nep-gth New Economics Papers
on Game Theory
Issue of 2014‒04‒05
nine papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. Constrained Interactions and Social Coordination By Mathias Staudigl; Simon Weidenholzer
  2. Advances in Auctions By Todd R. Kaplan; Shmuel Zamir
  3. Predictability and Power in Legislative Bargaining By S. Nageeb Ali; B. Douglas Bernheim; Xiaochen Fan
  4. Group size and decision rules in legislative bargaining By Miller , Luis; Vanberg, Christoph
  5. Framing Matters in Gender-Paired Dictator Games By Kettner , Sara Elisa; Ceccato , Smarandita
  6. Institutions as game theory outcomes: toward a cognitive-experimental inquiry By Ambrosino, Angela
  7. Evolution of wealth in a nonconservative economy driven by local Nash equilibria By Pierre Degond; Jian-Guo Liu; Christian Ringhofer
  8. Fear of being left alone drives inefficient exit from partnerships. An experiment By Gaudeul, A.; Crosetto, P.; Riener, G.
  9. Modeling emergence of the interbank networks By Hałaj, Grzegorz; Kok, Christoffer

  1. By: Mathias Staudigl; Simon Weidenholzer
    Abstract: We consider a co-evolutionary model of social coordination and network formation where agents may decide on an action in a 2x2 - coordination game and on whom to establish costly links to. We find that a payoff domination convention is selected for a wider parameter range when agents may only support a limited number of links as compared to a scenario where agents are not constrained in their linking choice. The main reason behind this result is that whenever there is a small cluster of agents playing the efficient strategy other players want to link up to those layers and choose the efficient action.
    Date: 2014–02–01
  2. By: Todd R. Kaplan (Department of Economics, University of Exeter and University of Haifa); Shmuel Zamir (Department of Economics, University of Exeter and the Center for the Study of Rationality, The Henrew University of Jerusalem, Israel)
    Abstract: As a selling mechanism, auctions have acquired a central position in the free market economy all over the globe. This development has deepened, broadened, and expanded the theory of auctions in new directions. This chapter is intended as a selective update of some of the developments and applications of auction theory in the two decades since Wilson (1992) wrote the previous Handbook chapter on this topic.
    Keywords: Auctions, Private-Value Auctions, Multi-Unit Auctions, All-Pay Auctions, Resale, Position Auctions, Dynamic Auctions, Spectrum Auctions; Monotone Equilibrium.
    JEL: D44 D82 C72 H57
    Date: 2014
  3. By: S. Nageeb Ali; B. Douglas Bernheim; Xiaochen Fan
    Abstract: This paper examines the relationship between the concentration of political power in legislative bargaining and the predictability of the process governing the recognition of legislators. Our main result establishes that, for a broad class of legislative bargaining games, if the recognition procedure permits the legislators to rule out some minimum number of proposers one round in advance, then irrespective of how patient the individual legislators are, Markovian equilibria necessarily deliver all economic surplus to the first proposer. We also examine the extent to which alternative bargaining protocols can limit the concentration of power.
    JEL: D72 D78
    Date: 2014–03
  4. By: Miller , Luis; Vanberg, Christoph
    Abstract: We conduct experiments to investigate the effects of different majority requirements on bargaining outcomes in small and large groups. In particular, we use a Baron-Ferejohn protocol and investigate the effects of decision rules on delay (number of bargaining rounds needed to reach agreement) and measures of "fairness" (inclusiveness of coalitions, equality of the distribution within a coalition). We find that larger groups and unanimity rule are associated with significantly larger decision making costs in the sense that first round proposals more often fail, leading to more costly delay. The higher rate of failure under unanimity rule and in large groups is a combination of three facts: (1) in these conditions, a larger number of individuals must agree, (2) an important fraction of individuals reject offers below the equal share, and (3) proposers demand more (relative to the equal share) in large groups.
    Keywords: Majority Rule; Unanimity Rule; Legislative Bargaining
    Date: 2014–03–21
  5. By: Kettner , Sara Elisa; Ceccato , Smarandita
    Abstract: We show that social context matters in gender-paired dictator decisions. Our experiment investigates the influence of gender-pairing and framing on monetary transfers in a 2x2x2 design where sender gender, recipient gender, and frame, i.e. give or take, are varied. We are the first to combine all three variables and uncover that giving information about the gender of the recipient accommodates framing effects. If each of the three manipulated variables were to be analyzed independently, our data would confirm previous findings where females transfer more than males and framing has no effect (Eckel and Grossman, 1998; Dreber et al., 2013). However, we investigate the manipulated variables in interaction and find that framing matters when information about recipient gender is salient. For both genders, transfers in opposite-sex pairs are always higher than in same-sex pairs, but signicantly higher in the take frame. We thus suggest that the gender composition of the sample, gender-pairing, or beliefs about the counterpart's gender should be controlled for in experiments testing gender differences in social interaction.
    Keywords: Framing; Gender Differences; Gender-Pairing; Dictator Game; Experiment
    Date: 2014–03–21
  6. By: Ambrosino, Angela
    Abstract: The paper investigates two different approaches to the analysis of institutions using game theory and discusses their methodological and theoretical implications for further research. Starting from von Neumann and Morgenstern’s theory, we investigate how game theory has been applied to the analysis of institutions, these being considered, as in Hayek (1967, 1988a) as the unplanned outcomes of self-interested individual behavior. We focus on Schotter’s (1981) and Schelling’s (1960) alternative approaches. The different ways in which these authors use von Neumann and Morgenstern’s concepts of coalition and indeterminacy of solutions play an important role in explaining the spontaneous emergence of institutions from interaction. We argue that this issue is also of importance in explaining how Schotter and Schelling’s theories fit with the main features of Hayek's theory of institutions.
    Keywords: Institutions, Game Theory, Cognition, Hayek, Schotter, Schelling
    JEL: B40 B31 B52 B20
    Date: 2009
  7. By: Pierre Degond; Jian-Guo Liu; Christian Ringhofer
    Abstract: We develop a model for the evolution of wealth in a non-conservative economic environment, extending a theory developed earlier by the authors. The model considers a system of rational agents interacting in a game theoretical framework. This evolution drives the dynamic of the agents in both wealth and economic configuration variables. The cost function is chosen to represent a risk averse strategy of each agent. That is, the agent is more likely to interact with the market, the more predictable the market, and therefore the smaller its individual risk. This yields a kinetic equation for an effective single particle agent density with a Nash equilibrium serving as the local thermodynamic equilibrium. We consider a regime of scale separation where the large scale dynamics is given by a hydrodynamic closure with this local equilibrium. A class of generalized collision invariants (GCIs) is developed to overcome the difficulty of the non-conservative property in the hydrodynamic closure derivation of the large scale dynamics for the evolution of wealth distribution. The result is a system of gas dynamics-type equations for the density and average wealth of the agents on large scales. We recover the inverse Gamma distribution, which has been previously considered in the literature, as a local equilibrium for particular choices of the cost function.
    Date: 2014–03
  8. By: Gaudeul, A.; Crosetto, P.; Riener, G.
    Abstract: We explore in an experiment what leads to the breakdown of partnerships. Subjects are assigned a partner and participate in a repeated public good game with stochastic outcomes. They can choose each period between staying in the public project or working on their own. There is excessive exit as subjects overestimate the likelihood their partner will leave. High barriers to exit thus improve welfare. We observe that exit is driven by failure within the common project but also by pay-off comparisons across options and beliefs about being exploited. Those considerations increasingly matter as we lower exit costs across treatments.
    JEL: C23 C92 H41
    Date: 2014
  9. By: Hałaj, Grzegorz; Kok, Christoffer
    Abstract: Interbank contagion has become a buzzword in the aftermath of the financial crisis that led to a series of shocks to the interbank market and to periods of pronounced market disruptions. However, little is known about how interbank networks are formed and about their sensitivity to changes in key bank parameters (for example, induced by common exogenous shocks or by regulatory initiatives). This paper aims to shed light on these issues by modelling endogenously the formation of interbank networks, which in turn allows for checking the sensitivity of interbank network structures and hence their underlying contagion risk to changes in market-driven parameters as well as to changes in regulatory measures such as large exposures limits. The sequential network formation mechanism presented in the paper is based on a portfolio optimisation model whereby banks allocate their interbank exposures while balancing the return and risk of counterparty default risk and the placements are accepted taking into account funding diversification benefits. The model offers some interesting insights into how key parameters may affect interbank network structures and can be a valuable tool for analysing the impact of various regulatory policy measures relating to banks' incentives to operate in the interbank market. JEL Classification: G21, C63, C78
    Keywords: counterparty risk, interbank network, nancial contagion, nancial regulation
    Date: 2014–03

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