nep-gth New Economics Papers
on Game Theory
Issue of 2015‒02‒11
sixteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Truthful Equilibria in Dynamic Bayesian Games By Johannes Horner; Satoru Takahashi; Nicolas Vieille
  2. A new solution for the roommate problem: The Q-stable matchings By Biró, Péter; Iñarra García, María Elena; Molis Bañales, Elena
  3. Object allocation via deferred-acceptance: strategy-proofness and comparative statics By EHLERS, Lars; KLAUS, Bettina
  4. Strategic influence in social networks. By Michel Grabisch; Antoine Mandel; Agnieszka Rusinowska; Emily Tanimura
  5. The Sequential Equal Surplus Division for Rooted Forest Games and an Application to Sharing a River with Bifurcations By Sylvain Béal; Amandine Ghintran; Eric Rémila; Philippe Solal
  6. Dynamic Behavior and Player Types in Majoritarian Multi-Battle Contests By Alan Gelder; Dan Kovenock
  7. Decomposing Random Mechanisms By Marek Pycia; M. Utku Ünver
  8. Peer effects in endogenous networks By Timo Hiller
  9. Pairwise Kidney Exchange with Blood-Group Incompatibility By Andersson , Tommy
  10. Networks of Rights in Conflict: A Talmudic Example By Barry O'Neill
  11. Designing Fair Tiebreak Mechanisms: The Case of FIFA Penalty Shootouts By Nejat Anbarci; Ching-Jen Sun; M. Utku Unver
  12. Hierarchy, Coercion, and Exploitation : An Experimental Analysis By Nikos Nikiforakis; Jörg Oechssler; Anwar Shah
  13. Measuring centrality by a generalization of degree By Csató, László
  14. Agricultural marketing cooperatives with direct selling : A cooperative non cooperative game By Maxime Agbo; Damien Rousselière; Julien Salanié
  15. Sophisticated Bidders In Beauty-Contest Auctions By Stefano Galavotti; Luigi Moretti; Paola Valbonesi
  16. Principal-Agent Settings with Random Shocks By Rubin, Jared; Sheremeta, Roman

  1. By: Johannes Horner (Cowles Foundation, Yale University); Satoru Takahashi (National University of Singapore); Nicolas Vieille (HEC Paris)
    Abstract: This paper characterizes an equilibrium payoff subset for dynamic Bayesian games as discounting vanishes. Monitoring is imperfect, transitions may depend on actions, types may be correlated and values may be interdependent. The focus is on equilibria in which players report truthfully. The characterization generalizes that for repeated games, reducing the analysis to static Bayesian games with transfers. With independent private values, the restriction to truthful equilibria is without loss, except for the punishment level; if players withhold their information during punishment-like phases, a folk theorem obtains.
    Keywords: Bayesian games, Repeated games, Folk theorem
    JEL: C72 C73
    Date: 2013–12
  2. By: Biró, Péter; Iñarra García, María Elena; Molis Bañales, Elena
    Abstract: The aim of this paper is to propose a new solution for the roommate problem with strict preferences. We introduce the solution of maximum irreversibility and consider almost stable matchings (Abraham et al. [2])and maximum stable matchings (Ta [30] [32]). We find that almost stable matchings are incompatible with the other two solutions. Hence, to solve the roommate problem we propose matchings that lie at the intersection of the maximum irreversible matchings and maximum stable matchings, which are called Q-stable matchings. These matchings are core consistent and we offer an effi cient algorithm for computing one of them. The outcome of the algorithm belongs to an absorbing set.
    Keywords: stability, unsolvability, roomate problem
    JEL: C62 C71 C78
    Date: 2014–09–16
  3. By: EHLERS, Lars; KLAUS, Bettina
    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 (unavailable-type-invariance, individual-rationality, weak non-wastefulness, or truncation-invariance). 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 agent-proposing deferred-acceptance-algorithm. For house allocation we show that DA-mechanisms are characterized by our basic properties and (i) strategy-proofness and population-monotonicity or (ii) strategy-proofness and resource-monotonicity. 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) strategy-proofness and population-monotonicity. On the other hand, our basic properties and (ii) strategy-proofness and resource-monotonicity characterize (the most general) class of DA-mechanisms 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 agent-proposing deferred-acceptance-algorithm. Therefore, in the general model resource-monotonicity is the «stronger» comparative statics requirement because it characterizes (together with our basic requirements and strategy-proofness) choice-based DA-mechanisms whereas population-monotonicity (together with our basic properties and strategy-proofness) does not.
    Keywords: Indivisible objects allocation; deferred-acceptance-algorithm; strategy-proofness; resource-monotonicity; population-monotonicity
    JEL: D63 D70
    Date: 2014
  4. By: Michel Grabisch (Paris School of Economics - Centre d'Economie de la Sorbonne); Antoine Mandel (Paris School of Economics - Centre d'Economie de la Sorbonne); Agnieszka Rusinowska (Paris School of Economics - Centre d'Economie de la Sorbonne); Emily Tanimura (Centre d'Economie de la Sorbonne)
    Abstract: We consider a model of influence with a set of non-strategic agents and two strategic agents. The non-strategic agents have initial opinions and are linked through a simply connected network. They update their opinions as in the DeGroot model. The two strategic agents have fixed opinions, 1 and 0 respectively, and are characterized by the magnitude of the impact they can exert on non-strategic agents. Each strategic agent forms a link with one non-strategic agent in order to alter the average opinion that eventually emerges in the network. This procedure defines a zero-sum game whose players are the two strategic agents and whose strategy set is the set of non-strategic agents. We focus on the existence and the characterization of equilibria in pure strategy in this setting. Simple examples show that the existence of a pure strategy equilibrium does depend on the structure of the network. The characterization of equilibrium we obtain emphasizes on the one hand the influenceability of target agents and on the other hand their centrality whose natural measure in our context defines a new concept, related to betweenness centrality, that we call intermediacy. We also show that in the case where the two strategic agents have the same impact, symmetric equilibria emerge as natural solutions whereas in the case where the impacts are uneven, the strategic players generally have differentiated equilibrium targets, the high-impacts agent focusing on centrality and the low-impact agent on influenceability.
    Keywords: Influence networks, beliefs, DeGroot model, strategic player, convergence, consensus, equilibrium.
    JEL: C71 D85
    Date: 2015–01
  5. By: Sylvain Béal (Université de Franche-Comté, CRESE, 30 Avenue de l'Observatoire, 25009 Besançon, France); Amandine Ghintran (Université Lille 3, EQUIPPE, France); Eric Rémila (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France, Université Jean Monnet, Saint-Etienne, F-42000, France); Philippe Solal (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France, Université Jean Monnet, Saint-Etienne, F-42000, France)
    Abstract: We introduce a new allocation rule, called the sequential equal surplus division for rooted forest TU-games. We provide two axiomatic characterizations for this allocation rule. The first one uses the classical property of component efficiency plus an edge deletion property. The second characterization uses standardness, an edge deletion property applied to specific rooted trees, a consistency property, and an amalgamation property. We also provide an extension of the sequential equal surplus division applied to the problem of sharing a river with bifurcations.
    Keywords: Amalgamation, Consistency, Fairness, Rooted forest, Sequential equal surplus division, Water allocation
    JEL: C71
    Date: 2014
  6. By: Alan Gelder (Economic Science Institute, Chapman University); Dan Kovenock (Economic Science Institute, Chapman University)
    Abstract: In a dynamic contest where it is costly to compete, a player who is behind must decide whether to surrender or to keep fighting in the face of bleak odds. We experimentally examine the game theoretic prediction of last stand behavior in a multi-battle contest with a winning prize and losing penalty, as well as the contrasting prediction of surrendering in the corresponding contest with no penalty. We find varied evidence in support of these hypotheses in the aggregated data, but more conclusive evidence when scrutinizing individual player behavior. Players’ realized strategies tend to conform to one of several “types”. We develop a taxonomy to classify player types and study how these types interact and how their incidence varies across treatments. Contrary to the theoretical prediction, escalation is the predominant behavior, but last stand and surrendering behaviors also arise at rates responsive to the importance of losing penalties.
    Keywords: Dynamic Contest, Multi-Battle Contest, Player Type, Experiment, All-Pay Auction, Escalation, Last Stand, Maximin
    JEL: C73 C92 D44 D72 D74
    Date: 2015
  7. By: Marek Pycia (UCLA); M. Utku Ünver (Boston College)
    Abstract: Random mechanisms have been used in real-life situations for reasons such as fairness. Voting and matching are two examples of such situations. We investigate whether desirable properties of a random mechanism survive decomposition of the mechanism as a lottery over deterministic mechanisms that also hold such properties. To this end, we represent properties of mechanisms--such as ordinal strategy-proofness or individual rationality--using linear constraints. Using the theory of totally unimodular matrices from combinatorial integer programming, we show that total unimodularity is a sufficient condition for the decomposability of linear constraints on random mechanisms. As two illustrative examples, we show that individual rationality is totally unimodular in general, and that strategy-proofness is totally unimodular in some individual choice models. However, strategy-proofness, unanimity, and feasibility together are not totally unimodular in collective choice environments in general. We thus introduce a direct constructive approach for such problems. Using this approach, we prove that feasibility, strategy-proofness, and unanimity, with and without anonymity, are decomposable on non-dictatorial single-peaked voting domains.
    Keywords: Random mechanisms, ordinal mechanisms, total unimodularity, singlepeaked preferences, voting, individual rationality, strategy-proofness, unanimity, anonymity, generalized median voter rules, universal truthfulness
    JEL: C60 D71 D72
    Date: 2014–09–30
  8. By: Timo Hiller
    Abstract: This paper presents a simple model of strategic network formation with local complementarities in effort levels and positive local externalities for a general class of payoff functions. Results are obtained for one-sided and two-sided link creation. In both cases (pairwise) Nash equilibrium networks are nested split graphs, which are a strict subset of core-periphery networks. The relevance of the convexity of the value function (gross payoffs as a function of neighbours' effort levels when best responding) in obtaining nested split graphs is highlighted. Under additional assumptions on payoffs, we show that the only efficient networks are the complete and the empty network. Furthermore, there exists a range of linking cost such that any (pairwise) Nash equilibrium is inefficient and for a strict subset of this range any (pairwise) Nash equilibrium network structure is different from the efficient network. These findings are relevant for a wide range of social and economic phenomena, such as educational attainment, criminal activity, labor market participation, and R&D expenditures of firms.
    Keywords: strategic network formation; peer effects; strategic complements; positive externalities
    JEL: J1
    Date: 2013–09
  9. By: Andersson , Tommy (Department of Economics, Lund University)
    Abstract: Kidney transplants across the blood-group barrier are medically feasible even if blood-group compatibility is preferred from a medical point of view. However, these types of transplants are motivated by the fact that they help in increasing the number of kidney transplants with living donors. This paper investigates priority matchings in a pairwise kidney exchange problem where blood-group incompatibilities may be present. As a priority matching not necessarily is unique, it is from a medical point of view natural to select a priority matching where the number of blood-group compatible exchanges is maximized among all priority matchings. The main result demonstrates that this can be achieved by solving an appropriately defined maximum weight matching problem.
    Keywords: pairwise kidney exchange; priority matchings; blood-group incompatibility.
    JEL: C78
    Date: 2015–02–02
  10. By: Barry O'Neill
    Abstract: Many disputes involve conflicts of rights. A common view is that rights cannot really be in conflict so one of those being claimed must be a mistake. This idea leads to extreme outcomes that cut some parties out. Many studies have investigated how to choose a compromise among rights but they have focus on situations where the incompatibility comes from the degrees of the claims, as when, for example, a deceased person promised his heirs more than his total estate. I analyze a Talmudic problem where the difficulty is the pattern of the rights - each one trumps another in a cycle. The theory of non-transferable utility coalitional games suggests two solutions, one based on Shapley's and Maschler-Owen's values, which are equivalent for the problem, and the other on Harsanyi's and Kalai-Samet's, also equivalent. Each satisfies four out of five desirable properties, better than several other solutions. The NTU games are appropriate not just for power-based negotiation but for disputes over justice, fairness and rights. It is hoped that this analysis will form part of a general understanding of rights conflicts.
    Date: 2014–12
  11. By: Nejat Anbarci; Ching-Jen Sun; M. Utku Unver
    Abstract: In the current FIFA penalty shootout mechanism, a coin toss decides which team will kick first. Empirical evidence suggests that the team taking the first kick has a higher probability to win a shootout. We design sequentially fair shootout mechanisms such that in all symmetric Markov-perfect equilibria each of the skill-balanced teams has exactly 50% chance to win whenever the score is tied at any round. Consistent with empirical evidence, we show that the current mechanism is not sequentially fair and characterize all sequentially fair mechanisms. Taking additional desirable properties into consideration, we propose and uniquely characterize a practical mechanism.
    Keywords: Fairness, mechanism design, soccer, penalty shootouts, market design, axiomatic approach
    JEL: D63 C79
    Date: 2015–02–05
  12. By: Nikos Nikiforakis (Department of Economics, The University of Melbourne, Victoria 3010, Australia; CNRS, Groupe dAnalyse et de Théorie Economique, 93, Chemin des Mouilles, 69130 Ecully, France; Max Planck Institute for Research on Collective Goods, Kurt Schumacher Strasse 10, 53113 Bonn, Germany); Jörg Oechssler (Department of Economics, University of Heidelberg, Bergheimer Str. 58, 69115 Heidelberg, Germany); Anwar Shah (School of Economics, Quaid-I-Azam University, 45320 Islamabad, Pakistan)
    Abstract: The power to coerce workers is important for the e¢ cient operation of hierarchically structured organizations. However, this power can also be used by managers to exploit their subordinates for their own benefit. We examine the relationship between the power to coerce and exploitation in a laboratory experiment where a senior and a junior player interact repeatedly for a finite number of periods. We find that senior players try repeatedly to use their power to exploit junior workers. These attempts are successful only when junior workers have incomplete information about how their e¤ort impacts on the earnings of senior players, but not when they have complete information. Evidence from an incentive-compatible questionnaire indicates that the social acceptability of exploitation depends on whether the junior worker can detect she is being exploited. We also show how a history of exploitation affects future interactions.
    Keywords: coercion, exploitation, disobedience, hierarchy, social norms
    JEL: C91 C72 D74
    Date: 2014
  13. By: Csató, László
    Abstract: Network analysis has emerged as a key technique in communication studies, economics, geography, history and sociology, among others. A fundamental issue is how to identify key nodes in a network, for which purpose a number of centrality measures have been developed. This paper proposes a new parametric family of centrality measures called generalized degree. It is based on the idea that a relationship to a more interconnected node contributes to centrality in a greater extent than a connection to a less central one. Generalized degree improves on degree by redistributing its sum over the network with the consideration of the global structure. Application of the measure is supported by a set of basic properties. A sufficient condition is given for generalized degree to be rank monotonic, excluding counter-intuitive changes in the centrality ranking after certain modifications of the network. The measure has a graph interpretation and can be calculated iteratively. Generalized degree is recommended to apply besides degree since it preserves most favorable attributes of degree, but better reflects the role of the nodes in the network and has an increased ability to distinguish between their importance.
    Keywords: networks, centrality measures, degree, axiomatic approach
    JEL: D85
    Date: 2015–01–22
  14. By: Maxime Agbo (African School of Economics, Abomey-Calavi, Benin); Damien Rousselière (AGROCAMPUS OUEST, Departement of Economics, Management and Society, Angers, France, UMR GRANEM, Angers, France); Julien Salanié (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France, Université Jean Monnet, Saint-Etienne, F-42000, France)
    Abstract: We build a theoretical model to study a market structure of a marketing cooperative with direct selling, in which many farmers are members of an agricultural marketing cooperative. They can sell their production either to the cooperative or on an oligopolistic local market. We show that the decision to sell to the cooperative induces an anti-competitive effect on the direct selling market. The cooperative facilitates collusion on the local market by making farmers softer competitors on that market. Conversely, direct selling may create a "healthy emulation" among farmers, leading to more production benefiting the cooperative.
    Keywords: marketing cooperative, direct selling, local market, competition
    JEL: D43 L11 Q13
    Date: 2014
  15. By: Stefano Galavotti (University of Padova); Luigi Moretti (University of Padova); Paola Valbonesi (University of Padova)
    Abstract: In this paper, we study bidding behavior by firms in beauty-contest auctions, i.e. auctions in which the winning bid is the one which gets closest to some function (average) of all submitted bids. Using a dataset on public procurement beauty-contest auctions in Italy and exploiting a change in the auction format, we show that firmsÕ observed bidding behavior departs from equilibrium and can be predicted by an index of sophistication, which captures the firmsÕ accumulated capacity of bidding well (i.e., close to optimality) in the past. We show that our empirical evidence is consistent with a Cognitive Hierarchy model of biddersÕ behavior. We also investigate whether and how firms learn to think and bid strategically through experience.
    Keywords: cognitive hierarchy; auctions; beauty-contest; public procurement.
    JEL: C70 D03 D44 D83 H57
    Date: 2014–09
  16. By: Rubin, Jared; Sheremeta, Roman
    Abstract: Using a gift exchange experiment, we show that the ability of reciprocity to overcome incentive problems inherent in principal-agent settings is greatly reduced when the agent’s effort is distorted by random shocks and transmitted imperfectly to the principal. Specifically, we find that gift exchange contracts without shocks encourage effort and wages well above standard predictions. However, the introduction of random shocks reduces wages and effort, regardless of whether the shocks can be observed by the principal. Moreover, the introduction of shocks significantly reduces the probability of fulfilling the contract by the agent, the payoff of the principal, and total welfare. Therefore, our findings demonstrate that random shocks place an important bound on the ability of gift exchange to overcome principal-agent problems.
    Keywords: gift exchange, principal-agent model, contract theory, reciprocity, effort, shocks, laboratory experiment
    JEL: C72 C91 D63 D81 H50
    Date: 2015–02–05

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