nep-gth New Economics Papers
on Game Theory
Issue of 2016‒03‒06
thirteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. The Associated Solidarity Game of n-Person Transferable Utility Games: Linking the Solidarity Value to the Shapley Value. By Miamo Wendji, Clovis
  2. Parameterized games, minimal Nash correspondences, and connectedness By Frank Page
  4. Costly Preplay Communication and Coordination in Stag-Hunt Games By Buyukboyaci, Muruvvet; Kucuksenel, Serkan
  5. Ambiguous Games without a State Space and Full Rationality By Giuseppe De Marco
  6. Stochastic Target Games and Dynamic Programming via Regularized Viscosity Solutions By Bruno Bouchard; Marcel Nutz
  7. Constructing Social Division to Support Cooperation By Choy , James
  8. Leniency and Damages By Marvao, Catarina; Spagnolo, Giancarlo; Buccirossi, Paolo
  9. Gossip and the Efficiency of Interactions By Fehr, Dietmar; Sutter, Matthias
  10. On the different geographic characteristics of Free Trade Agreements and Customs Unions By James Lake; Halis M. Yildiz
  11. The line planning routing game By Gattermann, P.; Schiewe, A.; Schmidt, M.
  12. Does the Reliability of Institutions Affect Public Good Contributions? Evidence from a Laboratory Experiment By Fochmann, Martin; Jahnke, Bjoern; Wagener, Andreas
  13. Optimal Crowdfunding Design By Matthew Ellman; Sjaak Hurkens

  1. By: Miamo Wendji, Clovis
    Abstract: We introduce for any TU-game, a new TU-game referred as its associated solidarity game (ASG). The ASG gives more power to the grand coalition by reducing the payoffs of others coalitions. It comes that, the Shapley value of the ASG is the Solidarity value of the initial game.
    Keywords: TU-game, Shapley value, Solidarity value
    JEL: C71 D63
    Date: 2015–05
  2. By: Frank Page
    Abstract: Economics and game theory are replete with examples of parameterized games. We show that all minimal Nash payoff USCOs belonging to the Nash equilibrium correspondence of a parameterized game with payoff functions that are uniformly equicontinuous in players’ action choices with respect to parameters have minimal Nash USCOs that are essentially-valued as well as connected-valued. We also show that in general for any uniformly equicontinuous parameterized game, the Nash equilibrium correspondence is the composition of two correspondences: the graph correspondence of the collective security mapping and the Ky Fan Correspondence. The graph correspondence, a mapping from the parameter space into Ky Fan sets, encodes the specifics of the parameterized game being consider, while the Ky Fan Correspondence (i.e., the KFC), a mapping from Ky Fan sets into Nash equilibria, is universal and common to all parameterized games. We also show that the range of the graph correspondence, contained in the hyperspace of Ky Fan sets is a hyperspace Peano continuum - and is therefore locally connected. This means that for any two distinct Ky Fan sets contained in the range of graph correspondence there is a continuous segment in the range of the graph correspondence containing these two distinct Ky Fan sets as endpoints.
    Keywords: minimal USCO; uniformly equicontinuous sets of payoff functions; essential Nash equilibria; connected sets of Nash equilibria; hyperspaces of Ky Fan sets; Nikaido and Isoda functions; quasi-minimal USCOs; 3M mappings; KFC correspondences; dense selections; Peano continua; locally connected continua.
    JEL: C7
    Date: 2015–09
  3. By: Yoshio Kamijo (School of Management, Kochi University of Technology); Hiroki Ozono (Faculty of Law, Economic and Humanities, Kagoshima University); Kazumi Shimizu (School of Political Science and Economics, Waseda University)
    Abstract: We examine three tools that can enhance coordination success in a repeated multiple choice coordination game. Gradualism means that the game starts as an easy coordination problem and moves gradually to a more difficult one. Endogeneity implies that a gradual increase in the upper limit of coordination occurs only if coordination with the Pareto superior equilibrium in a stage game is attained. Modification requires that when they fail coordination, the level of the next coordination game is adjusted to an easier one. We find from laboratory experiment that a mechanism that combines these three, termed herein the GEM, works well.
    Keywords: Coordination Failure, Minimum Effort Game, Experiment, Gradualism, Endogeneity, Modification
    JEL: C72 C91 C92 M54
    Date: 2014–04
  4. By: Buyukboyaci, Muruvvet; Kucuksenel, Serkan
    Abstract: In this paper, we experimentally investigate the impact of costly indirect and direct messages on coordination levels in a stag-hunt game. We also compare the coordination rates with costly pre-play communication to the rates with costless pre-play communication. Three main insights emerge from our experiments. First, we find a significant decrease in message usage with message cost in both treatments and a higher decrease in the indirect-message treatment. Second, we find that although there is no significant effect of costless or costly indirect messages on the frequency of risky actions, both costless and costly direct messages significantly increase the frequency of risky actions. Third, while we find a significant increase in the coordination rate on the payoff-dominant equilibrium from costless indirect message treatment to costly indirect message treatment, this rate significantly decreases from costless direct message to costly direct message treatment. Our findings show that depending on the structure of messages, message cost may increase or decrease the coordination rates on the payoff-dominant equilibrium.
    Keywords: coordination, cheap talk, pre-play communication, risk information, costly messages
    JEL: C72 C91
    Date: 2016–01–29
  5. By: Giuseppe De Marco (Università di Napoli Parthenope and CSEF)
    Abstract: Aim of this paper to differentiate and to better understand the assumptions that must be imposed on the structure of ambiguity and on the attitudes towards ambiguity in order to have the existence of equilibria in games under ambiguous belief correspondences. In the present paper, this class of games is studied under weaker restrictions on preferences which are not required to be rational. This paper shows that the assumption of imprecision averse (resp. loving) preferences is key to obtain equilibrium existence whenever it is combined with the property of convexity (resp. concavity) of the ambiguous belief correspondences. The paper also studies the role played by these assumptions in different specific models, so as to illustrate the applicability of the results of equilibrium existence.
    Date: 2016–01–18
  6. By: Bruno Bouchard (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris IX - Paris Dauphine - CNRS - Centre National de la Recherche Scientifique); Marcel Nutz (Dept. of Mathematics - Columbia University [New York])
    Abstract: We study a class of stochastic target games where one player tries to find a strategy such that the state process almost-surely reaches a given target, no matter which action is chosen by the opponent. Our main result is a geometric dynamic programming principle which allows us to characterize the value function as the viscosity solution of a non-linear partial differential equation. Because abstract mea-surable selection arguments cannot be used in this context, the main obstacle is the construction of measurable almost-optimal strategies. We propose a novel approach where smooth supersolutions are used to define almost-optimal strategies of Markovian type, similarly as in ver-ification arguments for classical solutions of Hamilton–Jacobi–Bellman equations. The smooth supersolutions are constructed by an exten-sion of Krylov's method of shaken coefficients. We apply our results to a problem of option pricing under model uncertainty with different interest rates for borrowing and lending.
    Keywords: 49L20,Viscosity solution AMS 2000 Subject Classification 93E20,Shaking of coefficients,91B28,Knightian uncertainty,Stochastic differential game,Stochastic target
    Date: 2015–07–10
  7. By: Choy , James (Department of Economics, University of Warwick)
    Abstract: Many societies are divided into multiple smaller groups. Certain kinds of interaction are more likely to take place within a group than across groups. I model a reputation effect that enforces these divisions. Agents who interact with members of different groups can support lower levels of cooperation with members of their own groups. A hierarchical relationship between groups appears endogenously in equilibrium. Group divisions appear without any external cause, and improvements in formal contracting institutions may cause group divisions to disappear. Qualitative evidence from the anthropological literature is consistent with several predictions of the model.
    Keywords: Cooperation, Caste, Social Institution
    JEL: C73 O12 O17
    Date: 2016
  8. By: Marvao, Catarina (Stockholm Institute of Transition Economics); Spagnolo, Giancarlo (Stockholm Institute of Transition Economics); Buccirossi, Paolo (LEAR)
    Abstract: Modern antitrust engenders a possible conflict between public and private enforcement due to the central role of Leniency Programs. Damage actions may reduce the attractiveness of Leniency Programs for cartel participants if their cooperation with the competition authority increases the chance that the cartel’s victims will bring a successful suit. A long legal debate culminated in a EU directive, adopted in November 2014, which seeks a balance between public and private enforcement. It protects the effectiveness of a Leniency Program by preventing the use of leniency statements in subsequent actions for damages and by limiting the liability of the immunity recipient to its direct and indirect purchasers. Our analysis shows such compromise is not required: limiting the cartel victims’ ability to recover their loss is not necessary to preserve the effectiveness of a Leniency Program and may be counterproductive. We show that damage actions will actually improve its effectiveness, through a legal regime in which the civil liability of the immunity recipient is minimized (as in Hungary) and full access to all evidence collected by the competition authority, including leniency statements, is granted to claimants (as in the US).
    Keywords: Private and public enforcement; cartels; competition policy; Leniency Program
    JEL: C72 C73 D43 D81 H11 K21 K42 L13 L44 L51
    Date: 2015–02–13
  9. By: Fehr, Dietmar (WZB - Social Science Research Center Berlin); Sutter, Matthias (University of Cologne)
    Abstract: Human communication in organizations often involves a large amount of gossiping about others. Here we study in an experiment whether gossip affects the efficiency of human interactions. We let subjects play a trust game. Third parties observe a trustee's behavior and can gossip about it by sending a message to the trustor with whom the observed trustee will be paired (for the first time) in the next round. While messages are non-verifiable and sometimes also incorrect, the possibility of gossip is highly efficiency-increasing compared to a situation without any gossip. In two further control treatments, we show that the mere fact of being observed by third parties cannot explain the efficiency-increasing effect of gossip, and that noisy gossip (where information transmission from third parties to trustors can fail) still increases efficiency, but less so than if information transmission is undisturbed.
    Keywords: gossip, communication, trust game, efficiency, experiment
    JEL: C72 C92
    Date: 2016–02
  10. By: James Lake (Southern Methodist University); Halis M. Yildiz (Ryerson University)
    Abstract: Casual observation reveals a striking phenomenon of Preferential Trade Agreements (PTAs): while Customs Unions (CUs) are only intra-regional, Free Trade Agreements (FTAs) are inter and intra-regional. Using a farsighted dynamic model, we endogenize the equilibrium path of PTAs among two close countries and one far country. Rising transport costs mitigate the cost of discrimination faced by the far country as a CU non-member and diminish the value of preferential access as a CU member. Thus, sufficiently large transport costs imply an FTA is the only type of PTA that can induce the far country's participation in PTA formation. Unlike CU formation, FTA formation can induce participation because FTAs provide a flexibility benefit: an FTA member can form further PTAs with non-members but a CU member must do so jointly with all existing members. Hence, in equilibrium, CUs are intra-regional while FTAs are intra- and inter-regional.
    Keywords: Free Trade Agreement, Customs Union, fl?exibility, coordination, geography, networks, farsighted
    JEL: C71 F12 F13
    Date: 2014–05
  11. By: Gattermann, P.; Schiewe, A.; Schmidt, M.
    Abstract: In this paper, we propose a novel algorithmic approach to solve line planning problems. To this end, we model the line planning problem as a game where the passengers are players which aim at minimizing individual objective functions composed of travel time, transfer penalties, and a share of the overall cost of the solution. To find equilibria of this routing game, we use a best-response algorithm. We investigate, under which conditions on the line planning model a passenger’s best-response can be calculated efficiently and which properties are needed to guarantee convergence of the best-response algorithm. Furthermore, we determine the price of anarchy which bounds the objective value of an equilibrium with respect to a system- optimal solution of the line planning problem. For problems where best-responses cannot be found efficiently, we propose heuristic methods. We demonstrate our findings on some small computational examples.
    Keywords: transportation, game theory, routing, line planning, routing game
    Date: 2014–12–03
  12. By: Fochmann, Martin; Jahnke, Bjoern; Wagener, Andreas
    Abstract: Reliable institutions - i.e., institutions that live up to the norms that agents expect them to keep - foment cooperative behavior. We experimentally confirm this hypothesis in a public goods game with a salient norm that cooperation was socially demanded and corruption ought not to occur. When nevertheless corruption attempts came up, groups that were told that "the system" had fended off the attempts made considerably higher contributions to the public good than groups that only learned that the attempt did not affect their payoffs or that were not at all exposed to corruption.
    Keywords: Public goods, Experiment, Institutions
    JEL: H41 A13 C91
    Date: 2016–02
  13. By: Matthew Ellman; Sjaak Hurkens
    Abstract: We characterize optimal reward-based crowdfunding where production is contingent on an aggregate funding threshold. Crowdfunding adapts project-implementation to demand (market-testing) and its multiple prices enhance rent-extraction via pivotality, even for large crowds, indeed for arbitrarily large if tastes are correlated. Adaptation raises welfare and rent-extraction can enhance adaptation, but sometimes distorts production and lowers welfare. Threshold commitment, central to All-Or-Nothing platforms, raises profits but can lower consumer welfare. When new buyers arrive ex-post, crowdfunding’s market-test complements traditional finance and informs subsequent pricing. We prove that crowdfunding is a general optimal mechanism in our baseline.
    Keywords: crowdfunding, Mechanism Design, entrepreneurial finance, market-testing, adaptation, rent-extraction
    JEL: C72 D42 L12
    Date: 2016–01

This nep-gth issue is ©2016 by László Á. Kóczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.