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on Game Theory |
| By: | Philippe Bich (Paris School of Economics - Centre d'Economie de la Sorbonne); Rida Laraki (LAMSADE - Université de Dauphine et Département d'Economie - Ecole Polytechnique) |
| Abstract: | Endogenous sharing rules was introduced by Simon and Zame to model payoff indeterminacy in discontinuous games. Their main result concerns the existence of a solution, i.e., a mixed Nash equilibrium and an associated sharing rule. This note extends their result to abstract economies where, by definition, players are restricted to pure strategies, and provide an interpretation of Simon and Zame's model in terms of preference incompleteness |
| Keywords: | abtract economies; endogenous sharing rules; competitive equilibrium; incomplete and discontinuous preferences; better-reply security |
| JEL: | C02 C62 C72 D50 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:15058&r=gth |
| By: | Irenaeus Wolff |
| Abstract: | In many social situations, human behaviour differs from the Nash-equilibrium under selfish payoff-maximisation. Numerous social-preference models have been proposed, virtually all of them relying on the Nash-equilibrium concept. This paper determines the Nash-equilibrium sets that result given experiment participants’ elicited preferences, and tests the various aspects of a ‘revealed-preference Nash-equilibrium’ by inducing common knowledge of preferences, using a publicgood situation as an example. The data show that in a three-player public-good situation, multiple equilibria should be expected relatively often (in a third of the cases). Second, most participants’ individual behaviour is in accordance with aspects of Nash equilibrium: most people best-respond to their beliefs, choose equilibrium actions, and consider beliefs that correspond to an equilibrium. However, many participants predict others’ behaviour poorly, which also entails that behaviour rarely is in equilibrium. This points to models like level-k as potential components for better social-preference theories. The experimental findings are obtained using experienced participants and robust to giving participants the option to look up the set of equilibria of their game, and to reducing the number of players to two. |
| Keywords: | Public good, social dilemma, Nash-equilibrium, rational beliefs, conditional cooperation, social preferences |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0097&r=gth |
| By: | Sarina Steinmann und Ralph Winkler |
| Abstract: | We consider the problem of efficient emission abatement in a multi polluter setting, where agents are located along a river in which net emissions accumulate and induce negative externalities to downstream riparians. Assuming a cooperative transferable utility game, we seek welfare distributions that satisfy all agents' participation constraints and, in addition, a fairness constraint implying that no coalition of agents should be better off than it were if all non-members of the coalition would not pollute the river at all. We show that the downstream incremental distribution, as introduced by Ambec and Sprumont (2002), is the only welfare distribution satisfying both constraints. In addition, we show that this result holds true for numerous extensions of our model. |
| Keywords: | Downstream externalities; downstream incremental distribution; optimal emission abatement; river pollution |
| JEL: | C71 D62 Q53 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1508&r=gth |
| By: | Sampson, Gabriel S.; Sanchirico, James N.; Wilen, James E. |
| Abstract: | In spite of wide spread use of territorial use rights fisheries (TURFs) as a management tool, efficient design of spatial property rights, particularly in context of communal ownership, remains poorly understood. We develop a spatially explicit game-theoretic model of a two-patch communally exploited TURF network to investigate spatial scale, species dispersal, and fisher interactions. We characterize biological networks and patch sizes conducive to fostering internally cooperative harvesting behaviors. We also characterize the magnitude and spatial distribution of cost of any defection from cooperative harvesting behaviors. We find when neighboring patches are each independently cooperative, profitability in presence of high larval-stage dispersal is higher than when species are immobile. Mutually non-cooperative behavior across TURFs produce outcomes under connectivity that are worse than when species are immobile. Our results demonstrate that joint accounting of species dispersal habits and behavioral organization of communities within spatial property rights are critical when demarcating property rights boundaries. |
| Keywords: | bioeconomics, communal management, externalities, game theory, property rights, small scale fisheries, territorial use rights fisheries (TURFs), Environmental Economics and Policy, Resource /Energy Economics and Policy, Q22, C72, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205641&r=gth |
| By: | Peter Mitic (Santander UK); Bertrand K. Hassani (Grupo Santander et Centre d'Economie de la Sorbonne) |
| Abstract: | A method of allocating Operational Risk regulatory capital using the Shapley method for a large number of business units, supported by a service, is proposed. A closed-form formula for Shapley allocations is developed under two principal assumptions. First, if business units form coalitions, the value added to the coalition by a new entrant depends on a constant proportionality factor. This factor represents the diversification that can be achieved by combining operational risk losses. Second, that the service should reduce the capital payable by business units, and that this reduction is calculated as an integral part of the allocation process. We ensure that allocations of capital charges are acceptable to and are understandable by both risk and senior managers. The results derived are applied to recent loss data |
| Keywords: | Allocation; Shapley; operational risk; diversification; service; Game theory; capital value |
| JEL: | C71 C63 C46 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:15056&r=gth |
| By: | Banerjee, Simanti; Shortle, James S. |
| Abstract: | In this paper we study the role of informal low-cost interventions such as providing information about behavior of one’s peer group, as a mechanism to improve the performance of farmland conservation programs. We focus on a specific policy that has high ecological significance because of its emphasis on spatially coordinated land uses – the Agglomeration Bonus. Prior research has indicated that strategic uncertainty within the economic environment of the Agglomeration Bonus (resembling a coordination game with multiple payoff ranked Nash Equilibria) can lead to coordination failure and limited spatial coordination on the payoff efficient strategy (that corresponds to the land use with higher ecosystem benefits). High levels of strategic uncertainty can be a result of large community sizes where landowners’ actions are interdependent, limited information about others’ behavior and conservative payoffs that may make coordination riskier and less attractive. In this context, we consider a laboratory experiment in which we reduce participants’ strategic uncertainty by varying the amount of information available to them. In control sessions, groups of 12 individuals (arranged on a circular local network on which every individual has 2 strategic neighbors) participate in an Agglomeration Bonus game and receive payoffs and information about both their neighbors’ actions. In the treatment sessions, in addition to this information, subjects are also informed about the choices of all members of the group (including their own and their strategic neighbors’ actions). Additionally, we reduce the group size from 12 to 8 subjects to further decrease game strategic uncertainty. Our results indicate that more information in smaller groups significantly improves the likelihood of making the efficient choice. However, repeated interaction leads to a reduction in the likelihood of choosing the efficient action unless both neighbors make the same choice. Analysis of group level spatial patterns indicate no significant treatment effect with increase in instances of coordination failure over time. Thus our treatment implementation while successful in increasing the likelihood of efficient choices, does not ensure that these choices are by adjacent individuals which is necessary for environmental successes. Thus, informal mechanisms that involve providing information about one’s social peers is not expected to improve policy performance even if individuals interact with each other in smaller groups. Additional mechanisms are needed to maintain the positive effect of information and incentivize spatially contiguous efficient land use choices in the long run. |
| Keywords: | Agglomeration Bonus, Ecosystem Services, Information, Local Networks, Spatial Coordination, Strategic Uncertainty, Environmental Economics and Policy, Institutional and Behavioral Economics, Land Economics/Use, Q57, Q24, D83, D85, C72, C91, C92, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205126&r=gth |
| By: | Peter Mitic (Santander UK); Bertrand K. Hassani (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, Santander UK) |
| Abstract: | The Shapley method is applied to capital allocation in the context of a simple business model, where many business units supported by services. In this model the services are capable of either reducing the capital payable by the business units, or the opposite. A simple model of evaluating the value of coalitions is proposed, with a modification if a service is a member of the coalition. A closed form formula for the Shapley allocation to all players is derived, thus eliminating combinatorial problems. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-01179057&r=gth |
| By: | Di Bartolomeo Giovanni; Stefano Papa |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:0117&r=gth |
| By: | Menezes, Flavio |
| Abstract: | In this article we explore some of the theoretical developments over the last 40 years which led to the emergence of the field of market design. This new field has had a substantive impact on policy, especially after the highly successful auctions of the mobile telephony licences in the mid-1990s in the US. The auctions replaced an inefficient allocation system where licences were allocated to applicants via a lottery and subsequently sold for large windfalls. These auctions raised substantial amount of revenue for the US government and were adopted worldwide, including in Australia. First, I provide a brief history of market design in cases where monetary payments can be used as the basis to allocate goods and services. This history starts with the game theoretical foundations of non-cooperative behaviour – as typically the interests of different individuals are in conflict, for example, when buying or selling goods and services – and then moves on to mechanism design and auction theory and practice. Second, I will review a very large experiment in Brazil where markets were created to avoid electricity rationing in 2001. The choice of this example is not inconsequential. It is meant to illustrate that such an approach to public policy can be successful even in developing countries with weaker institutions. I will then provide some concluding comments. |
| Keywords: | Auction theory, game theory, market design, Public Economics, D47, C7, D44, |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uqsers:159194&r=gth |
| By: | Peter Mitic (Santander UK); Bertrand K. Hassani (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, Santander UK) |
| Abstract: | A method of allocating Operational Risk regulatory capital using the Shapley method for a large number of business units, supported by a service, is proposed. A closed-form formula for Shapley allocations is developed under two principal assumptions. First, if business units form coalitions, the value added to the coalition by a new entrant depends on a constant proportionality factor. This factor represents the diversification that can be achieved by combining operational risk losses. Second, that the service should reduce the capital payable by business units, and that this reduction is calculated as an integral part of the allocation process. We ensure that allocations of capital charges are acceptable to and are understandable by both risk and senior managers. The results derived are applied to recent loss data. |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-01179042&r=gth |
| By: | Kreitmair, Ursula W.; Banerjee, Simanti; Walker, James M. |
| Abstract: | In this study, we employ laboratory economic experiments to explore the role information networks play in the collective provision of threshold or provision point public goods. Threshold public goods are those for which a target or threshold level of funds must be raised to make provision possible or economically viable. Many public goods exhibit this characteristic as they may only be provided in discrete quantities. Thresholds or provision points are particularly relevant to environmental public goods, given non-linear ecological processes. In a broader context, the study of contribution behavior for threshold public goods also provides valuable insights into fundraising activities of both national and local profit and not-for-profit agencies, which typically involve provision points. On the basis of a 2x2 full factorial treatment design we test the following hypotheses: 1) Given LOW endowments, localized information will be less effective than full contribution information in meeting the provision point. 2) Given HIGH endowments local information will be as effective as full information to meet the threshold contribution level. 3) In cases where the threshold is met, group members are more likely to make identical contributions in the COMPLETE treatments than in the LOCAL treatments. |
| Keywords: | Experimental Economics, Behavioral Economics, Networks, Information, Environmental Economics and Policy, Institutional and Behavioral Economics, Public Economics, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:206562&r=gth |
| By: | Zhang, Yu Yvette; Nayga, Rodolfo M. Jr.; Depositario, Dinah Pura T |
| Abstract: | We examined gender differences in bidding and learning behavior in Second Price Auctions (SPAs). Although bidding one’s true value is a weakly dominant strategy in SPAs, overbidding has been common and persistent in laboratory SPAs, i.e., bidding above one’s value. In our study, we found that inexperienced women overbid more than inexperienced men when they were provided with endowment money in the auctions. However, when participants were asked to bid using their own money, women became more cautious, bidding lower and closer to the optimal strategy (true value) even without experiences, while inexperienced men still overbid significantly deviating from the optimal strategy. As men gained more experiences, they learned from costly overbidding and eventually lowered their bids to the same level as those of women’s bids. In conclusion, we found that although women and men initially behaved differently in SPAs, both genders would eventually bid according to the optimal strategy and obtain the same outcome given sufficient learning experiences. |
| Keywords: | Gender, Learning, Auctions, Overbidding, Experiments, Institutional and Behavioral Economics, A1, C91, D44, D83, J16, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205699&r=gth |
| By: | Panebianco, Fabrizio; Verdier, Thierry |
| Abstract: | We study cultural diffusion in a complex network where the transition probabilities are determined by a cultural transmission technology with endogenous vertical transmission rates (a la Bisin and Verdier, 2001). We derive a two-way epidemic model in which both the infection and the recovery rates are endogenous and depend on the topology of the network. First, we identify a "social structure bias" in cultural transmission that determines the direction of cultural change relating the economic structure of parental socialization incentives to the social network structure. Second, we characterize two balancing conditions satisfied by the network degree distribution and the vertical transmission rate distribution to ensure the sustainability of long run cultural heterogeneity. Third, we show how paternalistic motivations for endogenous cultural transmission interact with the "social structure bias" channel and maintain steady state cultural diversity for any network structure. |
| Keywords: | cultural transmission; diffusion; mean-field; social networks |
| JEL: | C73 L14 O33 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10722&r=gth |
| By: | Poe, Abby; Coatney, Kalyn; Coble, Keith; Freeman, Matt |
| Abstract: | We analyze the impact of various subsidy policies using a two-stage dynamic game between a buyer (intended beneficiary) and two Bertrand suppliers of technical complementary inputs. Though we identify market power is one of the root causes of subsidy incidence, we also find that input product substitutability plays a much larger role. Furthermore, we identify that subsidy incidence occurs across multiple input markets. However, the multiplier effect of the subsidy enhances sector welfare, though disproportionally in favor of the input suppliers. |
| Keywords: | Subsidy Incidence, Differentiated Input Products, Dynamic Bertrand Game, Agricultural and Food Policy, Industrial Organization, Political Economy, H2, Q1, L13, C73, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea14:162507&r=gth |