nep-gth New Economics Papers
on Game Theory
Issue of 2014‒12‒29
fourteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Step out - Step in Sequencing Games By Musegaas, M.; Borm, P.E.M.; Quant, M.
  2. Network Games with Incomplete Information By De Martí, Joan; Zenou, Yves
  3. Stability and Cooperative Solution in Stochastic Games By Alessandro Tampieri; Elena M. Parilina
  4. Equilibrium in risk-sharing games By Michail Anthropelos; Constantinos Kardaras
  5. Learning and coordinating in a multilayer network By Haydée Lugo; Maxi San Miguel
  7. Bargaining with a residual claimant: An experimental study By Embrey M.S.; Hyndman K.; Riedl A.M.
  8. Matching under Preferences By Bettina Klaus; David F. Manlove; Francesca Rossi
  9. Replica Core Equivalence Theorem: An Extension of Debreu-Scarf Limit Theorem to Double Infinity Monetary Economies By Ken Urai; Hiromi Murakami
  10. International Cooperation and Institution Formation: A Game Theoretic Perspective By OKADA, Akira
  11. Conditions on the jury for the natural implementation of the deserving winner of a contest By Pablo Amorós
  12. Equity as a Prerequisite for Stability of Cooperation on Global Public Good Provision By Wolfgang Buchholz; Alexander Haupt; Wolfgang Peters
  13. Fair allocation of disputed properties By JU, Biung-Ghi; MORENO-TERNERO, Juan; ,
  14. The Illusion of School Choice: Empirical Evidence from Barcelona By Calsamiglia, Caterina; Güell, Maia

  1. By: Musegaas, M. (Tilburg University, Center For Economic Research); Borm, P.E.M. (Tilburg University, Center For Economic Research); Quant, M. (Tilburg University, Center For Economic Research)
    Abstract: In this paper a new class of relaxed sequencing games is introduced: the class of Step out - Step in sequencing games. In this relaxation any player within a coalition is allowed to step out from his position in the processing order and to step in at any position later in the processing order. Providing an upper bound on the values of the coalitions we show that every Step out - Step in sequencing game has a non-empty core. This upper bound is a sufficient condition for a sequencing game to have a non-empty core. Moreover, this paper provides a polynomial time algorithm to determine the coalitional values of Step out - Step in sequencing games.
    Keywords: cooperative game theory; sequencing games; core
    JEL: C71 C44
    Date: 2014
  2. By: De Martí, Joan; Zenou, Yves
    Abstract: We consider a network game with strategic complementarities where the individual reward or the strength of interactions is only partially known by the agents. Players receive different correlated signals and they make inferences about other players' information. We demonstrate that there exists a unique Bayesian-Nash equilibrium. We characterize the equilibrium by disentangling the information effects from the network effects and show that the equilibrium effort of each agent is a weighted combinations of different Katz-Bonacich centralities where the decay factors are the eigenvalues of the information matrix while the weights are its eigenvectors. We then study the impact of incomplete information on a network policy which aim is to target the most relevant agents in the network (key players). Compared to the complete information case, we show that the optimal targeting may be very different.
    Keywords: Bayesian games; key player policies; social networks; strategic complementarities
    JEL: C72 D82 D85
    Date: 2014–12
  3. By: Alessandro Tampieri (CREA, Université du Luxembourg); Elena M. Parilina (Saint Petersburg State University)
    Abstract: Cooperative game theory is effective in explaining many economic interactions, such as risk-sharing agreements or the enforcing role of social norms. In a stochastic environ- ment, the analysis of these issues is generalised by taking into account the presence of shocks. The paper finds the conditions of dynamic stability for cooperative stochastic games. Principles of dynamic stability include three conditions: subgame consistency, strategic stability and irrational-behaviour-proof of the cooperative agreement.
    Keywords: Cooperative Stochastic Game, stationary strategies, time consistency, subgame consistency, strategic stability, irrational-behaviour-proof
    JEL: C71 C73
    Date: 2014
  4. By: Michail Anthropelos; Constantinos Kardaras
    Abstract: The paper studies equilibrium sharing of risk among limited number of strategically-behaved agents. We propose a Nash game where agents' strategic sets consist of all possible sharing securities and pricing kernels that are consistent with Arrow-Debreu sharing rules. First, it is shown that the best response problem of each agent admits a unique solution. The risk-sharing Nash equilibrium admits a finite-dimensional characterisation and it is proved to be unique in the case of two agents. In Nash risk-sharing equilibrium agents choose to share random endowments that are different than their actual ones, and the shared securities are endogenously bounded, implying (amongst other things) loss of efficiency. In addition, an analysis regarding extremely risk tolerant agents indicates that they profit more from the Nash risk-sharing equilibrium as compared to the Arrow-Debreu one.
    Date: 2014–12
  5. By: Haydée Lugo (Departamento de Fundamentos del Análisis Económico II (Economía Cuantitativa) (Department of Foundations of Economic Analysis II (Quantitative Economics)), Facultad de Ciencias Económicas y Empresariales (Faculty of Economics and Business), Universidad Complutense de Madrid (Complutense University of Madrid)); Maxi San Miguel (IFISC (CSIC-UIB), Campus Universitat de les Illes Balears, 07122 Palma de Mallorca, Spain)
    Abstract: We introduce a two layer network model for social coordination incorporating two relevant ingredients: a) different networks of interaction to learn and to obtain a pay-off, and b) decision making processes based both on social and strategic motivations. Two populations of agents are distributed in two layers with intralayer learning processes and playing interlayer a coordination game. We find that the skepticism about the wisdom of crowd and the local connectivity are the driving forces to accomplish full coordination of the two populations, while polarized coordinated layers are only possible for all-to-all interactions. Local interactions also allow for full coordination in the socially efficient Pareto-dominant strategy in spite of being the riskier one
    Keywords: Doubt-based decisions, Coordination games, Multilayer network.
    JEL: D69 D79 C63
    Date: 2014
  6. By: Aniol Llorente-Saguer (School of Economics and Finance, Queen Mary, University of London); Ro’i Zultan (BGU)
    Keywords: auctions, collusion, bribes, experiment.
    JEL: C72 C91 D44
    Date: 2014
  7. By: Embrey M.S.; Hyndman K.; Riedl A.M. (GSBE)
    Abstract: We experimentally investigate a bargaining environment in which players negotiate over a xed payment to one player, while the other player receives the residual from a random pie realization after subtracting the xed payment. Contrary to the intuition that risk exposure is detrimental, we show that residual claimants are able to extract a risk premium, which is increasing in risk exposure. In some cases the premium is so high that it is advantageous to bargain over a risky pie rather than a risk-less pie. Contrary to theory, the comparatively less risk averse residual claimants benet the most. Moreover, bargaining frictions increase as risk increases, and we document more frequent disagreements as risk increases. When given the chance to choose a less or more risky distribution over which to bargain, residual claimants tend to choose the more risky distribution only when there is the possibility of an equal-split ex-post. Our results suggest that theoretical bargaining models require some separation between the determinants of bargaining power and fair compensation for risk exposure.
    Keywords: Cooperative Games; Design of Experiments: Laboratory, Group Behavior; Criteria for Decision-Making under Risk and Uncertainty;
    JEL: C71 C92 D81
    Date: 2014
  8. By: Bettina Klaus; David F. Manlove; Francesca Rossi
    Abstract: Matching theory studies how agents and/or objects from different sets can be matched with each other while taking agents' preferences into account. The theory originated in 1962 with a celebrated paper by David Gale and Lloyd Shapley (1962), in which they proposed the Stable Marriage Algorithm as a solution to the problem of two-sided matching. Since then, this theory has been successfully applied to many real-world problems such as matching students to universities, doctors to hospitals, kidney transplant patients to donors, and tenants to houses. This survey will focus on algorithmic as well as strategic issues of matching theory.
    Date: 2014–11
  9. By: Ken Urai (Graduate School of Economics, Osaka University); Hiromi Murakami (Graduate School of Economics, Osaka University)
    Abstract: An overlapping generations model with the double infinity of commodities and agents is the most fundamental framework to introduce outside money into a static economic model. In this model, competitive equilibria may not necessarily be Pareto-optimal. Although Samuelson (1958) emphasized the role of fiat money as a certain kind of social contract, we cannot characterize it as a cooperative game-theoretic solution like a core. In this paper, we obtained a finite replica core characterization of monetary equilibria. Preferences are not necessarily assumed to be ordered.
    Keywords: Monetary Equilibrium, Overlapping Generations Model, Core Equivalence, Replica Econ-omy, Non-Orderd Preference
    JEL: C71 D51 E00
    Date: 2014–11
  10. By: OKADA, Akira
    Abstract: Game theory presents a useful analytical tool for addressing the problem of international cooperation and the formation of institutions. We first examine four problems that must be solved to achieve international cooperation: the common knowledge problem, agreement problem, compliance problem, and participation problem. An institution is a mechanism used to enforce participants to cooperate for collective benefits. We consider a multi-stage game model of institution formation and show that a group of participants voluntarily forms an institution for international cooperation in a strict subgame perfect equilibrium if and only if the group satisfies the criticality condition. Some of the implications on the international frameworks that attempt to prevent the proliferation of nuclear weapons in East Asia are finally discussed.
    Date: 2014–12
  11. By: Pablo Amorós (Department of Economic Theory, Universidad de M‡laga)
    Abstract: A jury has to choose the winner of a contest. There exists a deserving winner, whose identity is common knowledge among the jurors, but not known by the planner. Jurors may be biased in favor (friend) or against (enemy) some contestants. We study conditions on the confi?guration of the jury so that it is possible to implement the deserving winner in Nash equilibrium when we restrict ourselves to mechanisms satisfying two conditions: (1) each juror only has to announce a contestant, and (2) announcing the deserving winner is an equilibrium. We call this notion natural implementation. We show that, in order to naturally implement the deserving winner, the planner needs to know a number of jurors with friends or a number of jurors with enemies. Speci?cally, the number of jurors with friends that the planner needs to know to naturally implement the deserving winner is less than the number of jurors with enemies that the planner would need to know for it.
    Keywords: Mechanism design; contests; jury; Nash equilibrium
    JEL: C72 D71 D78
    Date: 2014–11
  12. By: Wolfgang Buchholz (Department of Economics, University of Regensburg); Alexander Haupt (School of Management (Plymouth Business School)); Wolfgang Peters (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: In this paper, we explore the relationship between an equitable distribution of the cost shares in cooperative public good provision and the core property of Pareto-optimal allocations. Core allocations do not only fulfil an important stability condition but are also the only promising candidates for efficient public good allocations that are acceptable to all parties in a negotiation process. In particular, our analysis shows that it is an unequal distribution of costs that motivates a coalition of countries to stand alone and to block an initially given Pareto-optimal allocation. In our approach, distributional equity of individual public good contributions is assessed by a specif-ic sacrifice measure (the “Moulin sacrifice”), which is derived from the egalitarian-equivalent concept suggested by Moulin (1987).
    Date: 2014–11
  13. By: JU, Biung-Ghi (Seoul National University); MORENO-TERNERO, Juan (Universidad Pablo de Olavide, Spain; Université catholique de Louvain, CORE, Belgium); ,
    Abstract: We model problems of allocating disputed properties as generalized exchange economies in which agents have preferences and claims over multiple goods, and the social endowment of each good may not be sufficient to satisfy all individual claims. In this context, we investigate procedural and end-state principles of fairness, their implications and relations. To do so, we explore “procedural” allocation rules represented by a composition of a rights-assignment mechanism (to assign each profile of claims individual property rights over the endowment) and Walrasian, or other individually rational, exchange rule. Using variants of fairness based on no-envy as end-state principles, we provide axiomatic characterizations of the three focal egalitarian mechanisms, known in the literature on rationing problems as constrained equal awards, constrained equal losses, and proportional mechanisms. Our results are connected to focal contributions in political philosophy, and also provide rationale for market-based environ- mental policy instruments (such as cap-and-trade schemes and personal carbon trading) and moral foundation for the three proposals to allocate GHG emission rights known as the equal per capita sharing, the polluter pays principle and the equal burden sharing (the victims pay principle).
    Keywords: fairness, claims, no-envy, individual rationality, egalitarianism, efficiency, Walrasian exchange
    JEL: D63 D71
    Date: 2014–07–03
  14. By: Calsamiglia, Caterina; Güell, Maia
    Abstract: School choice aims to improve (1) the matching between children and schools and (2) students’ educational outcomes. Yet, the concern is that disadvantaged families are less able to exercise choice, which raises (3) equity concerns. The Boston mechanism (BM) is a procedure that is widely used around the world to resolve overdemands for particular schools by defining a set of priority points based on neighborhood and socioeconomic characteristics. The mechanism design literature has shown that under the BM, parents may not have incentives to provide their true preferences, thereby establishing a trade-off between preferences and perceived safety. However, the set of possible Nash equilibria arising from the BM is large and has varying properties, and what will actually happen is an empirical question. We exploit an unexpected change in the definition of neighborhood in Barcelona, which provides an exogenous change in the set of schools perceived as safe and allows us to separate housing and schooling decisions to assess the importance of this trade-off in the data. We find that safety carries a large weight in family choice. The huge majority of parents opt for schools for which they have the highest priority—the neighborhood schools—excluding other preferred schools. Similar to the previous literature, we also find that some parents seem naive, but using school registry data, we find that a significant fraction of them have the outside option of private schools, which allows them to take higher risks to access the best public schools. At the other extreme, some of the naive are not matched to any of the schools they applied for. Our results suggest that when allowing school choice under the BM with priorities: (1) the gains in terms of matching seem limited, because the equilibrium allocation is not very different from a neighborhood-based assignment, (2) estimating the effect of choice on outcomes by implementing such a mechanism may lead to a lower bound on the potential effects of having choice, and (3) important inequalities emerge beyond parents’ naivete found in the literature.
    Keywords: Boston mechanism; Priorities; school choice
    JEL: C78 D63 I24
    Date: 2014–06

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