nep-gth New Economics Papers
on Game Theory
Issue of 2015‒01‒26
twenty papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Non-cooperative games By van Damme, E.E.C.
  2. Group Strategy-Proofness in Private Good Economies By Salvador Barberà; Dolors Berga; Bernardo Moreno
  3. Natural implementation with partially-honest agents in economic environments with free-disposal By Michele Lombardi; Naoki Yoshihara
  4. Limited backward induction: foresight and behavior in sequential games By Marco Mantovani
  5. Existence of SPE in Discounted Stochastic Games; Revisited and Simplified By Yehuda Levy
  6. Hedonic Coalition Formation Games with Variable Populations: Core Characterizations and (Im)Possibilities By Mehmet Karakaya; Bettina Klaus
  7. Axiomatizing Multi-Prize Contests: A Perspective from Complete Ranking of Players By Jingfeng Lu; Zhewei Wang
  8. Existence of Steady-State Equilibria in Matching Models with Search Frictions By Stephan Lauermann; Georg Nöldeke
  9. Would I Care if I Knew? Image Concerns and Social Confirmation in Giving By Alexander S. Kritikos; Jonathan H. W. Tan
  10. Convex vNM–stable sets for a semi-orthogonal game. Part IV: Large Economies - The Existence Theorem By Joachim Rosenmüller
  11. The Value of Public Information in Common-Value Tullock Contests By Ezra Einy; Diego Moreno; Benyamin Shitovitz
  12. The Analysis of Leadership Formation in Networks Based on Shapley Value By Belik, Ivan; Jörnsten, Kurt
  13. Resale in Second-Price Auctions with Costly Participation By Gorkem Celik; Okan Yilankaya
  14. Overlapping Multiple Assignments By Kratz, Jörgen
  15. Playing the game the others want to play: Keynes’ beauty contest revisited. By Camille Cornand; Rodolphe Dos Santos Ferreira
  16. On the External Validity of Social- Preference Games: A Systematic Lab-Field Study By Matteo M. Galizzi; Daniel Navarro-Martínez
  17. The Kernel of a Patent Licensing Game By Shin Kishimoto; Naoki Watanabe
  18. Turning a blind eye, but not the other cheek: on the robustness of costly punishment By Peter H. Kriss; Roberto A. Weber; Erte Xiao
  19. Externalities in appropriation: Responses to probabilistic losses By Esther Blanco; Tobias Haller; James M. Walker
  20. Fair Apportionment in the View of the Venice Commission's Recommendation By László Á. Kóczy; Balázs Sziklai; Péter Biró

  1. By: van Damme, E.E.C. (Tilburg University, Center For Economic Research)
    Abstract: We describe non-cooperative game models and discuss game theoretic solution concepts. Some applications are also noted. Conventional theory focuses on the question ‘how will rational players play?’, and has the Nash equilibrium at its core. We discuss this concept and its interpretations, as well as refinements (perfect and stable equilibria) and relaxations (rationalizability and correlated equilibria). Motivated by experiments that show systematic theory violations, behavioral game theory aims to integrate insights from psychology to get better answers to the question ‘how do humans play?’. We provide an overview of the observed regularities and briefly sketch (beginnings of) theories of boundedly rational play.
    Keywords: Backward induction; behavioral economics; correlated equilibrium; decision; experimental economics; game; game theory; incomplete information; noncooperative,; perfect equilibrium; rationality; rationalizability; sequential equilibrium; stable equilibrium
    JEL: C72 D03
    Date: 2014
  2. By: Salvador Barberà; Dolors Berga; Bernardo Moreno
    Abstract: We observe that many salient rules to allocate private goods are not only (partially) strategy-proof, but also (partially) group strategy-proof, in appropriate domains of definition. That is so for solutions to matching, division, cost sharing, house allocation and auctions, in spite of the substantive disparity between these cases. In a general framework that encompasses all of them, we remark that those strategy-proof rules share a common set of properties, which together imply their group strategy-proofness. Hence, the equivalence between the two forms of strategy-proofness is due to the underlying common structure of all these rules, irrespectively of their specific application.
    Keywords: matching, division, house allocation, cost sharing, auctions, strategy-proofness, richness, group strategy-proofness, joint monotonicity, respectfulness, non-bossiness
    JEL: C78 D71 D78
    Date: 2014–12
  3. By: Michele Lombardi (University of Glasgow); Naoki Yoshihara (Hitotsubashi University)
    Abstract: We study Nash implementation by natural price-quantity mechanisms in pure exchange economies with free-disposal (Saijo et al., 1996, 1999) where agents have weak/strong intrinsic preferences for honesty (Dutta and Sen, 2012). Firstly, the Walrasian rule is shown tobe non-implementable where all agents have weak (but not strong) intrinsic preferences for honesty. Secondly, the class of e¢ cient allocation rules that are implementable is identi…ed provided that at least one agent has strong intrinsic preferences for honesty. Lastly, the Walrasian rule is shown to belong to that class.
    Keywords: Natural implementation, Nash equilibrium, exchange economies, intrinsic preferences for honesty
    JEL: C72 D71
  4. By: Marco Mantovani
    Abstract: The paper tests experimentally for limited foresight in sequential games. We develop a general out-of-equilibrium framework of strategic thinking based on limited foresight. It assumes the players take decisions focusing on close-by nodes, following backward induction – what we call limited backward induction (LBI). The main prediction of the model is tested in the context of a modified Game of 21. In line with the theoretical hypotheses, our results show most players think strategically only on close-by nodes without reasoning backwards from the end of the game. A small fraction of subjects play close to equilibrium, while few others try to exploit the limited foresight of their opponent. The results provide strong support for LBI, and cannot be accounted for using the most popular models of strategic thinking, let alone equilibrium analysis.
    Keywords: Behavioral game theory, sequential games, strategic thinking, level-k, limited foresight.
    JEL: D03 C72 C91
    Date: 2015–01
  5. By: Yehuda Levy
    Abstract: Mertens and Parthasarathy (1987) proved the existence of sub-game perfect equilibria in discounted stochastic games.  Their method involved new techniques in dynamic programming, which were presented in a very general framework, with no expense spared in highlighting versatility and scope.  This paper presents the fundamentals of their technique which are necessary, as well as identifies and elaborates on the components of their method, hence giving the core of the proof in a much more concise, direct, and illuminating manner.
    Keywords: Stochastic Games, Equilibrium Existence, Subgame-Perfect Equilibrium
    JEL: C62 C65 C73
    Date: 2015–01–14
  6. By: Mehmet Karakaya; Bettina Klaus
    Abstract: We consider hedonic coalition formation games with variable sets of agents and extend the properties competition sensitivity and resource sensitivity (introduced by Klaus, 2011, for roomate markets) to hedonic coalition formation games. Then, we show that on the domain of solvable hedonic coalition formation games, the Core is characterized by coalitional unanimity and Maskin monotonicity (see also Takamiya, 2010, Theorem 1). Next, we characterize the Core for solvable hedonic coalition formation games by unanimity, Maskin monotonicity, and either competition sensitivity or resource sensitivity (Corollary 2). Finally, and in contrast to roommate markets, we show that on the domain of solvable hedonic coalition formation games, there exists a solution not equal to the Core that satisfies coalitional unanimity, consistency, competition sensitivity, and resource sensitivity (Example 2).
    Keywords: Coalitional Unanimity; Competition Sensitivity; Consistency; Core; Hedonic Coalition Formation; Maskin Monotonicity; Resource Sensitivity
    JEL: C78 D63
    Date: 2015–01
  7. By: Jingfeng Lu (Department of Economics, National University of Singapore); Zhewei Wang (School of Economics, Shandong University)
    Abstract: Multiple prizes are usually awarded in contests (e.g., internal promotions, school admissions, sports, etc) and players exert effort to increase their chances for winning a higher prize. A multi-prize contest model must provide each player's probabilities of winning each prize as functions of all players' efforts. We find that the key notion of "hypothetical subcontests" in Skaperdas (1996) should be appropriately interpreted and precisely defined from a ranking perspective, as well as the relevant axioms of "Subcontest Consistency" and "Independence of Irrelevant Contestants" (IIC). When there are less than four contestants (exclusive), a set of axioms properly adapted from those in Skaperdas (1996) and Clark and Riis (1998a) are sufficient and necessary for axiomatizing the widely adopted multi-prize nested lottery contest of Clark and Riis (1996a). When there are more than four contestants (inclusive), including a new axiom of "Independence of Irrelevant Ranks" (IIR) is necessary and sufficient.
    JEL: C72 D72 D74
    Date: 2015–01
  8. By: Stephan Lauermann; Georg Nöldeke (University of Basel)
    Abstract: We prove existence of steady-state equilibrium in a class of matching models<br />with search frictions.
    Keywords: Search, Matching, Bargaining, Steady-State Equilibrium
    JEL: C62 C78 D83
    Date: 2014
  9. By: Alexander S. Kritikos; Jonathan H. W. Tan
    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, impunity, experiment, image, social confirmation
    JEL: C78 C92
    Date: 2014
  10. By: Joachim Rosenmüller (Center for Mathematical Economics, Bielefeld University)
    Abstract: Within this paper we establish the existence of a vNM-Stable Set for (cooperative) linear production games with a continuum of players. The coalitional function is generated by r+1 "production factors" (non atomic measures). r factors are given by orthogonal probabilities ("cornered" production factors) establishing the core of the game. Factor r+1 (the "centralized" production factor) is represented by a nonantomic measure with carrier "across the corners" of the market; i.e., this factor is more abundantly available and the representing measure is not located within the core of the game. The present paper continues a series of presentations of this topic, for Part I, II, III, see IMW Working Papers 483, 498 and 500, respectively. We focus on convex vNM-Stable Sets of the game and we present an existence theorem valid for "Large Economies" (the termin is not quite orthodox). There are some basic assumptions for the present model which enable us to come up with a comprehensive version of an existence theorem. However, in order to make our presentation tractable (and readable) we wisely restrict ourselves to a simplified model. As in our previous models there is a (not necessarily unique) imputation outside the core such that the vNM-Stable Set is the convex hull of this imputation and the core. Significantly, this additional imputation can be seen as a truncation of the "centralized" distribution, i.e., the r+1^st production factor. Hence there is a remarkable similarity mutatis mutandis regarding the Characterization Theorem that holds true for the "purely orthogonal case."
    Date: 2015–01
  11. By: Ezra Einy (BGU); Diego Moreno (Departamento de Economia, Universidad Carlos III de Madrid, Spain); Benyamin Shitovitz (Department of Economics, University of Haifa, Israel)
    Keywords: Tullock Contests, Common-Values, Value of Public Information
    JEL: C72 D44 D82
    Date: 2014
  12. By: Belik, Ivan (Dept. of Business and Management Science, Norwegian School of Economics); Jörnsten, Kurt (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: In the given research we analyse how an agent can move towards leadership in a socio-economic network. For the node’s (i.e., agent’s) importance measure we use the Shapley value (SV) concept from the area of cooperative games. We consider SV as the node’s centrality that corresponds to the significance of the agent within the socio-economic network. Using the polynomial algorithm developed by Aadithya, Ravindran, Michalak, & Jennings (2010) to compute SVs we analyze the way of creating new linkages to increase an agent’s significance (i.e., importance) in networks.
    Keywords: Socio-economic networks; Shapley value; leadership
    JEL: C00
    Date: 2015–01–09
  13. By: Gorkem Celik (Department of Economics, ESSEC Business School and THEMA Research Center, Cergy-Pontoise, France); Okan Yilankaya (Department of Economics, Koc University)
    Abstract: We investigate efficiency properties of sealed-bid second-price auctions with costly participation and resale. Each bidder chooses to participate in the auction if her valuation is higher than her optimally chosen participation cutoff. If resale is not allowed and the bidder valuations are drawn from a strictly convex distribution function, the symmetric equilibrium (where all bidders use the same cutoff) is less efficient than a class of two-cutoff asymmetric equilibria. Existence of these equilibria without resale is sufficient for existence of similarly constructed two-cutoff equilibria with resale. Moreover, these equilibria with resale are more asymmetric and (under a sufficient condition) more efficient than the corresponding equilibria without resale.
    Keywords: Second-price auctions; resale; participation cost; endogenous entry; endogenous valuations
    JEL: C72 D44 D82
    Date: 2015–01
  14. By: Kratz, Jörgen (Department of Economics, Lund University)
    Abstract: This paper studies an allocation problem with multiple assignments, indivisible objects, no endowments and no monetary transfers, where a single object may be assigned to several agents as long as the set of agents assigned the object satisfy a compatibility constraint. It is shown that, on the domain of complete, transitive and strict preferences, group-sorting sequential dictatorships are fully characterized by four different combinations of coalitional strategyproofness, strategyproofness, Pareto efficiency, non-bossiness, group-monotonicity and group-invariance. It is also demonstrated that the characterization in Pápai (2001) of sequential dictatorships for the case where assignments are not allowed to overlap is contained in the main result.
    Keywords: Multiple assignments; overlapping assignments; sequential dictatorship; strategyproofness; compatibility
    JEL: D61 D63 D71
    Date: 2014–12–22
  15. By: Camille Cornand; Rodolphe Dos Santos Ferreira
    Abstract: In Keynes’ beauty contest, agents have to choose actions in accordance with an expected fundamental value and with the conventional value expected to be set by the market. In doing so, agents respond to a fundamental and to a coordination motive respectively, the prevalence of either motive being set exogenously. Our contribution is to consider whether agents favor the fundamental or the coordination motive as the result of a strategic choice that generates a strong strategic complementarity of agents’ actions. We show that the coordination motive tends to prevail over the fundamental one, which yields a disconnection of activity away from the fundamental. A valuation game and a competition game are provided as illustrations of this general Framework.
    Keywords: beauty contest, financial markets, indeterminacy, oligopolistic competition, strategic complementarities.
    JEL: D84 E12 E44 L13
    Date: 2015
  16. By: Matteo M. Galizzi; Daniel Navarro-Martínez
    Abstract: We present a lab-field experiment designed to assess systematically the external validity of social preferences elicited in a variety of experimental games. We do this by comparing behavior in the different games with a number of behaviors elicited in the field and with self-reported behaviors exhibited in the past, using the same sample of participants. Our results show that the experimental social-preference games do a poor job in explaining both social behaviors in the field and social behaviors from the past.
    Keywords: social preferences, experimental games, external validity, field behavior
    JEL: C92 C93 D03
    Date: 2015–01
  17. By: Shin Kishimoto; Naoki Watanabe
    Abstract: This paper considers general bargaining outcomes under coalition structures formed by an external patent holder and firms in oligopoly markets. The main propositions are as follows. For each coalition structure, the kernel is a singleton; thus, the number of licensees that maximizes the patent holder's revenue can be determined. The upper and lower bounds of the kernel are specified for each coalition structure. We also provide sufficient conditions for the number of licensees that maximizes their total surplus to be optimal for the patent holder. Length: 30 pages
  18. By: Peter H. Kriss; Roberto A. Weber; Erte Xiao
    Abstract: Prior research demonstrates a willingness to incur costs to punish norm violators. But, how strong are the motives underlying such acts? Will people rely on "excuses" to avoid acting on costly punishment intentions, as with other costly pro-social acts? In a laboratory experiment, we find that third parties punish reluctantly: they state a preference to punish, but avoid the opportunity when doing so does not reveal this as their preference. In contrast, second parties - those directly wronged - are resolute punishers: they actively seek out the opportunity to punish. Our findings highlight important differences in motives underlying second- and third-party punishment.
    Keywords: Experiment, third-party punishment, second-party punishment, fairness
    JEL: C72 C92 D64
    Date: 2015–01
  19. By: Esther Blanco; Tobias Haller; James M. Walker
    Abstract: We examine behavior in one-shot appropriation games with deterministic and probabilistic degradation externalities, where the marginal net benefit from appropriation is endogenous, dependent on individuals' expectations of group appropriation. The experimental design involves a menu of games where the magnitude of a loss parameter associated with probabilistic degradation varies across games. On average, as the loss parameter increases we observe a significant reduction in group appropriation. There is, however, considerable heterogeneity in behavior. First, subjects who are more pessimistic (optimistic) about group appropriation significantly increase (decrease) appropriation as the loss parameter increases. Second, relative to subjects with more optimistic expectations regarding group appropriation, the appropriation of subjects who are more pessimistic is more closely tied to changes in expected marginal benefits.
    Keywords: Social dilemma, Laboratory experiment, Endogenous externality, Strategic uncertainty
    JEL: D70 D81 H41 C90
    Date: 2014–12
  20. By: László Á. Kóczy (Óbuda University); Balázs Sziklai (Hungarian Academy of Sciences); Péter Biró (Corvinus University)
    Abstract: In this paper we analyze the consequences of the fairness recommendation of the Venice Commission in allocating voting districts among larger administrative regions. This recommendation requires the size of any constituency not to differ from the average constituency size by more than a fixed limit. We show that this minimum difference constraint, while attractive per definition, is not compatible with monotonicity and Hare-quota properties, two standard requirements of apportionment rules. We present an algorithm that efficiently finds an allotment such that the differences from the average district size are lexicographically minimized. This apportionment rule is a well-defined allocation mechanism compatible with and derived from the recommendation of the Venice Commission. Finally, we compare this apportionment rule with mainstream mechanisms using real data from Hungary and the United States.
    Keywords: Apportionment, voting, elections, Venice Commission, proportionality, lexicographic ordering JEL Codes: C71, D72
    Date: 2013–11

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