
on Game Theory 
By:  Mikhail Safronov; Bruno Strulovici 
Abstract:  Cooperative concepts of renegotiation in repeated games have typically assumed that Paretoranked equilibria could not coexist within the same renegotiationproof set. With explicit renegotiation, however, a proposal to move to a Paretosuperior equilibrium can be deterred by a different continuation equilibrium which harms the proposer and rewards the refuser. This paper introduces a simple protocol of renegotiation for repeated games and defines the stability of social norms and renegotiationproof outcomes in terms of a simple equilibrium refinement. We provide distinct necessary and sufficient conditions for renegotiationproofness, which converge to each other as renegotiation frictions become negligible. Renegotiationproof outcomes always exist and can be all included within a single, most permissive social norm that is straightforward to characterize graphically. JEL Classification: C71, C72, C73, C78 
Date:  2014–11–14 
URL:  http://d.repec.org/n?u=RePEc:nwu:cmsems:1575&r=gth 
By:  Jörg Franke; Wolfgang Leininger; Cédric Wasser 
Abstract:  We characterize revenue maximizing head starts for allpay auctions and lottery contests with many heterogeneous players. We show that under optimal head starts allpay auctions revenuedominate lottery contests for any degree of heterogeneity among players. Moreover, allpay auctions with optimal head starts induce higher revenue than any multiplicatively biased allpay auction or lottery contest. While head starts are more effective than multiplicative biases in allpay auctions, they are less effective than multiplicative biases in lottery contests. 
Keywords:  Allpay auction; lottery contest; head start; revenue dominance 
JEL:  C72 D72 
Date:  2014–12 
URL:  http://d.repec.org/n?u=RePEc:rwi:repape:0524&r=gth 
By:  Elena B.Yanovskaya (National Research University Higher School of Economics) 
Abstract:  A weakening of covariance property for solutions of cooperative games with transferable utilities selfcovariance is dened. Selfcovariant solutions are positively homogenous and satisfy a "restricted"translation covariance such that feasible shifts are only the solution vectors themselves and their multipliers. A description of all nonempty, ecient, anonymous, selfcovariant, and singlevalued solution for the class of twoperson TU games is given. Among them the solutions admitting consistent extensions in the DavisMaschler sense are found. They are the equal share solution, the standard solution, and the constrained egalitarian solution for superadditive twoperson games. Characterizations of consistent extensions (Thomson 1996) of these solutions to the class of all TU games are given. 
Keywords:  cooperative game with transferable utilities, solution, selfcovariance, consistent extensions, constrained egalitarianism. 
JEL:  C71 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:hig:wpaper:85/ec/2014&r=gth 
By:  Lars Ehlers; Bettina Klaus 
Abstract:  We study the problem of assigning indivisible and heterogenous objects (e.g., houses, jobs, offices, school or university admissions etc.) to agents. Each agent receives at most one object and monetary compensations are not possible. We consider mechanisms satisfying a set of basic properties (unavailabletypeinvariance, individualrationality, weak nonwastefulness, or truncationinvariance). In the house allocation problem, where at most one copy of each object is available, deferred acceptance (DA)mechanisms allocate objects based on exogenously fixed objects' priorities over agents and the agentproposing deferredacceptancealgorithm. For house allocation we show that DAmechanisms are characterized by our basic properties and (i) strategyproofness and populationmonotonicity or (ii) strategyproofness and resourcemonotonicity. Once we allow for multiple identical copies of objects, on the one hand the first characterization breaks down and there are unstable mechanisms satisfying our basic properties and (i) strategyproofness and populationmonotonicity. On the other hand, our basic properties and (ii) strategyproofness and resourcemonotonicitycharacterize (the most general) class of DAmechanisms based on objects' fixed choice functions that are acceptant, monotonic, substitutable, and consistent. These choice functions are used by objects to reject agents in the agentproposing deferredacceptancealgorithm. Therefore, in the general model resourcemonotonicity is the "stronger" comparative statics requirement because it characterizes (together with our basic requirements and strategyproofness) choicebased DAmechanisms whereas populationmonotonicity (together with our basic properties and strategyproofness) does not. 
Keywords:  indivisible objects allocation; deferredacceptancealgorithm; strategyproofness; resourcemonotonicity; populationmonotonicity 
JEL:  D63 D70 
Date:  2014–12 
URL:  http://d.repec.org/n?u=RePEc:lau:crdeep:14.08&r=gth 
By:  Kritikos, Alexander S. (University of Potsdam, DIW Berlin); Tan, Jonathan H. W. (University of Nottingham) 
Abstract:  This paper experimentally investigates the nature of image concerns in gift giving. For this, we test variants of dictator and impunity games where the influences of social preferences on behavior are kept constant across all games. Givers maximize material payoffs by pretending to be fair when receivers do not know the actual surplus size, implying that portraying an outward appearance of norm compliance matters more than actual compliance. In impunity games, receivers can reject gifts with no payoff consequence to givers. In the face of receivers' feedback, some givers ensure positive feedback by donating more while some avoid negative feedback by not giving at all. Removing feedback reduces the incentive to give altogether. Differing behavior in the four games implies that social confirmation plays a crucial role in the transmission of image concerns in giving. 
Keywords:  dictator game, impunity game, experiment, image, social confirmation 
JEL:  C78 C92 
Date:  2014–12 
URL:  http://d.repec.org/n?u=RePEc:iza:izadps:dp8739&r=gth 
By:  Francesco De Sinopoli; Giovanna Iannantuoni; Elena Manzoni; Carlos Pimienta 
Abstract:  We introduce a model with strategic voting in a parliamentary election with proportional representation and uncertainty about voters’ preferences. In any equilibrium of the model, most voters only vote for those parties whose positions are extreme. In the resulting parliament, a consensus government forms and the policy maximizing the sum of utilities of the members of the government is implemented. 
Keywords:  Proportional Election, Strategic Voting, Legislative Bargaining 
JEL:  C72 D72 
Date:  2014–12 
URL:  http://d.repec.org/n?u=RePEc:mib:wpaper:288&r=gth 
By:  Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University) 
Abstract:  We discuss four solution concepts for games with incomplete information. We show how each solution concept can be viewed as encoding informational robustness. For a given type space, we consider expansions of the type space that provide players with additional signals. We distinguish between expansions along two dimensions. First, the signals can either convey payoff relevant information or only payoff irrelevant information. Second, the signals can be generated from a common (prior) distribution or not. We establish the equivalence between Bayes Nash equilibrium behavior under the resulting expansion of the type space and a corresponding more permissive solution concept under the original type space. This approach unifies some existing literature and, in the case of an expansion without a common prior and allowing for payoff relevant signals, leads us to a new solution concept that we dub belieffree rationalizability. 
Keywords:  Incomplete information, Informational robustness, Bayes correlated equilibrium, Interim corrrelated rationalizability, Belief free rationalizability 
JEL:  C79 D82 
Date:  2014–12 
URL:  http://d.repec.org/n?u=RePEc:cwl:cwldpp:1973&r=gth 
By:  Treibich, Rafael (Department of Business and Economics) 
Abstract:  We study the fair allocation of a onedimensional and perfectly divisible good when individuals have otherregarding preferences. Assuming no legitimate claims and purely ordinal preferences, how should society measure social welfare so as to satisfy basic principles of efficiency and fairness? We define the egalitarian equivalent as the size of the egalitarian allocation which leaves the individual indifferent to the current allocation. In two simple models of average and positional externalities, we characterize the class of social preferences which give full priority to the individual with the lowest egalitarian equivalent in the economy. 
Keywords:  Fair allocation; social welfare; externalities; behavioral economics 
JEL:  D62 D63 D64 D71 
Date:  2014–12–19 
URL:  http://d.repec.org/n?u=RePEc:hhs:sdueko:2014_022&r=gth 
By:  Stefano Caria; Marcel Fafchamps 
Abstract:  We play a oneshot public good game in rural India between farmers connected by an exogenous star network. Contributions by the centre of the star reach more players and have a larger impact on aggregate payoffs than contributions by the spoke players. Yet, we find that the centre player contributes just as much as the average of the spokes. We elicit expectations about the decisions of the centre player and, in randomly selected sessions, we disclose the average expectation of the farmers in the network. Farmers match the disclosed values frequently and do so more often when the monetary cost of making a contribution is reduced. However, disclosure is not associated with higher contributions. Our results support the predictions of a model of otherregarding preferences where players care about the expectations of others. This model is helpful to understand barriers to improvement in prosocial behaviour when groups expect low prosociality. 
Date:  2014 
URL:  http://d.repec.org/n?u=RePEc:csa:wpaper:201433&r=gth 
By:  Paula Jaramillo 
Abstract:  We consider school choice problems. We are interested in solutions that satisfy consistency. Consider a problem and a recommendation made by the solution for the problem. Suppose some students are removed with their positions in schools. Consider the “reduced” problem consisting of the remaining students and the remaining positions. Consistency states that in the reduced problem, the solution should assign each remaining student to the same school as initially. Neither the immediate acceptance rule (also known as the Boston mechanism) nor the top trading cycles rule is consistent. We show that the efficient solution is the smallest consistent solution containing the immediate acceptance rule. It is also the smallest consistent solution containing the top trading cycles rule. 
Keywords:  school choice, consistency, Boston mechanism, top trading cycles, minimal consistent enlargement 
JEL:  C78 D78 
Date:  2014–11–10 
URL:  http://d.repec.org/n?u=RePEc:col:000089:012343&r=gth 
By:  Nikhil Agarwal; Paulo Somaini 
Abstract:  Several school districts use assignment systems in which students have a strategic incentive to misrepresent their preferences. Indeed, we find evidence suggesting that reported preferences in Cambridge, MA respond to these incentives. Such strategizing can complicate the analysis of preferences. The paper develops a new method for estimating preferences in such environments. Our approach views the report made by a student as a choice of a probability distribution over assignment to various schools. We introduce a large class of mechanisms for which consistent estimation is feasible. We then study identification of a latent utility preference model under the assumption that agents play a Bayesian Nash Equilibrium. Preferences are nonparametrically identified under either sufficient variation in choice environments or sufficient variation in a special regressor. We then propose a tractable estimation procedure for a parametric model based on Gibbs’ sampling. Estimates from Cambridge suggest that while 84% of students are assigned to their stated first choice, only 75% are assigned to their true first choice. The difference occurs because students avoid ranking competitive schools in favor of less competitive schools. Although the Cambridge mechanism is manipulable, we estimate that welfare for the average student would be lower in the popular Deferred Acceptance mechanism. 
JEL:  C50 I20 
Date:  2014–12 
URL:  http://d.repec.org/n?u=RePEc:nbr:nberwo:20775&r=gth 