nep-gth New Economics Papers
on Game Theory
Issue of 2015‒08‒13
nineteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Differential Games with (A)symmetric Players and Heterogeneous Strategies By Benteng Zou
  2. Mate Choice Mechanism for Solving a Quasi-Dilemma By Tatsuyoshi SAIJO; Junyi SHEN
  3. The symmetric equilibria of symmetric voter participation games with complete information By Nöldeke, Georg; Peña, Jorge
  4. Stability in Network Formation Games with Streams of Payoffs: An Experimental Study By Mariya Teteryatnikova; James Tremewan
  5. On the (in)compatibility of rationality, monotonicity and consistency for cooperative games By Calleja, Pere; Llerena Garrés, Francesc
  6. Who knows it is a game? On strategic awareness and cognitive ability By Fehr, Dietmar; Huck, Steffen
  7. Market games as social dilemmas By Iván Barreda-Tarrazona; Aurora García-Gallego; Nikolaos Georgantzis; Nicholas Ziros
  8. Games Played on Networks By Yann Bramoullé; Rachel Kranton
  9. A mechanism to pick the deserving winner By Moskalenko, Anna
  10. Target-based solutions for Nash bargaining By Lorenzo Bastianello; Marco LiCalzi
  11. The Impact of Monitoring in Infinitely Repeated Games: Perfect, Public, and Private By Masaki Aoyagi; V. Bhaskar; Guillaume R. Frechette
  12. Inclusive versus Exclusive Markets: Search Frictions and Competing Mechanisms By Xiaoming Cai; Pieter Gautier; Ronald Wolthoff
  13. Identification of preferences in network formation games By Ãureo de Paula; Seth Richards-Shubik; Elie Tamer
  14. Institutional Dynamics Under Revenue Volatility and Revenue-Dependent Lobbying Power: A Stochastic Differential Game Approach By Raouf Boucekkine; Fabien Prieur; Benteng Zou
  15. Some Notes and Comments on the Efficient use of Information in Repeated Games with Poisson Signals By Osório, António (António Miguel)
  16. On the Uniqueness of Dynamic Groves Mechanisms By Kiho Yoon
  17. Inference in Ordered Response Games with Complete Information By Andres Aradillas-Lopez; Adam Rosen
  18. Cold Turkey vs. gradualism: Evidence on disinflation strategies from a laboratory experiment By Giamattei, Marcus
  19. Identification of First-Price Auctions With Biased Beliefs By Grundl, Serafin J.; Zhu, Yu

  1. By: Benteng Zou (CREA, Université de Luxembourg)
    Abstract: One family of heterogeneous strategies in differential games with (a)symmetric players is developed in which one player adopts an anticipating open-loop strategy and the other adopts a standard Markovian strategy. Via conjecturing principle, the anticipating open-loop strategic player plans her strategy based on the possible updating the rival player may take. These asymmetric strategies frame nondegenerate Markovian Nash Equilibrium, which could be subgame perfect for autonomous system with infinite time horizon. Except the stationary path, this kind of strategy makes the study of short-run trajectory possible, which usually are not subgame perfect. However, the short-run non-perfection provides very important policy suggestions. Differential game, Heterogeneous strategy, subgame perfect Markovian Nash Equilibrium, anticipating open-loop strategy
    JEL: C73 C72
    Date: 2015
  2. By: Tatsuyoshi SAIJO (Research Center for Social Design Engineering, Kochi University of Technology); Junyi SHEN (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: Saijo, Okano, and Yamakawa (2014) showed that the mate choice mechanism for a symmetric prisoner's dilemma (PD) game implements cooperation in backward elimination of weakly dominated strategies (BEWDS), and it attained almost full cooperation in their experiment. First, this study shows that the mechanism works well in the class of quasi-dilemma (QD) games such as asymmetric PD games and coordination games. Second, the class of BEWDS- implementable games is exactly the same as the class of QD games. Third, the mechanism cannot implement cooperation in a subgame perfect equilibrium. Finally, we confirm that the mate choice mechanism works well experimentally for an asymmetric PD game.
  3. By: Nöldeke, Georg; Peña, Jorge
    Abstract: We characterize the symmetric Nash equilibria of the symmetric voter participation game with complete information introduced by Palfrey and Rosenthal (1983). Our results confirm their conjecture on the existence, multiplicity, and comparative statics of such equilibria and yield more precise information on how changes in team size affect the location of equilibria.
    Keywords: costly voting; mixed strategy equilibrium; participation games; polynomials in Bernstein form
    JEL: C72 D72
    Date: 2015–07
  4. By: Mariya Teteryatnikova; James Tremewan
    Abstract: We run a novel network formation experiment with a stream of payos and relatively unstructured link formation process, and test the performance of a number of theoretical stability concepts in this environment. We focus especially on the issue of myopic versus farsighted behaviour in network formation. A subtle treatment variation demonstrates clearly the power of myopic stability concepts in identifying the most stable networks. However, we also nd support for farsighted concepts of stability, especially those that assume players are pessimistic about the eventual outcome of a deviation.
    JEL: A14 C71 C92 D85
    Date: 2015–07
  5. By: Calleja, Pere; Llerena Garrés, Francesc
    Abstract: On the domain of cooperative transferable utility games, we investigate if there are single valued solutions that reconcile rationality, consistency and monotonicity (with respect to the worth of the grand coalition) properties. This paper collects some impossibility results on the combination of core selection with either complement or projected consistency, and core selection, max consistency and monotonicity. By contrast, possibility results show up when combining individual rationality, projected consistency and monotonicity.
    Keywords: Jocs cooperatius, 33 - Economia,
    Date: 2015
  6. By: Fehr, Dietmar; Huck, Steffen
    Abstract: We introduce the notion of strategic awareness in experimental games which captures the idea that subjects realize they are playing a game and thus have to form beliefs about others' actions. The concept differs from both, rule understanding and rationality. We then turn to experimental evidence from a beauty contest game where we elicit measures of cognitive ability and beliefs about others' cognitive ability. We show that the effect of cognitive ability is highly non-linear. Subjects' behavior below a certain threshold choose numbers in the whole interval and does not correlate with beliefs about others ability. In contrast, choices of subjects who exceed the threshold avoid choices above 50 and react very sensitively to beliefs about others' cognitive ability.
    Abstract: In diesem kurzen Artikel führen wir das Konzept von strategic awareness in Experimenten ein. Dieses neue Konzept beschreibt die Fähigkeit von Experimentteilnehmer, strategische Situationen zu erkennen und daher Erwartungen über das Verhalten von anderen zu bilden. Das Konzept unterscheidet sich sowohl von Rationalität als auch vom bloßen Verstehen von den Regeln eines Experiments. Wir demonstrieren das Konzept empirisch mit Hilfe von Daten eines Beauty Contest Games, in dem wir die kognitiven Fähigkeiten der Teilnehmer und ihre Einschätzungen über die kognitiven Fähigkeiten der anderen Teilnehmer erheben. Die Resultate zeigen, dass kognitive Fähigkeiten einen starken nicht-linearen Effekt auf die Entscheidungen in dem Beauty Contest Game haben. Das Verhalten von Experimentteilnehmer, die unter einer bestimmten Schwelle liegen, kann nicht von zufälligen Entscheidungen unterschieden werden und korreliert auch nicht mit deren Einschätzung über die kognitiven Fähigkeiten der anderen Teilnehmer. Im Gegensatz dazu vermeiden Teilnehmer, die über dieser Schwelle liegen, dominierte Entscheidungen und basieren ihre Entscheidungen auf ihrer Einschätzung über die kognitiven Fähigkeiten der anderen Teilnehmer.
    Keywords: strategic awareness,cognitive ability,beauty contest
    JEL: C7 C9 D0
    Date: 2014
  7. By: Iván Barreda-Tarrazona; Aurora García-Gallego; Nikolaos Georgantzis; Nicholas Ziros
    Abstract: We study an experimental exchange market based on Shapley and Shubik (1977). Two types of players with different preferences and endowments independently submit quantities of the goods they wish to exchange in the market. We implement a case in which the Nash equilibrium involves minimum exchange or no trade at all. This is almost never confirmed by our laboratory data. On the contrary, after a sufficiently large number of periods, convergence close to full trade is obtained, which can be supported as an epsilon symmetric strategy evolutionary stable equilibrium. We also study cheap talk communication within pairs of traders from the same (horizontal) and opposite (vertical) sides of the market. As predicted by the theory, horizontal communication restricts trade, whereas vertical communication leads to higher bids, but always lower or equal than those achieved tacitly by learning alone. Vertical messages limit the collusive effect of horizontal communication when the former precede the latter. Results do not differ when players are allowed to choose the communication mode.
    Keywords: Efficiency, strategic market games, experiments, vertical communication, horizontal communication.
    Date: 2015–08
  8. By: Yann Bramoullé (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS); Rachel Kranton (Duke University)
    Abstract: This chapter studies games played on fixed networks. These games capture a wide variety of economic settings including local public goods, peer effects, and technology adoption. We establish a common analytical framework to study a wide game class. We unearth new connections between games in the literature and in particular between those with binary actions, like coordination and best-shot games, and those with continuous actions and linear best replies. We review and advance existing results by showing how they tie together within the common framework. We discuss the game-theoretic underpinnings of key notions including Bonacich centrality, maximal independent sets, and the lowest and largest eigenvalue. We study the interplay of individual heterogeneity and the network and we develop a new notion - interdependence - to analyze how a shock to one agent affects the action of another agent. We outline directions for future research.
    Keywords: Network Games, fixed networks, peer effects, coordination, interdependence
    Date: 2015–03
  9. By: Moskalenko, Anna
    Abstract: A group of individuals is choosing an individual (the winner) among themselves, when the identity of the deserving winner is a common knowledge among individuals. A simple mechanism of voting by veto is proposed as an alternative to the mechanism studied by Amorós (2011). Like Amorós’(2011), the suggested mechanism implements the socially desirable outcome (the deserving winner is chosen) in subgame perfect equilibria. Keywords: Implementation, mechanism design, subgame perfect equilibrium, individuals choosing among themselves, voting by veto. JEL classification: C72, D71, D78
    Keywords: Jocs no-cooperatius (Matemàtica), Elecció social, 33 - Economia,
    Date: 2015
  10. By: Lorenzo Bastianello (EDE-EM, Universite Paris 1-Pantheon-Sorbonne); Marco LiCalzi (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: We revisit the Nash model for two-person bargaining. A mediator knows agents' ordinal preferences over feasible proposals, but has incomplete information about their acceptance thresholds. We provide a behavioural characterisation under which the mediator recommends a proposal that maximises the probability that bargainers strike an agreement. Some major solutions are recovered as special cases; in particular, we offer a straightforward interpretation for the product operator underlying the Nash solution.
    Keywords: cooperative bargaining, target-based preferences, Nash solution, egalitarian and utilitarian solutions, mediation, copulas.
    JEL: C78 D82 D74
    Date: 2015–06
  11. By: Masaki Aoyagi; V. Bhaskar; Guillaume R. Frechette
    Abstract: This paper uses a laboratory experiment to study the effect of a monitoring structure on the play of the infinitely repeated prisoner's dilemma. Keeping the stage game fixed, we examine the behavior of subjects when information about past actions is perfect (perfect monitoring), noisy but public (public monitoring), and noisy and private (private monitoring). We find that the subjects sustain cooperation in every treatment, but that their strategies differ substantially in the three treatments. Specifically, we observe that the strategies are more complex under public and private monitoring than under perfect monitoring. We also find that the strategies under private monitoring are more lenient than under perfect monitoring, and less forgiving than under public monitoring.
    Date: 2015–07
  12. By: Xiaoming Cai; Pieter Gautier; Ronald Wolthoff
    Abstract: In a market in which sellers compete for heterogeneous buyers by posting mechanisms, we analyze how the properties of the meeting technology affect the allocation of buyers to sellers. We show that exclusive markets (i.e. a separate submarket for each type of buyer) are the efficient outcome if and only if meetings are bilateral. In contrast, an inclusive market (i.e. a single market in which all buyer types pool) is optimal if and only if the meeting technology satisfies a novel condition, which we call "love for variety." Both outcomes can be decentralized by sellers posting auctions combined with a fee that is paid by (or to) all buyers with whom the seller meets. Finally, we compare love for variety to two other properties of meeting technologies, invariance and non-rivalry, and explain the differences.
    Keywords: search frictions, matching function, meeting technology, competing mechanisms, heterogeneity
    JEL: C78 D44 D83
    Date: 2015–08–04
  13. By: Ãureo de Paula (Institute for Fiscal Studies and University College London); Seth Richards-Shubik (Institute for Fiscal Studies); Elie Tamer (Institute for Fiscal Studies and Northwestern University)
    Abstract: This paper provides a framework for identifying preferences in a large network under the assumption of pairwise stability of network links. Network data present difficulties for identification, especially when links between nodes in a network can be interdependent: e.g., where indirect connections matter. Given a preference specification, we use the observed proportions of various possible payoff-relevant local network structures to learn about the underlying parameters. We show how one can map the observed proportions of these local structures to sets of parameters that are consistent with the model and the data. Our main result provides necessary conditions for parameters to belong to the identified set, and this result holds for a wide class of models. We also provide sufficient conditions - and hence a characterization of the identified set - for two empirically relevant classes of specifications. An interesting feature of our approach is the use of the economic model under pairwise stability as a vehicle for effective dimension reduction. The paper then provides a quadratic programming algorithm that can be used to construct the identified sets. This algorithm is illustrated with a pair of simulation exercises.
    Date: 2015–06
  14. By: Raouf Boucekkine (Aix-Marseille University (Aix-Marseille School of Economics), CNRS and EHESS); Fabien Prieur (INRA-LAMETA and University of Montpellier); Benteng Zou (CREA, University of Luxembourg)
    Abstract: We propose an analysis of institutional dynamics under uncertainty by the means of a stochastic differential lobbying game with two main ingredients. The first one is uncertainty inherent in the institutional process itself. The second one has to do with the crucial role of resource windfalls in economic and political outcomes, shaping lobbying power and adding a second source of uncertainty. First, we focus on uncertainty surrounding the institutional process only and show that its main consequence is the existence of multiple equilibria with very distinct features: symmetric equilibria which lead the economy to reach almost surely a stable pointwise institutional steady state in the long run even in the absence of the retaliation motive put forward by the deterministic lobbying literature, and asymmetric equilibria which only show up under uncertainty and do no allow for stochastic convergence to a steady state. Second, when accounting for the two sources of uncertainty together with resource revenue-dependent lobbying power, we show that revenue volatility tends to stabilize institutional dynamics compared to the deterministic counterpart.
    Keywords: institutional dynamics, lobbying games, state-dependent lobbying power, revenue volatility, stochastic differential games
    JEL: D72 C61 C63
    Date: 2015–07
  15. By: Osório, António (António Miguel)
    Abstract: In the present paper we characterize the optimal use of Poisson signals to establish incentives in the "bad" and "good" news models of Abreu et al. [1]. In the former, for small time intervals the signals' quality is high and we observe a "selective" use of information; otherwise there is a "mass" use. In the latter, for small time intervals the signals' quality is low and we observe a "fine" use of information; otherwise there is a "non-selective" use. JEL: C73, D82, D86. KEYWORDS: Repeated Games, Frequent Monitoring, Public Monitoring, Infor- mation Characteristics.
    Keywords: Teoria de jocs, Informació, Teoria de la, Contractes -- Aspectes econòmics, 33 - Economia,
    Date: 2015
  16. By: Kiho Yoon (Department of Economics, Korea University, Seoul, Republic of Korea)
    Abstract: This paper defines the class of dynamic Groves mechanisms, and shows that (i) a dynamic Groves mechanism is outcome efficient and periodic ex-post incentive compatible, and (ii) any dynamic direct mechanism which is outcome efficient and periodic ex-post incentive compatible is a dynamic Groves mechanism when the domain of valuations is sufficiently rich.
    Keywords: Groves mechanism, dynamic mechanism design, ex-post incentive compatibility, outcome efficiency
    JEL: C73 D82
    Date: 2015
  17. By: Andres Aradillas-Lopez (Institute for Fiscal Studies); Adam Rosen (Institute for Fiscal Studies and cemmap and UCL)
    Abstract: We study econometric models of complete information games with ordered action spaces, such as the number of store fronts operated in a market by a rm, or the daily number of flights on a city-pair offered by an airline. The model generalizes single agent models such as ordered probit and logit to a simultaneous equations model of ordered response, allowing for multiple equilibria and set identication. We characterize identifed sets for model parameters under mild shape restrictions on agents' payo functions. We then propose a novel inference method for a parametric version of our model based on a test statistic that embeds conditional moment inequalities implied by equilibrium behavior. Using maximal inequalities for U-processes, we show that an asymptotically valid condence set is attained by employing an easy to compute fixed critical value, namely the appropriate quantile of a chi-square random variable. We apply our method to study capacity decisions measured as the number of stores operated by Lowe's and Home Depot in geographic markets. We demonstrate how our condence sets for model parameters can be used to perform inference on other quantities of economic interest, such as the probability that any given outcome is an equilibrium and the propensity with which any particular outcome is selected when it is one of multiple equilibria, and we perform a counterfactual analysis of store congurations under both collusive and monopolistic regimes.
    Date: 2014–09
  18. By: Giamattei, Marcus
    Abstract: Disinflation can be implemented gradually or via Cold Turkey - an immediate change of policy - with the latter being mainly recommended by theory and empirical literature. But Cold Turkey may only be superior because it is endogenously selected for favorable environments. To eliminate this endogeneity and to disentangle the credible push through of a disinflation policy from ex-ante credibility, I run an experiment where a central banker has to decide for a disinflationary strategy and four forecasters try to coordinate on it. The design abstracts from any rigidities and provides full information so that Cold Turkey is the Nash equilibrium. But Cold Turkey fails to be the most successful strategy because forecasters react sluggishly due to limited reasoning. Cold Turkey does not speed up learning or increase reasoning, is less successful and is reversed more often.
    Keywords: Disinflation,Credibility,Cold Turkey,Gradualism,Limited Reasoning,Endogenous Treatments
    JEL: E52 E58 C72 C92
    Date: 2015
  19. By: Grundl, Serafin J. (Board of Governors of the Federal Reserve System (U.S.)); Zhu, Yu (University of Leicester)
    Abstract: This paper exploits variation in the number of bidders to separately identify the valuation distribution and the bidders' belief about the valuation distribution in first-price auctions with independent private values. Exploiting variation in auction volume the result is extended to environments with risk averse bidders. In an illustrative application we fail to reject the null hypothesis of correct beliefs.
    Keywords: Biased beliefs; first-price auction; nonparametric identification; risk aversion
    Date: 2015–07–23

This nep-gth issue is ©2015 by László Á. Kóczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.