nep-gth New Economics Papers
on Game Theory
Issue of 2015‒03‒05
ten papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. The approval mechanism solves the prisoner's dilemma theoretically and experimentally By Tatsuyoshi Saijo; Yoshitaka Okano; Takafumi Yamakawa
  2. A revealed preference theory of monotone choice and strategic complementarity By John K.-H. Quah; Koji Shirai
  3. Three-person envy games: Experimental evidence and a stylized model By Bäker, Agnes; Güth, Werner; Pull, Kerstin; Stadler, Manfred
  4. Menu Auctions and Influence Games with Private Information By Martimort, David; Stole, Lars
  5. A strategic model for network formation By Atabati, Omid; Farzad, Babak
  6. A mechanism overcoming coordination failure based on gradualism and endogeneity By Yoshio Kamijo; Hiroki Ozono; Kazumi Shimizu
  7. Fear of novelty : a model of scientific discovery with strategic uncertainty By Besancenot, Damien; Vranceanu, Radu
  8. Lying about Delegation By Sutan, Angela; Vranceanu, Radu
  9. Reciprocal beliefs and out-group cooperation: evidence from a public good game By Brañas-Garza, Pablo; Coulson, Mark; Kernohan, David; Oyediran, Olusegun; Rivas, M. Fernanda
  10. Power of Joint Decision-Making in a Finitely-Repeated Dilemma By Kamei, Kenju

  1. By: Tatsuyoshi Saijo (School of Economics and Management, Kochi University of Technology); Yoshitaka Okano (School of Economics and Management, Kochi University of Technology); Takafumi Yamakawa (Osaka University)
    Abstract: Consider a situation where players in a prisoner's dilemma game can approve or reject the other's choice such as cooperation or defection. If both players approve the other's choice, the outcome is the one they chose, whereas if either one rejects the other's choice, the outcome is the one when both defect, which we name the approval mechanism herein (this is inspired by the Cold War doctrine of mutually assured destruction). Experimentally, we find that the cooperation rate with the approval mechanism is 90% in round one and averages 93.2% across the 19 rounds. The questionnaire analysis also allows us to find that subjects' behavior is consistent with subgame perfect elimination of weakly dominated strategies (SPEWDS) rather than Nash equilibrium (NE) or subgame perfect Nash equilibrium (SPNE) behavior. Theoretically, this mechanism implements cooperation in SPEWDS, but not in NE or SPNE.
    Keywords: prisoner’s dilemma, approval mechanism, mutually assured destruction, cooperation, subgame perfect elimination of weakly dominated strategies, experiment
    JEL: C72 C73 C92 D74 P43
    Date: 2015–02
  2. By: John K.-H. Quah (Department of Economics, University of Oxford); Koji Shirai (Institute of Economic Research, Kyoto University)
    Abstract: We carry out a revealed preference analysis of monotone comparative statics. We ask what restrictions on an agent's observed choice behavior are necessary and sufficient to rationalize the data with a preference guaranteeing that choices are always monotone with re- spect to a parameter. We extend our analysis to a game-theoretic setting where players' chosen actions, the strategy sets from which actions are chosen, and the parameters which may affect payoffs are observed. Variation in the data arises from changes to parameters and/or changes to the strategy sets. We show that an intuitive and easy-to-check property on the data set is necessary and sufficient for it to be consistent with the hypothesis that each observation is a pure strategy Nash equilibrium in a game with strategic complementarity. When a data set obeys this property, we show how to exploit this data to identify the set of possible Nash equilibria in a game outside the set of observations.
    Keywords: monotone comparative statics, single crossing dierences, interval dominance, supermodular games, lattices
    JEL: C6 C7 D7
    Date: 2015–02
  3. By: Bäker, Agnes; Güth, Werner; Pull, Kerstin; Stadler, Manfred
    Abstract: In three-person envy games, an allocator, a responder, and a dummy player interact. Since agreement payoffs of responder and dummy are exogenously given, there is no tradeoff between allocator payoff and the payoffs of responder and dummy. Rather, the allocator chooses the size of the pie and thus - being the residual claimant - defines his own payoff. While in the dictator variant of the envy game, responder and dummy can only refuse their own shares, in the ultimatum variant, the responder can accept or reject the allocator's choice with rejection leading to zero payoffs for all three players. Comparing symmetric and asymmetric agreement payoffs for responder and dummy shows that equality concerns are significantly context-dependent: allocators are willing to leave more money on the table when universal equality can be achieved than when only partial equality is at stake. Similarly, equality seeking of responders is most prominent when universal equality is possible.
    Keywords: envy games,experimental economics
    JEL: C72 C91 D63
    Date: 2015
  4. By: Martimort, David; Stole, Lars
    Abstract: We study games in which multiple principals influence the choice of a privately-informed agent by offering action-contingent payments. We characterize the equilibrium allocation set as the maximizers of an endogenous aggregate virtual-surplus program. The aggregate maximand for every equilibrium includes an information-rent margin which captures the confluence of the principals’ rent-extraction motives. We illustrate the economic implications of this novel margin in two applications: a public goods game in which players incentivize a common public good supplier, and a lobbying game between conflicting interest groups who offer contributions to influence a common political decision-maker.
    Keywords: Menu auctions, influence games, common agency, screening contracts, public goods games, lobbying games
    JEL: D82
    Date: 2015–02–23
  5. By: Atabati, Omid; Farzad, Babak
    Abstract: We study the dynamics of a game-theoretic network formation model that yields large-scale small-world networks. So far, mostly stochastic frameworks have been utilized to explain the emergence of these networks. On the other hand, it is natural to seek for game-theoretic network formation models in which links are formed due to strategic behaviors of individuals, rather than based on probabilities. Inspired by Even-Dar and Kearns' model [8], we consider a more realistic framework in which the cost of establishing each link is dynamically determined during the course of the game. Moreover, players are allowed to put transfer payments on the formation and maintenance of links. Also, they must pay a maintenance cost to sustain their direct links during the game. We show that there is a small diameter of at most 4 in the general set of equilibrium networks in our model. We achieved an economic mechanism and its dynamic process for individuals which firstly; unlike the earlier model, the outcomes of players' interactions or the equilibrium networks are guaranteed to exist. Furthermore, these networks coincide with the outcome of pairwise Nash equilibrium in network formation. Secondly; it generates large-scale networks that have a rational and strategic microfoundation and demonstrate the main characterization of small degree of separation in real-life social networks. Furthermore, we provide a network formation simulation that generates small-world networks.
    Keywords: network formation; linking game with transfer payments; pairwise stability; pairwise Nash equilibrium; small-world phenomenon
    JEL: C79 D85
    Date: 2014–11–01
  6. By: Yoshio Kamijo (School of Economics and Management, Kochi University of Technology); Hiroki Ozono (Kagoshima University); Kazumi Shimizu (Waseda University)
    Abstract: We examine three tools that can enhance coordination success in a repeated multiple-choice coordination game. Gradualism means that the game starts as an easy coordination problem and moves gradually to a more difficult one. The Endogenous Ascending mechanism implies that a gradual increase in the upper bound of coordination occurs only if coordination with the Pareto superior equilibrium in a stage game is attained. The Endogenous Descending mechanism requires that when the game's participants fail to coordinate, the level of the next coordination game be adjusted such that the game becomes simpler. We show that gradualism may not always work, but in such instances, its effect can be reinforced by endogeneity. Our laboratory experiment provides evidence that a mechanism that combines three tools, herein termed the ``Gradualism with Endogenous Ascending and Descending (GEAD)'' mechanism, works well. We discuss how the GEAD mechanism can be applied to real-life situations that suffer from coordination failure.
    Keywords: Coordination Failure, Minimum Effort Game, Laboratory Experiment, Target Adjustment, Gradualism, Endogenous Ascending, Endogenous Descending
    JEL: C72 C91 C92 M54
    Date: 2015–01
  7. By: Besancenot, Damien (Centre d'Economie de l'Université Paris Nord (CEPN)); Vranceanu, Radu (ESSEC Business School and THEMA)
    Abstract: This paper analyzes the production of fundamental research as a coordination game played by scholars. In the model, scholars decide to adopt a new idea only if they believe that a critical mass of peers is following a similar research strategy. If researchers observe only a noisy idiosyncratic signal of the true scientiÖc potential of a new idea, we show that the game presents a single threshold equilibrium. In this environment, fundamental research proceeds with large structural breaks followed by long periods of time in which new ideas are unsuccessful. The likelihood of a new idea emerging depends on various parameters, including the rewards of working in the old paradigm, the critical mass of researchers required to create a new school of thought and scholarsí ability to properly assess the scientific value of new ideas.
    Keywords: Economics of science; Scientific discovery; Strategic complementarity; Strategic uncertainty; Global games
    JEL: A14 C72 O31
    Date: 2015–02
  8. By: Sutan, Angela (Groupe ESC Dijon Bourgogne, LESSAC Laboratoire d'Expérimentation en en Sciences Sociales et Analyse des Comportements et LAMETA); Vranceanu, Radu (ESSEC Business School)
    Abstract: This paper reports results from a three-player variant of the ultimatum game in which the Proposer can delegate to a third party his decision regarding how to share his endowment with a Responder with a standard veto right. However, the Responder cannot verify whether the delegation is effective or the third party merely plays a “scapegoat” role while the decision is made by the Proposer himself. In this imperfect information setting, the Proposer can send an unverifiable message declaring his delegation strategy. The most interesting strategy is “false delegation”, in which the Proposer makes the decision but claims to have delegated it. In our sample, the recourse to false delegation is significant, and a significant number of potential Delegates accept serving in the scapegoat role. However, there are many honest Proposers, and 20% of all Delegates will refuse to be the accomplices of a dishonest Proposer. Responders tend to more readily accept poor offers in a setup that permits lying about delegation; the acceptance rate of the poor offer is the highest when Delegates can refuse the scapegoat role.
    Keywords: delegation of responsibility; lies; communications strategy; ultimatum game; dishonesty
    JEL: C72 C91 D82
    Date: 2015–01
  9. By: Brañas-Garza, Pablo; Coulson, Mark; Kernohan, David; Oyediran, Olusegun; Rivas, M. Fernanda
    Abstract: This study examined latent racial prejudice towards specified out-groups among 152 Spanish college students in a two-stage research strategy using a public goods game. When asked how generous various out-groups are, Asian, and Western groups were perceived as more generous than the in-group, whereas African and Latin American groups were perceived as less generous. When participants were incentivized, with payoff contingent on the accuracy of guesses, and accuracy quantified as performance of the relevant groups in a similar task to the one employed here, participants evidenced prejudice against African and Latin American groups, and towards Asian and Western groups. Models of racial beliefs were fitted for the four groups, however we do not find satisfactory explanations for why questionnaire response and lab behaviour did not match. Implications of the use of behavioural economic games in prejudice research are discussed.
    Keywords: Beliefs; Prejudice; Public Goods Game
    JEL: C91 H41 J15
    Date: 2014–05–13
  10. By: Kamei, Kenju
    Abstract: A rich body of literature has proposed that pairs behave significantly differently from individuals due to a number of reasons such as group polarization. This paper experimentally compares cooperation behaviors between pairs and individuals in a finitely-repeated two-player public goods game (continuous prisoner’s dilemma game). We show that pairs contribute significantly more than individuals to their group accounts. Especially, when two pairs are matched with each other for the entire periods, they successfully build long-lasting cooperative relationships with their matched pairs. Our detailed analyses suggest that the enhanced cooperation behavior of pairs may be driven by (a) the mere fact that they have partners when they make decisions, (b) group polarization – those who initially prefer to contribute smaller amounts are more affected by the partners in their pairs, and (c) stronger conditional cooperation behavior of pairs to their matched pairs.
    Keywords: experiment, cooperation, dilemma, team work, public goods
    JEL: C91 C92
    Date: 2015–02–26

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