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on Game Theory |
| By: | Johannes Horner (Cowles Foundation, Yale University); Satoru Takahashi (National University of Singapore) |
| Abstract: | We provide tight bounds on the rate of convergence of the equilibrium payoff sets for repeated games under both perfect and imperfect public monitoring. The distance between the equilibrium payoff set and its limit vanishes at rate (1 - delta)^{1/2} under perfect monitoring, and at rate (1 - delta)^{1/4} under imperfect monitoring. For strictly individually rational payoff vectors, these rates improve to 0 (i.e., all strictly individually rational payoff vectors are exactly achieved as equilibrium payoffs for delta high enough) and (1 - delta)^{1/2}, respectively. |
| Keywords: | Repeated games, Rates of convergence |
| JEL: | C72 C73 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2029&r=gth |
| By: | Florian Gauer (Bielefeld University); Christoph Kuzmics (University of Graz) |
| Abstract: | Two individuals are involved in a conflict situation in which preferences are ex ante uncertain. While they eventually learn their own preferences, they have to pay a small cost if they want to learn their opponent’s preferences. We show that, for sufficiently small positive costs of information acquisition, in any Bayesian Nash equilibrium of the resulting game of incomplete information the probability of getting informed about the opponent’s preferences is bounded away from zero and one. |
| Keywords: | Incomplete Information; Information Acquisition; Theory of Mind; Conflict; Imperfect Empathy |
| JEL: | C72 C73 D03 D74 D82 D83 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2016-02&r=gth |
| By: | Hammond, Peter J. (Department of Economics and CAGE (Centre for Competitive Advantage in the Global Economy) University of Warwick) |
| Abstract: | To prove their Walrasian equilibrium existence theorem, Arrow and Debreu (1954) devised an abstract economy that Shapley and Shubik (1977) cricitized as a market game because, especially with untrustworthy traders, it fails to determine a credible outcome away from equilibrium. All this earlier work also postulated a Walrasian auctioneer with complete information about traders' preferences and endowments. To ensure credible outcomes, even in disequilibrium, warehousing is introduced into a multi-stage market game. To achieve Walrasian outcomes in a large economy with incomplete information, even about traders' endowments, a strategy-proof demand revelation mechanism is considered, and then extended to include warehousing. |
| Keywords: | market design ; demand revelation ; strategyproofness ; hidden endowments ; warehousing |
| JEL: | C72 D41 D51 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1108&r=gth |
| By: | John J. Nay; Yevgeniy Vorobeychik |
| Abstract: | The Prisoner's Dilemma has been a subject of extensive research due to its importance in understanding the ever-present tension between individual self-interest and social benefit. A strictly dominant strategy in a Prisoner's Dilemma (defection), when played by both players, is mutually harmful. Repetition of the Prisoner's Dilemma can give rise to cooperation as an equilibrium, but defection is as well, and this ambiguity is difficult to resolve. The numerous behavioral experiments investigating the Prisoner's Dilemma highlight that players often cooperate, but the level of cooperation varies significantly with the specifics of the experimental predicament. We present the first computational model of human behavior in repeated Prisoner's Dilemma games that unifies the diversity of experimental observations in a systematic and quantitatively reliable manner. Our model relies on data we integrated from many experiments, comprising 168,386 individual decisions. The computational model is composed of two pieces: the first predicts the first-period action using solely the structural game parameters, while the second predicts dynamic actions using both game parameters and history of play. Our model is extremely successful not merely at fitting the data, but in predicting behavior at multiple scales in experimental designs not used for calibration, using only information about the game structure. We demonstrate the power of our approach through a simulation analysis revealing how to best promote human cooperation. |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1601.07792&r=gth |
| By: | Marco Faillo (University of Trento); Alessandra Smerilli (PFSE-Auxilium); Robert Sugden (University of East Anglia) |
| Abstract: | We investigate experimentally the conditions under which bounded best response and collective optimality reasoning are used in coordination games. Using level-k and team reasoning theories as exemplars, we study games with three pure-strategy equilibria, two of which are mutually isomorphic. The third is always team-optimal, but whether it is predicted by level-k theory differs across games. We find that collective optimality reasoning is facilitated if the collectively optimal equilibrium gives more equal payoffs than the others, and is inhibited if that equlibrium is Pareto-dominated by the others, considered separately. We suggest that coordination cannot be explained by a single theory. |
| Keywords: | team reasoning, level-k theory, coordination games |
| JEL: | C7 C9 |
| Date: | 2016–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-01&r=gth |
| By: | Sebastian Schäfer (University of Siegen); Lisa Schulten (University of Siegen) |
| Abstract: | Despite negative experiences with auctioning off subsidies for renewable energy in some countries, tenders are increasingly used today. We develop a reverse auction which accounts for particularities of intermittent renewable energy sources. Determining the quantity, demanded by the regulator, is internalized and directly linked to his two main objectives. On the one hand, the regulator seeks for a high share of renewable energy. On the other hand, he wants to enhance burden sharing between electricity consumers and renewable electricity producers. We further account for asymmetric information in reverse auctions. We analyze incentives for bidders to manipulate the auction outcome and adapt the design to prevent this behavior. Regional features as grid and generating capacity can be considered to optimize the deployment of renewable energy. We thereby introduce a link to fossil capacity auctions. |
| Keywords: | Auction Design, Tendering, Renewable Energy, Adverse Selection, Moral Hazard, Burden Sharing |
| JEL: | C72 D44 D82 L10 Q48 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201520&r=gth |
| By: | Rodrigo A. Velez (Texas A&M University, Department of Economics) |
| Abstract: | We study the stability with respect to the introduction of opportunity-based inequity aversion a la Dufwenberg et. al (2011) of three welfare properties satisfied by competitive equilibria in self-regarding economies: (i) Pareto efficiency may not be a stable property; (ii) undomination with respect to income redistribution is a stable property whenever the marginal indirect utility of income has no extreme variations; and (iii) generically (endowment-wise) market-constrained efficiency is a stable property. |
| Keywords: | inequity aversion, general equilibrium |
| JEL: | D63 C72 |
| Date: | 2016–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:txm:wpaper:20160111-001&r=gth |
| By: | Hammond, Peter J. (Department of Economics and CAGE (Centre for Competitive Advantage in the Global Economy) University of Warwick) |
| Abstract: | To prove their Walrasian equilibrium existence theorem, Arrow and Debreu (1954) devised an abstract economy that Shapley and Shubik (1977) cricitized as a market game because, especially with untrustworthy traders, it fails to determine a credible outcome away from equilibrium. All this earlier work also postulated a Walrasian auctioneer with complete information about traders' preferences and endowments. To ensure credible outcomes, even in disequilibrium, warehousing is introduced into a multi-stage market game. To achieve Walrasian outcomes in a large economy with incomplete information, even about traders' endowments, a strategy-proof demand revelation mechanism is considered, and then extended to include warehousing. |
| Keywords: | market design ; demand revelation ; strategyproofness ; hidden endowments ; warehousing JEL classification numbers: C72 ; D41 ; D47 ; D51 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wcreta:16&r=gth |
| By: | Bakó, Barna; Kálecz-Simon, András |
| Abstract: | Managerial bonus schemes and their effects on firm strategies and market outcomes are extensively discussed in the literature. Though quota bonuses are not uncommon in practice, they have not been analysed so far. In this article we compare quota bonuses to profit-based evaluation and sales (quantity) bonuses. In a duopoly setting with independent demand shocks we find that under certain circumstances choosing quota bonuses is a dominant strategy. This may explain the widespread use of quota bonuses in situations where incentive problems are relevant. |
| Keywords: | strategic delegation, oligopoly, managerial incentives |
| JEL: | C73 D21 D43 L13 |
| Date: | 2015–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:cvh:coecwp:2016/01&r=gth |