nep-gth New Economics Papers
on Game Theory
Issue of 2014‒09‒29
thirteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Stable cost sharing in production allocation games By Eric Bahel; Christian Trudeau
  2. Non-Laplacian Beliefs in a Global Game with Noisy Signaling By Chris Edmond
  3. Nash Equilibrium in Discontinuous Games By Philip J. Reny
  4. Pareto efficiency in the dynamic one-dimensional bargaining model By Tasos Kalandrakis
  5. Stable and sustainable global tax coordination with Leviathan governments By Thomas Eichner; Rüdiger Pethig
  6. Aggregative Oligopoly Games with Entry By Simon P. Anderson, Nisvan Erkal and
  7. Correlated equilibria in homogenous good Bertrand competition By Ole Jann; Christoph Schottmüller
  8. Limited Attention in Case-Based Belief Formation By Joerg Bleile
  9. Unanimity in Attribute-Based Preference Domains By Sidartha Gordon
  10. On the Characterization of Incentive Compatible Mechanisms in General Quasi-linear Environments By Yu Chen
  11. The Picketty Inequality in the Nash-Bargained Social Contract By Raul V. Fabella
  12. Auctions with prestige motives By Olivier BOS; Tom TRUYTS
  13. Taxation and the Sustainability of Collusion: Ad Valorem versus Specific Taxes By Azacis, Helmuts; Collie, David R.

  1. By: Eric Bahel (Department of Economics, Virginia Polytechnic Institute and State University); Christian Trudeau (Department of Economics, University of Windsor)
    Abstract: Suppose that a group have demands for some good. Each one of them owns a technology to produce the good, with these technologies varying in their effectiveness. We consider technologies exhibiting either increasing return to scale (IRS) or decreasing returns to scale (DRS). In each case, we solve the issue of the efficient allocation of the production between the agents. In the case of IRS, we prove that it is always efficient to centralize the production of the good, whereas efficiency in the case of DRS typically requires to spread the production. We then show that there exist stable cost sharing mechanisms whether we have IRS or DRS. Finally, we characterize a family of stable mechanisms exhibiting no price discrimination (agents are charged the same price for each unit demanded). Under some specific circumstances, our method generates the full core of the problem.
    Keywords: cost sharing, efficiency, stability, production allocation, returns to scale
    JEL: C71 D63
    Date: 2014–09
  2. By: Chris Edmond
    Abstract: In standard global games, individual behavior is optimal if it constitutes a best response to agnostic - Laplacian - beliefs about the aggregate behavior of other agents. This paper considers a standard binary action global game augmented with noisy signaling by an informed policy-maker and shows that in this game, equilibrium beliefs depart in quite stark ways from the Laplacian benchmark. In the limit as signals become arbitrarily precise, so that all fundamental uncertainty is removed (leaving only strategic uncertainty), the equilibrium beliefs of the marginal individual concerning the aggregate action collapse to a discrete binomial distribution, giving probability mass only to the polar extreme outcomes. By contrast in the underlying standard global game the marginal individual believes the aggregate action has a continuous uniform distribution, giving equal likelihood to all possible outcomes.
    Keywords: coordination;signaling;bias;strategic uncertainty;noise
    JEL: C7 D7 D8
    Date: 2013
  3. By: Philip J. Reny (University of Chicago)
    Abstract: We provide several generalizations of the various equilibrium existence results in Reny (1999), Barelli and Meneghel (2013), and McLennan, Monteiro, and Tourky (2011). We also provide an example demonstrating that a natural additional generalization is not possible. All of the theorems yielding existence of pure strategy Nash equilibria here are stated in terms of the players' preference relations over joint strategies. Hence, in contrast to virtually all of the previous work in the area the present results for pure strategy equilibria are entirely ordinal, as they should be.
    Keywords: discontinuous games, Nash equilibrium, pure strategies, ordinal
    JEL: C60
    Date: 2013
  4. By: Tasos Kalandrakis (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158)
    Abstract: Pareto dominated agreements are shown to prevail with positive probability in an open set of status quo in a Markov perfect equilibrium of a one-dimensional dynamic bargaining game with endogeneous status-quo. This equilibrium is continuous, symmetric, with dynamic preerences that satisfy the single-plateau proerty. It is also shown that there does not exist a symmetric equilibrium with single-peaked preferences.
    Date: 2014–08
  5. By: Thomas Eichner; Rüdiger Pethig
    Abstract: Itaya et al. (2014) study the conditions for sustainability and stability of capital tax coordination in a repeated game model with tax-revenue maximizing governments. One of their major results is that the grand tax coalition is never stable and sustainable. The purpose of this note is to prove that there are conditions under which the grand tax coalition is stable and sustainable in Itaya et al.’s model.
    Keywords: global tax coordination, repeated game, sustainability, stability
    JEL: H71 H77
    Date: 2014
  6. By: Simon P. Anderson, Nisvan Erkal and
    Abstract: We use cumulative reaction functions to compare long-run market structures in aggregative oligopoly games. We fi?rst compile an IO toolkit for aggregative games. We show strong neutrality properties across market structures. The aggregator stays the same, despite changes in the number of ?rooms and their actions. The IIA property of demands (CES and logit) implies that consumer surplus depends on the aggregator alone, and that the Bertrand pricing game is aggregative. We link together the following results: merging parties? pro?ts fall but consumer surplus is unchanged, Stackelberg leadership raises welfare, monopolistic competition is the market structure with the highest surplus.
    Keywords: Aggregative games; oligopoly theory; entry; strategic substitutes and
    JEL: D43 L13
    Date: 2009
  7. By: Ole Jann (Department of Economics, Copenhagen University); Christoph Schottmüller (Department of Economics, Copenhagen University)
    Abstract: We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogenous goods. This provides a theoretical underpinning for the so-called "Bertrand paradox" and also generalizes earlier results on mixed-strategy Nash equilibria. Our proof generalizes to asymmetric marginal costs and arbitrarily many players.
    Keywords: Bertrand paradox, correlated equilibrium, price competition
    JEL: C72 D43 L13
    Date: 2014–06–30
  8. By: Joerg Bleile (Center for Mathematical Economics, Bielefeld University)
    Abstract: An agent wants to derive her belief over outcomes based on past observations collected in her database (memory). There is well establish evidence in the psychology and marketing literature that agents consistently fail (or choose not) to process all available information. An agent might be constraint to pay attention (recall) and consider only parts of her potentially available information due to unawareness, cognitive or psychological limitations or intentionally for effort-efficiency. Based on this insight, we axiomatize a two-stage belief formation process in which in a first step agents filter ((un)intentionally) the available information. In a second step individuals employ the remaining observations to express a belief. We impose cognitively and normatively desirable properties on the filtering process. The axioms on the belief formation stage describe the relationship between databases and their induced beliefs. The axiomatized belief induced by a filtered databases is representable by a similarity weighted average of the estimations induced by each past attentiongrabbing observation. An appealing application is a satisficing filter that induces a filtered belief that relies only on past experiences that are sufficiently relevant for a current problem. For the specific situation that agents (are able to) always pay attention to all available information, our axiomatization coincides with the axiomatization of a belief formation in Billot et al.(Econometrica (2005)).
    Keywords: Belief formation, prior, case-based reasoning, relative frequencies, similarity, limited attention, consideration set, heuristics, satisficing, multicriteria choice, rationalization
    JEL: D01 D03 D11 D81 D83
    Date: 2014–06
  9. By: Sidartha Gordon (Département d'économie)
    Abstract: We provide several characterizations of unanimity decision rules, in a public choice model where preferences are constrained by attributes possessed by the alternatives (Nehring and Puppe, 2007a,b). Solidarity conditions require that when some parameters of the economy change, the agents whose parameters are kept fixed either all weakly lose or they all weakly win. Population-monotonicity (Thomson, 1983a,b) applies to the arrival and departure of agents, while replacement-domination (Moulin,1987) applies to changes in preferences. We show that either solidarity property is compatible with voter-sovereignty and strategy-proofness if and only if the attribute space is quasi-median (Nehring, 2004), and with Pareto-efficiency if and only if the attribute space is a tree. Each of these combinations characterizes unanimity.
    Keywords: Solidarity, Population-monotonicity, Replacement-domination, Unanimity, Strategy-proofness, Attribute-based Domains, Generalized Single-Peaked Domains.
    Date: 2014–09
  10. By: Yu Chen (Nanjing University)
    Keywords: Bayesian incentive compatible mechanism, ex post incentive compatible mechanism, quasi-linear environment
    JEL: C72 D82 D86
    Date: 2014–02
  11. By: Raul V. Fabella (School of Economics, University of the Philippines Diliman)
    Abstract: As a proxy for a Pareto-efficient market economy, we adopt the two-party Nash Bargaining model featuring a qualitative bias in the treatment of the contributions of the parties. The Piketty inequality here is the share in total welfare accruing to the richer party over total welfare attained at agreement point. We show that this inequality can never exceed the inequality in initial contributions if the qualitative bias is zero. The rising Piketty inequality requires that the qualitative bias exceed a positive threshold. The Piketty trajectory emerges if the qualitative bias oscillates around the threshold due to changing social and economic environment.
    Keywords: Piketty, Inequality, Nash Bargaining
    JEL: C78 D31 D63 D71
    Date: 2014–09
  12. By: Olivier BOS; Tom TRUYTS
    Abstract: Social status, or prestige, is an important motive for buying art or collectibles and for participation in charity auctions. We study a symmetric private value auction with prestige motives, in which the auction outcome is used by an outside observer to infer the bidders’ types. We elicit conditions under which an essentially unique D1 equilibrium bidding function exists in four auction formats: first-price, second-price, all-pay and the English auction. We obtain a strict ranking in terms of expected revenues: the first-price and all-pay auctions are dominating the English auction but are dominated by the second-price auction. Expected revenue equivalence is restored asymptotically for the number of bidders going to infinity.
    Date: 2014–07
  13. By: Azacis, Helmuts (Cardiff Business School); Collie, David R. (Cardiff Business School)
    Abstract: Assuming constant marginal cost, it is shown that a switch from specific to ad valorem taxation has no effect on the critical discount factor required to sustain collusion. This result is shown to hold for Cournot oligopoly as well as for Bertrand oligopoly when collusion is sustained with Nash-reversion strategies or optimal-punishment strategies. In a Cournot duopoly model with linear demand and quadratic costs, it is shown that the critical discount factor is lower with an ad valorem tax than with a specific tax. However, in contrast to Colombo and Labrecciosa (2013), it is shown that revenue is always higher with an ad valorem tax than with a specific tax.
    Keywords: Taxes; Imperfect Competition; Oligopoly; Cartel; Supergame
    JEL: H21 H22 L13 L41 C72 C73
    Date: 2014–09

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