|
on Game Theory |
| By: | Jun Honda (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | We consider the class of two-player symmetric n x n games with the total bandwagon property (TBP) introduced by Kandori and Rob (1998). We show that a game has TBP if and only if the game has 2^n - 1 symmetric Nash equilibria. We extend this result to bimatrix games by introducing the generalized TBP. This sheds light on the (wrong) conjecture of Quint and Shubik (1997) that any n x n bimatrix game has at most 2^n - 1 Nash equilibria. As for an equilibrium selection criterion, I show the existence of a ½-dominant equilibrium for two subclasses of games with TBP: (i) supermodular games; (ii) potential games. As an application, we consider the minimum-effort game, which does not satisfy TBP, but is a limit case of TBP. |
| Keywords: | Bandwagon, Nash Equilibrium, Number of Equilibria, Coordination Game, Equilibrium Selection |
| JEL: | C62 C72 C73 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp197&r=gth |
| By: | Emilio Calvo (Universidad de Valencia. ERI-CES); Esther Gutiérrez-López (Departamento de Economía Aplicada IV. Universidad del País Vasco U.P.V./E.H.U.) |
| Abstract: | We consider cooperative games in which the cooperation among players is restricted by a set system, which outlines the set of feasible coalitions that actually can be formed by players in the game. In our setting, the structure of this set system is completely free, and the only restriction is that the empty set belongs to it. An extension of the Shapley value is provided as the sum of the dividends that players obtain in the game. In this general setting, we offer two axiomatic characterizations for the value: one by means of component efficiency and fairness, and the other one with efficiency and balanced contributions. |
| Keywords: | TU-games; Restricted cooperation; Shapley value. |
| JEL: | C71 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:dbe:wpaper:0115&r=gth |
| By: | Jean-Pierre Benoît (London Business School (LBS)); Roberto Galbiati (Département d'économie); Emeric Henry (Département d'économie) |
| Abstract: | We study theoretically and in a lab-experiment how legal protection affects the level and type of investments in a setting where a player chooses an investment level before interacting repeatedly with the same set of agents. The investment stochastically affects the payoffs of the game in every subsequent period. We show that without legal protection: investments will be made since repeated interactions can serve as a substitute for legal enforcement; investments with less volatile returns are more likely; the investor might be forced to invest more to keep other players cooperative. Experimental results are broadly consistent with the theoretical findings. |
| Keywords: | Investment; Experiments; Repeated Games; Property Rights |
| JEL: | C72 C73 C91 C92 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/59r8grug28881rf8or7715f88g&r=gth |
| By: | Hiroki Ozono (Faculty of Law, Economics and Humanities, Kagoshima University); Yoshio Kamijo (School of Economics and Management, Kochi University of Technology); Kazumi Shimizu (School of Political Science and Economics, Waseda University) |
| Abstract: | Cooperation is fundamental to human societies, and one of the important paths for its emergence and maintenance is reciprocity. In prisoner’s dilemma (PD) experiments, reciprocal strategies are often effective at attaining and maintaining high cooperation. In many public goods (PG) games or n-person PD experiments, however, reciprocal strategies are not successful at engendering cooperation. In the present paper, we attribute this difficulty to a coordination problem against free riding among reciprocators: Because it is difficult for the reciprocators to coordinate their behaviors against free riders, this may lead to inequality among players, which will demotivate them from cooperating in future rounds. We propose a new mechanism, institutionalized reciprocity (IR), which refers to embedding the reciprocal strategy as an institution (i.e., institutionalizing the reciprocal strategy). We experimentally demonstrate that IR can prevent groups of reciprocators from falling into coordination failure and achieve high cooperation in PG games. In conclusion, we argue that a natural extension of the present study will be to investigate the possibility of IR to serve as a collective punishment system. |
| Keywords: | operation, public goods game, laboratory experiment, institutionalized reciprocity, raise the stakes strategy, collective punishment |
| JEL: | C72 C91 C92 M54 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:1509&r=gth |
| By: | Davide Dragone (Department of Economics, University of Bologna, Italy); Luca Lambertini (Department of Economics, University of Bologna, Italy; ENCORE, University of Amsterdam, The Netherlands; The Rimini Centre for Economic Analysis, Italy); George Leitmann (College of Engineering, University of California at Berkeley, United States of America); Arsen Palestini (MEMOTEF, Sapienza University of Rome, Italy) |
| Abstract: | We introduce the concept of Hamiltonian potential functions for non-cooperative open-loop differential games and we characterize sufficient conditions for their existence. We also identify a class of games admitting a Hamiltonian potential and illustrate the related properties of their dynamic structure. Possible similarities with the theory of quasi-aggregative games are discussed. As an illustration, we consider an asymmetric oligopoly game with process innovation. |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:15-25&r=gth |
| By: | Boudreau, James W.; Shunda, Nicholas |
| Abstract: | We analyze the determinants of tacit collusion in an infinitely repeated contest with noise in the contest success function. Sustaining collusion via Nash reversion strategies is easier the more noise there is, and is more difficult the larger is the contest's prize value. An increase in the contest's number of players can make sustaining collusion either more or less difficult. |
| Keywords: | Contest, Conflict, Collusion, Noise |
| JEL: | C72 C73 D72 D74 |
| Date: | 2015–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65671&r=gth |
| By: | Steg, Jan-Henrik (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We construct subgame-perfect equilibria with mixed strategies for symmetric stochastic timing games with arbitrary strategic incentives. The strategies are qualitatively different for local first- or second-mover advantages, which we analyse in turn. When there is a local second-mover advantage, the players may conduct a war of attrition with stopping rates that we characterize in terms of the Snell envelope from the general theory of optimal stopping, which is very general but provides a clear interpretation. With a local first-mover advantage, stopping typically results from preemption and is abrupt. Equilibria may differ in the degree of preemption, precisely at which points it is triggered. We provide an algorithm to characterize where preemption is inevitable and to establish the existence of corresponding payoff-maximal symmetric equilibria. |
| Keywords: | Stochastic timing games, mixed strategies, subgame perfect equilibrium, Snell envelope, optimal stopping |
| Date: | 2015–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:543&r=gth |
| By: | Berardino Cesi (DEF, University of Rome "Tor Vergata"); Walter Ferrarese (DEDI, University of Rome "Tor Vergata") |
| Abstract: | We show that in an infinitely repeated Cournot game when firms adopt stick and carrot strategies exogenous horizontal mergers are profitable regardless the size of the merged entity. We characterize an equilibrium in which the new entity maximizes its discounted intertemporal profit under the constraint that each outsider produces just enough to be better off after the merger. Once the merger has occurred each insider gains more than each outsider, therefore the insider's dilemma is completely solved. |
| Keywords: | Insider's dilemma, horizontal mergers, repeated games, stick and carrot strategy |
| JEL: | L11 L12 |
| Date: | 2015–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:350&r=gth |
| By: | Ina A Taneva |
| Abstract: | There are two ways of creating incentives for interacting agents to behave in a desired way. One is by providing appropriate payoff incentives, which is the subject of mechanism design. The other is by choosing the information that agents observe, which we refer to as information design. We consider a model of symmetric information where a designer chooses and announces the information structure about a payoff relevant state. The interacting agents observe the signal realizations and take actions which affect the welfare of both the designer and the agents. We characterize the general finite approach to deriving the optimal information structure for the designer - the one that maximizes the designer's ex ante expected utility subject to agents playing a Bayes Nash equilibrium. We then apply the general approach to a symmetric two state, two agent, and two actions environment in a parameterized underlying game and fully characterize the optimal information structure: it is never strictly optimal for the designer to use conditionally independent private signals; the optimal information structure may be a public signal or may consist of correlated private signals. Finally, we examine how changes in the underlying game affect the designer's maximum payoff. This exercise provides a joint mechanism/information design perspective. |
| Keywords: | informtion design, implementation, incomplete information, Bayes correlated equilibrium, sender-receiver games |
| JEL: | C72 D72 D82 D83 |
| Date: | 2015–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:256&r=gth |
| By: | Matthias Kräkel |
| Abstract: | In a multi-agent setting, individuals often compare own performance with that of their peers. These comparisons in?uence agents? incentives and lead to a noncooperative game, even if the agents have to complete independent tasks. I show that depending on the interplay of the peer effects, agents?efforts are either strategic complements or strategic substitutes. I solve for the optimal monetary incentives that complement the peer effects and show that the principal prefers sequential effort choices of the agents to choosing efforts simultaneously. |
| Keywords: | externalities, moral hazard, other-regarding preferences |
| JEL: | C72 D03 D86 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse03_2014&r=gth |
| By: | Misha Perepelitsa |
| Abstract: | We consider the dynamics of player's strategies in repeated market games, where the selection of strategies is determined by a learning model. Prior theoretical analysis and experimental data show that after large number of plays the average number of agents who decide to enter, per round of the game, approaches the market capacity and, after a longer wait, agents are being sorted into two groups: the agents in one group rarely enter the market, and in the other, the agents enter almost all the time. In this paper we obtain estimates of the characteristic times it takes for both patterns to emerge in the repeated plays of the game. The estimates are given in terms of the parameters of the game, assuming that the number of agents is large, the number of rounds of the game per unit of time is large, and the characteristic change of the propensity per game is small. Our approach is based on the analysis of the partial differential equation for the function $f(t,q)$ that describes the distribution of agents according to their level of propensity to enter the market, $q,$ at time $t.$ |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1507.05376&r=gth |
| By: | Jan-Henrik Steg |
| Abstract: | We construct subgame-perfect equilibria with mixed strategies for symmetric stochastic timing games with arbitrary strategic incentives. The strategies are qualitatively different for local first- or second-mover advantages, which we analyse in turn. When there is a local second-mover advantage, the players may conduct a war of attrition with stopping rates that we characterize in terms of the Snell envelope from the general theory of optimal stopping, which is very general but provides a clear interpretation. With a local first-mover advantage, stopping typically results from preemption and is abrupt. Equilibria may differ in the degree of preemption, precisely at which points it is triggered. We provide an algorithm to characterize where preemption is inevitable and to establish the existence of corresponding payoff-maximal symmetric equilibria. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1507.04797&r=gth |
| By: | Samir Amine; Sylvain Baumann; Pedro Lages Dos Santos; Fabrice Valognes |
| Abstract: | In labour economics theory, wage negotiations use to rely on a SymmetricNash Bargaining Solution. This article aims at showing that this kind of solution may be not relevant. Indeed, in a matching model framework, the comparison with the Kalai-Smorodinsky Solution suggests that a reflection should systematically be made with respect to the negotiation power of each agent. |
| JEL: | C78 J64 J68 |
| Date: | 2015–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2015s-29&r=gth |
| By: | Guillen, Pablo; Hakimov, Rustamdjan |
| Abstract: | We run a field experiment to test the truth-telling rates of the theoretically strategy-proof Top Trading Cycles mechanism (TTC) under different information conditions. First, we asked first-year economics students enrolled in an introductory microeconomics unit about which topic, among three, they would most like to write an essay about. Most students chose the same favorite topic. Then we used TTC to distribute students equally across the three options. We ran three treatments varying the information the students received about the mechanism. In the first treatment students were given a description of the matching mechanism. In the second they received a description of the strategy-proofness of the mechanism without details of the mechanism. Finally, in the third they were given both pieces of information. We find a significant and positive effect of describing the strategy-proofness on truth-telling rates. ON the other hand, describing the matching mechanism has a significant and negative effect on truth-telling rates. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2015-16&r=gth |
| By: | Benjamin Lester; Ludo Visschers; Ronald Wolthoff |
| Abstract: | In many markets, sellers advertise their good with an asking price. This is a price at which the seller will take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. Despite their prevalence in a variety of real world markets, asking prices have received little attention in the academic literature. We construct an environment with a few simple, realistic ingredients and demonstrate that using an asking price is optimal: it is the pricing mechanism that maximizes sellers' revenues and it implements the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the implications of this pricing mechanism for transaction prices and allocations. |
| Keywords: | asking prices, directed search, inspection costs, efficiency |
| JEL: | C78 D44 D82 D83 L11 R31 R32 |
| Date: | 2015–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:257&r=gth |