nep-gth New Economics Papers
on Game Theory
Issue of 2014‒07‒05
eleven papers chosen by
Laszlo A. Koczy
Hungarian Academy of Sciences and Obuda University

  1. A strategic approach for the discounted Shapley values By Emilio Calvo; Esther Gutiérrez-López
  2. Revenue Equivalence of the Volunteer’s Dilemma and the Stag Hunt Game and Inferiority of Intermediate Thresholds By Friedel Bolle
  3. "Mechanism Design with Bounded Depth of Reasoning and Small Modeling Mistakes" By Geoffroy de Clippel; Rene Saran; Roberto Serrano
  4. Market Power in a Power Market with Transmission Constraints By Bjørndal, Mette; Gribkovskaia, Victoria; Jörnsten, Kurt
  5. People Do Not Discount Heavily in Strategic Settings, but They Believe Others Do. By Cary Deck; Salar Jahedi
  6. National-Strategic Investment in European Power Transmission Capacity By Daniel Huppmann; Jonas Egerer
  7. The Analysis of Split Graphs in Social Networks Based on the K-Cardinality Assignment Problem By Belik, Ivan
  8. Local and Consistent Centrality Measures in Networks By Zenou, Yves; Dequiedt, Vianney
  9. Single- and Double-Elimination All-Pay Tournaments By Cary Deck; Erik O. Kimbrough
  10. Experimenting with Behavior Based Pricing By Zuzana Brokesova; Cary Deck; Jana Peliova
  11. Forecasting with a mismatch-enhanced labor market matching function By Hutter, Christian; Weber, Enzo

  1. By: Emilio Calvo (Universidad de Valencia. ERI-CES); Esther Gutiérrez-López (Departamento de Economía Aplicada IV. Universidad del País Vasco U.P.V./E.H.U.)
    Abstract: The family of discounted Shapley values is analyzed for cooperative games in coalitional form. We consider the bargaining protocol of the alternating random proposer introduced in Hart and Mas-Colell (1996). We demostrate that the discounted Shapley values arise as the expected payoffs associated with the bargaining equilibria when a time discount factor is considered. In a second model, we replace the time cost with the probability that the game ends without agreements. This model also implements these values in transferable utility games, moreover, the model implements the α-consistent values in the nontransferable utility setting.
    Keywords: Discounted Shapley value; egalitarianism; cooperative TU-games JEL
    JEL: C71
    Date: 2014–06
  2. By: Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: The launch of a public project requires “enough” support from a group of n players. If players have only binary decision sets (participate or not, vote approvingly or not) this game is called a Binary Threshold Public Goods game (BTPG). In this paper we keep the individual cost/benefit ratios of all players constant and vary only the (rather generally defined) threshold. The revenues of the various BTPG equilibria are compared. Applying two principles of equilibrium selection, the least and the most demanding threshold, namely “one supporting player is sufficient” (Volunteer’s Dilemma) and “support by all players is necessary” (Stag Hunt game) are revenue equivalent for all players. Compared with the Stag Hunt game, all intermediate thresholds are connected with Pareto-inferior revenues.
    Keywords: Threshold Public Goods, binary decisions, mixed strategy equilibria
    JEL: H41 D71
    Date: 2014–06
  3. By: Geoffroy de Clippel; Rene Saran; Roberto Serrano
    Abstract: We consider mechanism design in contexts in which agents exhibit bounded depth of reasoning (level k) instead of rational expectations. We use simple direct mechanisms, in which agents report only first-order beliefs. While level 0 agents are assumed to be truth tellers, level k agents best-respond to their belief that other agents have at most k - 1 levels of reasoning. We find that incentive compatibility is necessary for implementation in this framework, while its strict version alone is sufficient. Adding continuity to both directions, the same results are obtained for continuous implementation with respect to small modeling mistakes. We present examples to illustrate the permissiveness of our findings in contrast to earlier related results under the assumption of rational expectations
    Keywords: mechanism design; bounded rationality; level k reasoning; small modeling mistakes; incentive compatibility; continuity
    Date: 2014
  4. By: Bjørndal, Mette (Dept. of Business and Management Science, Norwegian School of Economics); Gribkovskaia, Victoria (Dept. of Business and Management Science, Norwegian School of Economics); Jörnsten, Kurt (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: In this paper we present a model for analysing the strategic behaviour of a generator and its short run implications on an electricity network with transmission constraints. The problem is formulated as a Stackelberg leader-follower game. The upper level problem is generator’s profit maximisation subject to the solution of the lower level problem of optimal power flow (OPF) solved by system operator. Strategic bidding is modelled as an iterative procedure where the supply functions of the competitive fringe are fixed while the strategic player’s bids are changed in a successive order until the bid giving maximum profit is found. This application rests on the assumption of supply function Nash equilibrium when the supplier believes that changes in his bids will not influence other actors to alter their bid functions. Numerical examples are presented on a simple triangular network.
    Keywords: Electric power market; Supply function equilibria; Bilevel games; Strategic energy bidding; Irrelevant constraints
    JEL: Q00
    Date: 2014–06–26
  5. By: Cary Deck (University of Arkansas and Chapman University); Salar Jahedi (RAND Corporation)
    Abstract: Several studies have shown that people greatly discount future benefits and costs. However, most of the direct laboratory evidence of this phenomenon has focused on individual choice experiments. This paper investigates the degree to which the timing of payments affects behavior in four commonly studies strategic settings: a Prisoner's Dilemma game, a Stag-Hunt game, a First Price Auction and a Second Price Auction. In all four settings, a two week delay in payoffs has a comparable effect to a 20% reduc- tion in current payoffs. A follow-up study suggests that it is an individual's strategic response to the anticipated discount rate of others that might be driving this behavior rather than a participant's own discount factor.
    Keywords: Strategic Behavior, Time Discounting, Experiments.
    Date: 2014
  6. By: Daniel Huppmann; Jonas Egerer
    Abstract: The transformation of the European energy system requires substantial investment in transmission capacity to facilitate cross-border trade and to efficiently integrate renewable energy sources. However, network planning in the EU is still mainly a national prerogative. In contrast to other studies aiming to identify the pan-European (continental) welfare-optimal transmission expansion, we investigate the impact of national regulators deciding on network investment strategically, with the aim of maximizing consumer surplus and generator profits in their jurisdiction. This reflects the inadequacy of current mechanisms to compensate for welfare re-allocations across national boundaries arising from network upgrades. We propose a three-stage equilibrium model to describe the Nash game between zonal planners (i.e., national governments, regulators, or system operators), each taking into account the impact of network expansion on the electricity spot market and the resulting welfare effects on the constituents within her jurisdiction. Using a four-node sample network, we identify several Nash equilibria of the game between the zonal planners, and illustrate the failure to reach the first-best welfare expansion in the absence of an effective compensation mechanism.
    Keywords: Electricity transmission, network expansion, Generalized Nash equilibrium (GNE), mixed-integer equilibrium problem under equilibrium constraints (MI-EPEC)
    JEL: L51 C61 C72
    Date: 2014
  7. By: Belik, Ivan (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: In terms of social networks, split graphs correspond to the variety of interpersonal and intergroup relations. In this paper we analyse the interaction between the cliques (socially strong and trusty groups) and the independent sets (fragmented and non-connected groups of people) as the basic components of any split graph. Based on the Semi-Lagrangean relaxation for the k-cardinality assignment problem, we show the way of minimizing the socially risky interactions between the cliques and the independent sets within the social network.
    Keywords: Social networks; split graphs; k-cardinality assignment
    JEL: C00 C60 C61
    Date: 2014–02–28
  8. By: Zenou, Yves (Dept. of Economics, Stockholm University); Dequiedt, Vianney (Université d’Auvergne)
    Abstract: The centrality of an agent in a network has been shown to be crucial in explaining different behaviors and outcomes. In this paper, we propose an axiomatic approach to characterize a class of centrality measures for which the centrality of an agent is recursively related to the centralities of the agents she is connected to. This includes the Katz-Bonacich and the eigenvector centrality. The core of our argument hinges on the power of the consistency axiom, which relates the properties of the measure for a given network to its properties for a reduced problem. In our case, the reduced problem only keeps track of local and parsimonious information. Our axiomatic characterization highlights the conceptual similarities among this class of measures.
    Keywords: Consistency; centrality measures; networks; axiomatic approach
    JEL: C70 D85
    Date: 2014–05–21
  9. By: Cary Deck (Department of Economics, University of Arkansas and Economic Science Institute, Chapman University); Erik O. Kimbrough (Department of Economics, Simon Fraser University)
    Abstract: Tournaments consisting of iterative matches are a common mechanism for determining how to allocate a prize. While participants are focused on their own outcomes, tournament organizers often have objectives such as maximizing the total investment or effort by the participants over the course of the tournament. For this reason it is important for organizers to understand the behavioral as well as the theoretical properties of different tournament structures. Given that laboratory experiments have consistently found high levels of overbidding in contests, one might suspect that double-elimination tournaments would generate substantially more total investment than single-elimination tournaments despite the two types of tournaments generating theoretically equivalent expected aggregate investment. This paper reports a set of laboratory experiments designed to test this comparison. The results indicate that aggregate investment is similar between the two tournaments. While observed behavior in the single-elimination tournament is quite similar to theoretical predictions, behavior in the double-elimination tournament appears to be impacted by an implicit, self-imposed budget constraint.
    Keywords: elimination tournaments, all-pay auctions, experiments
    JEL: C7 C9 D4 D7
    Date: 2014
  10. By: Zuzana Brokesova (University of Economics in Bratislava); Cary Deck (Sam M. Walton College of Business, University of Arkansas and Economic Science Institute, Chapman University); Jana Peliova (University of Economics in Bratislava)
    Abstract: Many purchases of differentiated goods are repeated, giving sellers the opportunity to engage in price discrimination based upon the shopper’s previous behavior by either offering loyalty discounts to repeat buyers or introductory rates to new customers. Recent theoretical work suggests that loyalty discounts are likely to be implemented when customer preferences are not stationary and sellers can pre-commit to prices for repeat buyers, but otherwise repeat buyers can be expected to pay the same or more than new buyers. This paper reports the results of a series of controlled laboratory experiments designed to empirically test the impact of these factors on pricing strategies, seller profit and total cost to consumers. Absent price pre-commitments, sellers in the lab engage in poaching when it is optimal to do so, but the ability to pre-commit leads to prices being relatively more favorable to loyal customers. Customer poaching increases seller profit and increases total consumer costs in the case of stable consumer preferences without price pre-commitment.
    Keywords: Strategic Behavior, Time Discounting, Experiments.
    JEL: C71 C91 D41
    Date: 2014
  11. By: Hutter, Christian (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weber, Enzo (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "This paper investigates the role of mismatch between job seekers and job openings for the forecasting performance of a labor market matching function. In theory, higher mismatch lowers matching efficiency which increases the risk that the vacancies cannot be filled within the usual period of time. We investigate whether and to what extent forecasts of German job findings can be improved by a mismatch-enhanced labor market matching function. For this purpose, we construct so-called mismatch indicators that reflect regional, occupational and qualification-related mismatch on a monthly basis. In pseudo out-of-sample tests that account for the nested model environment, we find that forecasting models enhanced by the mismatch indicator significantly outperform their benchmark counterparts for all forecast horizons ranging between one month and a year. This is especially pronounced in the aftermath of the Great Recession where a low level of mismatch improved the possibility of unemployed to find a job again." (Author's abstract, IAB-Doku) ((en))
    Keywords: mismatch, offene Stellen, Arbeitslose, Qualifikationsanforderungen, Qualifikationsmerkmale, Prognoseverfahren, Stellenbesetzung - Dauer, Indikatorenbildung
    JEL: C22 C52 C53 C78 E24 E27
    Date: 2014–06–25

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