nep-gth New Economics Papers
on Game Theory
Issue of 2014‒07‒28
fifteen papers chosen by
Laszlo A. Koczy
Magyar Tudományos Akadémia

  1. Strategy-proofness and essentially single-valued cores revisited By EHLERS, Lars
  2. A Note on Kuhn’s Theorem with Ambiguity Averse Players By Aryal, Gaurab; Stauber, Ronald
  3. Structural Estimation of Sequential Games of Complete Information By Jason R. Blevins
  4. Recursive Lexicographical Search: Finding all Markov Perfect Equilibria of Finite State Directional Dynamic Games By Fedor Iskhakov; John Rust; Bertel Schjerning; Jean-Robert Tyran
  5. Delayed-response strategies in repeated games with observation lags By Fudenberg, Drew; Ishii, Yuhta; Kominers, Scott Duke
  6. Who cooperates in repeated games: The role of altruism, inequity aversion, and demographics By Dreber-Almenberg, Anna; Fudenberg, Drew; Rand, David G.
  7. Bribing in First-Price Auctions: Corrigendum By Kotowski, Maciej Henryk; Rachmilevitch, Shiran
  8. Canonical correlation and assortative matching: A remark By DUPUY Arnaud; GALICHON Alfred
  9. Countervailing Conflict Interventions as a (Potentially Preventable) Prisoner’s Dilemma Outcome By Dulal, Rajendra
  10. Reciprocity Networks and the Participation Problem By Martin Dufwenberg; Amrish Patel
  11. Third-Party Punishment: Retribution or Deterrence? By Fangfang Tan; Erte Xiao
  12. I Cannot Cheat on You after We Talk By Cristina Bicchieri; Alessandro Sontuoso; ;
  13. On the continuous equilibria of affiliated-value, all-pay auctions with private budget constraints By Li, Fei; Kotowski, Maciej Henryk
  14. Behavior in Contests By Sheremeta, Roman
  15. Semiparametric Estimation of First-Price Auction Models By Aryal, Gaurab; Gabrielli, Maria F.; Vuong, Quang

  1. By: EHLERS, Lars
    Abstract: We consider general allocation problems with indivisibilities where agents' preferences possibly exhibit externalities. In such contexts many different core notions were proposed. One is the gamma-core whereby blocking is only allowed via allocations where the non-blocking agents receive their endowment. We show that if there exists an allocation rule satisfying ‘individual rationality’, ‘efficiency’, and ‘strategy-proofness’, then for any problem for which the gamma-core is non-empty, the allocation rule must choose a gamma-core allocation and all agents are indifferent between all allocations in the gamma-core. We apply our result to housing markets, coalition formation and networks.
    Keywords: General allocation problems, Externalities, Strategy-proofness, Gamma-core
    JEL: C78 D61 D78
    Date: 2014
  2. By: Aryal, Gaurab; Stauber, Ronald
    Abstract: Kuhn’s Theorem shows that extensive games with perfect recall can equivalently be analyzed using mixed or behavioral strategies, as long as players are expected utility maximizers. This note constructs an example that illustrates the limits of Kuhn’s Theorem in an environment with ambiguity averse players who use a maxmin decision rule and full Bayesian updating.
    Keywords: Extensive games; Ambiguity; Maxmin; Dynamic consistency
    JEL: C72 D81
    Date: 2014–06–17
  3. By: Jason R. Blevins (Department of Economics, Ohio State University)
    Abstract: In models of strategic interaction, there may be important order of entry effects if one player can credibly commit to an action (e.g., entry) before other players. If one estimates a simultaneous-move model, then the move-order effects will be confounded with the payoffs. This paper considers nonparametric identification and simulation-based estimation of sequential games of complete information. Relative to simultaneous-move games, these models avoid the problem of multiple equilibria and require fewer payoff normalizations. We apply the estimator in several Monte Carlo experiments and to study entry-order effects using data from the airline industry.
    Keywords: static games, sequential games, identification, simulation-based estimation, airline industry
    JEL: C15 C35 C72 L13 L93
    Date: 2014–07
  4. By: Fedor Iskhakov (University New South Wales); John Rust (Georgetown University); Bertel Schjerning (Department of Economics, Copenhagen University); Jean-Robert Tyran
    Abstract: We define a class of dynamic Markovian games that we call directional dynamic games (DDG) in which directionality is represented by a partial order on the state space. We propose a fast and robust state recursion algorithm that can find a Markov perfect equilibrium (MPE) via backward induction on the state space of the game. When there are multiple equilibria, this algorithm relies on an equilibrium selection rule (ESR) to pick a particular MPE.We propose a recursive lexicographic search (RLS) algorithm that systematically and efficiently cycles through all feasible ESRs and prove that the RLS algorithm finds all MPE of the overall game. We apply the algorithms to find all MPE of a dynamic duopoly model of Bertrand price competition and cost reducing investments which we show is a DDG. Even with coarse discretization of the state space we find hundreds of millions of MPE in this game.
    Keywords: Dynamic games, directional dynamic games, Markov-perfect equilibrium, subgame perfect equilibrium, multiple equilibria, partial orders, directed acyclic graphs, d-subgames, generalized stage games, state recursion, recursive lexicographic search algorithm, variable-base arithmetic, successor function
    JEL: D92 L11 L13
    Date: 2014–06–01
  5. By: Fudenberg, Drew; Ishii, Yuhta; Kominers, Scott Duke
    Abstract: We extend the folk theorem of repeated games to two settings in which players' information about others' play arrives with stochastic lags. In our first model, signals are almost-perfect if and when they do arrive, that is, each player either observes an almost-perfect signal of period-t play with some lag or else never sees a signal of period-t play. The second model has the same lag structure, but the information structure corresponds to a lagged form of imperfect public monitoring, and players are allowed to communicate via cheap-talk messages at the end of each period. In each case, we construct equilibria in “delayed-response strategies,†which ensure that players wait long enough to respond to signals that with high probability all relevant signals are received before players respond. To do so, we extend past work on private monitoring to obtain folk theorems despite the small residual amount of private information.
    Date: 2014
  6. By: Dreber-Almenberg, Anna; Fudenberg, Drew; Rand, David G.
    Abstract: We explore the extent to which altruism, as measured by giving in a dictator game (DG), accounts for play in a noisy version of the repeated prisoner's dilemma. We find that DG giving is correlated with cooperation in the repeated game when no cooperative equilibria exist, but not when cooperation is an equilibrium. Furthermore, none of the commonly observed strategies are better explained by inequity aversion or efficiency concerns than money maximization. Various survey questions provide additional evidence for the relative unimportance of social preferences. We conclude that cooperation in repeated games is primarily motivated by long-term payoff maximization and that even though some subjects may have other goals, this does not seem to be the key determinant of how play varies with the parameters of the repeated game. In particular, altruism does not seem to be a major source of the observed diversity of play.
    Date: 2014
  7. By: Kotowski, Maciej Henryk; Rachmilevitch, Shiran
    Abstract: We clarify the sufficient condition for a trivial equilibrium to exist in the model of Rachmilevitch (2013). Rachmilevitch (2013), henceforth R13, studies the following game. Two ex ante identical players are about to participate in an independent-private-value first-price, sealed bid auction for one indivisible object. After the risk-neutral players learn their valuations but prior to the actual auction, player 1 can offer a take-it-or-leave-it (TIOLI) bribe to his opponent in exchange for the opponent dropping out of the contest. If the offer is accepted, player 1 is the only bidder and obtains the item for free; otherwise, both players compete non-cooperatively in the auction as usual. This is called the first-price TIOLI game.1 R13 shows that under the restriction to continuous and monotonic bribing strategies for player 1, any equilibrium of this game must be trivial—the equilibrium bribing function employed by player 1, if it is continuous and non-decreasing, must be identically zero. In this note, we clarify the sufficient conditions under which a trivial equilibrium exists. These are less stringent than originally proposed.
    Date: 2013
  8. By: DUPUY Arnaud; GALICHON Alfred
    Abstract: In the context of the Beckerian theory of marriage, where men and women match on a single-dimensional index that is the weighted sum of their respective multivariate attributes, many papers in the literature have used linear canonical correlation, and related techniques, in order to estimate these weights. We argue that this estimation technique is inconsistent and suggest some solutions.
    Keywords: matching; marriage; assortative matching; assignment; canonical correlation
    JEL: C13 C78 D61
    Date: 2014–07
  9. By: Dulal, Rajendra
    Abstract: Scholars and policymakers have devoted much attention to issues of third party intervention in conflict. The present paper considers a conflict that draws two countervailing outside interveners. As in the realist perspective, the outside parties are drawn to intervene through some economic or geostrategic interest that would be promoted through the victory of an ally. Using a simple game theoretic model, I find conditions under which outside interveners fall prey to a Prisoner’s Dilemma outcome and become worse off through their own intervention. This result brings into question the desirability of escalatory conflict intervention. The paper also studies conditions required for the United Nations, or some such supra-national institution, to prevent a Prisoner’s Dilemma outcome and successfully deter escalatory bilateral intervention. The findings show that the United Nations can alter the game equilibrium, and deter escalatory intervention, by imposing sufficient costs on the intervening parties.
    Keywords: Conflict, Prisoner's Dilemma , Game theory
    JEL: F51
    Date: 2013–10
  10. By: Martin Dufwenberg; Amrish Patel
    Abstract: Reciprocity can be a powerful motivation for human behaviour. Scholars argue that it is relevant in the context of private provision of public goods. We examine whether reciprocity can resolve the associated coordination problem. The interaction of reciprocity with cost-sharing is critical. Neither cost-sharing nor reciprocity in isolation can solve the problem, but together they have that potential. We introduce new network notions of reciprocity relations to better understand this. Our analysis uncovers an intricate web of nuances that demonstrate the attainable yet elusive nature of a unique outcome.Keywords: Discrete public good, participation, reciprocity networks, coordination, cost-sharing JEL codes: C72, D03, H41.
    Date: 2014
  11. By: Fangfang Tan; Erte Xiao
    Abstract: We conduct an experiment to examine the role of retribution and deterrence in motivating third party punishment. In particular, we consider how the role of these two motives may differ according to whether a third party is a group or an individual. In a one-shot prisoner’s dilemma game with third party punishment, we find groups punish more when the penalty embeds deterrence than when it can only be retributive. In contrast, individual third parties’ punishment decisions do not vary on whether the punishment has any deterrent effect. In general, third party groups are less likely to impose punishment than individuals even though the punishment is costless for third parties.
    Keywords: third-party punishment, group decision making, retribution, deterrence, social dilemmas, experiment
    JEL: C72 C92 D63 D70
    Date: 2014–05
  12. By: Cristina Bicchieri; Alessandro Sontuoso (Philosophy, Politics and Economics, University of Pennsylvania); ;
    Abstract: This is a draft of a chapter in a planned book on the Prisoner’s Dilemma, edited by Martin Peterson, to be published by Cambridge University Press. - Experimental evidence on pre-play communication supports a “focusing function of communication” hypothesis. Relevant communication facilitates cooperative, pro-social behavior because it causes a shift in individuals’ focus towards strategies dictated by some salient social norm. After reviewing the formal foundations for a general theory of conformity to social norms, we provide an original application illustrating how a framework that allows for different conjectures about norms is able to capture the focusing function of communication and to explain experimental results.
    Keywords: social norms, social dilemmas
    JEL: C72 C92
    Date: 2014–07
  13. By: Li, Fei; Kotowski, Maciej Henryk
    Abstract: We consider all-pay auctions in the presence of interdependent, affiliated valuations and private budget constraints. For the sealed-bid, all-pay auction we characterize a symmetric equilibrium in continuous strategies for the case of N bidders. Budget constraints encourage more aggressive bidding among participants with large endowments and intermediate valuations. We extend our results to the war of attrition where we show that budget constraints lead to a uniform amplification of equilibrium bids among bidders with sufficient endowments. An example shows that with both interdependent valuations and private budget constraints, a revenue ranking between the two auction formats is generally not possible. Equilibria with discontinuous bidding strategies are discussed.
    Date: 2014
  14. By: Sheremeta, Roman
    Abstract: Standard theoretical prediction is that rational economic agents participating in rent-seeking contests should engage in socially inefficient behavior by exerting costly efforts. Experimental studies find that the actual efforts of participants are significantly higher than predicted and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although the standard theory cannot explain over-dissipation, this phenomenon can be explained by incorporating behavioral dimensions into the rent-seeking contest, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive, but they provide a coherent picture of important behavioral dimensions that should be considered when studying rent-seeking behavior in theory and in practice.
    Keywords: rent-seeking, contests, experiments, overbidding, over-dissipation
    JEL: C72 C91 C92 D72 D74
    Date: 2014–07–01
  15. By: Aryal, Gaurab; Gabrielli, Maria F.; Vuong, Quang
    Abstract: We propose a semiparametric estimator within the class of indirect methods. Specifically, we model private valuations through a set of conditional moment restrictions. Our econometric model calls for a two step procedure. In the first step we recover a sample of pseudo private values while using a Local Polynomial Estimator. In the second step we use a GMM procedure to obtain an estimate for the parameter of interest. The proposed semiparametric estimator is shown to have desirable statistical properties namely, it is consistent and has an asymptotic normal distribution. Moreover, the estimator attains the parametric rate of convergence.
    Keywords: Auctions, Structural Approach, Semiparametric Estimator, Local Polynomial, GMM.
    JEL: C14 C72 D44
    Date: 2014–07–12

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