nep-gth New Economics Papers
on Game Theory
Issue of 2015‒05‒30
ten papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Instability of Equilibria with Imperfect Private Monitoring By Heller, Yuval
  2. Peer Effects in Endogenous Networks By Timo Hiller; Timo Hiller
  3. Replica Core Equivalence Theorem: An Extension of the Debreu-Scarf Limit Theorem to Double Infinity Monetary Economies By Ken Urai; Hiromi Murakami
  4. Robert Louis Stevenson's Bottle Imp: A strategic analysis By Kukushkin, Nikolai S.
  5. “Fast Charging Stations: Simulating Entry and Location in a Game of Strategic Interaction” By Valeria Bernardo; Joan-Ramon Borrell; Jordi Perdiguero
  6. Projection Equilibrium: Definition and Applications to Social Investment and Persuasion By Kristóf Madarász
  7. On Strategy-proofness and the Salience of Single-peakedness By Shurojit Chatterjiy; Jordi Massó
  8. Financing and advising with (over)confident entrepreneurs : an experimental investigation By Laurent Vilanova; Nadège Marchand; Walid Hichri
  9. Product-Mix Auctions and Tropical Geometry By Ngoc Mai Tran; Josephine Yu
  10. Pooling data across markets in dynamic Markov games By Taisuke Otsu; Martin Pesendorfer; Yuya Takahashi

  1. By: Heller, Yuval
    Abstract: Various papers have presented folk-theorem results that yield efficiency in the repeated Prisoner's Dilemma with imperfect private monitoring. I present a mild refinement that requires robustness against small perturbations in the behavior of potential opponents, and I show that only defection satisfies this refinement among all the existing equilibria in the literature.
    Keywords: Belief-free equilibrium, evolutionary stability, imperfect private monitoring, repeated Prisoner's Dilemma, communication.
    JEL: C73 D82
    Date: 2015–05–19
  2. By: Timo Hiller; 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: D62 D85
    Date: 2013–09
  3. 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 Walrasian equilibrium allocations under non-negative wealth transfer and a core-limit characterization of Samuelsonfs social contrivance of money. Preferences are not necessarily assumed to be ordered.
    Keywords: Monetary Equilibrium, Overlapping Generations Model, Core Equivalence, Replica Econ- omy, Non-Ordered Preference
    JEL: C62 C71 D51 E00
    Date: 2014–11
  4. By: Kukushkin, Nikolai S.
    Abstract: The background of Stevenson's story is viewed as a stylized model of participation in a financial pyramid. You are invited to participate in a dubious activity. If you refuse, you neither gain nor lose anything. If you accept, you will gain if you are able to find somebody who will take your place on exactly the same conditions, but suffer a loss otherwise. The catch is that there is a finite number of discrete steps at which the substitution can be done, so the agent who joins in at the last step inevitably loses. Clearly, rational agents will not agree to participate at any step. However, an arbitrarily small probability of a "bailout," in which case that last agent will get the same gain as every other participant, plus an appropriately asymmetric structure of private information, change everything, so the proposal will be accepted in a (subgame perfect) equilibrium, provided there are sufficiently many steps ahead.
    Keywords: financial pyramid; partitional information structure; game of incomplete information; game of perfect information
    JEL: C72 D82
    Date: 2015–05–27
  5. By: Valeria Bernardo (Faculty of Economics, University of Barcelona); Joan-Ramon Borrell (Faculty of Economics, University of Barcelona); Jordi Perdiguero (Faculty of Economics, Universitat Autònoma de Barcelona)
    Abstract: This paper uses a game of strategic interaction to simulate entry and location of fast charging stations for electric vehicles. It evaluates the equilibria obtained in terms of social welfare and firm spatial differentiation. Using Barcelona mobility survey, demographic data and the street graph we find that only at an electric vehicle penetration rate above 3% does a dense network of stations appear as the equilibrium outcome of a market with no fiscal transfers. We also find that price competition drives location differentiation measured not only in Euclidean distances but also in consumer travel distances.
    Keywords: Regional Planning; Electric Vehicle; Fast Charging; Games of Strategic Interaction; Entry Models JEL classification: Q48, Q58, L13, L43, R53
    Date: 2015–05
  6. By: Kristóf Madarász
    Abstract: People exaggerate the extent to which their private information is shared with others. This paper introduces this phenomenon portably into Bayesian games where people wrongly think that if they can condition their strategy on an event others can do as well. I apply the model to a variety of settings. In the context of social investment people misattribute the uncertainty they face about others preferences to others having antagonistic motives. Even if all parties prefer mutual investment, none invests, yet all come to believe that others prefer not to invest. In the context of communication with costly state veri…cation, the model predicts credulity: persuasion by advisors, who are known to have an incentive to exaggerate the quality of an asset, will nevertheless induce uniformly exaggerated average posteriors for receivers. When endogenizing the con‡ict of interest between senders and receivers, I show that such credulous belief-bubbles rise discontinuously as the size of the market or the complexity of the asset increases. Further implications to auctions, common value trade and zero-sum games are explored.
    Keywords: Projection, Social Investment, Pluralistic Ignorance, Persuasion Belief-Bubbles.
    JEL: D03 C7
    Date: 2015–01
  7. By: Shurojit Chatterjiy; Jordi Massó
    Abstract: We consider strategy-proof social choice functions operating on a rich domain of preference profiles. We show that if the social choice function satisfies in addition tops-onlyness, anonymity and unanimity then the preferences in the domain have to satisfy a variant of single-peakedness (referred to as semilattice single-peakedness). We do so by deriving from the social choice function an endogenous partial order (a semilattice) from which the notion of a semilattice single-peaked preference can be defined. We also provide a converse of this main finding. Finally, we show how well-known restricted domains under which nontrivial strategy-proof social choice functions are admissible are semilattice single-peaked domains.
    Keywords: Strategy-proofness; Single-peakedness, Anonymity; Unanimity; Tops-onlyness; Semilattice.
    JEL: C71
    Date: 2015–05–20
  8. By: Laurent Vilanova (Université de Lyon, F-69007, France; Université Lyon 2, Coactis); Nadège Marchand (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon Saint-Etienne, Ecully, F-69130, France; Université Lyon 2, Lyon, F-69007, France); Walid Hichri (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon Saint-Etienne, Ecully, F-69130, France; Université Lyon 2, Lyon, F-69007, France)
    Abstract: We test in the laboratory how entrepreneurs’ skill perceptions influence the design of financing and advising contracts. Our theoretical framework proposes that selfconfident entrepreneurs prefer issuing debt whereas low self-confident ones prefer equity which induces strong investor assistance. The prevalence of overconfidence makes investors more reluctant to accept debt offers and constrains self-confident entrepreneurs to finance through mixed securities. Experimental results show that self-confident entrepreneurs issue more debt-like securities and receive less assistance. We also show that entrepreneurs learn not to offer pure debt and that initial ignorance of their own skills reinforces entrepreneurs’ ability to learn through risky choices.
    Keywords: Entrepreneurs, investment decision, learning, overconfidence, venture capital
    JEL: C72 C92 D83
    Date: 2015
  9. By: Ngoc Mai Tran; Josephine Yu
    Abstract: In a recent and ongoing work, Baldwin and Klemperer found a connection between tropical geometry and economics. They gave a sufficient condition for the existence of competitive equilibrium in product-mix auctions of indivisible goods. This result, which we call the Unimodularity Theorem, can also be traced back to the work of Danilov, Koshevoy, and Murota. We introduce auction theory for a mathematical audience and give two simple proofs of the Unimodularity Theorem - one via tropical and discrete geometry, and one via integer programming. We also give connections to Walrasian economies, stable matching with transferable utilities, the theory of discrete convex analysis, and some well-known problems on lattice polytopes.
    Date: 2015–05
  10. By: Taisuke Otsu; Martin Pesendorfer; Yuya Takahashi
    Abstract: This paper proposes several statistical tests for finite state Markov games to examine the null hypothesis that data from distinct markets can be pooled. We formulate tests of (i) the conditional choice and state transition probabilities, (ii) the steady-state distribution, and (iii) the conditional state distribution given an initial state. If the null cannot be rejected, then the data across markets can be pooled. A rejection of the null implies that the data cannot be pooled across markets. In a Monte Carlo study we find that the test based on the steady-state distribution performs well and has high power even with small numbers of markets and time periods. We apply the tests to the empirical study of Ryan (2012) that analyzes dynamics of the U.S. Portland Cement industry and assess if the single equilibrium assumption is supported by the data.
    Keywords: Dynamic Markov game, Poolability, Multiplicity of equilibria, Hypothesis testing
    JEL: C12 C72 D44
    Date: 2015–03

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