
on Game Theory 
By:  Ana Mauleon (SaintLouis University — Brussels); Nils Roehl (University of Paderborn); Vincent Vannetelbosch (CORE, University of Louvain) 
Abstract:  The objective of the paper is to analyze the formation of social networks where individuals are allowed to engage in several groups at the same time. These group structures are interpreted here as social networks. Each group is supposed to have specific rules or constitutions governing which members may join or leave it. Given these constitutions, we consider a social network to be stable if no group is modified any more. We provide requirements on constitutions and players’ preferences under which stable social networks are induced for sure. Furthermore, by embedding manytomany matchings into our setting, we apply our model to job markets with labor unions. To some extent the unions may provide job guarantees and, therefore, have influence on the stability of the job market. 
Keywords:  Social networks, Constitutions, Stability, ManytoMany Matchings. 
JEL:  C72 C78 D85 
Date:  2014–01 
URL:  http://d.repec.org/n?u=RePEc:pdn:dispap:02&r=gth 
By:  Berno Buechel (University of Hamburg); Nils Roehl (University of Paderborn) 
Abstract:  In the framework of spatial competition, two or more players strategically choose a location in order to attract consumers. It is assumed standardly that consumers with the same favorite location fully agree on the ranking of all possible locations. To investigate the necessity of this questionable and restrictive assumption, we model heterogeneity in consumers' distance perceptions by individual edge lengths of a given graph. A profile of location choices is called a ``robust equilibrium'' if it is a Nash equilibrium in several games which differ only by the consumers' perceptions of distances. For a finite number of players and any distribution of consumers, we provide a full characterization of all robust equilibria and derive structural conditions for their existence. Furthermore, we discuss whether the classical observations of minimal differentiation and inefficiency are robust phenomena. Thereby, we find strong support for an old conjecture that in equilibrium firms form local clusters. 
Keywords:  spatial competition, HotellingDowns, networks, graphs, Nash equilibrium, median, minimal differentiation 
JEL:  C72 D49 P16 D43 
Date:  2013–02 
URL:  http://d.repec.org/n?u=RePEc:pdn:dispap:03&r=gth 
By:  Jiang, Zhishan; Tian, Guoqiang 
Abstract:  This paper defines a notion of semistability for matching problem with couples, which is a natural generalization of, and further identical to, the conventional stability for matching without couples. It is shown that there always exists a semistable matching for couples markets with strict preferences, and the set of semistable matchings can be partitioned into subsets, each of which forms a distributive lattice. We further prove that a semistable matching is stable when couples play reservation strategies. This result perfectly explains the puzzle of NRMP even for finite markets. Moreover, we define a notion of asymptotic stability and present sufficient conditions for a sequential couples market to be asymptotically stable. Another remarkable contribution is that we develop a new algorithm, called Persistent Improvement Algorithm, for finding semistable matchings, which is also more efficient than the GaleShapley algorithm for finding stable matchings for singles markets. Lastly, this paper investigates the welfare property and incentive issues of semistable mechanisms. 
Keywords:  Matching with couples; stability; semistability; asymptotic stability; algorithm 
JEL:  C78 J41 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:57936&r=gth 
By:  Ahmed Barkaoui (Laboratoire d'Economie Forestière, INRA  AgroParisTech); Arnaud Dragicevic (Laboratoire d'Economie Forestière, INRA  AgroParisTech; Chaire Forêts pour Demain, Agro ParisTech–Office National des Forêts) 
Abstract:  We consider two economic agents, a timber and log supplier and a lumber manufacturer, endowed with the meanvariance utility preferences that negotiate according to the Nash bargaining game. We study both negotiation and renegotiation between a supplier that can be either publicoriented or profitmaximizing and a profitmaximizing manufacturer. We first prove that the Nash bargaining game has a unique equilibrium log supply contract, at which the negotiation takes only place on the prices. We then find that the expected profitmaximizing is achieved when the supplier’s public interest and the manufacturer’s bargaining power are strategic substitutes. The renegotiation reveals the presence of a memory effect over the quantities issued from bargaining. As well, it unveils strategic complementarity of changes in expected profits. The simulations we conduct provide an insight of the model outcomes. 
Keywords:  Nash Bargaining, Renegotiation, Social Preferences, Supply Contracts, ForestBased Sector 
JEL:  C78 D21 D86 L33 
Date:  2014–07 
URL:  http://d.repec.org/n?u=RePEc:lef:wpaper:201408&r=gth 
By:  Dufwenberg, Martin (Department of Economics, School of Business, Economics and Law, Göteborg University); Patel, Amrish (Department of Economics, School of Business, Economics and Law, Göteborg University) 
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 costsharing is critical. Neither costsharing 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; costsharing 
JEL:  C72 D03 H41 
Date:  2014–08–13 
URL:  http://d.repec.org/n?u=RePEc:hhs:gunwpe:0603&r=gth 
By:  Erhan Bayraktar; Zhou Zhou 
Abstract:  On a filtered probability space $(\Omega,\mathcal{F},P,\mathbb{F}=(\mathcal{F}_t)_{t=0,\dotso,T})$, we consider stopperstopper games $\overline V:=\inf_{\Rho\in\bT^{ii}}\sup_{\tau\in\T}\E[U(\Rho(\tau),\tau)]$ and $\underline V:=\sup_{\Tau\in\bT^i}\inf_{\rho\in\T}\E[U(\Rho(\tau),\tau)]$ in discrete time, where $U(s,t)$ is $\mathcal{F}_{s\vee t}$measurable instead of $\mathcal{F}_{s\wedge t}$measurable as is often assumed in the literature, $\T$ is the set of stopping times, and $\bT^i$ and $\bT^{ii}$ are sets of mappings from $\T$ to $\T$ satisfying certain nonanticipativity conditions. We convert the problems into a corresponding Dynkin game, and show that $\overline V=\underline V=V$, where $V$ is the value of the Dynkin game. We also get the optimal $\Rho\in\bT^{ii}$ and $\Tau\in\bT^i$ for $\overline V$ and $\underline V$ respectively. 
Date:  2014–08 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1408.3692&r=gth 
By:  Christoph Aymanns and CoPierre Georg 
Abstract:  When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observing a larger group of peers conveys more information and thus leads to a stronger social belief. Extending the standard model of Bayesian updating in social networks, we show that the probability that banks synchronize their investment strategy on a state nonmatching action critically depends on the weighting between private and social belief. This effect is alleviated when banks choose their peers endogenously in a network formation process, internalizing the externalities arising from social learning. 
Keywords:  social learning, endogenous financial networks, multiagent simulations, systemic risk 
JEL:  G21 C73 D53 D85 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:rza:wpaper:450&r=gth 
By:  Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and The Economic Science Institute, Chapman University) 
Abstract:  The standard theoretical description of rentseeking contests is that of rational individuals or groups engaging in socially inefficient behavior by exerting costly effort. Experimental studies find that the actual efforts of participants are significantly higher than predicted in the models based on rational behavior and that overdissipation of rents (or overbidding or overexpenditure of resources) can occur. Although overdissipation cannot be explained by the standard rationalbehavior theory, it can be explained by incorporating behavioral dimensions into the standard model, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive but provide a coherent picture of important behavioral dimensions to be considered when studying rentseeking behavior in theory and in practice. 
Keywords:  rentseeking, contests, experiments, overbidding, overdissipation 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:chu:wpaper:1414&r=gth 
By:  Tian, Guoqiang 
Abstract:  This paper provides necessary and sufficient conditions for fixedpoint theorems, minimax inequalities and some related theorems defined on arbitrary topological spaces that may be discrete, continuum, noncompact or nonconvex. We establish a single condition, γrecursive transfer lower semicontinuity, which fully characterizes the existence of equilibrium of minimax inequality without imposing any kind of convexity nor any restriction on topological space. The result then is employed to fully characterize fixed point theory, saddle point theory, and the FKKM theory. 
Keywords:  Fixedpoint theorems, minimax inequalities, saddle points, FKKM theorems, recursive transfer continuity 
JEL:  D00 
Date:  2012–11 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:57929&r=gth 
By:  Andrew F. Daughety (Vanderbilt University); Jennifer F. Reinganum (Vanderbilt University) 
Abstract:  This Handbook chapter provides a brief review of selected settlement bargaining models in some areas where new work is developing and where additional work is likely to yield yet further important results. This work has focused on what might be thought of as the environment of the settlement negotiation process, where bargaining failure generally results in trial, and our survey will use that perspective to organize the work discussed 
Keywords:  Settlement, bargaining 
JEL:  K4 C7 
Date:  2014–07–09 
URL:  http://d.repec.org/n?u=RePEc:van:wpaper:vueconsub1400006&r=gth 
By:  Barrdear, John (Bank of England) 
Abstract:  I present a model of social learning over an exogenous, directed network that may be readily nested within broader macroeconomic models with dispersed information and combines the attributes that agents (a) act repeatedly and simultaneously; (b) are Bayesrational; and (c) have strategic interaction in their decision rules. To overcome the challenges imposed by these requirements, I suppose that the network is opaque: agents do not know the full structure of the network, but do know the link distribution. I derive a specific law of motion for the hierarchy of aggregate expectations, which includes a role for network shocks (weighted sums of agents' idiosyncratic shocks). The network causes agents' beliefs to exhibit increased persistence, so that average expectations overshoot the truth following an aggregate shock. When the network is sufficiently (and plausibly) irregular, transitory idiosyncratic shocks cause persistent aggregate effects, even when agents are identically sized and do not trade. 
Keywords:  Dispersed information; network learning; heterogeneous agents; aggregate volatility 
JEL:  C72 D82 D83 D84 
Date:  2014–08–01 
URL:  http://d.repec.org/n?u=RePEc:boe:boeewp:0503&r=gth 
By:  Benjamin Lester (Federal Reserve Bank of Philadelphia), Ludo Visschers (The University of Edinburgh & Universidad Carlos III, Madrid), Ronald Wolthoff (University of Toronto) 
Abstract:  In a market in which sellers compete by posting mechanisms, we study how the properties of the meeting technology affect the mechanism that sellers select. In general, sellers have incentive to use mechanisms that are socially efficient. In our environment, sellers achieve this by posting an auction with a reserve price equal to their own valuation, along with a transfer that is paid by (or to) all buyers with whom the seller meets. However, we define a novel condition on meeting technologies, which we call “invariance,” and show that the transfer is equal to zero if and only if the meeting technology satisfies this condition. 
Keywords:  search frictions, matching function, meeting technology, competing mechanisms. 
JEL:  C78 D44 D83 
Date:  2014–05–01 
URL:  http://d.repec.org/n?u=RePEc:edn:esedps:242&r=gth 
By:  Roth, Alvin E. (Harvard University) 
Abstract:  I was born on December 18, 1951 in the New York City borough of Queens. My parents, Ernest and Lillian, were both public high school teachers of a subject that is probably no longer taught, called Secretarial Studies, which focused on typing and taking dictation via two methods of shorthand stenography, Pitman and Gregg. Their students were young women planning to go directly to work as secretaries after high school. 
Keywords:  Market Design; 
JEL:  C71 D01 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:ris:nobelp:2012_007&r=gth 