nep-gth New Economics Papers
on Game Theory
Issue of 2013‒04‒06
fourteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Stochastic stability in finite extensive-form games of perfect information By Xu, Zibo
  2. Contribution Games and the End-Game Effect: When Things Get Real – An Experimental Analysis By Bar-El, Ronen; Tobol, Yossi
  3. The core of games on ordered structures and graphs By Michel Grabisch
  4. Cheap talk with simultaneous versus sequential messages By Gurdal, Mehmet Y.; Ozdogan, Ayca; Saglam, Ismail
  5. The lifeboat problem By Konrad, Kai A.; Kovenock, Dan
  6. Markov Perfect Equilibria in Differential Games with Regime Switching By Ngo Van Long; Fabien Prieur; Klarizze Puzon; Mabel Tidball
  7. Assessing Mental Models via Recording the Decision Deliberations of Pairs By Siegfried K. Berninghaus; Werner Güth; Charlotte Klempt; Kerstin Pull
  8. Characterizing Social Value of Information By Ui, Takashi; Yoshizawa, Yasunori
  9. Incomplete Information about Social Preferences Explains Equal Division and Delay in Bargaining. By KOHLER, Stefan
  10. Random coefficients in static games of complete information By Fabian Dunker; Stefan Hoderlein; Hiroaki Kaido
  11. Compensating Wage Differentials in Stable Job Matching Equilibrium By Seungjin Han; Shintaro Yamaguchi
  12. Evolutionarily stable in-group favoritism and out-group spite in intergroup conflict By Konrad, Kai A.; Morath, Florian
  13. Assortative matching and search with labour supply and home production By Nicolas Jacquemet; Jean-Marc Robin
  14. The Impact of Leadership Incentives in Intergroup Contests By Gerald Eisenkopf

  1. By: Xu, Zibo (Dept. of Economic Statistics, Stockholm School of Economics)
    Abstract: We consider a basic stochastic evolutionary model with rare mutation and a best-reply (or better-reply) selection mechanism. Following Young's papers, we call a state stochastically 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, the best-reply dynamic converges to a Nash equilibrium almost surely. Moreover, only Nash equilibria can be stochastically stable. We present a `centipede-trust game', where we prove that both the backward induction equilibrium component and the Pareto-dominant equilibrium component are stochastically stable, even when the populations increase to infinity. For finite extensive-form games of perfect information, we give a sufficient condition for stochastic stability of the set of non-backward-induction equilibria, and show how much extra payoff is needed to turn an equilibrium stochastically stable.
    Keywords: Evolutionary game theory; Markov chains; equilibrium selection; stochastic stability; games in extensive form; games of perfect information; backward induction equilibrium; Nash equilibrium components; best-reply dynamics.
    JEL: C61 C62 C73
    Date: 2013–03–21
  2. By: Bar-El, Ronen (Open University of Israel); Tobol, Yossi (Jerusalem College of Technology (JTC))
    Abstract: We conduct a contribution game for a real public good and show that when the contributors value the real public good highly, they increase their contributions in each round. Thus, contrary to previous literature, free riding decreases over rounds and the end-game effect is reversed.
    Keywords: public goods experiment, end-game effect, free-riding
    JEL: C72 C92 H41
    Date: 2013–03
  3. By: Michel Grabisch (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: In cooperative games, the core is the most popular solution concept, and its properties are well known. In the classical setting of cooperative games, it is generally assumed that all coalitions can form, i.e., they are all feasible. In many situations, this assumption is too strong and one has to deal with some unfeasible coalitions. Defining a game on a subcollection of the power set of the set of players has many implications on the mathematical structure of the core, depending on the precise structure of the subcollection of feasible coalitions. Many authors have contributed to this topic, and we give a unified view of these different results.
    Keywords: TU-game; Solution concept; Core; Feasible coalition; Communication graph; Partially ordered set
    Date: 2013
  4. By: Gurdal, Mehmet Y.; Ozdogan, Ayca; Saglam, Ismail
    Abstract: Recent experimental studies find excessive truth-telling and excessive trust in one sender/one receiver cheap talk games with an essentially unique and babbling equilibrium. We extend this setup by adding a second sender into the play and study the behavior of the players both theoretically and experimentally. We examine games where senders are assumed to communicate with the receiver either simultaneously or sequentially as well as a game where the receiver chooses one of these two communication methods. The theoretical predictions for truth-telling, non-conflicting messages observed and trust frequencies are the same for both the simultaneous and sequential plays; however, we observe systematic differences between the treatments of these plays. While the truth-telling frequencies stay above the theoretical prediction of the one half during all the experiments, the nature of truth-telling seems to differ between sequential and simultaneous plays. Under simultaneous communication, the messages of senders are non-conflictive more than half of the time, while the non-conflicting messages are significantly more likely to be correct than not. The frequency of non-conflicting messages is lower under sequential plays due to the tendency of the second sender to revert the message of the first sender. We observe that subjects who prefer to get non-conflicting messages prefer simultaneous mode of communication more often. When acting as senders, these subjects also adjust their truth-telling frequencies so as to generate conflictive messages.
    Keywords: Strategic information transmission; truth-telling; trust; sender-receiver game.
    JEL: C72 C90 D83
    Date: 2013–04–01
  5. By: Konrad, Kai A.; Kovenock, Dan
    Abstract: We study an all-pay contest with multiple identical prizes ("lifeboat seats"). Prizes are partitioned into subsets of prizes ("lifeboats"). Players play a twostage game. First, each player chooses an element of the partition ("a lifeboat"). Then each player competes for a prize in the subset chosen ("a seat"). We characterize and compare the subgame perfect equilibria in which all players employ pure strategies or all players play identical mixed strategies in the first stage. We find that the partitioning of prizes allows for coordination failure among players when they play nondegenerate mixed strategies and this can shelter rents and reduce rent dissipation compared to some of the less efficient pure strategy equilibria.
    Keywords: all-pay contest; multiple prizes; rent dissipation; lifeboat
    Date: 2012
  6. By: Ngo Van Long; Fabien Prieur; Klarizze Puzon; Mabel Tidball
    Abstract: We propose a new methodology exploring Markov perfect equilibrium strategies in differential games with regime switching. Speciffically, we develop a general game with two players having two kinds of strategies. Players choose an action that in fluences the evolution of a state variable, and decide on the switching time between alternative and consecutive regimes. Compared to the optimal control problem with regime switching, necessary optimality conditions are modiffied for the first-mover. When choosing her optimal switching strategy, this player considers her impact on the other player's actions and welfare, vice versa. In order to deter- mine the optimal timing between regime changes, the notion of erroneous timing is introduced and necessary conditions for a particular timing to be erroneous are derived.
    Date: 2013–03
  7. By: Siegfried K. Berninghaus (Karlsruhe Institute of Technology, Institute for Economic Theory and Statistics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Charlotte Klempt (Institute for Applied Economic Research); Kerstin Pull (Eberhard Karls Universität Tübingen)
    Abstract: Two participants have to decide jointly, with the discussions preceding their choice being video/audiotaped. For two tasks, one with and one without strategic interaction, we refer to obvious reasoning styles as mental models. The videotaped discussions are analyzed according to which mental models are mentioned by one or both participants in the same pair and how decisive such arguments were. The mental models for the risky choice task are "analytic approach", "commitment mode", and "avoid chance", and for the outside-option game "equality seeking", "backward induction", and "forward induction". We classify each pair according to their mental constellation in both tasks and assess mental models in addition to collecting choice data. Altogether, this allows for better explanations, especially of heterogeneity in reasoning and deciding.
    Keywords: behavioral principles, videotaped experiments, outside option games
    JEL: C72 C90 D03 G11
    Date: 2013–03–21
  8. By: Ui, Takashi; Yoshizawa, Yasunori
    Abstract: This paper examines the social value of information in symmetric Bayesian games with quadratic payoff functions and normally distributed public and private signals. The main results identify necessary and sufficient conditions for welfare to increase with public or private information. Using the conditions, we classify games into eight types by welfare effects of information. In the first type, welfare necessarily increases with both public and private information. In the second type, welfare can decrease, but only with public information. In the third type, welfare can decrease as well as increase with both public and private information. In the fourth type, welfare can decrease with both, but can increase only with private information. The remaining four types are the counterparts of the above four types with the opposite welfare effects of information. For each type, we characterize a socially optimal information structure and a socially optimal Bayesian correlated equilibrium.
    Keywords: Bayesian game, incomplete information, optimal information structure, potential game, private signal, public signal, team, value of information
    JEL: C72 D82
    Date: 2013–03
  9. By: KOHLER, Stefan
    Abstract: Two deviations of alternating-offer bargaining behavior from economic theory are observed together, yet have been studied separately. Players who could secure themselves a large surplus share if bargainers were purely self-interested incompletely exploit their advantage. Delay in agreement occurs even if all experimentally controlled information is common knowledge. This paper rationalizes both regularities coherently by modeling heterogeneous social preferences, either self-interest or envy, of one bargaining party as private information in a three period game of bargaining and preference screening and signaling.
    Date: 2012
  10. By: Fabian Dunker; Stefan Hoderlein (Institute for Fiscal Studies and Boston College); Hiroaki Kaido (Institute for Fiscal Studies and Boston University)
    Abstract: Individual players in a simultaneous equation binary choice model act differently in different environments in ways that are frequently not captured by observables and a simple additive random error. This paper proposes a random coefficient specification to capture this type of heterogeneity in behaviour, and discusses nonparametric identification and estimation of the distribution of random coefficients. We establish nonparametric point identification of the joint distribution of all random coefficients, except those on the interaction effects, provided the players behave competitively in all markets. Moreover, we establish set identification of the density of the coefficients on the interaction effects, and provide additional conditions that allow to point identify this density. Since our identification strategy is constructive throughout, it allows us to construct sample counterpart estimators. We analyse their asymptotic behaviour, and illustrate their finite sample behaviour in a numerical study. Finally, we discuss several extensions, like the semiparametric case, or correlated random coefficients.
    Keywords: Games, heterogeneity, nonparametric identification, random coefficients, inverse problems
    Date: 2013–03
  11. By: Seungjin Han; Shintaro Yamaguchi
    Abstract: This paper studies implicit pricing of non-wage job characteristics in the labour market using a two-sided matching model. It departs from the previous literature by allowing worker heterogeneity in productivity, which gives rise to a double transaction problem in a hedonic model. Deriving sufficient conditions under which assortative matching is the unique stable job-worker matching, we show that observed wage differentials between jobs reflect not only compensating wage differentials, but also worker productivity gaps between the jobs. We find that the job-worker matching pattern determines the extent to which compensating wage differentials are confounded with the worker productivity gap effect.
    Keywords: hedonic model, heterogeneity, two-sided matching, matching pattern, wage differential, equalizing difference, worker productivity
    JEL: C78 J31
    Date: 2013–03
  12. By: Konrad, Kai A.; Morath, Florian
    Abstract: We study conflict between two groups of individuals. Using Schaffer`s (1988) concept of evolutionary stability we provide an evolutionary underpinning for in-group altruism combined with spiteful behavior towards members of the rival out-group. We characterize the set of evolutionarily stable combinations of in-group favoritism and out-group spite and find that an increase in in-group altruism can be balanced by a decrease in spiteful behavior towards the out-group.
    Keywords: altruism; spite; in-group favoritism; conflict; evolutionary stability; indirect evolutionary approach
    Date: 2012
  13. By: Nicolas Jacquemet; Jean-Marc Robin (Institute for Fiscal Studies and Sciences Po)
    Abstract: We extend the search-matching model of the marriage market of Shimer and Smith (200) to allow for labour supply and home production. We characterise the steady-state equilibrium when exogenous divorce is the only source of risk. We study nonparametric identification using cross-section data on wages and hours worked, and we develop a nonparametric estimator. The estimated matching probabilities that can be derived from the steady-state flow conditions are strongly increasing in male and female wages. We estimate the expected share of marriage surplus appropriated by each spouse as a function of wages. The model allows to infer the specialisation of female spouses in home production from observations on wages and hours worked.
    Keywords: search-matching, sorting, assortative matching, collective labour supply, structural estimation
    JEL: C78 D83 J12 J22
    Date: 2013–03
  14. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany)
    Abstract: The heterogeneous effort supply in intergroup contests explains why groups have a manager. However, the objectives of group managers and members often differ. Using data from an experiment this paper studies whether this conflict of interests affects leadership effectiveness. The managers have an advisory role only and cannot change the monetary incentives of the group members in any context. Depending on the treatment some managers prefer more competition than the group members, some less, and some do not have any incentive at all. The results show that managers can coordinate their groups rather effectively. Their incentives shape the competitive behavior of the 'subordinates'. However group members follow the non-binding investment recommendations of their group manager more closely if management compensation is not incentivized.
    Keywords: Communication, Experiment, Rent-seeking, Management compensation, Group decision making
    JEL: C72 C92 D72 D74 M12
    Date: 2013–03–26

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