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

  1. Strong equilibrium in games with common and complementary local utilities By Kukushkin, Nikolai S.
  2. The positive core for games with precedence constraints By Grabisch, Michel; Sudhölter, Peter
  3. Hotelling Games on Networks: Efficiency of Equilibria. By Gaëtan Fournier; Marco Scarsini
  4. Experimental games on networks: Underpinnings of behavior and equilibrium selection By Gary Charness; Francesco Feri; Miguel A. Meléndez-Jiménez; Matthias Sutter
  5. A new epistemic model By Pintér, Miklós
  6. Two-sided matching with one-sided preferences By Guillaume Haeringer; Vincent Iehlé
  7. Incentive and normative analysis on sequencing problem By De, Parikshit
  8. Strategically Equivalent Contests By Chowdhury, Subhasish; Sheremeta, Roman
  9. A threshold for biological altruism in public goods games played in groups including kin By Hannes Rusch
  10. Trading Participation Rights to the Red Hat Puzzle. Will Markets allocate the rights for performing decision tasks to the more abled players? By Choo, Lawrence C.Y
  11. Deception in Networks: A Laboratory Study By Rong Rong; Daniel Houser
  12. With God We Trust: Religion, Trust and Cooperation in Large-Scale Societies By Julien Gagnon
  13. Average player traits as predictors of cooperation in a repeated prisoner's dilemma By Al-Ubaydli, Omar; Jones, Garett; Weel, Jaap
  14. From Minority Games to $-Games By Jørgen Vitting Andersen
  15. Coalition-Preclusion Contracts and Moderate Policies By Hans Gersbach; Oriol Tejada; Maik T. Schneider
  16. Obedience to Rules with Mild Sanctions: The Roles of Peer Punishment and Voting By Chen, Josie I

  1. By: Kukushkin, Nikolai S.
    Abstract: A rather general class of strategic games is described where the coalition improvements are acyclic and hence strong equilibria exist: The players derive their utilities from the use of certain "facilities"; all players using a facility extract the same amount of "local utility" therefrom, which amount depends both on the set of users and on their actions, and is decreasing in the set of users; the "ultimate" utility of each player is the minimum of the local utilities at all relevant facilities. Two important subclasses are "games with structured utilities," basic properties of which were discovered in 1970s and 1980s, and "bottleneck congestion games," which attracted researchers' attention quite recently. The former games are representative in the sense that every game from the whole class is isomorphic to one of them. The necessity of the minimum aggregation for the "persistent" existence of strong equilibria, actually, just Pareto optimal Nash equilibria, is established.
    Keywords: Strong equilibrium; Weakest-link aggregation; Coalition improvement path; Congestion game; Game with structured utilities
    JEL: C72
    Date: 2014–04–21
  2. By: Grabisch, Michel (Paris School of Economics); Sudhölter, Peter (Department of Business and Economics)
    Abstract: We generalize the characterizations of the positive core and the positive prekernel to TU games with precedence constraints and show that the positive core is characterized by non-emptiness (NE), boundedness (BOUND), covariance under strategic equivalence, closedness (CLOS), the reduced game property (RGP), the reconfirmation property (RCP) for suitably generalized Davis-Maschler reduced games, and the possibility of nondiscrimination. The bounded positive core, i.e., the union of all bounded faces of the positive core, is characterized similarly. Just RCP has to be replaced by a suitable weaker axiom, a weak version of CRGP (the converse RGP) has to be added, and CLOS can be deleted. For classical games the prenucleolus is the unique further solution that satisfies the axioms, but for games with precedence constraints it violates NE as well as the prekernel. The positive prekernel, however, is axiomatized by NE, anonymity, reasonableness, the weak RGP, CRGP, and weak unanimity for two-person games (WUTPG), and the bounded positive prekernel is axiomatized similarly by requiring WUTPG only for classical two-person games and adding BOUND.
    Keywords: TU games; restricted cooperation; game with precedence constraints; positive core; bounded core; positive prekernel; prenucleolus
    JEL: C71
    Date: 2014–05–02
  3. By: Gaëtan Fournier (Centre d'Economie de la Sorbonne); Marco Scarsini (Dipartimento di Economia e Finanza - LUISS, Roma)
    Abstract: We consider a Hotelling game where a finite number of retailers choose a location, given that their potential customers are distributed on a network. Retailers do not compete on price but only on location, therefore each consumer shops at the closest store. We show that when the number of retailers is large enough, the game admits a pure Nash equilibrium and we construct it. We then compare the equilibrium cost bore by the consumers with the cost that could be achieved if the retailers followed the dictate of a benevolent planner. We perform this comparison in term of the induced price of anarchy, i.e., the ratio of the worst equilibrium cost and the optimal cost, and the induced price of stability, i.e., the ratio of the best equilibrium cost and the optimal cost. We show that, asymptotically in the number of retailers, these ratios are two and one, respectively.
    Keywords: Induced price of anarchy, induced price of stability, location games on networks, pure equilibria, large games.
    JEL: C72 R30 R39
    Date: 2014–04
  4. By: Gary Charness; Francesco Feri; Miguel A. Meléndez-Jiménez; Matthias Sutter
    Abstract: In this paper, we describe a series of laboratory experiments that implement specific examples of a more general network structure and we examine equilibrium selection. Specifically, actions are either strategic substitutes or strategic complements, and participants have either complete or incomplete information about the structure of a random network. Since economic environments typically have a considerable degree of complementarity or substitutability, this framework applies to a wide variety of settings. The degree of equilibrium play is striking, in particular with incomplete information. Behavior closely resembles the theoretical equilibrium whenever this is unique; when there are multiple equilibria, general features of networks, such as connectivity, clustering, and the degree of the players, help to predict informed behavior in the lab. People appear to be strongly attracted to maximizing aggregate payoffs (social efficiency), but there are forces that moderate this attraction: 1) people seem content with (in the aggregate) capturing only the lion’s share of the efficient profits in exchange for reduced exposure to loss, and 2) uncertainty about the network structure makes it considerably more difficult to coordinate on a demanding, but efficient, equilibrium that is typically implemented with complete information.
    Keywords: Random networks, Incomplete information, Connectivity, Clustering, Strategic substitutes, Strategic complements, Experiment
    JEL: C71 C91 D03 D85
    Date: 2014–04
  5. By: Pintér, Miklós
    Abstract: Meier (2012) gave a "mathematical logic foundation" of the purely measurable universal type space (Heifetz and Samet, 1998). The mathematical logic foundation, however, discloses an inconsistency in the type space literature: a finitary language is used for the belief hierarchies and an infinitary language is used for the beliefs. In this paper we propose an epistemic model to fix the inconsistency above. We show that in this new model the universal knowledgebelief space exists, is complete and encompasses all belief hierarchies. Moreover, by examples we demonstrate that in this model the players can agree to disagree Aumann (1976)'s result does not hold, and Aumann and Brandenburger (1995)'s conditions are not sufficient for Nash equilibrium. However, we show that if we substitute selfevidence (Osborne and Rubinstein, 1994) for common knowledge, then we get at that both Aumann (1976)'s and Aumann and Brandenburger (1995)'s results hold.
    Keywords: Incomplete information game, Agreeing to disagree, Nash equilibrium, Epistemic game theory, Knowledge-belief space, Belief hierarchy, Common knowledge, Self-evidence, Nash equilibrium
    JEL: C70 C72 D80 D82 D83
    Date: 2014–04–18
  6. By: Guillaume Haeringer (Zicklin School of Business - Baruch College); Vincent Iehlé (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine)
    Abstract: In a school choice context we show that considering only schools' priorities and the set of acceptable schools for each student - but not how these schools are ranked in their preferences - we can restrict the set of possible stable matchings that can arise for any preference profile of the students that leaves the set of acceptable schools unchanged. We characterize impossible matches, i.e., of pairs student school that cannot be matched at any stable matching, for any preference profile. Our approach consists of linking Hall's marriage condition to stable matchings. Our results offer a new methodology to assess to what extent the preferences on one side of a matching market can preset the stable matchings that can emerge. First, we use this technique to discuss the impact of priority zoning in school choice problems. Second, a new mechanism for school choice problems is proposed. It is shown that it (weakly) Pareto dominates the Student Optimal Stable Mechanism and retain some of its incentives.
    Keywords: school Choice; Hall's marriage theorem; stable matching; zoning policy; Pareto improvement
    Date: 2014–04–18
  7. By: De, Parikshit
    Abstract: We identify the complete class of transfer rules that guarantee strategyproofness of any non-increasing in completion time allocation rule for the sequencing problem. We then characterize the class of mechanisms satisfying efficiency of decision (or aggregate cost minimization), egalitarian equivalence and strategyproofness. There is no mechanism in this class that satisfies either feasibility or weak group strategyproofness. Finally we identify the restrictions under which egalitarian equivalence, efficiency of decision, identical preference lower bound and strategyproofness are compatible.
    Keywords: Sequencing problems; Strategyproofness; Egalitarian equivalence; Identical preference lower bound
    JEL: C72 D63 D71 D82
    Date: 2013–07–05
  8. By: Chowdhury, Subhasish; Sheremeta, Roman
    Abstract: Using a two-player Tullock-type contest we show that intuitively and structurally different contests can be strategically equivalent. Strategically equivalent contests generate the same best response functions and, as a result, the same equilibrium efforts. However, strategically equivalent contests may yield different equilibrium payoffs. We propose a simple two-step procedure to identify strategically equivalent contests. Using this procedure, we identify contests that are strategically equivalent to the original Tullock contest, and provide new examples of strategically equivalent contests. Finally, we discuss possible contest design applications and avenues for future theoretical and empirical research.
    Keywords: rent-seeking, contest, equivalence, contest design
    JEL: C72 D72 D74
    Date: 2014–04–18
  9. By: Hannes Rusch (University of Giessen)
    Abstract: Phenomena like meat sharing in hunter-gatherers, altruistic self-sacrifice in intergroup conflicts, and contribution to the production of public goods in laboratory experiments have led to the development of numerous theories trying to explain human prosocial preferences and behavior. Many of these focus on direct and indirect reciprocity, assortment, or (cultural) group selection. Here, I investigate analytically how genetic relatedness changes the incentive structure of that paradigmatic game which is conventionally used to model and experimentally investigate collective action problems: the public goods game. Using data on contemporary hunter-gatherer societies I then estimate a threshold value determining when biological altruism turns into maximizing inclusive fitness in this game. I find that, on average, contributing no less than about 40% of individual fitness to public goods production still is an optimal strategy from an inclusive fitness perspective under plausible socio-ecological conditions.
    JEL: B15 C72 D64 H41
    Date: 2014
  10. By: Choo, Lawrence C.Y
    Abstract: This paper investigates the conventional wisdom that markets would naturally allocate the rights for performing decisional task to those players who might be best suited to perform the task. We embedded the decisional tasks in a stylised setting of a game, motivated by Littlewood(1953) Red Hat Puzzle, when the optimal choices in the game require players to employ logical and epistemological reasoning. We present a treatment where players are permitted to trade their participation rights to the game. The payoffs are furthermore calibrated such that the players who know the optimal choice in the game should value the rights strictly more than those who do not. However, aggregated performances in this treatment were found to be significantly lower than the control treatments where players were not permitted to trade their participation rights, providing little support for the conventional wisdom. We show that this finding could be attributed to price bubbles in the markets for participations rights.
    Keywords: Game Theory, Experimental Economics, Trading Markets
    JEL: C72 C92 G34
    Date: 2014–04–27
  11. By: Rong Rong (Department of Economics, Weber State University); Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: Communication between departments within a firm may include deception. Theory suggests that telling lies in these environments may be strategically optimal if there exists a small difference in monetary incentives (Crawford and Sobel, 1982; Galeotti et al, 2012). We design a laboratory experiment to investigate whether agents with different monetary incentives in a network environment behave according to theoretical predictions. We found that players’ choices are consistent with the theory. That is, most communication within an incentive group is truthful and deception often occurs between subjects from different groups. These results have important implications for intra-organizational conflict management, demonstrating that in order to minimize deceptive communication between departments the firm may need to reduce incentive differences between these groups. Length: 19
    Keywords: social networks, deception, strategic information transmission, experiments
    JEL: D85 D02 C92
    Date: 2014–04
  12. By: Julien Gagnon
    Abstract: The first aim of this paper is to revisit the puzzle of cooperation in large-scale societies.It proposes a game theoretic model showing how endogenous emotion-based punishment can sustain ull cooperation when interactions are not repeated, provided that players' endogenous trust is high enough. The model the signalling theory of religion. Finally, the model enables clear and tractable predictions about the levels of religious affiliation and participation within a society. Evidence of the model's implications is discussed.
    Keywords: Cooperation; Emotions; Psychological Game Theory; Punishment; Religion; Trust.
    JEL: D02 D03 D71 D81 Z12
    Date: 2014–04–29
  13. By: Al-Ubaydli, Omar; Jones, Garett; Weel, Jaap
    Abstract: Many studies have looked at how individual player traits influence individual choice in the repeated prisoner’s dilemma, but few studies have looked at how the average traits of pairs of players influence the average choices of pairs. We consider cognitive ability, patience, risk tolerance, and the Big Five personality measures as predictors of individual and average group choices in a ten-round repeated prisoner’s dilemma. We find that a pair’s average cognitive ability measured by the Raven’s IQ test predicts average cooperation rates robustly and average earnings more modestly. Higher individual cognitive ability also predicts a greater probability of sustaining cooperation in the second round, suggesting that positive reciprocity is more likely among players with higher Raven’s scores. Openness is the only control variable that predicts first-round cooperative behavior.
    Keywords: cooperation; IQ; personality; discount rate; patience; risk-aversion; prisoner's dilemma
    JEL: D02 D23 O12 O43
    Date: 2014–02–05
  14. By: Jørgen Vitting Andersen (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne)
    Abstract: In this chapter we will first argue for the use of game theory/agent-based modeling, to go beyond the standard methods used in traditional approach of Finance. First will be introduced some very general thoughts of elements needed in a new framework for Finance. Then some few concrete examples of heterogeneous agent-based models will be introduced and several of their main results will be discussed. Finally applications and methods to real market data will be introduced, notably the idea of "decoupling" to explain the short-lasting synchronization of investors.
    Keywords: Agent-based modeling; price formation
    Date: 2014–04–07
  15. By: Hans Gersbach (ETH Zurich, Switzerland); Oriol Tejada (ETH Zurich, Switzerland); Maik T. Schneider (ETH Zurich, Switzerland)
    Abstract: We examine the effects of a novel political institution, which we call Coalition- Preclusion Contracts, on elections, policies, and welfare. Coalition-Preclusion Contracts enable political parties to credibly commit before the elections not to form a coalition after the elections with one or several other parties specified in the contract. We consider a political game in which three parties compete to form the government and study when contracts of the above type will be written. We find that in most circumstances Coalition-Preclusion Contracts with a single-party exclusion rule defend the interests of the majority by moderating the policies implemented. Moreover, they yield welfare gains for a large set of parameter values. We discuss the robustness of the results in more general settings and study how party-exclusion rules have to be adjusted when more than three parties compete in an election.
    Keywords: coalition formation; political contracts; elections; government formation
    JEL: D72 D82 H55
    Date: 2014–04
  16. By: Chen, Josie I
    Abstract: Governments sometimes promote rules backed by sanctions too weak to make obedience privately optimal. Factors that may help make such rules effective include the presence of informal sanctions by peers, and implementation through voting. I study the impact of non-deterrent formal sanctions on voluntary contributions to a public good in a laboratory experiment. The effect is studied both in the presence and absence of informal sanctions, under fully exogenous implementation and after both implemented and randomly overridden voting. I find that informal sanctions strengthen the effect of formal ones in most conditions. However, voted implementation has no clear effect on non-deterrent formal sanction in my data, which suggests a reason for caution when studying exogenous implementation by a random vote override procedure.
    Keywords: experiment, voluntary contribution, public goods, formal sanctions, informal sanctions, voting, democracy effect
    JEL: C72 C91 C92 D72 H41
    Date: 2014–04–15

This nep-gth issue is ©2014 by Laszlo A. Koczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.