nep-gth New Economics Papers
on Game Theory
Issue of 2013‒03‒30
eight papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. A monotonic core concept for convex games: The SD-prenucleolus By Arin Aguirre, Francisco Javier; Katsev, Ilya
  2. Schedulers, Potentials and Weak Potentials in Weakly Acyclic Games By Igal Milchtaich
  3. Dynamic Multilateral Markets By Arnold Polanski; Emiliya A. Lazarova
  4. An epistemic characterization of generalized backward induction By Giacomo Bonanno
  5. The Dynamics of Lobbying under Uncertainty: On Political Liberalization in Arab Countries By Raouf Boucekkine; Fabien Prieur; Klarizze Puzon
  6. Transboundary pollution, R&D spillovers, absorptive capacity and international trade By Dinar, Zeineb
  7. Bargaining power and local heroes By Heimeshoff, Ulrich; Klein, Gordon J.
  8. Harsanyi's aggregation theorem with incomplete preferences By Eric Danan; Thibault Gajdos; Jean-Marc Tallon

  1. By: Arin Aguirre, Francisco Javier; Katsev, Ilya
    Abstract: We prove that the SD-prenucleolus satisfies monotonicity in the class of convex games. The SD-prenucleolus is thus the only known continuous core concept that satisfies monotonicity for convex games. We also prove that for convex games the SD-prenucleolus and the SD-prekernel coincide.
    Keywords: prenucleolus, monotonicity, TU games
    JEL: C71 C72
    Date: 2013–02–26
  2. By: Igal Milchtaich (Bar-Ilan University)
    Abstract: In a number of large, important families of finite games, not only do pure-strategy Nash equilibria always exist but they are also reachable from any initial strategy profile by some sequence of myopic single-player moves to a better or best-response strategy. This weak acyclicity property is shared, for example, by all perfect-information extensive-form games, which are generally not acyclic since even sequences of best-improvement steps may cycle. Weak acyclicity is equivalent to the existence of weak potential, which unlike a potential increases along some rather than every sequence as above, as well as to the existence of an acyclic scheduler, which guarantees convergence to equilibrium by disallowing certain (improvement) moves. A number of sufficient conditions for acyclicity and weak acyclicity are known.
    Date: 2013–03
  3. By: Arnold Polanski (University of East Anglia); Emiliya A. Lazarova (University of Birmingham)
    Abstract: We study dynamic multilateral markets, in which players' payoffs result from coalitional bargaining. We establish payoff uniqueness of stationary equilibria and the emergence of endogenous cooperation structures when traders experience some degree of (heterogeneous) bargaining frictions. When we focus on market games with different player types, we derive, under mild conditions, an explicit formula for each type's equilibrium payoff as market frictions vanish. We further apply this methodology to the analysis of labor markets. From our general results, we can determine the endogenous composition of the equilibrium firm and the remuneration scheme.
    Date: 2013–03
  4. By: Giacomo Bonanno (Department of Economics, University of California Davis)
    Abstract: We investigate the extension of backward-induction to von Neumann extensive games (where information sets have a synchronous structure) and provide an epistemic characterization of it. Extensions of the idea of backward-induction were proposed by Penta (2009) and later by Perea (2013), who also provided an epistemic characterization in terms of the notion of common belief in future rationality. The epistemic characterization we propose, although differently formulated, is conceptually the same as Perea's and so is the generalization of backward induction. The novelty of this contribution lies in the epistemic models that we use, which are dynamic, behavioral models where strategies play no role and the only beliefs that are specified are the actual beliefs of the players at the time of choice. Thus our analysis is free of (objective or subjective) counterfactuals.
    Keywords: Dynamic game, imperfect information, backward induction, belief, rationality, behavioral model
    JEL: C7
    Date: 2013–03–11
  5. By: Raouf Boucekkine (Aix-Marseille University (Aix-Marseille School of Economics, CNRS & EHESS, IRES and CORE, Université Catholique de Louvain.); Fabien Prieur (LAMETA, Université Montpellier I and INRA); Klarizze Puzon (LAMETA, Universite Montpellier I.)
    Abstract: We consider a framework à la Wirl (1994) where political liberalization is the outcome of a lobbying differential game between a conservative elite and a reformist group, the former player pushing against political liberalization in opposition to the latter. In contrast to the benchmark model, we introduce uncertainty. We consider the typical case of an Arab oil exporter country where oil rents are fiercely controlled by the conservative elite. We assume that the higher the oil rents, the more reluctant to political liberalization the elite is. Two states of nature are considered (high vs low resource rents). We then compute the Market-perfect equilibria of the corresponding piecewise deterministic differential game. It is shown that introducing uncertainty in this manner increases the set of strategies compared to Wirl's original setting. In particular, it is shown that the cost of lobbying might be significantly increased under uncertainty with respect to the benchmark. This ultimately highlights some specificities of the political liberalization at stake in Arab countries and the associated risks.
    Keywords: Rent-seeking, lobbying, natural resources, Arab countries, piecewise deterministic differential games
    JEL: D72 C61 C73
    Date: 2013–03–15
  6. By: Dinar, Zeineb
    Abstract: In this paper, we consider a non-cooperative and symmetric three-stage game model composed by two regulator-firm hierarchies. By means of adequate emission taxes, original and absorptive research and development (R&D) subsidies we prove that regulators can reach the non-cooperative social optimum. In the presence of free R&D spillovers between countries, as well as the investment in absorptive research, the competition of firms on a common market helps non-cooperating countries to better internalize transboundary pollution. We find that in autarky and common market cases the investment in absorptive R&D leads to multiple non-cooperative equilibria, which may necessitate competing regulators to coordinate an equilibrium. Interestingly, opening markets to international trade increases the per-unit emission-tax and the per-unit original research subsidy. It causes a higher investment in original research and production, and a lower emission ratio. --
    Keywords: Transboundary pollution,R&D spillovers,absorptive capacity,international trade
    JEL: C72 H21 O32 D62
    Date: 2013
  7. By: Heimeshoff, Ulrich; Klein, Gordon J.
    Abstract: Bargaining Power of retailers is an important aspect of discourse in many industrialized countries, including Germany, Portugal, the UK, and the USA. In Germany the Federal Cartel Office argues that strong bargaining power of retailers presents danger for workable competition in the market. Furthermore, significant bargaining power on the retailer side is often assumed a priori without further investigation. Based on a treatment effect study using difference-in-differences techniques we show, that even small suppliers can have superior bargaining power against retailers depending on their shares on local markets. We do not argue that retailers have no bargaining power at all, but we want to show, that the division of bargaining power between the two sides of the markets varies from product to product and is also a dynamic phenomenon which changes over time. As a result, the a priori assumption of bargaining power of retailers can be very misleading. --
    Date: 2013
  8. By: Eric Danan; Thibault Gajdos; Jean-Marc Tallon (THEMA, Universite de Cergy-Pontoise and THEMA; GREQAM, CNRS, Aix-Marseille University; Universite Paris I Pantheon-Sorbonne, CNRS)
    Abstract: We provide a generalization of Harsanyi (1955)'s aggregation theorem to the case of incomplete preferences at the individual and social level. Individuals and society have possibly incomplete expected utility preferences that are represented by sets of expected utility functions. Under Pareto indifference, social preferences are represented through a set of aggregation rules that are utilitarian in a generalized sense. Strengthening Pareto indifference to Pareto preference provides a refinement of the representation.
    Keywords: Incomplete preferences, aggregation, expected multi-utility, utilitarianism.
    JEL: D71 D81
    Date: 2013

This nep-gth issue is ©2013 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.