nep-gth New Economics Papers
on Game Theory
Issue of 2016‒01‒03
fourteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. An Extended N-player Network Game and Simulation of Four Investment Strategies on a Complex Innovation Network By Zhou, Wen; Koptyug, Nikita; Ye, Shutao; Jia, Yifan; Lu, Xiaolong
  2. Efficient networks for a class of games with global spillovers By Pascal Billand; Christophe Bravard; Jacques Durieu; Sudipta Sarangi
  3. Hidden Action and Outcome Contractibility: An Experimental Test of Contract Theory By Hoppe, Eva I; Schmitz, Patrick W
  4. The Problem with All-or-nothing Trust Games: What Others Choose Not to Do Matters In Trust-based Exchange By Schniter, Eric; Sheremeta, Roman; Shields, Timothy
  5. "Buy-It-Now" or "Sell-It-Now" Auctions: Effects of Changing Bargaining Power in Sequential Trading Mechanisms By Grebe, Tim; Ivanova-Stenzel, Radosveta; Kröger, Sabine
  6. Monitoring institutions in indefinitely repeated games By G. Camera; M. Casari
  7. Instruction length and content: Effects on punishment behaviour in public goods games By Abhijit Ramalingam; Antonio J. Morales; James M. Walker
  8. Good Samaritans and the Market: Experimental Evidence on Other-Regarding Preferences in Partnership Formation By Belot, Michèle; Fafchamps, Marcel
  9. Observing Each Other's Observations in a Bayesian Coordination Game By Dominik Grafenhofer; Wolfgang Kuhle
  10. Electricity markets: Designing auctions where suppliers have uncertain costs By Pär Holmberg and Frank Wolak
  11. International Environmental Agreements-The Role of Foresight By Effrosyni Diamantoudi; Eftichios S. Sartzetakis
  12. Bargaining in the Absence of Property Rights: An Experiment By Oren Bar-Gill; Christoph Engel
  13. La teoria dei giochi e John Nash By Stefano Vannucci
  14. Bidding in first-price and second-price interdependent-values auctions: A laboratory experiment By Theodore L. Turocy; Timothy N. Cason

  1. By: Zhou, Wen (School of Computer Engineering and Science); Koptyug, Nikita (Research Institute of Industrial Economics (IFN)); Ye, Shutao (School of Computer Engineering and Science); Jia, Yifan (School of Computer Engineering and Science); Lu, Xiaolong (School of Computer Engineering and Science)
    Abstract: As computer science and complex network theory develop, non-cooperative games and their formation and application on complex networks have been important research topics. In the inter-firm innovation network, it is a typical game behavior for firms to invest in their alliance partners. Accounting for the possibility that firms can be resource constrained, this paper analyzes a coordination game using the Nash bargaining solution as allocation rules between firms in an inter-firm innovation network. We build an extended inter-firm n-player game based on nonidealized conditions, describe four investment strategies and simulate the strategies on an inter-firm innovation network in order to compare their performance. By analyzing the results of our experiments, we find that our proposed greedy strategy is the best-performing in most situations. We hope this study provides a theoretical insight into how firms make investment decisions.
    Keywords: Complex Networks; Game Theory; Innovation; Innovation Network; Nash Equilibrium
    JEL: C72 C81 C82 D81 L14
    Date: 2015–12–15
  2. By: Pascal Billand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Christophe Bravard (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Institut national de la recherche agronomique (INRA) - Université Grenoble Alpes - Grenoble 2); Jacques Durieu (CREG - Centre de recherche en économie de Grenoble - Grenoble 2 UPMF - Université Pierre Mendès France); Sudipta Sarangi (DIW - Deutsches Institut fur Wirtschaftsforschung, LSU - Louisiana State University at Baton Rouge)
    Abstract: In this paper we examine efficient networks in network formation games with global spillovers that satisfy convexity and sub-modularity properties. Unlike the previous literature we impose these properties on individual payoff functions. We establish that efficient networks of this class of games are nested split graphs. This allows us to complete the work of Goyal and Joshi (2006) and Westbrock (2010) on collaborative oligopoly networks.
    Keywords: networks, effi ciency, convexity, sub - modularity, oligopolies
    Date: 2015
  3. By: Hoppe, Eva I; Schmitz, Patrick W
    Abstract: We present the first large-scale laboratory experiment designed to capture the canonical hidden action problem as studied in contract theory, comparing treatments with unobservable effort to benchmark treatments with verifiable effort. In line with contract theory, when effort is a hidden action, the chosen effort levels crucially depend on the contractibility of the outcome. In our one-shot experiment the players endogenously negotiate contracts. In the absence of communication, they typically avoid gift-exchange situations. Even when the outcome is contractible and the hidden action problem is typically overcome with incentive-compatible contracts, communication is helpful since it may reduce strategic uncertainty.
    Keywords: Contract theory; Hidden action; Incentive theory; Laboratory experiments; Moral hazard
    JEL: C72 C92 D82 D86
    Date: 2015–12
  4. By: Schniter, Eric; Sheremeta, Roman; Shields, Timothy
    Abstract: Many economic interactions are characterized by “all-or-nothing” action spaces that may limit the demonstrability of intended trust. We investigate whether restricting investment opportunities to all-or-nothing options affects the investment rate and propensity to reciprocate. We do this by manipulating the investor’s action space in two versions of the trust game. In the all-or-nothing game the investor can invest either $10 (all) or $0 (nothing), while in the continuous game the investor can invest any amount between $10 and $0. In both games, the trustee receives the tripled investment and then can return any amount to the investor. Results indicate that investments are higher in the all-or-nothing game than in the continuous game. However, higher investments in the all-or-nothing game do not lead to higher returns. To the contrary, conditional on $10 investments, on average trustees return less in the all-or-nothing game. Although the all-or-nothing action space results in greater wealth overall, it also appears to “backfire” for investors who do not benefit from the increased wealth. These results support the proposition that humans perceive intentions not only by evaluating what others do but also by evaluating what others choose not to do.
    Keywords: trust game, demonstrability, intentions, reciprocity, experiment
    JEL: C72 C91
    Date: 2015–12–28
  5. By: Grebe, Tim (InterVal GmbH); Ivanova-Stenzel, Radosveta (Technical University of Berlin); Kröger, Sabine (Université Laval)
    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
    JEL: C72 C91 D44 D82
    Date: 2015–12
  6. By: G. Camera; M. Casari
    Abstract: Does monitoring past conduct facilitate intertemporal cooperation? We designed an experiment characterized by strategic uncertainty and multiple equilibria where coordinating on the efficient outcome is a challenge. Participants, interacting anonymously in a group, could pay a cost either to obtain information about their counterparts, or to create a freely available public record of individual conduct. Both monitoring institutions were actively employed. However, groups were unable to attain higher levels of cooperation compared to a treatment without monitoring. Information about past conduct alone thus appears to be ineffective in overcoming coordination challenges.
    JEL: C70 C90 D80
    Date: 2015–12
  7. By: Abhijit Ramalingam (University of East Anglia); Antonio J. Morales (Universidad de Malaga); James M. Walker (Indiana University)
    Abstract: Instruction length and content have been shown to affect comprehension levels and decision times of experimental subjects in public goods games. However, to date, there is no evidence of a significant impact on behaviour. We investigate the effects of instruction length and content on comprehension and behaviour in a more complicated setting – a public goods game with punishment. We find that longer instructions, that include examples that highlight the positive externality associated with public goods contributions, increase the comprehension levels of subjects, significantly lowering the time taken to answer the pre-experiment quiz and make decisions. Importantly, the differences in instructions are also associated with significant differences in behaviour. On average, groups that receive shorter instructions fail to use punishment effectively to raise contribution levels while those that receive longer instructions sustain higher contribution levels over time. In the former case, groups target low contributors less frequently than appears necessary to induce greater cooperation.
    Keywords: public goods, punishment, instruction length, decision times, contributions, punishment
    JEL: C72 C91 C92 H41
    Date: 2015–12–07
  8. By: Belot, Michèle; Fafchamps, Marcel
    Abstract: We construct an experiment to study the role of other-regarding preferences in the process of partnership formation. The literature on decentralized matching describes the process of match formation as a market-like process while the literature on other-regarding preferences suggests that such preferences are particularly strong in small partnerships. So we ask: do people apply market-like heuristics when searching for a partner (i.e. behave selfishly); or do they behave more pro-socially, as they do once these partnerships or small entities are formed? And if they do behave differently, what motivates differences in behavior? We focus on one possible mechanism explaining differences in behavior: the saliency of the implications of choices on others. We compare partnership choices in three treatments, varying the saliency of the implications of choices on others. We find that a market-like situation reduces the `good samaritan' spirit in this environment as well: when choosing a partner agents are less likely to sacrifice their own material well-being to increase the well-being of others.
    Keywords: Efficiency; Inequality; Markets; Other-regarding preferences; Partnership formation
    JEL: A13 C91 D61 D63 D64
    Date: 2015–12
  9. By: Dominik Grafenhofer (Max Planck Institute for Research on Collective Goods, Bonn); Wolfgang Kuhle (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We study a Bayesian coordination game where agents receive private information on the game's payoff structure. In addition, agents receive private signals that inform them of each other's private information. We show that once agents possess these different types of information, there exists a coordination game in the evaluation of this information. Even though the precisions of both signal types is exogenous, the precision with which agents forecast each other's actions in equilibrium turns out to be endogenous. As a consequence, there exist multiple equilibria which differ with regard to the way that agents weight their private information to forecast each other's actions. Finally, even though all players' signals are of identical quality, it turns out that efficient equilibria are asymmetric.
    Keywords: Coordination Games, Equilibrium Selection, Primary Signals, Secondary Signals
    Date: 2015–11
  10. By: Pär Holmberg and Frank Wolak
    Abstract: We analyse how the market design influences the bidding behaviour in multi-unit auctions, such as wholesale electricity markets. It is shown that competition improves for increased market transparency and we identify circumstances where the auctioneer prefers uniform to discriminatory pricing. We note that political risks could significantly worsen competition in hydro-dominated markets. It would be beneficial for such markets to have clearly defined contingency plans for extreme market situations.
    Keywords: cost uncertainty, asymmetric information, uniform-price auction, discriminatory pricing, Bertrand game, market transparency, wholesale electricity market, treasury auction, Bayesian Nash equilibria
    JEL: C72 D43 D44 L13 L94
    Date: 2015–12–21
  11. By: Effrosyni Diamantoudi (Department of Economics, Concordia University); Eftichios S. Sartzetakis (Department of Economics, University of Macedonia)
    Abstract: The present paper attempts to bridge the gap between the coop- erative and the non-cooperative approach employed to examine the size of stable coalitions, formed to address global environmental prob- lems. We do so by endowing countries with foresightedness, that is, by endogenizing the reaction of the coalition's members to a deviation by one member. We assume that when a country contemplates with- drawing or joining an agreement, it takes into account the reactions of other countries ignited by its own actions. We identify conditions under which there always exists a unique set of farsighted stable IEAs. The new farsighted IEAs can be much larger than those some of the previous models supported but are not always Pareto efficient.
    Keywords: International Environmental Agreements.
    Date: 2015–12
  12. By: Oren Bar-Gill (Harvard Law School); Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: The Coase theorem posits: If [1] property rights are perfect, [2] contracts are enforceable, [3] preferences are common knowledge, and [4] transaction costs are zero, then the initial allocation of property rights only matters for distribution, not for efficiency. In this paper we claim that condition [1] can be dropped and show experimentally that this is also empirically true. This also holds when we frame taking as “stealing”, and when the initial possessor has to work for the good.
    Keywords: Coase theorem, absolute vs. relative right, bargaining, efficiency, distribution, fairness
    Date: 2015–11
  13. By: Stefano Vannucci
    Abstract: La teoria dei giochi è l?area di ricerca matematica in cui i contributi di John Nash sono stati meno profondi ed allo stesso tempo hanno forse avuto a tutt?oggi l?impatto maggiore. Nel presente lavoro ci si propone di contribuire alla commemorazione di un grande ricercatore provando a spiegare questo apparente paradosso
    JEL: A12 C6 C7
    Date: 2015–12
  14. By: Theodore L. Turocy (University of East Anglia); Timothy N. Cason (Purdue University)
    Abstract: We report a laboratory experiment on first-price and second-price auctions in settings with independent signals and interdependent values. The environment includes independent private values and the common-value "wallet game" as limiting cases. We manipulate the degree of interdependence of values across sessions, while maintaining the same Bayes-Nash equilibrium bidding function. In contrast, cursed equilibrium predicts bids will be raised for lower signals. We find some support for cursed equilibrium, in that bids change as the degree of value interdependence changes. Contrary to both Bayes-Nash and cursed equilibrium, auction revenues are largest for intermediate levels of interdependence. We construct a model combining cursedness with an underweighting of the opportunity costs of higher bids, and find substantial bidder heterogeneity. A majority of bidders are either fully cursed and disregard completely the bad news that winning the auction entails, or are not cursed at all. We also find evidence for some systematic procedural differences in bidding between first-price and second-price auctions.
    Keywords: auctions, affiliated values, winner's curse, wallet game, experiments
    JEL: D44 C91
    Date: 2015–12–18

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