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on Game Theory |
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Issue of 2013‒10‒25
four papers chosen by Laszlo A. Koczy Hungarian Academy of Sciences and Obuda University |
| By: | Otsu, Taisuke; Pesendorfer, Martin; Takahashi, Yuya |
| Abstract: | This paper proposes several statistical tests for finite state Markov games to examine the null hypothesis that the data are generated from a single equilibrium. We formulate tests of (i) the conditional choice probabilities, (ii) the steady-state distribution of states and (iii) the conditional distribution of states conditional on an initial state. In a Monte Carlo study we find that the chi-squared test of the steady-state distribution performs well and has high power even with a small number of markets and time periods. We apply the chi-squared test to the empirical application of Ryan (2012) that analyzes dynamics of the U.S. Portland Cement industry and test if his assumption of single equilibrium is supported by the data. |
| Keywords: | Dynamic Markov Game; Multiplicity of Equilibria; Testing |
| JEL: | C12 C72 D44 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:423&r=gth |
| By: | George J. Mailath (Department of Economics, University of Pennsylvania); Andrew Postlewaite (Department of Economics, University of Pennsylvania); Larry Samuelson (Department of Economics, Yale University) |
| Abstract: | We analyze a model in which agents make investments and then match into pairs to create a surplus. The agents can make transfers to reallocate their pretransfer ownership claims on the surplus. Mailath, Postlewaite, and Samuelson (2013) showed that when investments are unobservable, equilibrium investments are generally inefficient. In this paper we work with a more structured model that is sufficiently tractable to analyze the nature of the investment inefficiencies. We provide conditions under which investment is inefficiently high or low and conditions under which changes in the pretransfer ownership claims on the surplus will be Pareto improving, as well as examine how the degree of heterogeneity on either side of the market affects investment efficiency. |
| Keywords: | Directed search, matching, premuneration value, prematch investments, search |
| JEL: | C78 D40 D41 D50 D83 |
| Date: | 2013–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:13-060&r=gth |
| By: | Enriqueta Aragonès; Dimitrios Xefteris |
| Abstract: | We analyze a unidimensional model of two-candidate electoral competition where voters have imperfect information about the candidates' policy proposals, that is, voters cannot observe the exact policy proposals of the candidates but only which candidate offers the most leftist/rightist platform. We assume that candidates are purely office motivated and that one candidate enjoys a valence advantage over the other. We characterize the unique Sequential Equilibrium in very-weakly undominated strategies of the game. In this equilibrium the behavior of the two candidates tends to maximum extremism, due to the voters' lack of information. But it may converge or diverge depending on the size of the advantage. For small values of the advantage candidates converge to the extreme policy most preferred by the median and for large values of the advantage candidates strategies diverge: each candidate specializes in a different extreme policy. These results are robust to the introduction of a proportion of well informed voters. In this case the degree of extremism decreases when the voters become more informed. |
| Keywords: | Downsian model, imperfect information, advantaged candidate, maximum differentiation |
| JEL: | D72 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:725&r=gth |
| By: | Christopher Gertz (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | I analyze a monopolistic model of quality uncertainty but with the possibility of information acquisition on the consumer side. Information is costly and its amount is chosen by the consumer. The analysis of Bayesian equilibria shows the possibility of three equilibrium classes, only one of which leaves positive utility to the consumer. The classic adverse selection results of these markets are weakened in this situation. I show that cheaper information does not necessarily benefit the consumer but can instead rule out the buyer-friendly and welfare maximizing equilibria. Moreover, making quality search arbitrarily efficient does not lead to sure selling of the high quality product. A sustainable adverse selection effect, though weaker than in the classical model, remains even in the limit. |
| Keywords: | Quality uncertainty, Price signaling, Adverse selection, Information acquisition, Two-sided incomplete information |
| JEL: | C72 D42 D82 D83 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:487&r=gth |