nep-gth New Economics Papers
on Game Theory
Issue of 2013‒11‒09
sixteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Stationary Markov Perfect Equilibria in Discounted Stochastic Games By Wei He; Yeneng Sun
  2. The Farsighted Stable Set By Debraj Ray; Rajiv Vohra
  3. The (non-)robustness of influential cheap talk equilibria By Christoph Diehl; Christoph Kuzmics
  4. Minimum Cost Connection Networks: Truth-telling and Implementation By Jens Leth Hougaard; Mich Tvede
  5. An application of wage bargaining to price negotiation with discount factors varying in time By Ahmet Ozkardas; Agnieszka Rusinowska
  6. Privacy concerns, voluntary disclosure of information, and unraveling: An experiment By Benndorf, Volker; Kübler, Dorothea; Normann, Hans-Theo
  7. Trust and Manipulation in Social Networks By Manuel Förster; Ana Mauleon; Vincent Vannetelbosch
  8. Random Coefficients in Static Games of Complete Information By Fabian Dunker; Stefan Hoderlein; Hiroaki Kaido
  9. Fair Apportionment in the View of the Venice Commission's Recommendation By Peter Biro; Laszlo A. Koczy; Balazs Sziklai
  10. Voting in committee: firm value vs. back scratching. By Ravanel, M.
  11. Dynamic climate policy with both strategic and non-strategic agents : taxes versus quantities By Karp, Larry; Siddiqui, Sauleh; Strand, Jon
  12. Nash equilibrium for coupling of CO2 allowances and electricity markets By Mireille Bossy; Nadia Maizi; Odile Pourtallier
  13. The Multifactor Model of the Agent’s Power in Social Networks By Belik, Ivan; Hexmoor, Henry
  14. Approval Voting and Scoring Rules with Common Values By David S. Ahny; Santiago Oliveros
  15. Aggregation of endogenous information in large elections By Santiago Oliveros
  16. Distributional effects of hiring through networks By Yoske Igarashi

  1. By: Wei He; Yeneng Sun
    Abstract: The existence of stationary Markov perfect equilibria in stochastic games is shown in several contexts under a general condition called "coarser transition kernels". These results include various earlier existence results on correlated equilibria, noisy stochastic games, stochastic games with mixtures of constant transition kernels as special cases. The minimality of the condition is illustrated. The results here also shed some new light on a recent example on the nonexistence of stationary equilibrium. The proofs are remarkably simple via establishing a new connection between stochastic games and conditional expectations of correspondences.
    Date: 2013–11
  2. By: Debraj Ray; Rajiv Vohra
    Abstract: Harsanyi (1974) criticized the von Neumann-Morgenstern notion of a stable set on the grounds that it implicitly assumes coalitions to be shortsighted in evaluating their prospects. He proposed a modification of the dominance relation to incorporate farsightedness. In doing so, however, Harsanyi retained another feature of the stable set: that a coalition S can impose any imputation as long as its restriction to S is feasible for S. This implicitly gives an objecting coalition complete power to arrange the payoffs of players elsewhere, which is clearly unsatisfactory. While this assumption is absolutely innocuous for the classical stable set, it is of crucial significance for farsighted dominance. Our proposed modification of the Harsanyi set respects “coalitional sovereignty.” The resulting farsighted stable set is very different, both from that of Harsanyi or of von Neumann and Morgenstern. We provide a necessary and sufficient condition for the existence of a farsighted stable set containing just a single payoff allocation. This condition is weaker than assuming that the relative interior of the core is non-empty, but roughly establishes an equivalence between core allocations and the union of allocations over all singlepayoff farsighted stable sets. We state two conjectures: that farsighted stable sets exist in all transferable-utility games, and that when a single-payoff farsighted stable set exists, there are no farsighted stable sets containing multiple payoff allocations.
    Keywords: #
    Date: 2013
  3. By: Christoph Diehl; Christoph Kuzmics (Center for Mathematical Economics, Bielefeld University)
    Abstract: Chakraborty and Harbaugh (2010) prove the existence of influential cheap talk equilibria in one sender one receiver games when the state is multidimensional and the preferences of the sender are state-independent. We show that only the babbling equilibrium survives the introduction of any small degree of uncertainty about the sender’s preferences in the spirit of Harsanyi (1973). None of the influential equilibria are robust to this kind of uncertainty.
    Date: 2013–10
  4. By: Jens Leth Hougaard (Department of Food and Resource Economics, University of Copenhagen); Mich Tvede (Newcastle University Business School, Newcastle University)
    Abstract: In the present paper we consider the allocation of cost in connection networks. Agents have connection demands in form of pairs of locations they want to be connected. Connections between locations are costly to build. The problem is to allocate costs of networks satisfying all connection demands. We use three axioms to characterize allocation rules that truthfully implement cost minimizing networks satisfying all connection demands in a game where: (1) a central planner announces an allocation rule and a cost estimation rule; (2) every agent reports her own connection demand as well as all connection costs; and, (3) the central planner selects a cost minimizing network satisfying reported connection demands based on estimated connection costs and allocates true connection costs of the selected network.
    Keywords: axiomatic characterization, connection networks, cost sharing, implementation, truth-telling
    JEL: C70 C72 D71 D85
    Date: 2013–10
  5. By: Ahmet Ozkardas (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Agnieszka Rusinowska (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: We consider a non-cooperative price bargaining model between a monopolistic producer and a monopsonic consumer. The innovative element that our model brings to the existing literature on price negotiation concerns the parties' preferences which are not expressed by constant discount rates, but by sequences of discount factors varying in time. We assume that the sequence of discount rates of a party can be arbitrary, with the only restriction that the infinite series that determines the utility for the given party must be convergent. Under certain parameters, the price negociation model coincides with wage bargaining with the exogenous always strike decision. We determine the unique subgame perfect equilibrium in this model for no-delay strategies independent of the former history of the game. Then we relax the no-delay assumption and determine the highest equilibrium payoff of the seller and the lowest equilibrium payoff of the buyer for the general case. We show that the no-delay equilibrium strategy profiles support these extreme payoffs.
    Keywords: Price bargaining; alternating offers; varying discount rates; subgame perfect equilibrium
    Date: 2013–10
  6. By: Benndorf, Volker; Kübler, Dorothea; Normann, Hans-Theo
    Abstract: We study the voluntary revelation of private, personal information in a labor-market experiment with a lemons structure where workers can reveal their productivity at a cost. While rational revelation improves a worker's payout, it imposes a negative externality on others and may trigger further unraveling. Our data suggest that subjects reveal their productivity less frequently than predicted in equilibrium. A loaded frame emphasizing personal information about workers' health leads to even less revelation. We show that three canonical behavioral models all predict too little rather than too much revelation: level-k reasoning, quantal-response equilibrium, and to a lesser extent inequality aversion. --
    Keywords: information revelation,privacy,lemons market,level-k reasoning,quantalresponse equilibrium,inequality aversion
    JEL: C72 C90 C91
    Date: 2013
  7. By: Manuel Förster (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique); Ana Mauleon (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CEREC - Université Saint-Louis - Bruxelles); Vincent Vannetelbosch (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CEREC - Université Saint-Louis - Bruxelles)
    Abstract: We investigate the role of manipulation in a model of opinion formation where agents have opinions about some common question of interest. Agents repeatedly communicate with their neighbors in the social network, can exert some effort to manipulate the trust of others, and update their opinions taking weighted averages of neighbors' opinions. The incentives to manipulate are given by the agents' preferences. We show that manipulation can modify the trust structure and lead to a connected society, and thus, make the society reaching a consensus. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the long-run opinions. In sufficiently homophilic societies, manipulation accelerates (slows down) convergence if it decreases (increases) homophily. Finally, we investigate the tension between information aggregation and spread of misinformation. We find that if the ability of the manipulating agent is weak and the agents underselling (overselling) their information gain (lose) overall influence, then manipulation reduces misinformation and agents converge jointly to more accurate opinions about some underlying true state.
    Keywords: Social networks; trust; manipulation; opinion leadership; consensus; wisdom of crowds
    Date: 2013–09
  8. By: Fabian Dunker (University of Goettingen); Stefan Hoderlein (Boston College); Hiroaki Kaido (Brown 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 behavior, 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 to construct sample counterpart estimators. We analyze their asymptotic behavior, and illustrate their finite sample behavior 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: 2013–03–25
  9. By: Peter Biro (Momentum Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies); Laszlo A. Koczy (Momentum Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies); Balazs Sziklai (Momentum Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies)
    Abstract: In this paper we analyze the consequences of the fairness recommendation of the Venice Commission in allocating voting districts among larger administrative regions. This recommendation requires the size of any constituency not to differ from the average constituency size by more than a fixed limit. We show that this minimum difference constraint, while attractive per definition, is not compatible with monotonicity and Hare-quota properties, two standard requirements of apportionment rules. We present an algorithm that efficiently finds an allotment such that the differences from the average district size are lexicographically minimized. This apportionment rule is a well-defined allocation mechanism compatible with and derived from the recommendation of the Venice Commission. Finally, we compare this apportionment rule with mainstream mechanisms using real data from Hungary and the United States.
    Keywords: Apportionment, voting, elections, Venice Commission, proportionality, lexicographic ordering
    JEL: C71 D72
    Date: 2013–11
  10. By: Ravanel, M.
    Abstract: In this paper, I study how the CEO's election can be biased if some directors in the board belong to the same network. I use a static Bayesian game. Directors want to elect the best candidate but they also want to vote for the winner. In that context, results show that, when no candidate is part of the network, boards with a network perform better in electing the right candidate. On the other hand, it becomes detrimental for stockholders if one candidate is part of the network. Indeed, compared to a situation where there are no interconnections between directors, the directors who are members of a network vote more often for the candidate they think is best, rather than for the one they think might win. The ones who are not part of the network follow their lead. Thus the network has power on the result of the election and therefore limits the power of the future CEO.
    Keywords: Networks, corporate governance.
    JEL: D71 G34 Z13
    Date: 2013
  11. By: Karp, Larry; Siddiqui, Sauleh; Strand, Jon
    Abstract: This paper studies a dynamic game where each of two large blocs, of fossil fuel importers and exporters respectively, sets either taxes or quotas to exercise power in fossil-fuel markets. The main novel feature is the inclusion of a"fringe"of non- strategic (emerging and developing) countries which both consume and produce fossil fuels. Cumulated emissions over time from global fossil fuel consumption create climate damages which are considered by both the strategic importer and the non-strategic countries. Markov perfect equilibria are examined under the four combinations of trade policies and compared with the corresponding static games where climate damages are given (not stock-related). The main results are that taxes always dominate quota policies for both the strategic importer and exporter and that"fringe"countries bene?t from a tax policy as compared with a quota policy for the strategic importer, as the import fuel price then is lower, and the strategic importer's fuel consumption is also lower, thus causing fewer climate damages.
    Keywords: Economic Theory&Research,Climate Change Economics,Markets and Market Access,Debt Markets,Emerging Markets
    Date: 2013–10–01
  12. By: Mireille Bossy; Nadia Maizi; Odile Pourtallier
    Abstract: In this note, we present an existence result of a Nash equilibrium between electricity producers selling their production on an electricity market and buying CO2 emission allowances on an auction carbon market. The producers' strategies integrate the coupling of the two markets via the cost functions of the electricity production. We set out a clear Nash equilibrium that can be used to compute equilibrium prices on both markets as well as the related electricity produced and CO2 emissions covered.
    Date: 2013–11
  13. By: Belik, Ivan (Dept. of Business and Management Science, Norwegian School of Economics); Hexmoor, Henry (Dept. of Computer Science, Southern Illinois University at Carbondale)
    Abstract: The analysis of social reasoning is at the core of understanding how to manage social networks. Since interpersonal relations are composed of multiple factors with different nature (i.e., structural and social factors), we explore their influence on the strategizing processes in social networks. We formalize interpersonal relations using the methods of structural and social analysis. As a part of the research, we develop the soft-ware application for the numerical visualization of the social network functioning based on the proposed mechanism.
    Keywords: Agent’s power; social networks; structural centrality; trust
    JEL: Z13
    Date: 2013–10–25
  14. By: David S. Ahny; Santiago Oliveros
    Abstract: Consider the problem of deciding a winner among three alternatives when voters have common values, but private information regarding the values of the alternatives. We compare approval voting with other scoring rules. For any finite electorate, the best equilibrium under approval voting is more efficient than either plurality rule or negative voting. If any scoring rule yields a sequence of equilibria that aggregates information in large elections, then approval voting must do so as well.
    Date: 2013–09–01
  15. By: Santiago Oliveros
    Abstract: We study aggregation of information when voters can collect information of different precision, with increased precision entailing an increasing marginal cost. In order to properly understand the incentives to collect information we introduce another dimension of heterogeneity: on top of the ideological dimension we allow for different levels of intensity in preferences. Contrary to traditional models of endogenous information, in equilibrium, there are voters collecting information of different qualities. After characterizing all symmetric Bayesian equilibria in pure strategies for arbitrary rules of election and fairly general distribution of types. We study information aggregation in symmetric electorates and show that information aggregates even when voters collect information of different qualities.
    Date: 2013–05–01
  16. By: Yoske Igarashi (Department of Economics, University of Exeter)
    Abstract: How would a policy that bans the use of networks in hiring (e.g., anti-old boy network laws) affect welfare? To answer this question, we examine a variant of Galenianos (2013), a version of a random search model with two matching technologies: a standard matching function and worker networks. Our model has two types of workers, networked workers and non-networked workers. It is shown that the effects of such a policy on non-networked workers can be either positive or negative, depending on model parameters. In our calibration such a policy would make non-networked workers slightly worse off and networked workers substantially worse off.
    Keywords: random search, network, referral, policy analysis, welfare, dynamics.
    JEL: C78 E24 E60 I3 J20 J30
    Date: 2013

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