nep-gth New Economics Papers
on Game Theory
Issue of 2015‒12‒28
eleven papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Minimal core allocations, empty threats and the Fair Division solution for the assignment problem By Christian Trudeau
  2. Decomposition of Network Communication Games By Dietzenbacher, Bas; Borm, Peter; Hendrickx, Ruud
  3. Ambiguity and Long-Run Cooperation By Marco Rojas Olivares; Damián Vergara Domínguez
  4. An Experimental Study of Decentralized Link Formation with Competition By Margherita Comola; Marcel Fafchamps
  5. Feasible sets, comparative risk aversion, and comparative uncertainty aversion in bargaining By Driesen B.W.I.; Lombardi M.; Peters H.J.M.
  6. Imitation and price competition in a differentiated market By Khan A.; Peeters R.J.A.P.
  7. "Learned Generosity? A Field Experiment with Parents and their Children" By Avner Ben-Ner; John A. List; Louis Putterman; Anya Samek
  8. Self-Selection in School Choice By Li Chen; Juan Sebastian Pereyra Barreiro
  9. Robust Social Decisions By Eric Danan; Thibault Gajdos; Brian Hill; Jean-Marc Tallon
  10. Dynamic Directed Random Matching By Darrell Duffie; Lei Qiao; Yeneng Sun
  11. The Impact of Foresight in a Transboundary Pollution Game By Hassan BENCHEKROUN; Guiomar MARTÍN-HERRÁN

  1. By: Christian Trudeau (Department of Economics, University of Windsor)
    Abstract: We consider two properties for the assignment problems. The first one is inspired by the Minimal Rights First property for the bankruptcy problem: assigning to agents their minimal core allocation, adjusting the value created accordingly and sharing the value created should give the same shares as if we just share the value created in the original problem. The second property considers assignment problems in which agents have no better option than to partner up with their optimal match, for which we argue that since agents have no reasons to threathen to secede with another partner, the values for other matches should not impact the shares assigned to each agent. We show that these properties, together with stability, yield the extreme points of the core of Demange (1982) and Leonard (1983), as well as their weighted averages. Adding Symmetry, we characterize the Fair Division solution of Thompson (1981). We also provide a new method to compute the minimal core allocations.
    Keywords: assignment problems, core, fair division, dominant diagonal, minimal rights.
    JEL: C71 D63
    Date: 2015–12
  2. By: Dietzenbacher, Bas (Tilburg University, Center For Economic Research); Borm, Peter (Tilburg University, Center For Economic Research); Hendrickx, Ruud (Tilburg University, Center For Economic Research)
    Abstract: Using network control structures this paper introduces network communication<br/>games as a generalization of vertex games and edge games corresponding to communication situations and studies their decomposition into unanimity games. We obtain a relation between the dividends of the network communication game and the underlying transferable utility game, which depends on the structure of the undirected graph. This relation extends the computational results for tree communication networks to general undirected graphs and is used to derive new characterizations of the Myerson value and the position value. Moreover, network communication games also allow to consider<br/>both the vertices and the edges of the graph as players, leading to a new network value.
    Keywords: network communication games; network control structures; decomposition theorems; Myerson value; position value
    JEL: C71
    Date: 2015
  3. By: Marco Rojas Olivares; Damián Vergara Domínguez
    Abstract: This paper studies the effects of ambiguity on long-run cooperation, by analyzing the infinitely repeated Prisoner’s Dilemma and its application to Cournot’s duopoly model. We show that ambiguity decreases the likelihood of cooperation in the infinitely repeated Prisoner’s Dilemma, regardless the level of optimism. In the economic application, we find that ambiguity is positively related with static equilibrium quantities and negatively related with the probability of sustaining a tacit collusion, i.e. positively related with competition. In fact, the critical discount factor associated with the probability of achieving a collusive equilibrium can be even higher than one for some parametric combinations. Nevertheless, depending on the level of optimism, a discontinuity can arise when ambiguity is too high, emerging a situation where collusion can be implemented as a short-run equilibrium. That is due to the fact that, for some parametric combinations, the economic application stops being a particular case of the Prisoner’s Dilemma and start behaving as different games in which cooperation can be achieved as a short-run pure Nash equilibrium. Finally, an alternative interpretation suggests an equivalence result: a Cournot’s duopoly with high ambiguity and relatively pessimist players behaves as a coordination game with exogenous payoffs.
    Date: 2015–12
  4. By: Margherita Comola; Marcel Fafchamps
    Abstract: We design a laboratory experiment to investigate bilateral link formation in a setting where payoffs are pair-specific. Our link formation rule is decentralized and players can make link offers and counter-offers, as in a Beckerian marriage market. The game is designed in such a way that a stable equilibrium configuration exists and does not depend on conditions such as initial configuration or order of move. We test whether the theoretical equilibrium is obtained under experimental conditions, and which individual motivations and decision-making techniques lead players to depart from myopic best response. We find that players are remarkably good at attaining a stable equilibrium configuration, which happens in 86% of the games. Results show that complete information speeds up the game via self-censoring, and that sub-optimal choices are mostly driven by over-thinking behavior and reluctance to accept to link with players who have been disloyal earlier in the game.
    JEL: D03 D49 O17
    Date: 2015–11
  5. By: Driesen B.W.I.; Lombardi M.; Peters H.J.M. (GSBE)
    Abstract: We study feasible sets of the bargaining problem under two different assumptions the players are subjective expected utility maximizers or the players are Choquet expected utility maximizers. For the latter case, we consider the effects on bargaining solutions when players become more risk averse and when they become more uncertainty averse.
    Keywords: Bargaining Theory; Matching Theory; Criteria for Decision-Making under Risk and Uncertainty;
    JEL: C78 D81
    Date: 2015
  6. By: Khan A.; Peeters R.J.A.P. (GSBE)
    Abstract: We study the market outcome that evolves in the long-run when price-setting firms, that compete in a differentiated market, are driven by an imitation dynamic. We find that the prices that can evolve in the long-run depend on the level of market differentiation and on the degree of oversight firms have on market decisions and outcomes. The unique symmetric pure Nash equilibrium price is always supported in the long-run, and it is the unique long-run market outcome for high and low levels of differentiation, when there is no oversight or even with limited oversight on market decisions and outcomes. For intermediate levels of differentiation, in addition to the Nash equilibrium price, there is a set of prices that may emerge in the long-run while these other prices are below Nash equilibrium price when there is almost no oversight on market performances, they are above Nash equilibrium price when the oversight on market performances is more acute.
    Keywords: Noncooperative Games; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games; Firm Behavior: Theory; Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection; Production, Pricing, and Market Structure; Size Distribution of Firms; Oligopoly and Other Imperfect Markets;
    JEL: C72 C73 D21 D43 L11 L13
    Date: 2015
  7. By: Avner Ben-Ner; John A. List; Louis Putterman; Anya Samek
    Abstract: An active area of research within the social sciences concerns the underlying motivation for sharing scarce resources and engaging in other pro-social actions. We develop a theoretical framework that sheds light on the developmental origins of social preferences by providing mechanisms through which parents transmit preferences for generosity to their children. Then, we conduct a field experiment with nearly 150 3-5 year old children and their parents, measuring (1) whether child and parent generosity is correlated, (2) whether children are influenced by their parents when making sharing decisions and (3) whether parents model generosity to children. We observe no correlation of independently measured parent and child sharing decisions at this young age. Yet, we find that apart from those choosing an equal allocation of resources between themselves and another child, children adjust their behaviors to narrow the gap with their parent’s or other adult’s choice. We find that fathers, and parents of initially generous children, increase their sharing when informed that their child will be shown their choice.
    Date: 2015
  8. By: Li Chen; Juan Sebastian Pereyra Barreiro
    Keywords: school choice; incomplete information; self-selection; serial dictatorship; mechanism; strategy-proofness
    JEL: C40 C78 D63 I20 I21
    Date: 2015–12
  9. By: Eric Danan (THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique); Thibault Gajdos (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université Paul Cézanne - Aix-Marseille 3 - Université de la Méditerranée - Aix-Marseille 2 - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - AMU - Aix-Marseille Université); Brian Hill (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS - Centre National de la Recherche Scientifique); Jean-Marc Tallon (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We propose and operationalize normative principles to guide social decisions when individuals potentially have imprecise and heterogeneous beliefs, in addition to conflicting tastes or interests. To do so we adapt the standard Pareto principle to those preference comparisons that are robust to belief imprecision and characterize social preferences that respect this robust principle. We also characterize a suitable restriction of this principle. The former principle provides stronger guidance when it can be satisfied; when it cannot, the latter always provides minimal guidance.
    Keywords: Unambiguous preferences,Pareto dominance,Prefer-ence aggregation,Social choice,Uncertainty
    Date: 2015–12–11
  10. By: Darrell Duffie; Lei Qiao; Yeneng Sun
    Abstract: We demonstrate the existence of a continuum of agents conducting directed random searches for counterparties, and characterize the implications. Our results provide the first probabilistic foundation for static and dynamic directed random search (including the matching function approach) that is commonly used in the search-based models of financial markets, monetary theory, and labor economics. The agents' types are shown to be independent discrete-time Markov processes that incorporate the effects of random mutation, random matching with match-induced type changes, and with the potential for enduring partnerships that may have randomly timed break-ups. The multi-period cross-sectional distribution of types is shown to be deterministic via the exact law of large numbers.
    JEL: C78 D83 E41 G12
    Date: 2015–11
    Abstract: We study the impact of foresight in a transboundary pollution game; i.e. the ability of a country to control its emissions taking into account the relationship between current emissions and future levels of pollution and thus on future damages. We show that when all countries are myopic, i.e., choose the 'laisser-faire' policy, their payoffs are smaller than when all countries are farsighted, i.e., non-myopic. However, in the case where one myopic country becomes farsighted we show that the welfare impact of foresight on that country is ambiguous. Foresight may be welfare reducing for the country that acquires it. This is due to the reaction of the other farsighted countries to that country's acquisition of foresight. The country that acquires foresight reduces its emissions while the other farsighted countries extend their emissions. The overall impact on total emissions is ambiguous. Moreover, our results suggest that incentive mechanisms, that involve a very small (possibly zero) present value of transfers, can play an important role in inducing a country to adopt a farsighted behavior and diminishing the number of myopic countries. These incentives would compensate the myopic country for the short-run losses incurred from the acquisition of foresight and can be reimbursed by that country from the gains from foresight that it enjoys in the long run.
    Keywords: myopia, differential games, transboundary pollution
    JEL: C73 D90 Q59
    Date: 2015

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