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on Game Theory |
| By: | Ziv Hellman (Bar-Ilan University); Ron Peretz (London School of Economics) |
| Abstract: | We suppose that players in a cooperative game are located within a graph structure, such as a social network or supply route, that limits coalition formation to coalitions along connected subsets within the graph. This in turn leads to a more general study of coalitional games in which there are arbitrary limitations on the collections of coalitions that may be formed. Within this context we define a generalisation of the Shapley value that is studied from an axiomatic perspective. The resulting ‘graph value’ (and ‘S-value’ in the general case) is endogenously asymmetric, with the automorphism group of the graph playing a crucial role in determining the relative values of players. |
| Keywords: | Shapley value, network games |
| JEL: | C71 D46 D72 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2015-04&r=gth |
| By: | Igal Milchtaich (Bar-Ilan University) |
| Abstract: | Polyequilibrium is a generalization of Nash equilibrium that is applicable to any strategic game, whether finite or otherwise, and to dynamic games, with perfect or imperfect information. It differs from equilibrium in specifying strategies that players do not choose and by requiring an after-the-fact justification for the exclusion of these strategies rather than the retainment of the non-excluded ones. Specifically, for each excluded strategy of each player there must be a non-excluded one that responds to every profile of non-excluded strategies of the other players at least as well as the first strategy does. A polyequilibrium’s description of the outcome of the game may be more or less specific, depending on the number and the identities of the non-excluded strategy profiles. A particular property of the outcome is said to hold in a polyequilibrium if it holds for all non-excluded profiles. Such a property does not necessarily hold in any Nash equilibrium in the game. In this sense, the generalization proposed in this work extends the set of justifiable predictions concerning a game’s results. |
| Keywords: | Polyequilibrium, Polystrategy, Coarsening of Nash equilibrium, Subgame perfection, Bayesian perfection |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2015-06&r=gth |
| By: | Kenan Huremovic (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS) |
| Abstract: | Network structure has a significant role in determining the outcomes of many socio-economic relationships, including antagonistic ones. In this paper we study a situation in which agents, embedded in a network, simultaneously play interrelated bilateral contest games with their neighbours. Spillovers between contests induce complex local and global network effects. We first characterize the equilibrium of the game on an arbitrary fixed network. Then we study a network formation model, introducing a novel but intuitive link formation protocol. As links represent negative relationships, link formation is unilateral while link destruction is a bilateral action. The unique stable network topology is the complete k-partite network with partitions of different sizes. This model also provides a micro-foundation for the concept of structural balance, and the main results go in line with theoretical and empirical findings from other disciplines, including biology and sociology. |
| Keywords: | network formation, game on network, contest, structural balance |
| JEL: | D85 D74 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1521&r=gth |
| By: | Umut Mert Dur (Department of Economics, North Carolina State University); M. Utku Unver (Department of Economics, Boston College) |
| Abstract: | We introduce a new matching model to mimic two-sided exchange programs such as tuition and worker exchange, in which each firm has to avoid being a net-exporter of workers. These exchanges use decentralized markets, making it difficult to achieve a balance between exports and imports. We show that stable equilibria discourage net-exporting firms from exchange. We introduce the two-sided top-trading-cycles mechanism that is balanced-efficient, worker-strategy-proof, acceptable, and individually rational, and respects priority bylaws regarding worker eligibility. We prove that it is the unique mechanism fulfilling these objectives. Moreover, it encourages exchange, since full participation is the dominant strategy for firms. |
| Keywords: | Market Design, Matching Theory, Tuition Exchange, Worker Exchange, Balanced Exchange, Two–sided Matching, Two–sided Top Trading Cycles. |
| JEL: | C71 C78 D71 D78 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1508&r=gth |
| By: | Ekaterina Sherstyuk (University of Hawaii at Manoa, Department of Economics); Nori Tarui (University of Hawaii at Manoa, Department of Economics); Majah-Leah Ravago (School of Economics, University of the Philippines Diliman); Tatsuyoshi Saijo (Kochi University of Technology) |
| Abstract: | Dynamic externalities are at the core of many long-term environmental problems, from species preservation to climate change mitigation. We use laboratory experiments to compare welfare outcomes and underlying behavior in games with dynamic externalities under two distinct settings: traditionally studied games with infinitely-lived decision makers, and more realistic intergenerational games. We show that if decision makers change across generations, resolving dynamic externalities becomes more challenging for two distinct reasons. First, decision makers' actions may be short-sighted due to their limited incentives to care about the future generations' welfare. Second, even when the incentives are perfectly aligned across generations, increased strategic uncertainty of the intergenerational setting may lead to an increased inconsistency of own actions and beliefs about the others, making own actions more myopic. Access to history and advice from previous generations may improve dynamic efficiency, but may also facilitate coordination on non-cooperative action paths. |
| Keywords: | Economic experiments, dynamic externalities, intergenerational games, climate change |
| JEL: | C92 D62 D90 Q54 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201509&r=gth |
| By: | Yasushi Asako (School of Political Science and Economics, Waseda University) |
| Abstract: | This study develops a war-of-attrition model with the asymmetric feature that one player can be defeated by the other but not vice versa; that is, only one player has an exogenous probability of being forced to capitulate. With complete information, the equilibria are almost identical to the canonical war-of-attrition model. On the other hand, with incomplete information on a players robustness, a war where both players ght for some duration emerges. Moreover, a player who is never defeated may capitulate in equilibrium, and this player will give in earlier if the other players ghting costs are greater. |
| Keywords: | war, attrition, Bayesian learning, asymmetric robustness |
| JEL: | C72 D82 D83 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:1420&r=gth |
| By: | de Haan, Monique; Gautier, Pieter A; Oosterbeek, Hessel; van der Klaauw, Bas |
| Abstract: | Theory points to a potential trade-off between two main school assignment mechanisms; Boston and Deferred Acceptance (DA). While DA is strategy-proof and gives a stable matching, Boston might outperform DA in terms of ex-ante efficiency. We quantify the (dis)advantages of the mechanisms by using information about actual choices under Boston complemented with survey data eliciting students' school preferences. We find that under Boston around 8% of the students apply to another school than their most-preferred school. We compare allocations resulting from Boston with DA with single tie-breaking (one central lottery; DA-STB) and multiple tie-breaking (separate lottery per school; DA-MTB). DA-STB places more students in their top-n schools, for any n, than Boston and results in higher average welfare. We find a trade-off between DA-STB and DA-MTB. DA-STB places more students in their single most-preferred school than DA-MTB, but fewer in their top-n, for n >= 2. Finally, students from disadvantaged backgrounds benefit most from a switch from Boston to any of the DA mechanisms. |
| Keywords: | Boston mechanism; deferred acceptance mechanism; ex-ante efficiency; ex-post efficiency; school choice; strategic behavior |
| JEL: | C83 I20 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10656&r=gth |
| By: | Andersson , Tommy (Department of Economics, Lund University); Svensson, Lars-Gunnar (Department of Economics, Lund University) |
| Abstract: | This paper considers a housing market with price restrictions. On such markets, the existence of a unique minimum rationing equilibrium price vector has been established for each preference profile on a general preference domain that contains almost all preference profiles. This vector can be used as a key ingredient in a direct and strategy-proof allocation mechanism. The main contribution of this paper is to provide two price sequences, one with increasing prices and one with decreasing prices, that both terminate to a minimal rationing equilibrium price vector in a finite number of steps. These sequences are demonstrated to play key-roles in an English auction and a Dutch auction, respectively, for the considered housing market with price restrictions. |
| Keywords: | Price sequence; auction rules; rationing; rationing equilibrium price |
| JEL: | C78 D44 D45 |
| Date: | 2015–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2015_018&r=gth |
| By: | Vincent Anesi (Department of Economics, University of Nottingham); John Duggan (Department of Political Science and Department of Economics, University of Rochester) |
| Abstract: | This note examines the structure of stationary bargaining equilibria in the finite framework of Anesi (2010). The main result establishes a tight connection between the set of equilibrium absorbing points and the von Neumann-Morgestern solutions: assuming that players are patient, that the voting rule is oligarchical, and that there is at least one veto player with positive recognition probability, a set of alternatives corresponds to the absorbing points of an equilibrium if and only if it is a von Neumann-Morgenstern solution. We also apply our analysis of ergodic properties of equilibria to the persistent agenda setter environment of Diermeier and Fong (2012). We show that all equilibria are essentially pure, and we extend their characterization of absorbing sets to allow an arbitrary voting rule and by removing the restriction to pure strategy equilibira. |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2015-12&r=gth |
| By: | Timothy N. Cason; Vai-Lam Mui |
| Abstract: | This paper reports an experiment to evaluate the effectiveness of repeated interactions in deterring leaders’ from using divide-and-conquer strategies to extract surplus from their subordinates, when every decision-maker involved is a group instead of an individual. We find that both the resistance rate by subordinates and the divide-and-conquer transgression rate by leaders are the same in the group and individual repeated coordinated resistance games. Similar to the individual game, adding communication to the group game can help deter opportunistic behavior by the leaders even in the presence of repetition. |
| Keywords: | Communication, Coordinated Resistance, Divide-and-Conquer, Laboratory experiment, Repeated Games, Group Decision-Making |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2015-13&r=gth |
| By: | Vincent Anesi (School of Economics, University of Nottingham); John Duggan (Department of Political Science and Department of Economics, University of Rochester) |
| Abstract: | We show that dynamic bargaining games are characterized by a continuum of stationary Markov perfect equilibria, when the set of alternatives is multidimensional and players are patient. In fact, we show that there is a continuum of equilibria close to any alternative satisfying a simple linear independence condition on the players’ gradients. The approach extends the construction of simple solutions from Anesi and Seidmann (2015) to the spatial setting. The implication is that constructive techniques, which involve an explicit specification of a particular equilibrium and are common in the literature, implicitly rely on a restrictive selection of equilibria. |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2015-01&r=gth |
| By: | Dengler-Roscher, Kathrin (Institute of Economics, Ulm University); Montinari, Natalia (Department of Economics, Lund University); Panganiban, Marian (Max Planck Institute for Research on Collective Goods, Bonn); Ploner, Matteo (Department of Economics and Management, University of Trento); Werner, Benedikt (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | How malleable are people’s fairness ideals? Although fairness is an oft-invoked concept in allocation situations, it is still unclear whether and to what extent people’s allocations reflect their fairness ideals. We investigate in a laboratory experiment whether people’s fairness ideals vary with respect to changes in the order in which they undertake two allocation tasks. Participants first generate resources in a real- effort task and then distribute them. In the partial allocation task, the participant determines the earnings for himself and another participant. In the impartial allocation task, the participant determines the earnings for two other participants. We also manipulate the participants’ experience, i.e., whether they took part in similar allocation experiments before. We find that participants are more likely to allocate more resources to themselves than what they earned in the real-effort task when they decide partially. Exclusively for inexperienced participants, deciding impartially first dampens selfish behavior when they decide partially. |
| Keywords: | Fairness; Proportionality Principle; Dictator; Partial Stakeholders; Impartial Spectators; Fairness Bias |
| JEL: | C72 C91 D63 D64 |
| Date: | 2015–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2015_017&r=gth |
| By: | Kathrin Dengler-Roscher (Institute of Economics, Ulm University, Germany); Natalia Montinari (Department of Economics, Lund University, Sweden); Marian Panganiban (Max Planck Institute for Research on Collective Goods, Bonn and Friedrich Schiller University, Jena, Germany); Matteo Ploner (Department of Economics and Management University of Trento, Italy); Benedikt Werner (Max Planck Institute for Research on Collective Goods, Bonn and Friedrich Schiller University, Jena, Germany) |
| Abstract: | How malleable are people's fairness ideals? Although fairness is an oft-invoked concept in allocation situations, it is still unclear whether and to what extent people's allocations reflect their fairness ideals. We investigate in a laboratory experiment whether people's fairness ideals vary with respect to changes in the order in which they undertake two allocation tasks. Participants first generate resources in a real- effort task and then distribute them. In the partial allocation task, the participant determines the earnings for himself and another participant. In the impartial allocation task, the participant determines the earnings for two other participants. We also manipulate the participants' experience, i.e, whether they took part in similar allocation experiments before. We find that participants are more likely to allocate more resources to themselves than what they earned in the real-effort task when they decide partially. Exclusively for inexperienced participants, deciding impartially first dampens selfish behavior when they decide partially. |
| Keywords: | fairness, proportionality principle, dictator, partial stakeholders, impartial spectators, fairness bias |
| JEL: | C72 C91 D63 D64 |
| Date: | 2015–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2015-006&r=gth |
| By: | Shuhua Chang; Xinyu Wang; Alexander Shananin |
| Abstract: | In this paper, we present a mean field game to model the production behaviors of a very large number of producers, whose carbon emissions are regulated by government. Especially, an emission permits trading scheme is considered in our model, in which each enterprise can trade its own permits flexibly. By means of the mean field equilibrium, we obtain a Hamilton-Jacobi-Bellman (HJB) equation coupled with a Kolmogorov equation, which are satisfied by the adjoint state and the density of producers (agents), respectively. Then, we propose a so-called fitted finite volume method to solve the HJB equation and the Kolmogorov equation. The efficiency and the usefulness of this method are illustrated by the numerical experiments. Under different conditions, the equilibrium states as well as the effects of the emission permits price are examined, which demonstrates that the emission permits trading scheme influences the producers' behaviors, that is, more populations would like to choose a lower rather than a higher emission level when the emission permits are expensive. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1506.04869&r=gth |
| By: | Mazurek, Jiří |
| Abstract: | The aim of the paper is to provide several quantitative measures concerning preference structure in a group decision making setting. These measures enable to assess group and individual discord, core preferences and outliers, or to find a consensus, where a consensus is defined as a preference with a minimum sum of distances to other preferences. Also, it is shown that a distance of a consensus to a median preference is upper bounded, which might reduce a search for a consensus significantly. |
| Keywords: | consensus; decision making; distance; discord; geometric median; group decision making; group discord; preference; preference structure. |
| JEL: | D7 D70 |
| Date: | 2015–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:64998&r=gth |
| By: | Berthold, Kristin |
| Abstract: | Der vorliegende Artikel untersucht die aktuelle Krise zwischen Griechenland und dem Rest der Eurozone. Ziel ist es, diesen internationalen Konflikt spieltheoretisch zu analysieren und mögliche Handlungsalternativen, verschiedene Szenarien und Folgen abzuleiten. Den Rahmen stellt das sogenannte Feiglingspiel dar. In diesem Spiel geht es um eine Mutprobe zwischen zwei Fahrern, die aufeinander zufahren. Es erfolgt eine Erweiterung des Modells, indem die Strategieoptionen und Präferenzen verändert werden. |
| Abstract: | This article examines the current crisis between Greece and the rest of the Eurozone. Its objective is to provide a game-theoretic analysis of this international conflict and to develop alternative courses of action, different scenarios and consequences. The socalled Chicken-Game represents the analytic framework. This game illustrates a test of courage between two car drivers which drive towards each other. The model will be extended and analyzed using variations of strategy options and preferences. |
| Keywords: | Chicken-Game,Eurokrise,Griechenland |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:euvwdp:370&r=gth |
| By: | Gedai, Endre; Kóczy, László Á.; Meier zu Köcker, Gerd; Zombori, Zita |
| Abstract: | This study introduces an entirely novel way to study the cooperative and noncooperative nature of clusters by looking at the selfish, profit-seeking interests of the actors within cluster initiatives. The approach provides a game theory inspired framework to study the dilemma of cluster actors between the fruitful cooperation with other actors and their own selfish – and possibly short-term – interests at three levels: intensity focussing on the overall cooperation effort; structure looking at the network of cooperation and balance discussing good ways to allocate resources. Characteristic models of cluster behaviour have been developed for all these aspects. Interviews have been conducted among cluster actors of two cluster initiatives. Both were quite matured and well managed with similar core objectives. The methodology applied has revealed that the nature of cooperation among the actors and how the cluster initiative is managed is of surprisingly different nature although both cluster initiatives provide high added value by the cluster actors perspective. One cluster initiative can be characterised as a “managed cooperation cluster”, where the management has a central role to match actors, while the nature of the other cluster initiative is more “a peer-to-peer cooperation cluster” where cooperation emerges directly between cluster actors and the cluster management has another role. The results of the study lead to conclusions that there is not one ideal way how to manage cluster initiative. Furthermore the cluster actors cannot be seen as a homogenous group. Even if all of them have similar objectives like increased innovation capabilities, higher competitiveness, higher profitability etc. their intension why joining a cluster initiative and the readiness to contribute or just to benefit is very different. The cluster management has to understand what are the particular interests and to what extent a dedicated cluster is ready to contribute. Applying the game theory inspired analytical approach helps to gain important inside views for cluster management. Furthermore the study shows that the way how cluster initiatives are set up and supported by public authorities does have a strong implication on the nature of cooperation and selfishness among the cluster actors. The conclusion from the study is, among others, that high public funding facilitates the creation of cluster initiatives, but also attracts free riders to join since the barriers to enter are quite low. Having such an interest group “on board” within a cluster initiative hampers further trust building and cooperative framework conditions since selfish actors dominate. Low public funding at the beginning of the life of a cluster initiative leads to higher barriers due to higher mandatory investments of cluster participants, but creates a cooperative environment since mainly those actors have joint that are really interested to cooperate and take common risks. However, the study has shown that good cluster managements can deal with different cooperative natures among cluster participants, if they are aware of this and implement proper actions. |
| Keywords: | industrial cluster initiative game theory cooperation effort cooperation structure balanced cooperation managed cooperation cluster peer-to-peer cooperation cluster |
| JEL: | C70 D23 D71 M19 O32 |
| Date: | 2015–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65053&r=gth |
| By: | Raffo López Leonardo |
| Abstract: | This article presents a theoretical model to explain the performance of illicit drug markets. The analytical framework is based on the oligopoly model of Poret and Téjedo (2006), but the latter is extended in a crucial respect: the influence of drug trafficking networks in the illicit drug markets is considered. The proposed model indicates that Poret and Téjedo were correct: the aggregate quantity of drugs sold is negatively affected by the intensity of the law enforcement policies applied and positively affected by the number of traffickers in the market. We also determined that the individual and aggregate sales in the market are positively affected by the network’s average density. Our model is useful for explaining the failure of the war against drugs to halt the reproduction and expansion of illegal activities at a global level during the three past decades. |
| Keywords: | drug trafficking, illegal markets, law enforcement, social networks, gametheory, oligopoly |
| JEL: | K42 D43 L13 C72 D85 |
| Date: | 2015–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:000149:013014&r=gth |
| By: | Daniela Di Cagno (LUISS Guido Carli); Arianna Galliera (LUISS Guido Carli); Werner Güth (Luiss Guido Carli and Frankfurt School of Finance and Management); Noemi Pace (Universy Ca' Foscari of Venice, and CEIS Tor Vergata); Luca Panaccione (DEDI and CEIS, Università di Roma "Tor Vergata",) |
| Abstract: | This paper focuses on a bargaining experiment in which the privately informed seller of a company sends a value message to the uninformed potential buyer who then proposes a price for acquiring the company. Participants are constantly in the role of either seller or buyer and interact over 30 rounds with randomly changing partners in the other role. We test how overstating the value of the company, underpricing the received value message and acceptance of price offers are affected by experience and gender (constellation). Like in our companion paper on single play (Di Cagno et al. 2015) we control via treatments for awareness of gender (constellation). One main hypothesis is that gender (constellation) matters but that the effects become weaker with more experience and that the main experience effects apply across gender (constellations). |
| Keywords: | bargaining, cheap-talk, experience effect, experiment, gender, winner’s curse |
| JEL: | C78 C91 |
| Date: | 2015–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:346&r=gth |