nep-gth New Economics Papers
on Game Theory
Issue of 2014‒08‒16
nine papers chosen by
Laszlo A. Koczy
Magyar Tudományos Akadémia

  1. Evolutionary Games with Group Selection By Martin Kaae Jensen; Alexandros Rigos
  2. Equilibrium delay and non-existence of equilibrium in unanimity bargaining games By Britz V.; Herings P.J.J.; Predtetchinski A.
  3. On the risk in deviating from Nash equilibrium By Irit Nowik; Shmuel Zamir
  4. Information and Volatility By Dirk Bergemann; Tibor Heumann; Stephen Morris
  5. Common Value Allocation Mechanisms with Private Information: Lotteries or Auctions? By Alexander Matros; Alex Possajennikov
  6. Entitlement in a Real Effort Ultimatum Game By Michael D. Carr; Phil Mellizo
  7. Fixed Points of Parameterized Perturbations By Andrew McLennan
  8. What drives failure to maximize payoffs in the lab? A test of the inequality aversion hypothesis By Nicolas Jacquemet; Adam Zylbersztejn
  9. An Experimental Study of Network Formation with Limited Observation By Michael Caldara; Michael McBride

  1. By: Martin Kaae Jensen; Alexandros Rigos
    Abstract: This paper introduces two new concepts in evolutionary game theory: Nash equilibrium with Group Selection (NEGS) and Evolutionarily Stable Strategy with Group Selection (ESSGS). These concepts generalize Maynard Smith and Price (1973) to settings with arbitrary matching rules, inparticular they reduce, respectively, to Nash equilibrium and ESS when matching is random. NEGS and ESSGS are to the canonical group selection model of evolutionary theory what Nash Equilibrium and ESS are to the standard replicator dynamics: any NEGS is a steady state, any stable steady state is a NEGS, and any ESSGS is asymptotically stable. We exploit this to prove what may be called “the second welfare theorem of evolution”: Any evolutionary optimum will be a NEGS under some matching rule. Our results are illustrated in Hawk-Dove, Prisoners’ dilemma, and Stag Hunt games.
    Keywords: Evolutionary Game Theory, Evolutionarily Stable Strategy, ESS, Group Selection, Non-random Matching, Trait-group Model, Haystack Model.
    JEL: C72 C73
    Date: 2014–07
  2. By: Britz V.; Herings P.J.J.; Predtetchinski A. (GSBE)
    Abstract: We consider a class of perfect information unanimity bargaining games, where the players have to choose a payoff vector from a fixed set of feasible payoffs. The proposer and the order of the responding players is determined by a state that evolves stochastically over time. The probability distribution of the state in the next period is determined jointly by the current state and the identity of the player who rejects the current proposal.This protocol encompasses a vast number of special cases studied in the literature. These special cases have in common that equilibria in pure stationary strategies exist, are efficient, are characterized by the absence of delay, and converge to a unique limit corresponding to an asymmetric Nash bargaining solution. For our more general protocol, we show that subgame perfect equilibria in pure stationary strategies need not exist. When such equilibria do exist, they may exhibit delay. Limit equilibria as the players become infinitely patient need not be unique.
    Keywords: Bargaining Theory; Matching Theory;
    JEL: C78
    Date: 2014
  3. By: Irit Nowik; Shmuel Zamir
    Abstract: The purpose of this work is to offer for any zero-sum game with a unique strictly mixed Nash equilibrium, a measure for the risk when deviating from the Nash equilibrium. We present two approaches regarding the nature of deviations; strategic and erroneous. Accordingly, we define two models. In each model we define risk measures for the row-player (PI) and the column player (PII), and prove that the risks of PI and PII coincide. This result holds for any norm we use for the size of deviations. We develop explicit expressions for the risk measures in the L1 and L2 norms, and compute it for several games. Although the results hold for all norms, we show that only the L1 norm is suitable in our context, as it is the only norm which is consistent in the sense that it gives the same size to potentially equivalent deviations. The risk measures defined here enables testing and evaluating predictions on the behavior of players. For example: Do players deviate more in a game with lower risks than in a game with higher risk?
    Date: 2014–04
  4. By: Dirk Bergemann (Cowles Foundation, Yale University); Tibor Heumann (Dept. of Economics, Yale University); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: In an economy of interacting agents with both idiosyncratic and aggregate shocks, we examine how the information structure determines aggregate volatility. We show that the maximal aggregate volatility is attained in a noise free information structure in which the agents confound idiosyncratic and common components of the payoff state, and display excess response to the common component, as in Lucas (1972). The upper bound on aggregate volatility is linearly increasing in the variance of idiosyncratic shocks, for any given variance of aggregate shocks. Our results hold in a setting of symmetric agents with linear best responses and normal uncertainty. We show our results by providing a characterization of the set of all joint distributions over actions and states that can arise in equilibrium under any information structure. This tractable characterization, extending results in Bergemann and Morris (2013b), can be used to address a wide variety of questions.
    Keywords: Incomplete information, Bayes correlated equilibrium, Volatility, Moments restrictions, Linear best responses, Quadratic payoffs
    JEL: C72 C73 D43 D83
    Date: 2013–12
  5. By: Alexander Matros (Darla Moore School of Business, University of South Carolina); Alex Possajennikov (Department of Economics, University of Nottingham)
    Abstract: We consider mechanisms for allocating a common-value prize between two players in an incomplete information setting. In this setting, each player receives an independent private signal about the prize value. The signals are from a discrete distribution and the value is increasing in both signals. First, we characterize symmetric equilibria in four mechanisms: a lottery; and Â…rst-price, second-price, and all-pay auctions. Second, we establish revenue equivalence of these auction mechanisms in this setting. Third, we describe conditions under which the expected revenue is higher in the lottery than in any of the auctions. Finally, we identify an optimal mechanism and its implementation by means of reserve prices in lottery and auction mechanisms.
    Keywords: common value; contests; auctions
  6. By: Michael D. Carr; Phil Mellizo
    Abstract: Data from lab experiments support the claim that individuals have social preferences. Most models of social preferences, however, consider only the distribution of outcomes, not the source of the endowment used in the game. Once the source is considered, outcomes in the ultimatum game are more difficult to interpret. We extend the ultimatum game to allow for responder-produced endowments. We find that offers increase when the responder produces the endowment, but rejection rates are lower. Further, offers remain below 100% of the endowment, suggesting that unproductive proposers feel entitled to a part of the endowment, and responders respect this right.
    JEL: C91 D30 D63
    Date: 2013–09
  7. By: Andrew McLennan (School of Economics, The University of Queensland)
    Abstract: The effect of perturbing a parameter—comparative statics—is, of course, a familiar and important issue in economic analysis. Perfection of a single Nash equilibrium (Selten (1975)) is defined by requiring that at least some perturbations in a given class give rise to perturbed games that have nearby equilibria. Roughly, Kohlberg and Mertens (1986) define strategic stability of a set of equilibria by requiring that for all sufficiently small perturbations, the perturbed games have equilibria near the set. This note presents a topological result concerning the behavior of such nearby equilibria when there is a function from a neighborhood of the relevant set of equilibria to the space of perturbations.
    Date: 2014–07–21
  8. By: Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II); Adam Zylbersztejn (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: Experiments based on the Beard and Beil (1994) two-player coordination game robustly show that coordination failures arise as a result of two puzzling behaviors: (i) subjects are not willing to rely on others' self-interested maximization, and (ii) self-interested maximization is not ubiquitous. Such behavior is often considered to challenge the relevance of subgame perfectness as an equilibrium selection criterion, since weakly dominated strategies are actually used. We report on new experiments investigating whether inequality in payoffs between players, maintained in most lab implementations of this game, drives such behavior. Our data clearly show that the failure to maximize personal payoffs, as well as the fear that others might act this way, do not stem from inequality aversion. This result is robust to varying the saliency of decisions, repetition-based learning and cultural differences between France and Poland.
    Keywords: Coordination Failure ; Subgame perfectness ; Non-credible threats; Laboratory experiments; Social Preferences; Inequality Aversion
    Date: 2014
  9. By: Michael Caldara (Economic Science Institute, Chapman University); Michael McBride (Department of Economics, University of California-Irvine)
    Abstract: Many social and economic networks emerge among actors that only partially observe the network when forming network ties. We ask: what types of network architectures form when actors have limited observation, and does limited observation lead to less efficient structures? We report numerous results from a laboratory experiment that varies both network observation and the cost of forming links. Overall, we find that limited network observation does not inevitably lead to highly inefficient networks but instead might actually inhibit inefficient positional jockeying among actors.
    Keywords: Networks; Limited observation; Coordination
    JEL: C92 D83 D85
    Date: 2014–07

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