nep-gth New Economics Papers
on Game Theory
Issue of 2013‒08‒10
twelve papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Stochastic Asymmetric Blotto Games: Theory and Experimental Evidence By John Duffy; Alexander Matros
  2. Finite Depth of Reasoning and Equilibrium Play in Games with Incomplete Information By Willemien Kets
  3. Limits to Reputations By Mehmet Ekmekci; Nuh Dalkiran
  4. Natural Implementation with Partially Honest Agents in Economic Environments By Lombardi, Michele; Yoshihara, Naoki
  5. Salience and Cooperation Among Rational Egoists By Raul V. Fabella
  6. Decision time and steps of reasoning in a competitive market entry game By Florian Lindner
  7. Partially Honest Nash Implementation: A Full Characterization By Lombardi, Michele; Yoshihara, Naoki
  8. The effect of options on coordination By GUIMARAES, Bernardo; ARAUJO, Luis
  9. Cupid's Invisible Hand: Social Surplus and Identification in Matching Models. By Salanié, Bernard; Galichon, Alfred
  10. An Evolutionary Game for the Issues of Social Investment, Environmental Compliance and Consumer Boycott By André Barreira da Silva Rocha
  11. Carry a big stick, or no stick at all An experimental analysis of trust and capacity of punishment By Vicente Calabuig; Enrique Fatas; Gonzalo Olcina; Ismael Rodriguez-Lara
  12. Feedback equilibria in a dynamic renewable resource oligopoly: pre-emption, voracity and exhaustion By Luca Lambertini; Andrea Mantovani

  1. By: John Duffy; Alexander Matros
    Abstract: We consider a model where two players compete for n items having different common values in a Blotto game. Players have to decide how to allocate their budgets across all n items. The winner of each item is determined stochastically using a lottery mechanism. We analyze two payoff objectives: (i) players aim to maximize their total expected payoff and (ii) players maximize the probability of winning a majority value of all n items. We develop some new theoretical results for the majority rule case and show that the majority rule objective results in qualitatively different equilibrium behavior than the total expected payoff objective. We report the results of an experiment where the two payoff mechanisms are compared and we find strong support for the theoretical predictions.
    Keywords: Colonel Blotto game, Contests, Resource Allocation, Lotteries, Electoral College, Game Theory, Political Theory, Experimental Economics
    JEL: C72 C73 C92 D72 D74
    Date: 2013–08
  2. By: Willemien Kets
    Abstract: The standard framework for analyzing games with incomplete information models players as if they have an infinite depth of reasoning, which is not always consistent with experimental evidence. This paper generalizes the type spaces of Harsanyi (1967- 1968) so that players can have a nite depth of reasoning. We do this restricting the set of events that a player of a finite depth can reason about. This approach allows us to extend the Bayesian-Nash equilibrium concept to environments with players with a nite depth of reasoning. We demonstrate that the standard approach of modeling beliefs with Harsanyi type spaces fails to capture the equilibrium behavior of players with a nite depth, at least in some games. Consequently, the standard approach cannot be used to describe the equilibrium behavior of players with a finite depth in general.
    Keywords: Bounded rationality, higher-order beliefs, finite depth of reasoning, games with incomplete information, Bayesian equilibrium JEL Classification: C700, C720, D800, D830
    Date: 2013–07–22
  3. By: Mehmet Ekmekci (Northwestern University); Nuh Dalkiran (Bilkent University)
    Abstract: Much of the interest in the adverse selection approach to reputations in repeated games arises from the fact that quite small departures from the complete information model seems to have large effects on the set of equilibrium payoffs. We show that this is not the case in reputation games where a long-run player plays a fixed stage-game against an infinite sequence of short-run players under imperfect public-monitoring. We conclude that in such games, introducing arbitrarily small incomplete information cannot open the possibility of new equilibrium payoffs that are far away from the complete information equilibrium payoff set, even when the long-run player's discount factor is very high but fixed. Our main result implies that the standard reputation results hold true due to a specific order of limits.
    Date: 2013
  4. By: Lombardi, Michele; Yoshihara, Naoki
    Abstract: In this paper, we introduce the weak and the strong notions of partially honest agents (Dutta and Sen, 2012), and then study implementation by natural price-quantity mechanisms (Saijo et al., 1996, 1999) in pure exchange economies with three or more agents in which pure-consequentialistically rational agents and partially honest agents coexist. Firstly, assuming that there exists at least one partially honest agent in either the weak notion or the strong notion, the class of efficient social choice correspondences which are Nash-implementable by such mechanisms is characterized. Secondly, the (unconstrained) Walrasian correspondence is shown to be implementable by such a mechanism when there is at least one partially honest agent of the strong type, which may provide a behavioral foundation for decentralized implementation of the Walrasian equilibrium. Finally, in this set-up, the effects of honesty on the implementation of more equitable Pareto optimal allocations can be viewed as negligible.
    Keywords: Natural implementation, Nash equilibrium, exchange economies, intrinsic preferences for honesty
    JEL: C72 D71
    Date: 2013–07
  5. By: Raul V. Fabella (School of Economics, University of the Philippines Diliman)
    Abstract: We give the conditions for the attainment of self-enforcing Pareto efficiency under complete effort non-observability, strict agent rationality and global budget balance among teams involved in a winner-takes-all contest for a prize. Employing Nash conjectures and fixed fee financing of the prize, we characterize the competitive environment that allows teams to overcome the moral hazard problem and induce self-enforcing egalitarian outcomes. If the number of identical teams is finite, the production technology is restricted to factor symmetric ones. When the number of identical teams becomes unbounded, the restriction on the production technology vanishes and there always exists a fee level that supports a self-enforcing Pareto efficient solution as long as member utilities over own share are identical and obey the Inada conditions. Some form of membership symmetry cannot be ruled out for Pareto efficiency.
    Keywords: social dilemma, rational egoist, cooperation, Ostrom threshold
    JEL: C72 D01 D02
    Date: 2013–07
  6. By: Florian Lindner
    Abstract: Entry decisions in market entry games usually depend on the belief about how many others are entering the market, the belief about the own rank in a real effort task, and subjects' risk preferences. In this paper I am able to replicate these basic results and examine two further dimensions: (i) the level of strategic sophistication, which has a positive impact on entry decisions, and (ii) the impact of time pressure, which has a (partly) negative influence on entry rates. Furthermore, when ranks are determined using a real effort task, differences in entry rates are explainable by higher competitiveness of males. Additionally, I show that individual characteristics are more important for the entry decision in more competitive environments.
    Keywords: Market entry game, Time pressure, Level-k reasoning, Risk, Competitiveness, Experiment
    JEL: C72 C91 D81
    Date: 2013–07
  7. By: Lombardi, Michele; Yoshihara, Naoki
    Abstract: Given the framework introduced by Dutta and Sen (2012), this paper offers a comprehensive analysis of (Nash) implementation with partially honest agents when there are three or more participants. First, it establishes a condition which is necessary and sufficient for implementation. Second, it provides simple tests for checking whether or not a social choice correspondence can be implemented. Their usefulness is shown by examining implementation in a wide variety of environments.
    Keywords: Implementation, Nash equilibrium, social choice correspondences, partial honesty, Condition μ
    JEL: C72 D71
    Date: 2013–07
  8. By: GUIMARAES, Bernardo; ARAUJO, Luis
    Abstract: This paper studies how constraints on the timing of actions affect equilibrium in intertemporalcoordination problems. The model exhibits a unique symmetric equilibrium in cut-o¤ strategies.The risk-dominant action of the underlying one-shot game is selected when the option to delayeffort is commensurate with the option to wait longer for others' actions. The possibility of waitinglonger for the actions of others enhances coordination, but the option of delaying one s actionscan induce severe coordination failures: if agents are very patient, they might get arbitrarily lowexpected payoffs even in cases where coordination would yield arbitrarily large returns.
    Date: 2013–08–02
  9. By: Salanié, Bernard; Galichon, Alfred (Département d'économie)
    Abstract: We investigate a model of one-to-one matching with transferable utility when some of the characteristics of the players are unobservable to the analyst. We allow for a wide class of distributions of unobserved heterogeneity, subject only to a separability assumption that generalizes Choo and Siow (2006). We first show that the stable matching maximizes a social gain function that trades off the average surplus due to the observable characteristics and a generalized entropy term that reflects the impact of matching on unobserved characteristics. We use this result to derive simple closed-form formulæ that identify the joint surplus in every possible match and the equilibrium utilities of all participants, given any known distribution of unobserved heterogeneity. If transfers are observed, then the pre-transfer utilities of both partners are also identified. We also present a very fast algorithm that computes the optimal matching for any specification of the joint surplus. We conclude by discussing some empirical approaches suggested by these results.
    Date: 2013
  10. By: André Barreira da Silva Rocha
    Abstract: I propose an evolutionary game model to study competition among a large number of firms, in which I take into account the issues of social responsibility, government monitoring of environmental compliance and consumer boycott. A large number of firms sell their homogeneous good in an almost perfect competitive market, where consumers have preferences for socially responsible firms. Firms may incur additional costs and carry out social investment and/or environmental investment. Each time interval, a firm may be called to play a competition-stage game, in which it tries to sell its good, or an audit-stage game, in which inspectors audit its degree of environmental compliance.
    Keywords: Replicator dynamics, social responsibility, boycott, investment, regulation.
    JEL: C73 M14 L51
    Date: 2013–07
  11. By: Vicente Calabuig (ERICES, Universidad de Valencia); Enrique Fatas (University of East Anglia); Gonzalo Olcina (ERICES, Universidad de Valencia); Ismael Rodriguez-Lara (ERICES, Universidad de Valencia)
    Abstract: We investigate the effect of punishment in a trust game with endowment heterogeneity in which the investor may punish the allocator at a cost. Our results indicate that the effect of the punishment crucially depends on the investor’s capacity of punishment, that is measured in our experiment by the proportion of the allocator’s payoffs that the investor can destroy. We find that punishment fosters trust when the capacity of punishment is high (i.e., when the cost of punishing is relatively low). Otherwise, punishment fails to promote trusting behavior, crowding out intrinsic motivation to trust. Trustworthiness is higher with punishment than without punishment, except if investors have a high capacity of punishment
    Keywords: Trust game, punishment, crowding-out, intrinsic and extrinsic motivation, experimental economics
    JEL: C91 D02 D03 D69
    Date: 2013–08
  12. By: Luca Lambertini (University of Bologna & ENCORE); Andrea Mantovani (University of Bologna & IEB)
    Abstract: We extend Fujiwara’s (2008) model to describe a differential oligopoly game of resource extraction under static, linear feedback and nonlinear feedback strategies, generalising his result that steady state feedback outputs are lower than monopoly and static oligopoly equilibrium outputs for any number of firms. Additionally, we show that (i) feedback rules entail resource exhaustion for a finite number of firms; and (ii) feedback strategies are more aggressive than static ones as long as the resource stock is large enough, in accordance with the acquired view based on the traditional pre-emption argument associated with feedback information.
    Keywords: Dynamic oligopoly, renewable resources, feedback strategies
    JEL: C73 L13 Q2
    Date: 2013

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