nep-gth New Economics Papers
on Game Theory
Issue of 2015‒11‒01
fifteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Myopic behavior and overall utility maximization - A study of linked hawks and doves - By Siegfried Berninghaus; Stephan Schosser; Bodo Vogt
  2. Behavior in All-Pay Auctions with Ties By Gelder, Alan; Kovenock, Dan; Sheremeta, Roman
  3. Preferences-dependent learning in the Centipede game By Astrid, Gamba; Tobias, Regner
  4. Public Goods in Endogenous Networks By Markus Kinateder; Luca Paolo Merlino
  5. A Link between Sequential Semi-anonymous Nonatomic Games and their Large but Finite Counterparts By Jian Yang
  6. Who cares about the balderdash I spouted yesterday?* – An experiment on the volatility of bargaining norms – By Stephan Schosser
  7. Endowment Origin, Demographic Effects and Individual Preferences in Contests By Simon, Curtis J.; Sheremeta, Roman
  8. Behavior in Group Contests: A Review of Experimental Research By Sheremeta, Roman
  9. The costs and benefits of symmetry in common-ownership allocation problems. By Alexander L. Brown; Rodrigo A. Velez
  10. Experience and Gender Effects in an Acquiring-a-Company Experiment Allowing for Value Messages By Noemi Pace; Daniela Di Cagno; Arianna Galliera; Werner Güth; Luca Panaccione
  11. Representation-Compatible Power Indices By Serguei Kaniovski; Sascha Kurz
  12. Modeling Risk and Ambiguity-on-Nature in Normal-form Games By Jian Yang
  13. Trading Votes for Votes. A Decentralized Matching Algorithm By Casella, Alessandra; Palfrey, Thomas R
  14. Meaningful Learning in Weighted Voting Games: An Experiment By Eric Guerci; Nobuyuki Hanaki; Naoki Watanabe
  15. Beyond Truth-Telling: Preference Estimation with Centralized School Choice By Gabrielle Fack; Julien Grenet; Yinghua He

  1. By: Siegfried Berninghaus (Karlsruhe Institute of Technology); Stephan Schosser (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Bodo Vogt (Faculty of Management, Economics and Social Sciences, University of Cologne)
    Abstract: At present, in the domain of simultaneous action selection and network formation games, game-theoretic behavior and experimental observations are not consistent. While theory typically predicts inefficient outcomes for (anti- )co-ordination games, experiments show that subjects tend to play efficient (non-Nash) strategy profiles. One reason for this discrepancy is the tendency to model corresponding games as one-shot and derive predictions. In this paper, we calculate the equilibria for a finitely repeated version of the Hawk-Dove game with endogenous network formation and show that the repetition leads to additional sub-game perfect equilibria; namely, the efficient strategy profiles played by human subjects. However, efficiency crucially depends on the design of the game. This paper theoretically demonstrates that, although technically feasible, the efficient profiles are not sub-game perfect equilibria if actions are fixed after an initial period. We confirm this result using an experimental study that demonstrates how payoffs are higher if actions are never fixed.
    Keywords: Network; Hawk-Dove; Game theory; Behavioral experiment; Finitely re- peated game
    JEL: D85 C72 C73 C92
    Date: 2015–07
  2. By: Gelder, Alan; Kovenock, Dan; Sheremeta, Roman
    Abstract: Despite the wide occurrence of ties in a variety of contest settings, the strategic interaction that arises when ties are treated as viable outcomes has received little attention. Building on recent theoretical work, we experimentally examine an extension of the canonical two-player all-pay auction in which a tie occurs unless one player’s bid exceeds the other’s by some critical threshold. In the event of a tie, each player receives an identical fraction of the prize. For the case where players receive one-half of the prize when they tie, we find that players’ expenditures are non-monotonic in the threshold required for victory. Moreover, for certain positive thresholds, expenditures may even be higher than under the standard all-pay auction. We also find that decreasing the fraction of the prize players receive for tying may either increase or decrease total expenditures. In accordance with theory, the effect depends upon the threshold.
    Keywords: All-pay auction, contest, tie, draw, bid differential, experiment
    JEL: C72 C92 D44 D72 D74
    Date: 2015–10–29
  3. By: Astrid, Gamba; Tobias, Regner
    Abstract: We study experimentally whether heterogeneity of behavior in the Centipede game can be interpreted as the result of a learning process of individuals with different preference types (more and less pro-social) and coarse information regarding the opponent's past behavior. We manipulate the quality of information feedbacks provided after each play. If subjects rely only on their personal database, long run behavior resembles a Self-confirming equilibrium whereby less pro-social types take at earlier nodes due to prediction errors. Aggregate information release decreases heterogeneity of behavior by increasing the passing rates of pro-selfs and play moves towards Bayesian Nash equilibrium.
    Keywords: Social preferences, Learning, Self-confirming equilibrium, Experiment
    JEL: C71 C73 C91 D83
  4. By: Markus Kinateder (​University of Navarra); Luca Paolo Merlino (Universit e libre de Bruxelles)
    Abstract: In this paper we study a local public good game in an endogenous network with heterogeneous agents. We consider two specifications, in which different networks arise. When agents differ in the cost of acquiring the public good, active agents form hierarchical complete multipartite graphs; yet, better types need not have more neighbors. When agents have heterogeneous benefits from the public good, nested split graphs in which investment need not be monotonic in type emerge. In large societies, few agents are active and the network dampens inequality.
    Keywords: public goods,
    JEL: C72 D00 D85 H41
    Date: 2015–10–21
  5. By: Jian Yang
    Abstract: We show that equilibria of a sequential semi-anonymous nonatomic game (SSNG) can be adopted by players in corresponding large but finite dynamic games to achieve near-equilibrium payoffs. Such equilibria in the form of random state-to-action rules are parsimonious in form and easy to execute, as they are both oblivious of past history and blind to other players' present states. Our transient results can be extended to a stationary case, where the finite counterparts are special discounted stochastic games. The kind of equilibria we adopt for SSNG are similar to distributional equilibria that are well understood in literature, and they themselves are shown to exist.
    Date: 2015–10
  6. By: Stephan Schosser (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: When talking about possible bargaining results participants in the Nash bargaining game mainly use fairness norms to support their favored outcome. According to theory a variety of different, fair solutions exists from which the participants can choose. In this paper, we experimentally investigate Nash bargaining with a previous opportunity to chat about the bargaining outcome. We find that playing a dictator game prior to the Nash bargaining game establishes – without any additional communication – a fairness norm, the participants resort to. However, if nothing is played prior to the Nash bargaining game, participants discuss longer about what to play. In addition, we find that deviations in favor of one participant occur the longer preplay communication lasts.
    Keywords: bargaining game, dictator game, norms, experimental economics
    JEL: C7 C9
    Date: 2015–10
  7. By: Simon, Curtis J.; Sheremeta, Roman
    Abstract: In modern firms the use of contests as an incentive device is ubiquitous. Nonetheless, experimental research shows that in the laboratory subjects routinely make suboptimal decisions in contests even to the extent of making negative returns. The purpose of this study is to investigate how earning the endowment, demographic differences and individual preferences impact behavior in contests. To this end, we conduct a laboratory experiment in which subjects expend costly resources (bids) to attain an award (prize). In line with other laboratory studies of contests, our results show that subjects overbid relative to theoretical predictions and incur substantial losses as a result. Making subjects earn their initial resource endowments mitigates the amount of overbidding and thus increases efficiency. Overbidding is linked to gender, with women bidding higher than men and having lower average earnings. Other demographic information, such as religiosity, and individual preferences, such as preferences towards winning and risk, also influence behavior in contests.
    Keywords: contest, experiments, overbidding, endowment, gender, religiosity
    JEL: C72 C91 D61 D72 J16
    Date: 2015–03–25
  8. By: Sheremeta, Roman
    Abstract: Group contests are ubiquitous. Some examples include warfare between countries, competition between political parties, team-incentives within firms, group sports, and rent-seeking. In order to succeed, members of the same group have incentives to cooperate with each other by expending individual efforts. However, since effort is costly, each member also has an incentive to abstain from expending any effort and instead free-ride on the efforts of other members. Contest theory shows that the intensity of competition between groups and the amount of free-riding within groups depend on the group size, sharing rule, group impact function, contest success function, and heterogeneity of players. We review experimental studies testing these theoretical predictions. Almost all studies of behavior in group contests find significant over-expenditure of effort relative to the theory. We discuss potential explanations for such over-expenditure, including the utility of winning, bounded rationality, relative payoff maximization, parochial altruism, and social identity. Despite over-expenditure, most studies find support for the comparative statics predictions of the theory (with the exception of the “group size paradox”). Finally, studies show that there are effective mechanisms that can promote within-group cooperation and conflict resolution mechanisms that can de-escalate and potentially eliminate between-group conflict.
    Keywords: groups, contests, experiments
    JEL: C7 C9 D7 H4 J4 K4 L2 M5
    Date: 2015–10–29
  9. By: Alexander L. Brown (Texas A&M University, Department of Economics); Rodrigo A. Velez (Texas A&M University, Department of Economics)
    Abstract: In experimental partnership dissolution problems with complete information, the divide-and-choose mechanism is significantly superior to the winner's-bid-auction. The performance of divide-and-choose is mainly affected by reciprocity issues and not by bounded rationality. The performance of the winner's-bid-auction is significantly affected by bounded rationality. Contrary to theoretical predicitions divide-and-choose exhibits no first-mover bias.
    Keywords: experimental economics; no-envy; divide-and-choose; winner's-bid auction; behavioral mechanism design
    JEL: C91 D63 C72
    Date: 2014–09–18
  10. By: Noemi Pace (Department of Economics, University Of Venice Cà Foscari); Daniela Di Cagno (Luiss Guido Carli, Rome); Arianna Galliera (Luiss Guido Carli, Rome); Werner Güth (Luiss Guido Carli, Rome, Frankfurt School of Finance and Management, Max Planck Institute, Bonn, Germany); Luca Panaccione (DEDI and CEIS, University of Rome 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
  11. By: Serguei Kaniovski (Austrian Institute of Economic Research (WIFO)); Sascha Kurz (Department of Mathematics, University of Bayreuth)
    Abstract: We use average representations of a weighted voting game to obtain four new indices of voting power for this type of voting games. The average representations are computed from weight and representation polytopes defined by the set of winning and losing coalitions of the game.These average representations come remarkably close to fulfilling the standard criteria for a coherent measure of voting power. They are symmetric, positive, efficient and strongly monotonic. The dummy property, which assigns zero power to powerless players, can be imposed by restricting the polytopes. The resulting restricted average representations are coherent measures of power.The defining property of the four new indices is representation compatibility, which ensures proportionality between power and weight. We believe that proportionality makes the new indices ideal measure of power for voting institutions, in which the votes are distributed to the voter based on their contribution to a fixed purse. Examples include shareholder voting in corporations and country member voting in the multilateral institutions of the Bretton Woods Accord (The World Bank, IMF).The practical significance of representation compatibility lies in institutional design. In a weighted voting game, the design is given by the voting weights and the voting rule, or the number of affirmative votes required to pass a decision. In institutions, in which the number of votes depends on the capital contributions of the voters to a purse of a given size, a voter wants to know which distributions of voting weights confer the desired power or that voter's expected share of the purse. A prime example of such an institution is the corporation. But the same principles can be used for designing any voting body, for example distributing parliamentary seats after a general election, and we provide examples for the German Bundestag and the Austrian Nationalrat.
    Keywords: average representation; power index; proportionality between weights and power
    JEL: D71 C71
  12. By: Jian Yang
    Abstract: We propose multi-player frameworks that mitigate decision-theoretical difficulties with the traditional normal-form game, where players are concerned with expected utility functions of their payoffs. We react to Allais's (1953) paradox by concerning players with potentially nonlinear functionals of the payoff distributions they encounter. To counter Ellsberg's (1961) paradox, we let players optimize on vectors of payoff distributions in which every component is a payoff distribution corresponding to one particular nature action. In the preference game we introduce, players merely express preferences over payoff-distribution vectors. Depending on ways in which players' mixed strategies are verified, there will emerge two equilibrium concepts, namely, the ex post and ex ante types. Conditions for equilibrium existence are identified; also, the unification of the two concepts at the traditional game is explained. When the preference relations lead to real-valued satisfaction functions, we have a satisfaction game. Two notable special cases are one coping with Gilboa and Schmeidler's (1989) ambiguity-averse worst-prior setup and another involving Artzner et al.'s (1999) coherent-risk measure with risk-averse tendencies. For both, searching for ex post equilibria boils down to solving sequences of simple nonlinear programs (NLPs).
    Date: 2015–10
  13. By: Casella, Alessandra; Palfrey, Thomas R
    Abstract: Vote-trading is common practice in committees and group decision-making. Yet we know very little about its properties. Inspired by the similarity between the logic of sequential rounds of pairwise vote-trading and matching algorithms, we explore three central questions that have parallels in the matching literature: (1) Does a stable allocation of votes always exists? (2) Is it reachable through a decentralized algorithm? (3) What welfare properties does it possess? We prove that a stable allocation exists and is always reached in a finite number of trades, for any number of voters and issues, for any separable preferences, and for any rule on how trades are prioritized. Its welfare properties however are guaranteed to be desirable only under specific conditions. A laboratory experiment confirms that stability has predictive power on the vote allocation achieved via sequential pairwise trades, but lends only weak support to the dynamic algorithm itself.
    Keywords: algorithms; matching; vote trading; voting
    JEL: C92 D7 D72 P16
    Date: 2015–10
  14. By: Eric Guerci (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - UNS - Université Nice Sophia Antipolis); Nobuyuki Hanaki (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - UNS - Université Nice Sophia Antipolis); Naoki Watanabe (Faculty of Engineering, Information and Systems, University of Tsukuba - University of Tsukuba)
    Abstract: By employing binary committee choice problems, this paper investigates how varying or eliminating feedback about payoffs affects: (1) subjects' learning about the underlying relationship between their nominal voting weights and their expected payoffs in weighted voting games; and (2) the transfer of acquired learning from one committee choice problem to a similar but different problem. In the experiment, subjects choose to join one of two committees (weighted voting games) and obtain a payoff stochastically determined by a voting theory. We found that: (i) subjects learned to choose the committee that generates a higher expected payoff even without feedback about the payoffs they received; and (ii) there was statistically significant evidence of ``meaningful learning'' (transfer of learning) only for the treatment with no payoff-related feedback. This finding calls for re-thinking existing models of learning to incorporate some type of introspection.
    Keywords: two-armed bandit problem,learning, voting game, experiment
    Date: 2015–10–15
  15. By: Gabrielle Fack (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Julien Grenet (PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Yinghua He (TSE - Toulouse School of Economics - Toulouse School of Economics)
    Abstract: We propose novel approaches and tests for estimating student preferences with data from school choice mechanisms, e.g., the Gale-Shapley Deferred Acceptance. Without requiring truth-telling to be the unique equilibrium, we show that the matching is (asymptotically) stable, or justified-envy-free, implying that every student is assigned to her favorite school among those she is qualified for ex post. Having validated the methods in simulations, we apply them to data from Paris and reject truth-telling but not stability. Our estimates are then used to compare the sorting and welfare effects of alternative admission criteria prescribing how schools rank students in centralized mechanisms.
    Keywords: Gale-Shapley Deferred Acceptance Mechanism,School Choice,Stable Matching,Student Preferences,Admission Criteria,C78, D47, D50, D61, I21
    Date: 2015–10

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