nep-gth New Economics Papers
on Game Theory
Issue of 2013‒09‒06
five papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Correlated Equilibria and Communication Equilibria in All-pay Auctions By Gregory Pavlov
  2. The Max-Min Group Contest By Subhasish M. Chowdhury; Dongryul Lee; Iryna Topolyan
  3. Coasian Bargaining with An Arriving Outside Option By Ilwoo Hwang; Fei Li
  4. Caps on Coasean Transfers By Ian A. MacKenzie; Markus Ohndorf
  5. Measuring and rewarding flexibility in collaborative distribution, including two-partner coalitions By Vanovermeire, Christine; Sörensen, Kenneth

  1. By: Gregory Pavlov (University of Western Ontario)
    Abstract: We study cheap-talk pre-play communication in the static all-pay auctions. For the case of two bidders, all correlated and communication equilibria are payoff equivalent to the Nash equilibrium if there is no reserve price, or if it is commonly known that one bidder has a strictly higher value. Hence, in such environments the Nash equilibrium predictions are robust to preplay communication between the bidders. If there are three or more symmetric bidders, or two symmetric bidders and a positive reserve price, then there may exist correlated and communication equilibria such that the bidders’ payoffs are higher than in the Nash equilibrium. In these cases, pre-play cheap talk may affect the outcomes of the game, since the bidders have an incentive to coordinate on such equilibria.
    Keywords: Communication; Collusion; All-pay auctions
    JEL: C72 D44 D82 D83 L41
    Date: 2013
  2. By: Subhasish M. Chowdhury (University of East Anglia); Dongryul Lee (Sungshin University); Iryna Topolyan (Mississippi State University)
    Abstract: We investigate a group all-pay auction with weakest-link impact function and group-specific public good prize. Since only the minimum effort exerted among all group members represents the group effort and the group with the maximum group effort wins the contest, this is termed as the `Max-Min group contest'. Examples of such structure include various sporting events, territorial conicts, negative product or political campaigns etc. We fully characterize equilibria for the case of two groups and show that a continuum of pure strategy equilibria exist, in which all (active) players exert the same effort. A semi-pure strategy equilibrium may also exist in which all the members of one group play the same pure strategy whereas all the members of the other group play the same mixed strategy. There are two types of non-degenerate mixed strategy equilibria - with and without continuous supports. When either type of such equilibrium exists, it exhibits the same support and effort distribution of group members. We also fully characterize pure strategy equilibria for a general case of n groups and specify candidates for mixed strategy equilibria.
    Date: 2013–08
  3. By: Ilwoo Hwang (Department of Economics, University of Pennsylvania); Fei Li (Department of Economics, University of North Carolina Chapel Hill)
    Abstract: We consider Coasian bargaining problems where the buyer has an outside option arriving at a stochastic time. We study both observable outside option models and unobservable outside option models. In both models, we show that a Coasian equilibrium exists if (1) the arrival of the outside option is public, or (2) the arrival of the outside option is private but the arrival probability is small enough. (1) the seller makes multiple rounds of offers, and (2) the Coase conjecture holds for an arbitrarily large arrival rate of the outside option. The result also applies to the time-varying outside option model. This exercise helps us to understand the sharp difference between Board and Pycia (2013), where the buyer's outside option is always available, and the standard Coasian bargaining literature, where the buyer has no outside option.
    Keywords: Bargaining, Arriving Outside Option, Dynamic Games, Coase Conjecture
    JEL: C78 D74 D83
    Date: 2013–08–25
  4. By: Ian A. MacKenzie (School of Economics, The University of Queensland); Markus Ohndorf
    Abstract: We investigate the efficiency of Coasean bargaining when transfers between agents are capped. We model a two-stage Coasean environment where, in the first stage, property rights are costly to attribute. After the attribution stage agents voluntarily exchange over the level of harm. If property rights are attributed via an all-pay auction, then the introduction of a cap is Pareto improving. Using a Tullock contest we find a cap is Pareto inferior, but may increase Kaldor-Hicks efficiency. Applications include the analysis of tort law.
    Date: 2013–08–30
  5. By: Vanovermeire, Christine; Sörensen, Kenneth
    Abstract: Horizontal collaboration among shippers is gaining traction as a way to increase logistic efficiency. The total distribution cost of a logistic coalition is generally between 9% and 30% lower than the sum of costs of each partner distributing separately. However, the coalition gain is highly dependent on the flexibility that each partner allows in its delivery terms. Flexible delivery dates, flexible order sizes, order splitting rules, etc., allow the coalition to exploit more opportunities for optimization and create better and cheaper distribution plans. An important challenge in a logistic coalition is the division (or sharing) of the coalition gain. Several methods have been proposed for this purpose, often stemming from the eld of game theory. This paper states that an adequate gain sharing method should not only be fair, but should also reward exibility in order to persuade companies to relax their delivery terms. Methods that limit the criteria for cost allocation to the marginal costs and the values of the subcoalitions are found to be able to generate adequate incentives for companies to adopt a flexible position. In a coalition of two partners however, we show that these methods are not able to correctly evaluate an asymmetric effort to be more exible. For this situation, we suggest an alternative approach to better measure and reward the value of flexibility.
    Date: 2013–08

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