nep-gth New Economics Papers
on Game Theory
Issue of 2015‒09‒11
thirteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Authority and centrality: Power and cooperation in social dilemma networks By Boris van Leeuwen; Abhijit Ramalingam; David Rojo Arjona; Arthur Schram
  2. When and How the Punishment Must Fit the Crime By George J. Mailath; Volker Nocke; Lucy White
  3. Evidential equilibria: Heuristics and biases in static games of complete information Working Paper Version By Ali al-Nowaihi; Sanjit Dhami
  4. A strategic implementation of the sequential equal surplus division rule for digraph cooperative games By Sylvain Béal; Eric Rémila; Philippe Solal
  5. Intra Firm Bargaining and Shapley Values By Brügemann, Björn; Gautier, Pieter A.; Menzio, Guido
  6. Group size and matching protocol in contests By Kyung Hwan Baik; Subhasish M. Chowdhury; Abhijit Ramalingam
  7. Local and Global Pollution and International Environmental Agreements in a Network Approach By Günther, Michael; Hellmann, Tim
  8. Fair Reallocation in Economies with Single-Peaked Preferences By Kazuhiko Hashimoto; Takuma Wakayama
  9. Does it matter which effort task you use? A comparison of four effort tasks when agents compete for a prize By Emanuela Lezzi; Piers Fleming; Daniel John Zizzo
  10. Tax evasion as a determinant of corruption: a game-theoretical analysis By Sokolovska, Olena; Sokolovskyi, Dmytro
  11. The Poker-Litigation Game By Enrique Guerra-Pujol
  12. How to share joint liability: a cooperative game approach By DEHEZ, Pierre; FEREY, Samuel
  13. Third-Party vs. Second-Party Control: Disentangling the role of autonomy and reciprocity. By Gabriel Burdin; Simon Halliday; Fabio Landini

  1. By: Boris van Leeuwen (Toulouse School of Economics); Abhijit Ramalingam (University of East Anglia); David Rojo Arjona (University of Leicester); Arthur Schram (Amsterdam School of Economics)
    Abstract: We investigate the effects of power on cooperation in repeated social dilemma settings. Groups of five players play either multi-player trust games or VCM-games on a fixed network. Power stems from having the authority to allocate funds raised through voluntary contributions by all members and/or from having a pivotal position in the network (centrality). We compare environments with and without ostracism by allowing players in some treatments to exclude others from further participation in the network. Our results show that power matters but that its effects hinge strongly on the type involved. Reminiscent of the literature on leadership, players with authority often act more cooperatively than those without such power. Nevertheless, when possible, they are quickly ostracized from the group. Thus, this kind of power is not tolerated by the powerless. In stark contrast, centrality leads to less cooperative behavior and this free riding is not punished; conditional on cooperativeness, players with power from centrality are less likely to be ostracized than those without. Hence, not only is this type of power tolerated, but so is the free riding it leads to.
    Keywords: power, cooperation, networks, public goods
    JEL: C91 D02 D03 H41
    Date: 2015–03–03
  2. By: George J. Mailath; Volker Nocke; Lucy White
    Abstract: In repeated normal-form (simultaneous-move) games, simple penal codes (Abreu,1986, 1988) permit an elegant characterization of the set of subgame-perfect outcomes.We show that the logic of simple penal codes fails in repeated extensive-form games. By means of examples, we identify two types of settings in which a subgame-perfect outcome may be supported only by a profile with the property that the continuation play after a deviation is tailored not only to the identity of the deviator, but also to the nature of the deviation.
    Keywords: Simple Penal Code, Subgame Perfect Equilibrium, Repeated Extensive Game, Optimal Punishment
    JEL: C70 C72 C73
    Date: 2015–02
  3. By: Ali al-Nowaihi; Sanjit Dhami
    Abstract: Standard equilibrium concepts in game theory find it difficult to explain the empirical evidence from a large number of static games including the prisoners dilemma game, the hawk-dove game, voting games, public goods games and oligopoly games. Under uncertainty about what others will do in one-shot games, evidence suggests that people often use evidential reasoning (ER), i.e., they assign diagnostic significance to their own actions in forming beliefs about the actions of other like-minded players. This is best viewed as a heuristic or bias relative to the standard approach. We provide a formal theoretical framework that incorporates ER into static games by proposing evidential games and the relevant solution concept: evidential equilibrium (EE). We derive the relation between a Nash equilibrium and an EE. We illustrate these concepts in the context of the prisoners dilemma game.
    Keywords: Evidential reasoning, game theory, cognitive bias, prisoners dilemma game, oligopoly games, conservative heuristics, radical heuristics, decision making.
    JEL: D03
    Date: 2015–08
  4. By: Sylvain Béal (CRESE EA3190, Univ. Bourgogne Franche-Comté); Eric Rémila (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne); Philippe Solal (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne)
    Abstract: We provide a strategic implementation of the sequential equal surplus division rule (Béal et al., 2014). Precisely, we design a non-cooperative mechanism of which the unique subgame perfect equilibrium payoffs correspond to the sequential equal surplus division outcome of a superadditive rooted tree TU-game. This mechanism borrowed from the bidding mechanism designed by Pérez-Castrillo and Wettstein (2001), but takes into account the direction of the edges connecting any two players in the rood tree, which reflects some dominance relation between them
    Keywords: Bidding approach, Implementation, Rooted tree TU-games, Sequential equal surplus division
    JEL: C71
    Date: 2015–06
  5. By: Brügemann, Björn (VU University Amsterdam); Gautier, Pieter A. (VU University Amsterdam); Menzio, Guido (University of Pennsylvania)
    Abstract: The paper revisits the problem of wage bargaining between a firm and multiple workers. We show that the Subgame Perfect Equilibrium of the extensive-form game proposed by Stole and Zwiebel (1996a) does not imply a profile of wages and profits that coincides with the Shapley values as claimed in their classic paper. We propose an alternative extensive-form bargaining game, the Rolodex Game, that follows a simple and realistic protocol and that, under some mild restrictions, admits a unique Subgame Perfect Equilibrium generating a profile of wages and profits that are equal to the Shapley values. The vast applied literature that refers to the Stole and Zwiebel game to give a game-theoretic foundation to the use of the Shapley values as the outcome of the bargain between a firm and multiple workers should instead refer to the Rolodex game.
    Keywords: intra firm bargaining, Shapley value
    JEL: D21 J30
    Date: 2015–08
  6. By: Kyung Hwan Baik (Sungkyunkwan University); Subhasish M. Chowdhury (University of East Anglia); Abhijit Ramalingam (University of East Anglia)
    Abstract: We investigate the effects of partner and random stranger matching protocols in Tullock contests between two and between three players. In the groups of three players, we find no difference in the level or the dispersion of bids between matching protocols. For the two-player case, however, a partner matching results both in a lower level and a lower dispersion of bids – indicating tacit collusion. We conclude that unless one is interested in two-player contests or unless a particular matching protocol is required for the specific research, using a partner matching is preferred since it allows more flexibility in budget, logistics and data analysis. Furthermore, adding to the literature on group size, we find no difference in absolute bid levels due to group size across matching protocols. But the overbidding rate, defined as the bid over the Nash equilibrium level scaled with the Nash bid, is lower for the two-player groups.
    Keywords: contest, experiment, matching protocol, group size, experimental methodology
    JEL: B41 C72 C91
    Date: 2015–05–26
  7. By: Günther, Michael (Center for Mathematical Economics, Bielefeld University); Hellmann, Tim (Center for Mathematical Economics, Bielefeld University)
    Abstract: Increasing concerns about climate change have given rise to the formation of International Environmental Agreements (IEAs) as a possible solution to limit global pollution effects. In this paper, we study the stability of IEAs in a repeated game framework where we restrict to strategies which are simple and invariant to renegotiation. Our main contribution to the literature on IEAs is that we allow for heterogeneous patterns of pollution such that additional to a global effect of pollution there are local pollution effects represented by a network structure. We show that stable IEAs exist if the network structure is balanced. Too large asymmetries in the degree of local spillovers may however lead to non-existence of stable structures. The generality of our approach allows for several applications to general problems in the provision of public goods.
    Keywords: Coalition structures, Networks, International environmental agreements, Weak renegotiation-proofness
    Date: 2015–09–04
  8. By: Kazuhiko Hashimoto; Takuma Wakayama
    Abstract: We consider the problem of fairly reallocating the individual endowments of a perfectly divisible good among agents with single-peaked preferences. We provide a new concept of fairness, called position-wise envy-freeness, that is compatible with individual rationality. This new concept requires that each demander (i.e., agent whose most preferred amount is strictly greater than his endowment) should not envy another demander who does not receive his endowment and that each supplier (i.e., agent whose most preferred amount is strictly less than his endowment) should not envy another supplier who does not receive his endowment. We establish that a rule is efficient, individually rational, strategy-proof, and position-wise envy-free if and only if it is the gradual uniform rule, which is an extension of the well-known uniform rule.
    Date: 2015–09
  9. By: Emanuela Lezzi (University of Insubria); Piers Fleming (University of East Anglia); Daniel John Zizzo (Newcastle University)
    Abstract: Effort tasks are commonly used to assess individual investment and performance in an experimental setting. Although the tasks used are diverse, they are typically intended to be equivalent as far as they aim to generalize beyond the specific task. We compare an induced value effort task and three real effort tasks in a contest game. Results show that there is no equivalence across tasks in relation to how risk attitude, anxiety and gender predict performance.
    Keywords: effort tasks, experimental methodology, contests, induced value
    JEL: C72 C90 C91
    Date: 2015–04
  10. By: Sokolovska, Olena; Sokolovskyi, Dmytro
    Abstract: We consider a static non-cooperative game theoretic model of tax evasion. Some concepts concerned with strategies of interaction between economic agents are formalized in order to determine further possible presence of corrupt practices.
    Keywords: tax evasion, game theory, corruption, behavior
    JEL: C70 D73 H26
    Date: 2015
  11. By: Enrique Guerra-Pujol
    Abstract: Is litigation a serious search for truth or simply a game of skill or luck? Although the process of litigation has been modeled as a Prisoner's Dilemma, as a War of Attrition, as a Game of Chicken and even as a simple coin toss, no one has formally modeled litigation as a game of poker. This paper is the first to do so. We present a simple "poker-litigation game" and find the optimal strategy for playing this game.
    Date: 2015–06
  12. By: DEHEZ, Pierre; FEREY, Samuel
  13. By: Gabriel Burdin (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Simon Halliday (Smith College (United States). Department of Economics); Fabio Landini (Bocconi University (Italy). Department of Political Science)
    Abstract: This paper studies the role of autonomy and reciprocity in explaining control averse responses in principal-agents interactions. While most of the social psychology literature emphasizes the role of autonomy, recent economic research has provided an alternative explanation based on reciprocity. We propose a simple model and an experiment to test the relative strength of these two motives. We compare two treatments: one in which control is exerted directly by the principal (second-party control); and the other in which it is exerted by a third party enjoying no residual claimancy rights (third-party control). If control aversion is driven mainly by autonomy, then it should persist in the third-party treatment. Our results, however, suggest that this is not the case. Moreover, when a third party instead of the principal exerts control, control results in a greater expected profit for the principal. The implications of these results for organizational design are discussed.
    Keywords: third-party, second-party, control aversion, autonomy, principal-agent game, social preferences, trust, reciprocity
    JEL: C72 C91 D23 M54
    Date: 2015–09

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