nep-gth New Economics Papers
on Game Theory
Issue of 2014‒01‒17
nineteen papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Influence and Social Tragedy in Networks By Yann Rébillé; Lionel Richefort
  2. Majoritarian Contests with Asymmetric Battlefields: An Experiment By Maria Montero; Alex Possajennikov; Martin Sefton; Theodore Turocy
  3. Leadership and conditional cooperation in public good games: What difference does the game make? By Edward J Cartwright; Denise Lovett
  4. When Parity Promotes Peace: Resolving Conflict Between Asymmetric Agents By Kimbrough, Erik; Sheremeta, Roman; Shields, Timothy
  5. Competition and Cooperation in Network Games By Konovalov, Alexander
  6. The Division Problem under Constraints By Gustavo Bergantiños; Jordi Massó; Alejandro Neme
  7. Cheap Talk with Two Audiences: An Experiment By Mikhail Drugov; Roberto Hernán-González; Praveen Kujal; Marta Troya Martinez
  8. Game-theoretic foundations of monetary equilibrium By Camera, Gabriele; Gioffré, Alessandro
  9. Rent-seeking contests with private values and common knowledge about the mean By Andrea Gallice
  10. Concession Bargaining - An Experimental Comparison of Protocols and Time Horizons By Federica Alberti; Sven Fischer; Werner Güth; Kei Tsutsui
  11. Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities By Camille Cornand; Frank Heinemann
  12. When best-replies are not in equilibrium: understanding cooperative behaviour By Irenaeus Wolff
  13. A Note on Networks of Collaboration in Multi-market Oligopolies By Pascal Billand; Christophe Bravard; Subhadip Chakrabarti; Sudipta Sarangi
  14. Robustness of Intermediate Agreements for the Discrete Raiffa Solution By Walter Trockel
  15. Bilateral versus Multilateral Free Trade Agreements: A Welfare Analysis By Demet Yilmazkuday; Hakan Yilmazkuday
  16. Explaining Behavior in the "11-20" Game By Choo, Lawrence C.Y; Kaplan, Todd R.
  17. Recognizing Contributors: An Experiment on Public Goods By Anya Savikhin Samek; Roman M. Sheremeta
  18. Age based preferences in paired kidney exchange By Antonio Nicolò; Carmelo Rodríguez-Álvarez
  19. Should we internalize intertemporal production externalities in the case of pest resistance? By Elsa Martin

  1. By: Yann Rébillé (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Lionel Richefort (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: We model agents in a network game of strategic complements and negative externalities. Sufficient conditions for the existence of a unique Nash equilibrium and of a unique social optimum are established. Under these conditions, we find that players with more vulnerable locations in the network exert more effort at equilibrium, and that the most influential players should exert less effort at efficiency. We then find structural conditions under which each player exerts strictly more effort than her efficient level, whether the social optimum be interior or not.
    Keywords: Network; strategic complements; equilibrium; efficiency; social tragedy.
    Date: 2014–01–06
  2. By: Maria Montero (School of Economics, University of Nottingham); Alex Possajennikov (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham); Theodore Turocy (University of East Anglia)
    Abstract: We investigate a version of the classic Colonel Blotto game in which individual battles may have different values. Two players allocate a fixed budget across battlefields and each battlefield is won by the player who allocates the most to that battlefield. The winner of the game is the player who wins the battlefields with highest total value. We focus on the case where there is one large and several small battlefields, such that a player wins if he wins the large and any one small battlefield, or all the small battlefields. We compute the mixed strategy equilibrium for these games and compare this with choices from a laboratory experiment. The equilibrium predicts that the large battlefield receives more than a proportional share of the resources of the players, and that most of the time resources should be spread over more battlefields than are needed to win the game. We find support for the main qualitative features of the equilibrium. In particular, strategies that spread resources widely are played frequently, and the large battlefield receives more than a proportional share in the treatment where the asymmetry between battlefields is stronger.
    Keywords: Colonel Blotto, majoritarian contests, experiment
    Date: 2013–12
  3. By: Edward J Cartwright; Denise Lovett
    Abstract: We investigate experimentally whether the extent of conditional cooperation in public good games depends on the marginal return to the public good and type of game. The marginal return is varied from 0.2 to 0.4 to 0.8. The 'standard' game, in which three players contribute before a follower, is compared with a leader-follower game, in which one player leads and three follow. We find no strong evidence that the marginal return or type of game makes a difference to the extent of conditional cooperation. We also find no evidence that the type of game makes a difference to unconditional contributions. The level of marginal return does, however, have a strong effect on unconditional contributions. Our results highlight the critical role that can be played by leaders in a public good game.
    Keywords: Public good; conditional cooperation; reciprocity; leadership
    JEL: C72 H41
    Date: 2013–12
  4. By: Kimbrough, Erik; Sheremeta, Roman; Shields, Timothy
    Abstract: Due to the high costs of conflict both in theory and practice, we examine and experimentally test the conditions under which conflict between asymmetric agents can be resolved. We model conflict as a two-agent rent-seeking contest for an indivisible prize. Before conflict arises, both agents may agree to allocate the prize by fair coin flip to avoid the costs of conflict. The model predicts that “parity promotes peace”: in the pure-strategy equilibrium, agents with relatively symmetric conflict capabilities agree to resolve the conflict by using a random device; however, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. The results of the experiment confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
    Keywords: contest, asymmetries, conflict resolution, experiments
    JEL: C72 C91 D72 D74
    Date: 2013–12–20
  5. By: Konovalov, Alexander (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We consider games where agents are embedded in a network of bilateral relationships and have multivariate strategy sets. Some components of their strategies correspond to individual activities, while the other strategic components are related to joint activities and interaction with the partners. We introduce several new equilibrium concepts that account for the possibility that players act competitively in individual components of their strategy but cooperate on the components corresponding to joint activity or collaboration. We apply these concepts to the R&D collaboration networks model where firms engage in bilateral joint projects with other firms. The analysis shows that investments are highest under bilateral cooperation and lowest under full cooperation because the spillovers associated to bilateral collaboration are bound to the partnership. This leads to welfare being maximized under bilateral collaboration when there are a few firms in the market and under non-cooperation in markets with many firms; full cooperation is never social welfare maximizing. Investigating the issue of endogenous network formation, we find that bilateral cooperation increases (lowers) the profits of more (less) connected firms. However, this does not always lead to a denser stable network of R&D collaboration under bilateral cooperation.
    Keywords: network games; bilateral cooperation; hybrid equilibrium; R&D collaboration networks
    JEL: L13 L14 L22 O31 O32
    Date: 2014–01
  6. By: Gustavo Bergantiños; Jordi Massó; Alejandro Neme
    Abstract: The division problem under constraints consists of allocating a given amount of an homogeneous and perfectly divisible good among a subset of agents with single-peaked preferences on an exogenously given interval of feasible allotments. We characterize axiomatically the family of extended uniform rules proposed to solve the division problem under constraints. Rules in this family extend the uniform rule used to solve the classical division problem without constraints. We show that the family of all extended uniform rules coincides with the set of rules satisfying efficiency, strategy-proofness, equal treatment of equals, bound monotonicity, consistency, and independence of irrelevant coalitions.
    Keywords: division problem, single-peaked preferences
    JEL: D71
    Date: 2013–12
  7. By: Mikhail Drugov (Universidad Carlos III de Madrid, University of Warwick and CEPR); Roberto Hernán-González (Departamento de Teoría e Historia Económica, Universidad de Granada); Praveen Kujal (Middlesex University Business School); Marta Troya Martinez (Department of Economics, University of Oxford)
    Abstract: In this paper we experimentally test strategic information transmission between one informed and two uninformed agents in a cheap-talk game. We find evidence of the "disciplining" effect of public communication as compared to private; however, it is much weaker than predicted by the theory. Adding a second receiver naturally increases the complexity of strategic thinking when communication is public. Using the level-k model, we exploit the within subject design to show how individuals decrease their level-k in public communication. Surprisingly, we find that individuals become more sophisticated when they communicate privately with two receivers rather than one.
    Keywords: Cheap Talk, Communication, Experiment, Level-k, Cognitive ability, Cognitive Reflection Test
    JEL: C72 C92 D83
    Date: 2013
  8. By: Camera, Gabriele; Gioffré, Alessandro
    Abstract: Monetary theorists have advanced an intriguing notion: we exchange money to make up for a lack of enforcement, when it is difficult to monitor and sanction opportunistic behaviors. We demonstrate that, in fact, monetary equilibrium cannot generally be sustained when monitoring and punishment limitations preclude enforcement - external or not. Simply put, monetary systems cannot operate independently of institutions - formal or informal - designed to monitor behaviors and sanction undesirable ones. This fundamental result is derived by integrating monetary theory with the theory of repeated games, studying monetary equilibrium as the outcome of a matching game with private monitoring. --
    Keywords: Social norms,repeated games,cooperation,payment systems
    JEL: E4 E5 C7
    Date: 2013
  9. By: Andrea Gallice (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: We study a rent-seeking contest in which players have heterogeneous and private valuations. In addition to their own type, agents only know that all valuations are drawn from a distribution, of which they only know the mean. We obtain a closed-form solution for agents' optimal level of investment and subject it to comparative statics analysis. We also investigate the issue of entry in the game and the amount of rent dissipation that results in equilibrium. Finally, we compare our results with those that would emerge in a context of perfect information.
    Keywords: rent-seeking, contests, private information, imperfect information
    JEL: D72 D82
    Date: 2013–12
  10. By: Federica Alberti (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Sven Fischer (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Kei Tsutsui (Frankfurt School of Finance & Management, Frankfurt am Main)
    Abstract: Concessions try to avoid conflict in bargaining and can finally lead to an agreement. Although they usually are seen as unfolding in time, concessions can also be studied in normal form or by conditioning only on failure of earlier agreement attempts. We experimentally compare three protocols of concession bargaining, the normal form or static one, the one where concessions only condition on earlier failures and the truly dynamic one. In spite of their considerable differences in conditioning, the three protocols do not differ in agreement ratio, efficiency and inequality of agreements. There are, however, effects of the maximal number of trials to reach an agreement by concession making and of protocol on when to abstain from conceding.
    Keywords: concession bargaining, dynamic interaction, emotions, deadline, conflict, experiment
    JEL: C72 C78
    Date: 2014–01–06
  11. By: Camille Cornand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon); Frank Heinemann (Fachgebiet Makroökonomik - Technische Universität Berlin)
    Abstract: In games with strategic complementarities, public information about the state of the world has a larger impact on equilibrium actions than private information of the same precision, because public signals are more informative about the likely behavior of others. We present an experiment in which agents' optimal actions are a weighted average of the fundamental state and their expectations of other agents' actions. We measure the responses to public and private signals. We find that, on average, subjects put a larger weight on the public signal. In line with theoretical predictions, as the relative weight of the coordination component in a player's utility increases, players put more weight on the public signal when making their choices. However, the weight is smaller than in equilibrium, which indicates that subjects underestimate the information contained in public signals about other players' beliefs.
    Keywords: coordination games; strategic uncertainty; private information; public information
    Date: 2014–01–07
  12. By: Irenaeus Wolff
    Abstract: To understand cooperative behaviour in social-dilemma experiments, we need to understand the game participants play not only in monetary but in preference terms. Does a Nash-prediction based on participants' actual preferences describe their behaviour in a public-good experiment well? And if not, where does the observed behaviour diverge from the prediction? This study provides an environment which allows to answer these questions: when making their contribution decision, participants are informed about their co-playersÕ priorly-elicited conditional contribution preferences. This induces common knowledge of preferences and thereby leads to direct experimental control over the game participants play. Results show that most people play best-responses to their beliefs. At the same time, beliefs in a third of the cases do not correspond to an equilibrium prediction that is based on the elicited conditional-cooperation preferences. Moreover, more often than not, beliefs are empirically inaccurate. This holds true even in a treatment that gives participants the option to look up the set of equilibria of their game.
    Keywords: Public good, social dilemma, Nash-equilibrium, rational beliefs, conditional cooperation, social preferences.
    Date: 2013
  13. By: Pascal Billand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon); Christophe Bravard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon); Subhadip Chakrabarti (Finance and economics research group. School of management. Queen's University. Belfast - Queen's University); Sudipta Sarangi (Department of Economics, Louisiana State University - Department of Economics, Louisiana State University)
    Abstract: In this note, we extend the Goyal and Joshi's model of network of collaboration in oligopoly to multi-market situations. We examine the incentive of firms to form links and the architectures of the resulting equilibrium networks in this setting. We also present some results on efficient networks.
    Keywords: R&D Collaborations; Network Formation; Multi-market Oligopolies
    Date: 2014–01–07
  14. By: Walter Trockel (Center for Mathematical Economics, Bielefeld University)
    Abstract: First via a counter example it is shown that the Proposition 3 of Anbarci & Sun (2013) is false. Then a gap and a mistake in their proof are identified. Finally, a modified version of their Proposition 3 is stated and proved.
    Keywords: Counterexample, Intermediate Agreement, Bargaining Solution
    JEL: C78 D74
    Date: 2013–12
  15. By: Demet Yilmazkuday (Department of Economics, Florida International University); Hakan Yilmazkuday (Department of Economics, Florida International University)
    Abstract: Why do we observe proliferation of bilateral free trade agreements (FTAs) between certain types of countries instead of having progress in attaining global free trade through a multilateral FTA? We answer this question by exploring the enforceability of di¡èerent types of FTAs through comparing minimum discount factors that are necessary to sustain them in an in?nitely repeated game framework. We also search for the globally welfare maximizing trade agreements that are sustainable under different conditions. The results depict that transportation costs, differences in country sizes and comparative advantages are all obstacles for having a multilateral FTA. Accordingly, international development policies conducted for the removal of such obstacles should be the main goal toward achieving a multilateral FTA, which we show to be the ?rst-best solution to the maximization problem of global welfare.
    Keywords: Free Trade Agreements; Self-Enforcing Rules; Transportation Costs; Country Size; Comparative Advantage; Repeated Game
    JEL: C72 C73 D60 F15
    Date: 2014–01
  16. By: Choo, Lawrence C.Y; Kaplan, Todd R.
    Abstract: We investigate whether subjects’ behavior in the Arad and Rubinstein (2012) "11-20" game could be well explained by the k-level process described by the authors. We replicated their game in our baseline experiment and provided two other variations that retained the same mixed-strategy equilibrium but resulted in different predicted behavior by the k-level process. Our experiments results suggest that k-level process leads to inconsistent predictions. In contrast to the standard k-level process as in Arad and Rubinstein, we allow players to best respond stochastically in our "SK" model and compared the model’s statistical fit against the Quantal Response Equilibrium and Cognitive Hierarchy Model. The SK model and Cognitive Model were able to outperform the QRE in a statistical sense and performed as well as each other. In addition, the Cognitive Hierarchy and to lesser extend the SK model, demonstrate consistent estimates. Our findings suggest that the behavioral assumptions of Arad and Rubinstein k-level process does not fully explain behavior in the "11-20" and better explanations could be obtained when one allows for stochastic best responds as in the SK and Cognitive Hierarchy Models.
    Keywords: k-level, Cognitive Hierarchy, Quantal Response Equilibrium, "11-20" money request game
    JEL: C73 C91
    Date: 2014–01–09
  17. By: Anya Savikhin Samek (School of Human Ecology, University of Wisconsin-Madison); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and the Economic Science Institute, Chapman University)
    Abstract: We experimentally investigate the impact of recognizing contributors on public good contributions. We vary recognizing all, highest or lowest contributors. Consistent with previous studies, recognizing all contributors significantly increases contributions relative to the baseline. Recognizing only the highest contributors does not increase contributions compared to not recognizing contributors, while recognizing only the lowest contributors is as effective as recognizing all contributors. These findings support our conjecture that aversion from shame is a more powerful motivator for giving than anticipation of prestige.
    Keywords: public-goods, information, experiments
    JEL: C72 C91 H41
    Date: 2013
  18. By: Antonio Nicolò (School of Social Sciences, The University of Manchester MANCHESTER M13 9PL, United Kingdom, and Dipartamento di Scienze Economiche \Marco Fanno". Universita degli Studi di Padova andVia del Santo 33, 35123 PADOVA. Italy); Carmelo Rodríguez-Álvarez (Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa) (Department of Foundations of Economic Analysis II (Quantitative Economics)), Facultad de Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad Complutense de Madrid (Complutense University of Madrid))
    Abstract: We consider a model of Paired Kidney Exchange (PKE) with feasibility constraints on the number of patient-donor pairs involved in exchanges. Patients' preferences are restricted so that patients prefer kidneys from compatible younger donors to kidneys from older donors. In this framework, patients with compatible donors may enroll on PKE programs to receive an organ with higher expected graft survival than that of their intended donor. PKE rules that satisfy individual rationality, eciency, and strategy-proofness necessarily select pairwise exchanges. Such rules maximize the number of transplantations among pairs with the youngest donors, and sequentially among pairs with donors of dierent age groups.
    Keywords: Kidney exchange, Age based preferences, Priority rules, Strategy-proofness.
    JEL: C78 D02 D78 I10
    Date: 2013–11–01
  19. By: Elsa Martin
    Abstract: Pesticides efficiency decreases with their global application by farmers. Within a strategic dynamic framework, this results in a classic intertemporal production externality. We analyze tax and subsidy schemes that can be used in order to internalize this externality. We show that they are able to restore socially optimal paths but that final time of pesticide use differs. With these schemes, farmers have a tendency to switch to alternative pest-control technology, as integrated pest management, earlier than is optimal. A lump-sum transfer is shown to be necessary to obtain a switching time equal to the socially optimal one, for the subsidy case only. Furthermore, the socially optimal switching time can be later than the one obtained under a situation without control.
    Keywords: stock externality, pest resistance, technology change
    JEL: Q10 Q3 H23 C73
    Date: 2013–11–29

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