|
on Game Theory |
|
Issue of 2013‒08‒16
five papers chosen by Laszlo A. Koczy Hungarian Academy of Sciences and Obuda University |
| By: | Felipe Balmaceda; Juan Esconar |
| Abstract: | This paper studies which social networks maximize trust and cooperation when agreements are implicitly enforced. We study a repeated trust game in which trading opportunities arise exogenously and the social network determines the information transmission technology. We show that cohesive communities, modeled as social networks of complete components, emerge as the optimal community design. Cohesive communities generate some degree of common knowledge of transpired play that allows players to coordinate their punishments and, as a result, yield relatively high equilibrium payoffs. Our results provide an economic rationale for the commonly argued optimality of cohesive social networks. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:295&r=gth |
| By: | Eric Fesselmeyer; Leonard J. Mirman; Marc Santugini (IEA, HEC Montréal) |
| Abstract: | We study the effect of investment on the dynamics of aggregate capital when different sectors of the economy compete strategically for the utilization of non-excludable capital to produce both consumption and investment goods. We consider two types of investment goods: complements and substitutes. For each case, we derive the equilibrium and provide the corresponding stationary distribution. We then compare the equilibrium with the social planner's optimal solution. |
| Keywords: | Capital accumulation, Dynamic game, Growth, Investment, Non-excludable capital |
| JEL: | C72 C73 D81 D92 O40 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:1301&r=gth |
| By: | Rene Carmona; Jean-Pierre Fouque; Li-Hsien Sun |
| Abstract: | We propose a simple model of inter-bank borrowing and lending where the evolution of the log-monetary reserves of $N$ banks is described by a system of diffusion processes coupled through their drifts in such a way that stability of the system depends on the rate of inter-bank borrowing and lending. Systemic risk is characterized by a large number of banks reaching a default threshold by a given time horizon. Our model incorporates a game feature where each bank controls its rate of borrowing/lending to a central bank. The optimization reflects the desire of each bank to borrow from the central bank when its monetary reserve falls below a critical level or lend if it rises above this critical level which is chosen here as the average monetary reserve. Borrowing from or lending to the central bank is also subject to a quadratic cost at a rate which can be fixed by the regulator. We solve explicitly for Nash equilibria with finitely many players, and we show that in this model the central bank acts as a clearing house, adding liquidity to the system without affecting its systemic risk. We also study the corresponding Mean Field Game in the limit of large number of banks in the presence of a common noise. |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1308.2172&r=gth |
| By: | Caria, Antonia Stefano; Hassen, Ibrahim Worku |
| Abstract: | In this study we focus on exclusion from job contact networks, which constitutes a major disadvantage for labor market participants in settings where referral hiring is common and information about jobs hard to obtain. In a mid-size town in northern Ethiopia, where these mechanisms are at work, we observe that many individuals do not access local job contact networks. Models of strategic network formation and behavioral decision theory suggest that given the right incentives, job contact networks should be more inclusive. On these grounds we hypothesize that workers would link to peripheral peers when this maximizes their chances of referral and when self-regarding concerns are absent due to social preferences. |
| Keywords: | social network, Labor market, field experiment, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1282&r=gth |
| By: | S. Bortolotti; M. Casari; F. Pancotto |
| Abstract: | Norms of cooperation and punishment differ across societies, but also within a single society. In an experiment with two subject pools sharing the same geographical and cultural origins, we show that opportunities for peer punishment increase cooperation among students but not in the general population. In previous studies, punishment magnified the differences across societies in peoples ability to cooperate. Here, punishment reversed the order: with punishment, students cooperate more than the general population while they cooperate less without it. Our results obtained with students cannot be readily generalized to the society at large. |
| JEL: | C72 C90 Z13 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp898&r=gth |