nep-gth New Economics Papers
on Game Theory
Issue of 2015‒12‒20
twelve papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Rationalizable Strategies in Games With Incomplete Preferences By Kokkala, Juho; Poropudas, Jirka; Virtanen, Kai
  2. Dynamic Matching Markets and the Deferred Acceptance Mechanism By John Kennes; Daniel Monte; Norovsambuu Tumennasan
  3. Bad Reputation under Bounded and Fading Memory By Benjamin Sperisen
  4. Discounted Tree Solutions By Sylvain Béal; Eric Rémila; Phillippe Solal
  5. Parabolic Cylinders and Folk Theorems By F. Delbono; L. Lambertini
  6. Price Reveal Auctions By Andrea Gallice
  7. “Buy-It-Now” or “Sell-It-Now” Auctions: Effects of Changing Bargaining Power in Sequential Trading Mechanisms By Tim Grebe; Radosveta Ivanova-Stenzel; Sabine Kröger
  8. Linking individual and collective contests through noise level and sharing rules By Pau Balart; Subhasish Modak Chowdhury; Orestis Troumpounis
  9. How to get truthful reporting in matching markets: A field experiment By Guillén, Pablo; Hakimov, Rustamdjan
  10. The impact of group identity on coalition formation By Denise Laroze; David Hugh-Jones; Arndt Leininger
  11. In Gov we trust: Voluntary compliance in networked investment games By Natalia Borzino; Enrique Fatas; Emmanuel Peterle
  12. Privacy, trust and social network formation By Gaudeul, Alexia; Giannetti, Caterina

  1. By: Kokkala, Juho; Poropudas, Jirka; Virtanen, Kai
    Abstract: Games with incomplete preferences are normal-form games where the preferences of the players are defined as partial orders over the outcomes of the game. We define rationality in these games as follows. A rational player forms a set-valued belief of possible strategies selected by the opponent(s) and selects a strategy that is not dominated with respect to this belief. Here, we say a strategy is dominated with respect to the set-valued belief if the player has another strategy that would yield a better outcome according to the player's preference relation, no matter which strategy combination the opponent(s) play among those contained in the belief. We define rationalizable strategies as the logical implication of common knowledge of this rationality. We show that the sets of rationalizable strategies are the maximal mutually nondominated sets, i.e., the maximal sets that contain no dominated strategies with respect to each other. We show that no new rationalizable strategies appear when additional preference information is included. We consider multicriteria games as a special case of games with incomplete preferences and introduce a way of representing incomplete preference information in multicriteria games by sets of feasible weights of the criteria.
    Keywords: Normal-form games, incomplete preferences, rationalizable strategies, multicriteria games
    JEL: C72
    Date: 2015–12–11
  2. By: John Kennes (Department of Economics and Business Economics, Aarhus University, Denmark); Daniel Monte (Department of Economics and Business Economics, Aarhus University, Denmark and Sao Paulo School of Economics, Brazil); Norovsambuu Tumennasan (Department of Economics and Business Economics, Aarhus University, Denmark and Department of Economics, Dalhousie University, Canada)
    Abstract: In many dynamic matching markets, priorities depend on previous allocations. In such environments, agents on the proposing side can manipulate the period-by-period deferred acceptance (DA) mechanism. We show that the fraction of agents with incentives to manipulate the DA mechanism approaches zero as the market size increases. In addition, we provide a novel al- gorithm to calculate the percentage of markets that can be manipulated. Based on randomly generated data, we find that the DA becomes approximately non-manipulable when the schools capacity reaches 20. Our theoretical and simulation results together justify the implementation of the period-by-period DA mechanism in dynamic markets.
    Keywords: Large market, dynamic school choice, deferred acceptance mechanism
    JEL: C78 D61 D78 I20
    Date: 2015–12–15
  3. By: Benjamin Sperisen (Department of Economics, Tulane University)
    Abstract: I relax the full memory assumption in Ely and Valimaki's (2003) mechanic game, where reputation is bad for all players. First I consider "bounded memory," where only finitely many recent periods are observed. For long memory, reputation is still bad. Shortening memory avoids bad reputation but only by making it "useless." There is no "happy middle:" reputation is either useless or reduces equilibrium payoffs for any memory length. I find a qualitatively different result for "fading memory," where players randomly sample past periods with probabilities "fading" toward zero. Unlike bounded memory, reputation is not bad but remains useful under sufficiently fast fading. This result extends to a more general class of both good and bad reputation games, suggesting reputation leaves long-run player behavior unaffected in some realistic word-of-mouth environments.
    Keywords: reputation; bounded memory; fading memory; mechanic game
    JEL: C73 D8
    Date: 2015–12
  4. By: Sylvain Béal (Université de Bourgogne Franche-Comté, CRESE); Eric Rémila (Université de Saint-Etienne, Gate); Phillippe Solal (Université de Saint-Etienne, Gate)
    Abstract: This article introduces a discount parameter and a weight function in Myerson's (1977) classical model of cooperative games with restrictions on cooperation. The discount parameter aims to re ect the time preference of the agents while the weight function aims to re ect the importance of each node of a graph. We provide axiomatic characterizations of two types of solution that are inspired by the hierarchical outcomes (Demange, 2004).
    Keywords: Graph games, discount parameter, weight function, discounted tree solutions, invariance with respect to cone amalgamation, generalized standardness, delta-reducing agent
    JEL: C71
    Date: 2015–12
  5. By: F. Delbono; L. Lambertini
    Abstract: We study a class of games featuring payo¤ functions being parabolic cylinders where best reply functions are orthogonal and therefore the pure-strategy non-cooperative solution is attained as a Nash equilibrium in dominant strategies. We prove that the resulting threshold of the discount factor above which implicit collusion on the Pareto frontier is stable in the in…nite supergames is independent of the number of players. This holds irrespective of whether punishment is based on in…nite Nash reversion or one-shot stick-and-carrot strategy. We outline two examples stemming from economic theory and one from international relations.
    JEL: C73
    Date: 2015–12
  6. By: Andrea Gallice
    Abstract: A price reveal auction (PRA) is a descending price auction in which the current price of the item on sale is hidden. Buyers can privately observe the price only by paying a fee, and every time an agent does so, the price falls by a predetermined amount. We show that if the number of participants, n, is common knowledge, then in equilibrium a PRA replicates the outcome of a posted price mechanism. In particular, at most one buyer observes the price and the auction immediately ?nishes. In contrast, multiple entries can occur and pro?tability is enhanced when agents are uncertain about n. Under some conditions, a PRA may even yield higher expected revenues than standard auction formats.
    Keywords: price reveal auctions, pay-per-bid auctions, endogenous price decrease.
    JEL: D44 C72
    Date: 2015
  7. By: Tim Grebe; Radosveta Ivanova-Stenzel; Sabine Kröger
    Abstract: We study experimentally the effect of bargaining power in two sequential mechanisms that offer the possibility to trade at a fixed price before an auction. In the “Buy-It-Now” format, the seller has the bargaining power and offers a price prior to the auction; whereas in the “Sell-It-Now” format, it is the buyer. Both formats are extensively used in online and offline markets. Despite very different strategic implications for buyers and sellers, results from our experiment suggest no effects of bargaining power on aggregate outcomes. There is, however, substantial heterogeneity within sellers. Sellers who ask for high prices not only benefit from having the bargaining power but also earn revenue above those expected in the auction.
    Keywords: Buy-It-Now price, Sell-It-Now price, private value auction, single item auction, sequential selling mechanism, fixed price, auction.
    JEL: C72 C91 D44 D82
    Date: 2015
  8. By: Pau Balart (Universidad Carlos III de Madrid); Subhasish Modak Chowdhury (University of East Anglia); Orestis Troumpounis (Lancaster University)
    Abstract: We provide a theoretical link between the two most prominent ways of modelling individual and collective contests as proposed by Tullock (1980) and Nitzan (1991) respectively. By introducing Nitzan's sharing rule as a way of modeling individual contests we obtain a contest success function nesting a standard Tullock contest and a fair lottery. We first provide an equivalence result between the proposed contest and Tullock's contest for the two-player set-up. We then employ this nested contest as a way of introducing noise in multi-player contests when in the Tullock contest a closed form solution for the equilibrium in pure strategies does not exist. We conclude by comparing the proposed contest with the existing ones in the literature.
    Keywords: individual contest, collective contest, equivalence
    JEL: C72 D72 D74
    Date: 2015–11–06
  9. By: Guillén, Pablo; Hakimov, Rustamdjan
    Abstract: We run a field experiment to test the truth-telling rates of the theoretically strategy-proof Top Trading Cycles mechanism (TTC) under different information conditions. First, we asked first-year economics students enrolled in an introductory microeconomics unit about which topic, among three, they would most like to write an essay on. Most students chose the same favorite topic. Then we used TTC to distribute students equally across the three options. We ran three treatments varying the information the students received about the mechanism. In the first treatment students were given a description of the matching mechanism. In the second they received a description of the strategy-proofness of the mechanism without details of the mechanism. Finally, in the third they were given both pieces of information. We find a significant and positive effect of describing the strategy-proofness on truth-telling rates. On the other hand, describing the matching mechanism has a significant and negative effect on truth-telling rates.
    Keywords: school choice,matching,field experiment
    Date: 2015
  10. By: Denise Laroze (University of Essex); David Hugh-Jones (University of East Anglia); Arndt Leininger (Hertie School of Governance)
    Abstract: Bargaining and coalition building is a central part of modern politics. Typically, game-theoretic models cannot predict a unique equilibrium. One possibility is that coalitions are formed on the basis of social identity loyalty to a gender, ethnic or political in-group. We test the effect of gender, race and ideological distance on coalition formation in a majority-rule bargaining experiment. Despite the absence of any incentives to do so, we find that ideological distance significantly affects offers made to potential coalition partners. As a result, coalitions tend to be ideologically coherent, even though there is no ideological policy output. We conclude that social identity considerations can determine equilibria in coalition formation.
    Keywords: coalition formation, laboratory experiments, Baron and Ferejon model, legislative bargaining, social identity
    Date: 2015–09–03
  11. By: Natalia Borzino (University of East Anglia); Enrique Fatas (University of East Anglia); Emmanuel Peterle (University of Gottingen)
    Abstract: We conduct a controlled laboratory experiment to investigate trust and trustworthiness in a networked investment game in which two senders interact with a receiver. We investigate to what extent senders and receivers comply with an exogenous and non-binding recommendation. We also manipulate the level of information available to senders regarding receiver’s behavior in the network. We compare a baseline treatment in which senders are only informed about the actions and outcomes of their own investment games to two information treatments. In the reputation treatment, senders receive ex ante information regarding the average amount returned by the receiver in the previous period. In the transparency treatment, each sender receives ex post additional information regarding the returning decision of the receiver to the other sender in the network. Across all treatments and for both senders and receivers, the non-binding rule has a significant and positive impact on individual decisions. Providing senders with additional information regarding receiver’s behavior affects trust at the individual level, but leads to mixed results at the aggregate level. Our findings suggest that reputation building, as well as allowing for social comparison could be efficient ways for receivers to improve trust within networks.
    Date: 2015–12
  12. By: Gaudeul, Alexia; Giannetti, Caterina
    Abstract: We study in the laboratory the impact of private information revelation on the selection of partners when forming individual networks. Our experiment combines a "network game" and a "public-good game". In the network game, individuals decide with whom to form a link with, while in the public-good game they decide whether or not to contribute. The variations in our treatments allow us to identify the effect of revealing one´s name on the probability of link formation. Our main result suggests that privacy mechanisms affect partner selection and the consequent structure of the network: when individuals reveal their real name, their individual networks are smaller but their profits are higher. This indicates that the privacy costs of revealing personal information are compensated by more productive links.
    Keywords: privacy,social networks,public goods,trust
    JEL: D12 D85
    Date: 2015

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