nep-gth New Economics Papers
on Game Theory
Issue of 2015‒11‒07
six papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. A Comment on "Multilateral Bargaining" By Maurya, Amit Kumar
  2. Multilateral Bargaining with Discrete Surplus By Maurya, Amit Kumar
  3. Compromises and Rewards: Stable and Non-manipulable Probabilistic Pairing By Gudmundsson, Jens
  4. Trading Votes for Votes. A Decentralized Matching Algorithm By Alessandra Casella; Thomas Palfrey
  5. Strategic Delegation and Non-cooperative International Permit Markets By Habla, Wolfgang; Winkler, Ralph
  6. The Impact of Innovative New Economy Products on Market Competition: Competition Might Decrease By Arzdar Kiracı

  1. By: Maurya, Amit Kumar
    Abstract: Krishna and Serrano (1996) study a model of multilateral bargaining, and claim that their analysis is applicable irrespective of whether the surplus exists at the start of the game or it is created after all players agree. We show that their claim is wrong. Their analysis is not applicable when the surplus is created after all players agree. Hence, some of the important real life bargaining situations, like management-multiple unions bargaining and land assembly are not in the scope of Krishna and Serrano (1996).
    Keywords: Multilateral bargaining, Efficiency
    JEL: C72 C78
    Date: 2015–10–02
  2. By: Maurya, Amit Kumar
    Abstract: Krishna and Serrano (1996) show a unique and efficient outcome in a model of multilateral bargaining. We show that the predictability of the model critically depends on the nature of the surplus i.e. whether it is continuous or discrete. We show that the model suffers from multiple equilibria and severe inefficiency when the surplus is discrete, not continuous as assumed in Krishna and Serrano (1996), and players are patient enough.
    Keywords: Multilateral bargaining, Discrete surplus, Inefficiency
    JEL: C72 C78
    Date: 2015–10–10
  3. By: Gudmundsson, Jens (Department of Economics, Lund University)
    Abstract: Can we reconcile stability with non-manipulability in pairing problems by selecting lotteries over matchings?We examine the problem of eliciting preferences to make pairs as introduced by Gale and Shapley (1962). We develop ex-ante notions of stability and non-manipulability that are parameterized by collections of utility functions. In particular, we study the collection of utility functions with increasing differences for which stability and non-manipulability turn out to characterize Compromises and Rewards. This is a novel rule that is fundamentally different from the one that has attracted most attention in the literature, Deferred Acceptance.
    Keywords: Pairing; Lottery; Stability; Non-manipulability; Compromises; Rewards
    JEL: C62 D02 D60
    Date: 2015–10–26
  4. By: Alessandra Casella; Thomas Palfrey
    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.
    JEL: C92 D7 D72
    Date: 2015–10
  5. By: Habla, Wolfgang (Department of Economics, School of Business, Economics and Law, Göteborg University); Winkler, Ralph (Department of Economics and Oeschger Centre for Climate Change Research, University of Bern Schanzeneckstrasse 1, CH-3012 Bern, Switzerland)
    Abstract: We analyze a principal-agent relationship in the context of international climate policy in a two-country framework. First, the principals of both countries decide whether to link their domestic emission permit markets to an international market. Second, the principals select agents who then non-cooperatively determine the levels of emission permits. Finally, these permits are traded on domestic or international permit markets. We find that the principals in both countries have an incentive to select agents that care (weakly) less for environmental damages than the principals do themselves. This incentive is more pronounced under international permit markets, particularly for permit sellers, rendering an international market less beneficial to at least one country. Our results may explain why we do not observe international permit markets despite their seemingly favorable characteristics and, more generally, suggest that treating countries as atomistic players may be an oversimplifying assumption when analyzing strategic behavior in international policy making.
    Keywords: non-cooperative climate policy; political economy; emissions trading; linking of permit markets; strategic delegation; strategic voting
    JEL: D72 H23 H41 Q54 Q58
    Date: 2015–11
  6. By: Arzdar Kiracı (Siirt University, Department of Economics)
    Abstract: This paper presents a parametric Cournot type of game theoretic model that uses Rogers’ Diffusion of Innovations Theory to construct a model that simulates the strategic interaction between firms. The constructed model simulates the strategic interaction of old economy firms that compete with the adoption of an innovative information and communication technologies based product, which is produced by a monopolistic New Economy firm. The model incorporates the accelerated product innovation process, globalization and interaction of firms in competitive environment. This paper confirms the expected result that innovator firms gain by adopting profitable New Economy products; however, surprisingly, under some circumstances market competition might decrease even when there is globalization. It is proven that this result is valid for markets with large (customer) demands when firms of the New Economy that produce innovative products charge high prices for their products. Firms of the New Economy that produce innovative products are given the privilege to be monopolists for the duration of their patent, but according to the findings of this paper they need to be regulated by competition authorities.
    Keywords: Game Theory, Cost structure, New Economy, Globalization, Competition, Innovative Product
    JEL: C72 O14 O33 D42 L11
    Date: 2015

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