nep-gth New Economics Papers
on Game Theory
Issue of 2016‒03‒17
fifteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Fairness Versus Efficiency: How Procedural Fairness Concerns Affect Coordination By Kurz, Verena; Orland, Andreas; Posadzy, Kinga
  2. Overcoming Coordination Failure in a Critical Mass Game: Strategic Motives and Action Disclosure By Aidas Masiliunas
  3. Multiple causation, apportionment and the Shapley value By Ferey, S.; Dehez, P.
  4. On Harsanyi dividends and asymmetrid values By DEHEZ, P.
  5. Deadlines and Matching By Baughman, Garth
  6. A behavioral study of “noise” in coordination games By Michael Mäs; Heinrich H. Nax
  7. The Formation of Networks in the Diaspora By Epstein, Gil S.; Heizler (Cohen), Odelia
  8. Networks in the Diaspora By Gil S. Epstein; Odelia Heizler (Cohen)
  9. Sharing the proceeds from a hierarchical venture By Hougaard, J.; Moreno-Ternero, J.; Tvede, M.; Osterdal, L.
  10. Evolutionary Competition between Adjustment Processes in Cournot Oligopoly: Instability and Complex Dynamics By Cars H. Hommes; Marius I. Ochea; Jan Tuinstra
  11. Congested observational learning By Erik Eyster; Andrea Galeotti; Navin Kartik; Matthew Rabin
  12. Doing Your Best When Stakes Are High? Theory and Experimental Evidence By Houy, Nicolas; Nicolaï, Jean-Philippe; Villeval, Marie Claire
  13. An Economic Rationale for Dismissing Low-Quality Experts in Trial By Kim, Chulyoung
  14. Cooperation, Motivation and Social Balance By Bosworth, Steven; Singer, Tania; Snower, Dennis J.
  15. On public good provision mechanisms with dominant strategies and balanced budget By Christoph Kuzmics; Jan-Henrik Steg

  1. By: Kurz, Verena (University of Gothenburg, Department of Economics, Sweden); Orland, Andreas (University of Potsdam, Department of Economics, Germany); Posadzy, Kinga (Division of Economics, Department of Management and Engineering, Linköping University)
    Abstract: What happens if a mechanism that aims at improving coordination treats some individuals unfairly? We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations that can help them avoid miscoordination if followed by both players. One of the players receives a disadvantageous recommendation to volunteer while the other player receives a recommendation not to volunteer that gives her a payoff advantage if both players follow the recommendations they have received. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving a disadvantageous recommendation between players. We find that the recommendations improve overall efficiency regardless of their consequences for payoff division. However, there are behavioral asymmetries depending on the recommendation received by a player: advantageous recommendations are followed less frequently than disadvantageous recommendations in case of actions that guarantee a low payoff. While there is no difference in acceptance of different recommendation procedures, beliefs about others’ actions are more pessimistic in the treatment with a procedure inducing unequal expected payoffs. Our data shows that beliefs about others’ behavior are correlated with one’s own behavior, however this is the case only when following recommendations is a strategy that involves payoff-uncertainty.
    Keywords: Coordination; Correlated equilibrium; Recommendations; Procedural fairness; Volunteer’s Dilemma; Experiment
    JEL: C72 C91 D63 D83
    Date: 2016–03–01
  2. By: Aidas Masiliunas (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)
    Abstract: We study whether coordination failure is more often overcome if players can easily disclose their actions. In an experiment subjects first choose their action and then choose whether to disclose this action to other group members, and disclosure costs are varied between treatments. We find that no group overcomes coordination failure when action disclosure costs are high, but half of the groups do so when the costs are low. Simulations with a belief learning model can predict which groups will overcome coordination failure, but only if it is assumed that players are either farsighted, risk-seeking or pro-social. To distinguish between these explanations we collected additional data on individual preferences and the degree of farsightedness. We find that in the low cost treatment players classified as more farsighted more often deviate from an inefficient convention and disclose this action, while the effect of risk and social preferences is not significant.
    Keywords: lock-in, coordination failure, learning, strategic teaching, information, collective action, critical mass
    JEL: C72 C92 D83
    Date: 2016–02–11
  3. By: Ferey, S. (University of Lorraine); Dehez, P. (Université catholique de Louvain, CORE, Belgium)
    Abstract: Multiple causation is one of the most intricate issues in contemporary tort law. Sharing a loss suffered by a victim among multiple tortfeasors is indeed difficult and Courts do not always follow clear and consistent principles. Here, we argue that the axiomatic approach provided by the theory of cooperative games can be used to clarify that issue. We have considered the question from a purely game theoretic point of view in Dehez and Ferey (2013). Here we propose to analyze it in a legal perspective. We consider in particular the difficult case of successive causation to which we associate a general class of games called "sequential liability games". We show that our model rationalizes the two-step process proposed by the Restatement Third of Torts, apportionment by causation and apportionment by responsibility. More precisely, we show that the weighted Shapley value associated to a sequential liability game is the legal counterpart of this two-step process.
    Date: 2015–11–01
  4. By: DEHEZ, P. (Université catholique de Louvain, CORE, Belgium)
    Abstract: The concept of dividend of a coalition introduced by Harsanyi in 1959 within the framework of transferable utility games is a flexible and powerful concept that can be used to characterize different solution concepts, including random order values and weighted Shapley values. Many authors have contributed to that question. Here, we offer a synthesis of their work, with a particular attention to restrictions on dividend distributions, starting with the seminal contributions of Vasil'ev (1978), Hammer, Peled and Sorensen (1977) and Derks, Haller and Peters (2000), until the recent paper of van den Brink, van der Laan and Vasil'ev (2014).
    Keywords: Harsanyi dividends, Weber set, weighted Shapley values, core
    JEL: C71
    Date: 2015–09–30
  5. By: Baughman, Garth (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Deadlines and fixed end dates are pervasive in matching markets including school choice, the market for new graduates, and even financial markets such as the market for federal funds. Deadlines drive fundamental non-stationarity and complexity in behavior, generating significant departures from the steady-state equilibria usually studied in the search and matching literature. I consider a two-sided matching market with search frictions where vertically differentiated agents attempt to form bilateral matches before a deadline. I give conditions for existence and uniqueness of equilibria, and show that all equilibria exhibit an "anticipation effect" where less attractive agents become increasingly choosy over time, preferring to wait for the opportunity to match with attractive agents who, in turn, become less selective as the deadline approaches. When payoffs accrue after the deadline, or agents do not discount, a sharp characterization is available: at any point in time, the market is segmented into a first class of matching agents and a second class of waiting agents. This points to a different interpretation of unraveling observed in some markets and provides a benchmark for other studies of non-stationary matching. A simple intervention -- a small participation cost -- can dramatically improve efficiency.
    Keywords: Deadlines; matching; nonstationary dynamics; search
    Date: 2016–02–24
  6. By: Michael Mäs; Heinrich H. Nax
    Abstract: ‘Noise’ in this study, in the sense of evolutionary game theory, refers to deviations from prevailing behavioral rules. Analyzing data from a laboratory experiment on coordination in networks, we tested ‘what kind of noise’ is supported by behavioral evidence. This empirical analysis complements a growing theoretical literature on ‘how noise matters’ for equilibrium selection. We find that the vast majority of decisions (96%96%) constitute myopic best responses, but deviations continue to occur with probabilities that are sensitive to their costs, that is, less frequent when implying larger payoff losses relative to the myopic best response. In addition, deviation rates vary with patterns of realized payoffs that are related to trial-and-error behavior. While there is little evidence that deviations are clustered in time or space, there is evidence of individual heterogeneity.
    Keywords: behavioral game theory; discrete choice; evolution; learning; logit response; stochastic stability; trial-and-error
    JEL: C73 C91 C92
    Date: 2016–03
  7. By: Epstein, Gil S. (Bar-Ilan University); Heizler (Cohen), Odelia (Academic College of Tel-Aviv Yaffo)
    Abstract: In this paper, we examine possible types of network formation among immigrants in the diaspora and between those immigrants and the locals in different countries. We present the model by considering different possible interactions between immigrants and the new society in their host country. Spread of migrants from the same origin in the diaspora may well increase international trade between the different countries, depending on the types of networks formed. We present possible applications of network structure on the country of origin, such as on international trade. We find that when the size of the diaspora is sufficiently large, the natives in the different countries will be willing to bear the linking cost with the immigrants because the possible benefits increase with increasing size of the diaspora.
    Keywords: immigrants, networks, diaspora
    JEL: D85 D74 J61 L14
    Date: 2016–02
  8. By: Gil S. Epstein (Bar-Ilan University); Odelia Heizler (Cohen) (Tel-Aviv-Yaffo Academic College)
    Abstract: In this paper, we examine possible types of network formation among immigrants in the diaspora and between those immigrants and the locals in different countries. We present the model by considering different possible interactions between immigrants and the new society in their host country. Spread of migrants from the same origin in the diaspora may well increase international trade between the different countries, depending on the types of networks formed. We present possible applications of network structure on the country of origin, such as on international trade. We find that when the size of the diaspora is sufficiently large, the natives in the different countries will be willing to bear the linking cost with the immigrants because the possible benefits increase with increasing size of the diaspora.
    Keywords: Immigrants, Networks, Diaspora
    JEL: D85 D74 J61 L14
    Date: 2016–02
  9. By: Hougaard, J. (University of Copenhagen); Moreno-Ternero, J. (Université catholique de Louvain, CORE, Belgium); Tvede, M. (Newcastle University Business School); Osterdal, L. (University of Southern Denmark)
    Abstract: We consider the problem of distributing the proceeds generated from a joint venture in which the participating agents are hierarchically organized. We introduce and characterize a family of allocation rules where revenue ‘bubbles up’ in the hierarchy. The family is flexible enough to accommodate a no-transfer rule (where no revenue bubbles up) and a full-transfer rule (where all the revenues bubble up to the top of the hierarchy). Intermediate rules within the family are reminiscent of popular incentive mechanisms for social mobilization. Our benchmark model refers to the case of linear hierarchies, but we also extend the analysis to the case in which hierarchies may convey a general tree structure and include joint ownerships.
    Keywords: Hierarchies, Joint ventures, Resource allocation, Transfer rules, MIT strategy
    JEL: C71 I10
    Date: 2015–07–01
  10. By: Cars H. Hommes; Marius I. Ochea; Jan Tuinstra (Université de Cergy-Pontoise, THEMA)
    Abstract: We introduce evolutionary competition between adjustment processes in the Cournot oligopoly model. Our main focus is on rational play versus a general short-memory adaptive adjustment process. We nd that, although rational play has a stabilizing inuence, a su¢ cient increase in the number of rms in the market tends to make the Cournot-Nash equilibrium unstable. Moreover, the interaction between adjustment processes naturally leads to the emergence of complicated endogenous uctuations as the number of rms increases, even when demand and costs are linear.
    Keywords: Stability of Cournot-Nash equilibrium, n-player Cournot games, Evolutionary competition, Endogenous uctuations
    JEL: C72 C73 D43
    Date: 2016
  11. By: Erik Eyster; Andrea Galeotti; Navin Kartik; Matthew Rabin
    Abstract: We study observational learning in environments with congestion costs: an agent’s payoff from choosing an action decreases as more predecessors choose that action. Herds cannot occur if congestion on every action can get so large that an agent prefers a different action regardless of his beliefs about the state. To the extent that switching away from the more popular action reveals private information, it improves learning. The absence of herding does not guarantee complete (asymptotic) learning, however, as information cascades can occur through perpetual but uninformative switching between actions. We provide conditions on congestion costs that guarantee complete learning and conditions that guarantee bounded learning. Learning can be virtually complete even if each agent has only an infinitesimal effect on congestion costs. We apply our results to markets where congestion costs arise through responsive pricing and to queuing problems where agents dislike waiting for service.
    Keywords: congestion; information aggregation; queueing; social learning
    JEL: J1
    Date: 2014–09
  12. By: Houy, Nicolas (University of Lyon 2); Nicolaï, Jean-Philippe (ETH Zurich); Villeval, Marie Claire (CNRS, GATE)
    Abstract: Achieving an ambitious goal frequently requires succeeding in a sequence of intermediary tasks, some being critical for the final outcome, and others not. Individuals are not always able to provide a level of effort sufficient to guarantee success in all the intermediary tasks. The ability to manage effort throughout the sequence of tasks is therefore critical. In this paper we propose a criterion that defines the importance of a task and that identifies how an individual should optimally allocate a limited stock of exhaustible efforts over tasks. We test this importance criterion in a laboratory experiment that reproduces the main features of a tennis match. We show that our importance criterion is able to predict the individuals' performance and it outperforms the Morris importance criterion that defines the importance of a point in terms of its impact on the probability to achieve the final outcome. We also find no evidence of choking under pressure and stress, as proxied by electrophysiological measures.
    Keywords: critical ability, choking under pressure, Morris-importance, Skin Conductance Responses, experiment
    JEL: C72 C92 D81
    Date: 2016–02
  13. By: Kim, Chulyoung
    Abstract: The history of the admissibility standard for expert testimony in American courtrooms reveals that the standard has gradually increased to a high level since a series of important decisions by the Supreme Court. Whether such a stringent standard for expert testimony is beneficial or detrimental to the American justice system is still under fierce debate, but there has been scant economic analysis of this issue. This paper attempts to fill the gap by presenting a game-theoretic argument showing that a stringent admissibility standard operates to increase the judicial decision's accuracy under certain situations. More precisely, when the judge faces uncertainty regarding an expert's quality, the admissibility standard may provide the judge with information about the quality of expert testimony, thereby increasing the accuracy of the judicial decision by mitigating the judge's inference problem. I show the ways in which this effect dominates at trial and discuss related issues.
    Keywords: expert testimony; admissibility standard; persuasion game; evidence distortion
    JEL: C72 D82 K41
    Date: 2015–12
  14. By: Bosworth, Steven; Singer, Tania; Snower, Dennis J.
    Abstract: This paper examines the reflexive interplay between individual decisions and social forces to analyze the evolution of cooperation in the presence of "multi-directedness", whereby people's preferences depend on their psychological motives. People have access to multiple, discrete motives. Different motives may be activated by different social settings. Inter-individual differences in dispositional types affect the responsiveness of people's motives to their social settings. The evolution of these dispositional types is driven by changes in the frequencies of social settings. In this context, economic policies can influence economic decisions not merely by modifying incentives operating through given preferences, but also by influencing people's motives (thereby changing their preferences) and by changing the distribution of dispositional types in the population (thereby changing their motivational responsiveness to social settings).
    Keywords: Cooperation; Dispositions; Endogenous preferences; motivation; Reflexivity; Social dilemma
    JEL: A13 C72 D01 D03 D62 D64
    Date: 2016–02
  15. By: Christoph Kuzmics (University of Graz); Jan-Henrik Steg (Bielefeld University)
    Abstract: Consider a mechanism for the binary public good provision problem that is dominant strategy incentive compatible (DSIC), ex-post individually rational (EPIR), and ex-post budget balanced (EPBB). Suppose this mechanism has the additional property that the utility from participating in the mechanism to the lowest types is zero for all agents. Such a mechanism must be of a threshold form, in which there is a fixed threshold for each agent such that the public good is not provided if there is an agent with a value below her threshold and is provided if all agents' values exceed their respective threshold. There are mechanism that are DSIC, EPIR, and EPBB that are not of the threshold form. Mechanisms that maximize welfare subject to DSIC, EPIR, and EPBB must again have the threshold form. Finally, mechanisms that are DSIC, EPIR, EPBB and that furthermore satisfy the condition that there is at least one type profile in which all agents can block the provision of the public good, also must be of the threshold form. As we allow individuals' values for the public good to be negative and positive, our results cover examples including bilateral trade, bilateral wage negotiations, a seller selling to a group of individuals (who then have joint ownership rights), and rezoning the use of land.
    Keywords: Public good provision; asymmetric information; dominant strategy
    JEL: C72 D82 H41
    Date: 2016–03

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