
on All new papers 
By:  Melanie Parravano (University of East Anglia); Odile Poulsen (University of East Anglia) 
Abstract:  We collect data from symmetric and asymmetric coordination games with a focal point and vary the stake size. The data show that in symmetric games coordination on the labelsalient strategy increases with stake size. By contrast, in asymmetric games the coordination rates do not vary with stake size and are close to the levels predicted by both the mixed Nash equilibrium and the levelk model used by Crawford, Gneezy, and Rottenstreich (2008). These findings suggest that players’ mode of reasoning, and the extent to which it can be explained by team reasoning or a levelk model, crucially depends on the symmetry or asymmetry of the coordination payoffs. 
Keywords:  coordination, labels, focal point, stake size, payoff asymmetry 
JEL:  C70 C72 C92 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:uea:wcbess:1407&r=gth 
By:  Ismail M.S. (GSBE) 
Abstract:  We illustrate an equivalence between the class of twoperson symmetric games and the class of decision problems with a complete preference relation. Moreover, we show that a strategy is an optimal threat strategy Nash, 1953 in a twoperson symmetric game if and only if it is a maximal element in its equivalent decision problem. In particular, a Nash equilibrium in a twoperson symmetric zerosum game and a pair of maximal elements in its equivalent decision problem coincide. In addition, we show that a twoperson symmetric zerosum game can be extended to its von NeumannMorgenstern vNM mixed extension if and only if the extended decision problem satisfies the SSB utility Fishburn, 1982 axioms. Furthermore, we demonstrate that a decision problem satisfies vNM utility if and only if its equivalent symmetric game is a potential game. Accordingly, we provide a formula for the number of linearly independent equations in order for the independence axiom to be satisfied which grows quadratically as the number of alternatives increase. 
Keywords:  Noncooperative Games; 
JEL:  C72 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:unm:umagsb:2014023&r=gth 
By:  Zoe Bett (University of East Anglia); Anders Poulsen (University of East Anglia); Odile Poulsen (University of East Anglia) 
Abstract:  We consider coordination situations with a conflict of interest, and experimentally vary the inefficiency of an equal earnings equilibrium, as well as the number of efficient and unequal earnings equilibria. We observe that equality, as long it is not extremely inefficient, remains very salient, and primarily because it offers players a way to avoid a coordination failure in selecting between the efficient unequal earnings equilibria, and less because subjects have a strong inherent preference for equality. 
Keywords:  equality, efficiency, coordination, salience, levelk model 
JEL:  C70 C72 C92 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:uea:wcbess:1302r&r=gth 
By:  Kyung Hwan Baik (Sungkyunkwan University); Subhasish M. Chowdhury (University of East Anglia); Abhijit Ramalingam (University of East Anglia) 
Abstract:  We investigate the effects of Partner and Stranger matching in contest experiments and find no difference in the level or distribution of bids across matching protocols. However, demographic and individual strategy effects are different with different matching. Hence, unless one is interested in the demographic effects, or a Stranger matching is needed for the specific research, using a Partner matching is preferred since it allows more flexibility in logistics and data analysis. 
Keywords:  contest, experiment, matching protocol, economic methodology 
JEL:  B41 C72 C91 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:uea:wcbess:1311&r=gth 
By:  Lee J.; Müller R.J.; Vermeulen A.J. (GSBE) 
Abstract:  Using a network approach we provide a characterization of a separating equilibrium for standard signaling games where the senders payoff function is quasilinear. Given a strategy of the sender, we construct a network where the node set and the length between two nodes are the set of the senders type and the difference of signaling costs, respectively. Construction of a separating equilibrium is then equivalent to constructing the length between two nodes in the network under the condition that the response of the receiver is a node potential.We show that, when the set of the senders type is finite, the collection of separating signaling functions forms a lower bounded lattice. We describe an algorithm to compute separating equilibrium strategies. When the set of the senders type is a real interval, shortest path lengths are antisymmetric and a node potential is unique up to a constant. A strategy of the sender in a separating equilibrium is characterized by some differential equation with a unique solution.Our results can be readily applied to a broad range of economic situations, such as the standard job market signaling model of Spence a model not captured by earlier papers and principalagent models with production. 
Keywords:  Noncooperative Games; Asymmetric and Private Information; Mechanism Design; 
JEL:  C72 D82 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:unm:umagsb:2014026&r=gth 
By:  Olga Gorelkina (Max Planck Institute for Research on Collective Goods) 
Abstract:  This paper studies collusion in oneshot auctions, where a buyer can bribe his competitors into lowering their bids. We modify the singleunit Vickrey auction to incite deviations from the designatedwinner scenario and thus undermine collusion. The construction of mechanism does not require the knowledge of colluders’ identities or distributions of valuations, in which sense it is entirely detailfree. 
Keywords:  Bidder collusion, detailfree auctions, Vickrey auction 
JEL:  D82 C72 D44 
Date:  2014–08 
URL:  http://d.repec.org/n?u=RePEc:mpg:wpaper:2014_10&r=gth 
By:  Fehr, Ernst (University of Zurich); Powell, Michael (Northwestern University); Wilkening, Tom (University of Melbourne) 
Abstract:  The assumption that payoffrelevant information is observable but not verifiable is important for many core results in contract, organizational and institutional economics. However, subgameperfect implementation (SPI) mechanisms – which are based on offequilibrium arbitration clauses that impose fines for lying and the inappropriate use of arbitration – can be used to render payoffrelevant observable information verifiable. Thus, if SPI mechanisms work as predicted, they undermine the foundations of important economic results based on the observable but nonverifiable assumption. Empirical evidence on the effectiveness of SPI mechanisms is, however, scarce. In this paper we show experimentally that SPI mechanisms have severe behavioral limitations. They induce retaliation against legitimate uses of arbitration and thus make the parties reluctant to trigger arbitration. The inconsistent use of arbitration eliminates the incentives to take firstbest actions and leads to costly disagreements such that individuals – if given the choice – opt out of the mechanism in the majority of the cases. Incentive compatible redesigns of the mechanism solve some of these problems but generate new ones such that the overall performance of the redesigned mechanisms remains low. Our results indicate that there is little hope for SPI mechanisms to solve verifiability problems unless they are made retaliationproof and, more generally, robust to otherregarding preferences. 
Keywords:  implementation theory, incomplete contracts, experiments 
JEL:  D23 D71 D86 C92 
Date:  2014–08 
URL:  http://d.repec.org/n?u=RePEc:iza:izadps:dp8404&r=gth 
By:  Sinitskaya, Ekaterina; Tesfatsion, Leigh 
Abstract:  Realworld decisionmakers are forced to be locally constructive, in the sense that their actions are constrained by the interaction networks, limited information, and computational capabilities at their disposal.� This study poses the following question:� Suppose utilityseeking consumers and profitseeking firms in an otherwise standard dynamic macroeconomic model are required to be locally constructive decisionmakers, unaided by the external imposition of global coordination conditions.� What combinations of locally constructive decision rules result in good macroeconomic performance relative to a social planner benchmark model, and what are the gametheoretic properties of these decisionrule combinations?� We begin our investigation of this question by specifying locally constructive decision rules for the consumers and firms that range from simple reinforcement learning to sophisticated adaptive dynamic programming algorithms.� We then use computational experiments to explore macroeconomic performance under alternative decisionrule combinations.� A key finding is that simpler rules can outperform more sophisticated rules, but that forwardlooking behavior coupled with a relatively long memory permitting past observations to inform current decisionmaking is critical for good performance. 
Keywords:  Learning; Macroeconomics; agentbased; game; stochastic optimization 
JEL:  B4 C6 C7 E2 
Date:  2014–08–22 
URL:  http://d.repec.org/n?u=RePEc:isu:genres:37834&r=gth 
By:  Holmberg, Pär (Research Institute of Industrial Economics (IFN)) 
Abstract:  In multiunit auctions, such as auctions of commodities and securities, and financial exchanges, it is necessary to specify rationing rules to break ties between multiple marginal bids. The standard approach in the literature and in practice is to ration marginal bids proportionally. This paper shows how bidding can be made more competitive if the rationing rule instead gives increasing priority to bidders with a small volume of marginal bids at clearing prices closer to the reservation price. In comparison to standard rationing, such a rule can have almost the same effect on the competitiveness of bids as a doubling of the number of bidders. 
Keywords:  C72; D44; D45 
JEL:  C72 D44 D45 
Date:  2014–08–22 
URL:  http://d.repec.org/n?u=RePEc:hhs:iuiwop:1037&r=gth 
By:  Fuad Aleskerov (National Research University Higher School); Irina Andrievskaya (National Research University Higher School); Elena Permjakova (National Research University Higher School) 
Abstract:  The issue of systemic importance has received particular attention since the recent financial crisis when it came to the fore that an individual financial institution can disturb the whole financial system. Interconnectedness is considered as one of the key drivers of systemic importance. Several measures have been proposed in the literature in order to estimate the interconnectedness of financial institutions and systems. However, most of them lack an important dimension of this characteristic: intensities of agent interaction. This paper proposes a novel method that solves this issue. A distinctive feature of our approach is that it takes into consideration not just the interconnectedness of agents but also their interaction intensities. The approach is based on the power index and centrality analysis and is employed to find a key borrower in a loan market. To illustrate the feasibility of our methodology we apply it at the European Union level and find key countriesborrowers. 
Keywords:  Power index, key borrower, systemic importance, interconnectedness, centrality 
JEL:  C7 G2 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:hig:wpaper:33/fe/2014&r=gth 