theorem, and provides a sort of converse of the Non-Manipulability Theorem (Demange, 1982, Leonard, 1983, Demange and Gale, 1985).
    Keywords: matching, competitive equilibrium, optimal competitive equilibrium, manipulability, competitive equilibrium mechanism, competitive equilibrium rule
    JEL: C78 D78
    Date: 2013–02
    Abstract: The paper attempts to test the following hypotheses: (i) Are people generally self interested, (ii) If people tend to be generous, what is the motive, i.e., either they fear rejection or do they have a preference for fairness, and (iii) Is there any behavioral difference in bargaining between males and females. In this respect, we conduct an ultimatum bargaining experiment in a “same gender pairings” setting in International Islamic University Islamabad, Pakistan. In order to test the first hypothesis we look at the overall offers made by the proposers and the rejection rates of the responders. In order to test the second hypothesis we compare the offers that proposers anticipate will be accepted by the responders and the offers they actually make. If actual offer exceeds the minimum acceptable offer anticipated by the proposer, we conclude that he is fair minded. Otherwise, he is being generous due to fear of rejection. In order to test the third hypothesis, we compare the offers and responses made by males and females in this game. At the start of this study, we were of the view that the people of an Islamic society, in general, and students of International Islamic University, Islamabad, in particular, would show a greater concern for fairness rather than fear of rejection. As is evident, the results of this study prove these views wrong. Further, this fear of rejection was very realistic, particularly, in case of males where the rejection rates for unfair offers were very high.
    Keywords: Ultimatum games, fairness, self-interest, gender
    JEL: C9 C91 C92 D0 D03
    Date: 2013–03–10
  19. By: Jeanette Brosid-Koch; Timo Heinrich; Christoph Helbach
    Abstract: This study tests experimentally whether teams can create synergies in strategic interactions. For our comparison between team and individual behavior we employ the race game. This game has the advantage that the optimal strategy does neither depend on beliefs about other players nor on distributional or efficiency concerns. Our results reveal that teams do not only outperform individuals but that they can also beat the “truth-wins” benchmark. In particular, varying the length of the race game we find that the team advantage increases with the complexity of the game. The latter finding supports the conjectures made by Charness et al. (2010) and Cooper and Kagel (2005), who suggest a relation between task complexity and the size of synergies created by teams.
    Keywords: Race game; strategic sophistication; team decision making
    JEL: C72 C91 C92
    Date: 2013–01
  20. By: Francesco Fallucchi (School of Economics, University of Nottingham); Elke Renner (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham)
    Abstract: We investigate the effects of information feedback in rent-seeking games with two different contest structures. In the deterministic contest a contestant receives a share of the rent equal to her share of rent-seeking expenditures, while in the stochastic contest a contestant wins the entire rent with probability equal to her share of rent-seeking expenditures. In deterministic contests average expenditures converge to equilibrium levels when subjects only get feedback about own earnings, and additional feedback about rivals’ choices and earnings raises average expenditures. In stochastic contests information feedback has an opposite, and even stronger, effect: when subjects only get feedback on own earnings we observe high levels of rent dissipation, usually exceeding the value of the rent, and additional feedback about rivals’ choices and earnings has a significant moderating influence on expenditures. In a follow-up treatment we endogenize information feedback by allowing contestants in a stochastic contest to make “public” or “private” expenditures. Subjects make the vast majority of expenditures privately and overall excess expenditures are similar to the stochastic contest with own feedback.
    Keywords: contests, rent-seeking, information feedback, learning, experiments
    Date: 2013–02
  21. By: Adam Zylbersztejn (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: Several experimental studies show that ex post communication promotes generosity in situations where individual incentives contradict with common interest, like the provision of public goods. The root underlying the effect of this institution, especially in a repeated interaction, is nonetheless still obscure. This study provides a novel empirical testbed for two mechanisms by which ex post communication may affect behavior in repeated interactions : one is related to strategic signaling, the other involves emotions induces by others' opinions. The main findings are as follows. First, the presence of ex post communication (conducted through the attribution of costless disapproval points) fosters pro-social behavior and reduces free-riding. Second, I find systematic evidence that subjects tend to use ex post communication as a signaling device, whilst no evidence in favor of the emotion-based hypothesis. A possible interpretation of this phenomenon is that ex post messages are used to announce future sanctions for free-riding.
    Keywords: Public goods game, voluntary contribution mechanism, ex post communication.
    JEL: C72 D83
    Date: 2013–02
  22. By: Hailin Sun (University of Toulouse); Sanxi Li (University of Toulouse); Tong Wang (University of East Anglia)
    Abstract: This paper studies the comparative statics regarding changes in risk on Nash's solution to bargaining games with stochastic outcome and disagreement points. When absolute risk tolerance is linear with constant slope, the Nash's solution to bargaining with risky outcomes and risky disagreement points can be viewed as division of divisible certainty equivalent between two risk-averse agents. We show that whether a deterioration of a bargainer's risky prospect is advantageous to his opponent often depends on whether preference displays decreasing absolute risk aversion (DARA). Specically, for perfectly correlated risky prospects, DARA à la Arrow-Pratt works to the concavity of the joint certainty equivalent with respect to a bargainer's initial wealth or size of risky exposure; for independent risky prospects, DARA à la Ross vulnerates his risk bearing under Rothschild-Stiglitz increase in risk taking the form of adding an independent noise, both leading to the bargainer's increased propensity for risk aversion as well as the joint size of the pie. These results illuminate how individual risky prospect as well as risk preference influence the cooperating partners' income shares and thus the market equilibrum of marriage formation. We also show that this result is robust under Rubinstein's non-cooperative bargaining game.
    Date: 2013–03
  23. By: Giuseppe Dari-Mattiacci; Eric Langlais; Bruno Lovat; Francesco Parisi
    Abstract: In rent-seeking contests, players are seldom identical to one another. In this chapter, we examine the rent-seeking literature that explores the effects of specific forms of asymmetry between contestants. We consider Tullock’s rent-seeking contests involving two players who differ in strength (marginal returns to effort), motivation (valuations of the sought-after rent) and cunning (bargaining power). We study the combined interaction of these three possible forms of asymmetry in rent-seeking. We examine how these asymmetries affect the rent-seeking contest and investigate the effect of ex post trading opportunities on the players’ efforts, on probabilities of winning and on the social costs of rent-seeking.
    Keywords: rent-seeking games, returns to effort, asymmetric rents, asymmetric strength, tradable rents
    JEL: D72
    Date: 2013
  24. By: Schmitz, Patrick W.
    Abstract: In the property rights approach to the theory of the firm (Hart, 1995), parties bargain about whether or not to collaborate after non-contractible investments have been made. Most contributions apply the regular Nash bargaining solution. We explore the implications of using the generalized Nash bargaining solution. A prominent finding regarding the suboptimality of joint ownership turns out to be robust. However, in contrast to the standard property rights model, it may well be optimal to give ownership to a party whose investments are less productive, provided that this party's ex-post bargaining power is relatively small.
    Keywords: ownership, incomplete contracts, bargaining, investment incentives
    JEL: C78 D23 D86 L23 L24 M11
    Date: 2013–02
  25. By: Gabriel Desgranges (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise); Stéphane Gauthier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We study how asymmetric information affects the set of rationalizable solutions in a linear setup where the outcome is determined by forecasts about this same outcome. The unique rational expectations equilibrium is also the unique rationalizable solution when the sensitivity of the outcome to agents' forecasts is less than one, provided that this sensitivity is common knowledge. Relaxing this common knowledge assumption, multiple rationalizable solutions arise when the proportion of agents who know the sensitivity is large, and the uninformed agents believe it is possible that the sensitivity is greater than one. Instability is equivalent to existence of some kind of sunspot equilibria.
    Keywords: Asymmetric information; common knowledge; eductive learning; rational expectations; rationalizability
    Date: 2013
  26. By: Renato Gomes; Alessandro Pavan
    Abstract: We develop a theory of price discrimination in many-to-many matching markets in which agents’ preferences are vertically and horizontally differentiated. The optimal plans induce negative assortative matching at the margin: agents with a low value for interacting with other agents are included in the matching sets of only those agents from the opposite side whose value for matching is sufficiently high (cross-subsidization). We deliver testable predictions relating the optimal matching plans and price schedules to the distribution of the agents’ preferences and attractiveness. The analysis has implications for the design of business-to-business platforms, advertising, and cable TV packages. JEL Classification Numbers: D82
    Keywords: Dynamic Voting, Condorcet Winner, Commitment, Condorcet Cycle, Social Experimentation, Status Quo Bias, Social Inefficiency, Social Inertia
    Date: 2013–01–01
  27. By: AMARANTE, Massimiliano
    Abstract: Let 'epsilon' be a class of event. Conditionally Expected Utility decision makers are decision makers whose conditional preferences ≿E, E є 'epsilon', satisfy the axioms of Subjective Expected Utility theory (SEU). We extend the notion of unconditional preference that is conditionally EU to unconditional preferences that are not necessarily SEU. We give a representation theorem for a class of such preferences, and show that they are Invariant Bi-separable in the sense of Ghirardato et al.[7]. Then, we consider the special case where the unconditional preference is itself SEU, and compare our results with those of Fishburn [6].
    Keywords: Conditional expected utility, Unconditional preference, Invariant Bi-separable preference
    JEL: D81
    Date: 2013
  28. By: Erwin Amann; Nadine Leonhardt
    Abstract: In the context of international bargaining, standard models predict that a shift in military power can cause preventive war because it changes the relative bargaining position between states. We find that shifts in military power are not the only cause of war under commitment problems and that commitment problems per se are not necessarily a cause of war even if the relative bargaining position changes substantially.
    Keywords: Bargaining; commitment problems; shifts in power
    JEL: C78 D74 J52
    Date: 2013–02
  29. By: Buechel, Berno; Emrich, Eike; Pohlkamp, Stefanie
    Abstract: To which extent high performances in professional sports are based on the use of illicit substances or other doping practices is extremely difficult to measure empirically. Game-theoretical approaches predict strong incentives to dope based on the interaction among athletes (prisoner's dilemma) or the interaction between some control organization and the athletes (inspection game). The role of stakeholders such as customers, sponsors, and the media is either ignored or only informally discussed. One might think that customers who are ready to withdraw their support after a doping scandal, would reduce the incentives to dope. We explicitly model the strategic interaction of such customers with athletes and organizers and strongly refute this (optimistic) conjecture. Customers even trigger doping by putting a threat on the organizers not to conduct serious doping tests. However, we show that this result can be altered by a change in the information structure. If transparency about doping tests is established, then there is a doping-free equilibrium. This has practical implications for the design of anti-doping policies, as well as for other situations of fraudulent activities.
    Keywords: inspection game, doping, professional sports, scandals, cheating
    JEL: C72 K42 L83
    Date: 2013–02–20
  30. By: Michielsen, T.O. (Tilburg University, Center for Economic Research)
    Abstract: Abstract I analyze optimal natural resource use in an intergenerational model with the risk of a catastrophe. Each generation maximizes a weighted sum of discounted utility (positive) and the probability that a catastrophe will occur at any point in the future (negative). The model generates time-inconsistency as generations disagree on the relative weights on utility and catastrophe prevention. As a consequence, future generations emit too much from the current generation’s perspective and a dynamic game ensues. I consider a sequence of models. When the environmental problem is related to a scarce exhaustible resource, early generations have an incentive to reduce emissions in Markov equilibrium in order to enhance the ecosystem’s resilience to future emissions. When the pollutant is expected to become obsolete in the near future, early generations may however increase their emissions if this reduces future emissions. When polluting inputs are abundant and expected to remain essential, the catastrophe becomes a self-fulfilling prophecy and the degree of concern for catastro- phe prevention has limited or even no effect on equilibrium behaviour.
    Keywords: catastrophic events;decision theory;uncertainty;time consistency
    JEL: C73 D83 Q54
    Date: 2013

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