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on Game Theory |
| By: | Scott Barrett (Columbia University); Astrid Dannenberg (University of Kassel) |
| Abstract: | In some important multi-player situations, such as efforts to supply a global public good, players can choose the game they want to play. In this paper we conduct an experimental test of the decision to choose between a “tipping” game, in which every player wants to contribute to the public good provided enough other players contribute, and a prisoners’ dilemma, the classic cooperation game. In the prisoners’ dilemma, the first best outcome is attainable, but cannot be sustained as a Nash equilibrium. In the tipping game, only a second best outcome may be attainable, but there exists a Nash equilibrium that is strictly preferred to the one in the prisoners’ dilemma. We show that groups do significantly better when they choose the tipping game, and yet many groups repeatedly choose the prisoners’ dilemma, indicating a mistaken and persistent tendency to prefer a game with potentially higher payoffs to one having a strategic advantage. |
| JEL: | C72 C92 F53 H41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201529&r=gth |
| By: | Frank Page (Indiana University); Rui Gong (Indiana University); Myrna Wooders (Vanderbilt University) |
| Abstract: | We model the structure and strategy of social interactions prevailing at any point in time as a directed network and address the following question: given the rules of network and coalition formation, preferences of individuals over networks, strategic behavior of coalitions in forming networks, and the trembles of nature, what network and coalitional dynamics are likely to emergence and persist. We formulate the problemas a dynamic, stochastic game and v equilibrium (in network and coalition formation strategies), (ii) together with the trembles of nature, this correlated stationary equilibrium determines an equilibrium Markov process of network and coalition formation, and (iii) this endogenous Markov process possesses a finite set of ergodic measures, and generates a finite, disjoint collection of nonempty subsets of networks and coalitions, each constituting a basin of attraction. Moreover, we extend to the setting of endogenous Markov dynamics the notions of pairwise stability (Jackson-Wolinsky, 1996) and the path dominance core (Page Wooders, 2009a). We show that in order for any network-coalition pair to emerge and persist, it is necessary that the pair reside in one of finitely many basins of attraction. The results we obtain here build on Page and Wooders (2009a)and the seminal contributions of Jackson and Watts (2002), Konishi and Ray (2003), and Dutta, Ghosal, and Ray (2005). |
| Keywords: | KEYWORDS: games of network formation, stationary Markov correlated equilibrium, equilibrium Markov process of network formation, basins of attraction, Harris decomposition, ergodic probability measures, dynamic path dominance core,dynamic pairwise stability. |
| JEL: | C7 C6 |
| Date: | 2016–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-16-00010&r=gth |
| By: | Cheung, Man-Wah; WU, JIABIN |
| Abstract: | This paper generalizes the discrete cultural transmission model proposed by Bisin and Verdier (2001) to continuous trait space. The resulting cultural evolutionary dynamic can be characterized by a continuous imitative dynamic in a population game in which a player's payoff is equal to the aggregate cultural intolerance he has towards other agents. We show that cultural heterogeneity is always preserved. In addition, we model each agent's cultural intolerance towards another agent as an increasing function of cultural distance --- the distance between that other agent's trait and his own trait in the trait space. This captures people's general tendencies of evaluating culturally more distant people with stronger biases, and it is most easily modeled on a continuous trait space. We find that the curvature of the cultural intolerance function plays an important role in determining the long-run cultural phenomena. In particular, when cultural intolerance is a convex function of cultural distance, only the most extremely polarized state is a stable limit point. |
| Keywords: | Cultural transmission, Continuous trait space, Cultural evolution, Imitative Dynamic, Polarization |
| JEL: | A14 C72 C73 D10 Z13 |
| Date: | 2016–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:69934&r=gth |
| By: | Maria Montero (School of Economics, University of Nottingham) |
| Abstract: | We examine the relationship between voting weights and expected equilibrium payoffs in legislative bargaining and provide a necessary and sufficient condition for payoffs to be proportional to weights. This condition has a natural interpretation in terms of the supply and demand for coalition partners. An implication of this condition is that Snyder et al.Â’s (2005) result, that payoffs are proportional to weights in large replicated games, does not necessarily extend to the smaller games that arise in applications. Departures from proportionality may be substantial and may arise even in well-behaved (homogeneous) games. |
| Keywords: | legislative bargaining, weighted voting, proportional payoffs |
| Date: | 2016–02 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2016-02&r=gth |
| By: | Nobuyuki Hanaki (GREDEG CNRS; Université Nice Sophia Antipolis; Skema Business School; IUF); Angela Sutan (Univ. Bourgogne Franche-Comte; ESC Dijon-CEREN; LAMETA); Marc Willinger (Université de Montpellier; LAMETA) |
| Abstract: | Recent experimental studies have shown that observed outcomes deviate significantly more from the Nash equilibrium when actions are strategic complements than when they are strategic substitutes. This "strategic environment effect" offers promising insights into the aggregate consequences of interactions among heterogeneous boundedly rational agents, but its macroeconomic implications have been questioned because the underlying experiments involve a small number of agents. We studied beauty contest games with a unique interior Nash equilibrium to determine the critical group size for triggering the strategic environment effect. We show theoretically that the effect operates for interactions among three or more agents. Our experimental results partially support this theory, showing a statistically significant strategic environment effect for groups of five or more agents. Our findings establish that experiments involving a small number of interacting agents can provide major insights into macro phenomena and bolster previous work done on such issues as price dynamics. |
| Keywords: | beauty contest games, iterative reasoning, strategic substitutability, strategic complementarity |
| JEL: | C72 C91 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2016-05&r=gth |
| By: | Premm Raj H.; Ranganathan, Kavitha |
| Abstract: | Government interventions on usage of free speech for communication has been rising of late. The government of Iraq’s ban on the Internet, ban of mobile communications in Hong Kong student protests highlight the same. Applications like Firechat which use mobile ad hoc networks (MANETs) to enable off the grid communication between mobile users, have gained popularity in these regions. However, there have been limited studies on selfish user behavior in community data sharing networks. We wish to study these data sharing communities using game theoretic principles and propose a normal form game. We model selfishness in community data sharing MANETs and define the rationality for selfishness in these networks. We also look at the impact of altruism in community data sharing MANETs and address the issue of minimum number of altruistic users needed to sustain the MANET. We validate the novel model using exhaustive simulations and empirically derive important observations. |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:14425&r=gth |
| By: | Huck, Steffen; Weizsäcker, Georg |
| Abstract: | We study markets for sensitive personal information. An agent wants to communicate with another party but any revealed information can be intercepted and sold to a third party whose reaction harms the agent. The market for information induces an adverse sorting effect, allocating the information to those types of third parties who harm the agent most. In equilibrium, this limits information transmission by the agent, but never fully deters it. We also consider agents who naively provide information to the market. Their presence renders traded information more valuable and, thus, harms sophisticated agents by increasing the third party's demand for information. Halfbaked regulatory interventions may hurt naive agents without helping sophisticated agents. Comparing monopoly and oligopoly markets, we find that oligopoly is often better for the agent: it requires a higher value of traded information and therefore has to grant the agent more privacy. |
| Keywords: | privacy,markets for information,naivete |
| JEL: | C72 D11 D18 D43 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2015305r&r=gth |
| By: | Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The two games usually employed to model markets with asymmetries of information are the signalling game and the screening game. In the signalling game, an equilibrium may not be efficient due to the arbitrariness in the off-the-equilibrium-path beliefs. In the screening game, a pure strategy Nash equilibrium may fail to exist because of " cream-skimming " deviations. Perhaps surprisingly, I show how in a game that combines signalling and screening, an equilibrium generically exists and is efficient. |
| Keywords: | efficiency,existence,Signalling,screening,information economics |
| Date: | 2016–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01285190&r=gth |
| By: | Bhaskar Dutta; Rajiv Vohra |
| Abstract: | In the study of farsighted coalitional behavior, a central role is played by the von Neumann-Morgenstern (1944) stable set and its modification that incorporates farsightedness. Such a modification was first proposed by Harsanyi (1974) and has recently been re-formulated by Ray and Vohra (2015). The farsighted stable set is based on a notion of indirect dominance in which an outcome can be dominated by a chain of coalitional ‘moves’ in which each coalition that is involved in the sequence eventually stands to gain. However, it does not require that each coalition make a maximal move, i.e., one that is not Pareto dominated (for the members of the coalition in question) by another. Nor does it restrict coalitions to hold common expectations regarding the continuation path from every state. Consequently, when there are multiple continuation paths the farsighted stable set can yield unreasonable predictions. We resolve this difficulty by requiring all coalitions to have common rational expectations about the transition from one outcome to another. This leads to two related concepts: the rational expectations farsighted stable set (REFS) and the strong rational expectations farsighted stable set (SREFS). We apply these concepts to simple games and to pillage games to illustrate the consequences of imposing rational expectations for farsighted stability. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2015-10&r=gth |
| By: | di Guida, Sibilla; Han, The Anh; Kirchsteiger, Georg; Lenaerts, Tom; Zisis, Ioannis |
| Abstract: | This paper investigates experimentally how the endogenous group formation combined with the possibility of repeated interaction impacts cooperation levels and surplus distribution. We developed a Surplus Production Distribution Game where the cooperation of four agents is needed to produce a surplus. In case of cooperation, two of the four subjects, the distributors, decided how much of surplus each of them wanted to give to the two other agents, the receivers. This game was played repeatedly with different matching procedures. In the Re-match Treatment (RT) the subjects got randomly re-matched every round, while in the Endogenous-match Treatment (ET) a group was maintained as long as its members cooperated. There was also a Base treatment (BT) where cooperation was exogenously enforced. We found that the distributor's contributions were higher in the ET and the RT than in the BT - unsurprisingly, receivers' possibility to refuse cooperation led to more equal surplus distributions. But contrary to commonly hold beliefs, the possibility of repeated interaction did not lead to higher cooperation levels and more equal allocations of the surplus. Instead, endogenous group formation combined with the possibility of repeated interaction led to self-selection of the subjects in the ET. The endogenous group duration varied drastically between different groups in the ET, with long-lived groups exhibiting contributions and cooperation levels higher than in the RT, while short-lived groups showed contributions and cooperation levels lower than in the RT. Furthermore, for given contribution levels, receivers were more likely to refuse cooperation when their average relationship length was short. This shows that long-lived groups consisted of generous distributors and not so demanding receivers, while ungenerous distributors and demanding receivers formed short-lived groups. Hence, the possibility of repeated interaction does not necessarily increase cooperation and efficiency levels when combined with endogenous group formation. Rather, such a situation might lead to self-selection of agents. |
| Keywords: | group formation; repeated cooperation; surplus distribution |
| JEL: | C92 D03 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11157&r=gth |
| By: | Sibilla Di Guida; The Anh T.A.H. Han; Georg Kirchsteiger; Tom Lenaerts; Ioannis Zisis |
| Abstract: | This paper investigates experimentally how the endogenous group formation combined with the possibility of repeated interaction impacts cooperation levels and surplus distribution. We developed a Surplus Production Distribution Game where the cooperation of four agents is needed to produce a surplus. In case of cooperation, two of the four subjects, the distributors, decided how much of surplus each of them wanted to give to the two other agents, the receivers. This game was played repeatedly with different matching procedures. In the Re-match Treatment (RT) the subjects got randomly re-matched every round, while in the Endogenous-match Treatment (ET) a group was maintained as long as its members cooperated. There was also a Base treatment (BT) where cooperation was exogenously enforced. We found that the distributor's contributions were higher in the ET and the RT than in the BT - unsurprisingly, receivers' possibility to refuse cooperation led to more equal surplus distributions. But contrary to commonly hold beliefs, the possibility of repeated interaction did not lead to higher cooperation levels and more equal allocations of the surplus. Instead, endogenous group formation combined with the possibility of repeated interaction led to self-selection of the subjects in the ET. The endogenous group duration varied drastically between different groups in the ET, with long-lived groups exhibiting contributions and cooperation levels higher than in the RT, while short-lived groups showed contributions and cooperation levels lower than in the RT. Furthermore, for given contribution levels, receivers were more likely to refuse cooperation when their average relationship length was short. This shows that long-lived groups consisted of generous distributors and not so demanding receivers, while ungenerous distributors and demanding receivers formed short-lived groups. Hence, the possibility of repeated interaction does not necessarily increase cooperation and efficiency levels when combined with endogenous group formation. Rather, such a situation might lead to self-selection of agents. |
| Keywords: | repeated cooperation; surplus distribution; group formation |
| JEL: | C92 D30 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/228058&r=gth |
| By: | Eerola, Essi; Määttänen, Niku |
| Abstract: | We study the interaction of matching and credit frictions in the housing market. In the model, risk-averse households may save or borrow in order to smooth consumption over time and finance owner housing. Prospective sellers and buyers meet randomly and bargain over the price. We analyze how borrowing constraints influence house price determination in the presence of matching frictions. We also show that credit frictions greatly magnify the effects of matching frictions. For instance, in the presence of matching frictions, a moderate tightening of the borrowing constraint increases idiosyncratic price dispersion and the average time-on-the-market substantially. |
| Keywords: | housing, borrowing constraint, matching |
| JEL: | E21 R21 C78 |
| Date: | 2015–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:urn:nbn:fi:bof-201510061415&r=gth |
| By: | HORAN, Sean |
| Abstract: | Despite the wide range of agendas used in legislative decision-making, the literature has focused almost exclusively on two stylized formats, the so-called Euro-Latin and Anglo-American agendas. As emphasized by Ordeshook and Schwartz [1987], this focus leaves a sizable gap in our understanding of the legislative process. To help address the deficiency, I first define a very broad class of agendas (called simple agendas) whose features are common among agendas used in legislative settings. I then characterize the sophisticated (Farquharson [1969]) voting outcomes implemented by agendas in this class. By establishing a clear connection between the structure of simple agendas and the outcomes associated with them, the characterization extends our understanding of legislative decision-making well beyond the very limited scope of Euro-Latin and Anglo-American agendas. |
| Keywords: | Majority voting; sophisticated voting; agendas; committees; implementation |
| JEL: | C72 D02 D71 D72 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montde:2016-02&r=gth |
| By: | Kohei Kawamura; Yohei Kobashi; Masato Shizume; Kozo Ueda |
| Abstract: | We conduct a discourse analysis of the Bank of Japan's Monthly Report and examine its characteristics in relation to business cycles. We find that the difference between the number of positive and negative expressions in the reports leads the leading index of the economy by approximately three months, which suggests that the central bank' reports have some superior information about the state of the economy. Moreover, ambiguous expressions tend to appear more frequently with negative expressions. Using a simple persuasion game, we argue that the use of ambiguity in communication by the central bank can be seen as strategic information revelation when the central bank has an incentive to bias the reports (and hence beliefs in the market) upwards. |
| Keywords: | Monetary policy, transparency, natural language processing, modality, latent Dirichlet allocation (LDA), verifiable disclosure model |
| JEL: | D78 D82 E58 E61 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2016-11&r=gth |
| By: | Kohei Kawamura (University of Edinburgh); Yohei Kobashi (Waseda University); Masato Shizume (Waseda University); Kozo Ueda (Waseda University and Centre for Applied Macroeconomic Analysis (CAMA)) |
| Abstract: | We conduct a discourse analysis of the Bank of Japan's Monthly Report and examine its characteristics in relation to business cycles. We find that the difference between the number of positive and negative expressions in the reports leads the leading index of the economy by approximately three months, which suggests that the central bank's reports have some superior information about the state of the economy. Moreover, ambiguous expressions tend to appear more frequently with negative expressions. Using a simple persuasion game, we argue that the use of ambiguity in communication by the central bank can be seen as strategic information revelation when the central bank has an incentive to bias the reports (and hence beliefs in the market) upwards. |
| Keywords: | monetary policy; transparency; natural language processing; modality;latent Dirichlet allocation (LDA); verifiable disclosure model |
| JEL: | D78 D82 E58 E61 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:upd:utppwp:062&r=gth |
| By: | Srivastava, Vatsalya (Tilburg University, Center For Economic Research) |
| Abstract: | When players face uncertainty in choosing actions, undesirable outcomes cannot be avoided. Accidental defections caused by uncertainty, that does not depend on the level of care, require a mechanism to reconcile the players. This paper shows the existence of a perfect sorry equilibrium in a game of imperfect public monitoring. In the sorry equilibrium, costly apology is self-imposed in case of accidental defections, making private information public and allowing cooperation to resume. Cost of the apology required to sustain this equilibrium is calculated, the efficiency characteristics of the equilibrium evaluated and outcomes compared to those from other bilateral social governance mechanisms and formal legal systems. It is argued that with the possibility of accidental defections, other social mechanisms have limitations, while formal legal systems can generate perverse incentives. Therefore, apologies can serve as a useful economic governance institution. |
| Keywords: | apology; sorry; imperfect public monitoring; uncertainty; social norms; economics governance; Legal institutions; incentives |
| JEL: | D80 K40 K41 K42 D02 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:51d65f16-812c-4fbd-9cd2-f3609b6bcd81&r=gth |
| By: | Bernado Moreno (Department of Economic Theory, Universidad de Málaga); María del Pino Ramos-Sosa (Department of Economic Theory, Universidad de Málaga); Ismael Rodríguez-Lara (Department of Economics, Middlesex University London) |
| Abstract: | We induce conformity in a binary-decision voting game by assuming that agents may derive some utility by voting the same option that others. Theoretically, we show that truthful voting is the unique equilibrium without conformity. Introducing conformity enlarges the set of equilibria, which includes voting profiles in which agents do not necessarily vote for their preferred option. If agents are informed that others will vote truthfully, truthful voting is more pervasive in equilibrium. In our setting, the effects of conformity and information depend on the voting rule and the preferred option of each agent. We provide empirical support for our theoretical predictions by means of a laboratory experiment. |
| Keywords: | Issue-Silence; truthful voting, conformity, information, experimental evidence. |
| JEL: | C91 C92 D71 D72 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:mal:wpaper:2016-1&r=gth |
| By: | Anne Van den nouweland (University of Oregon); Myrna Wooders (Vanderbilt University) |
| Abstract: | Share equilibrium was introduced in van den Nouweland and Wooders (2011) as an extension of ratio equilibrium to local public good economies. In that paper, we took an axiomatic approach to motivate share equilibrium. In the current paper we consider questions related to the existence of share equilibrium and we derive a necessary and sufficient condition for the existence of share equilibrium in symmetric economies. Along the way, we develop a deeper understanding of the possible variation in share equilibrium by considering when symmetric players necessarily have the same share indices in equilibrium. |
| Keywords: | Share equilibrium, Local public goods, Cost shares, Core, Top convexity |
| JEL: | H4 C7 |
| Date: | 2016–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:vuecon-sub-16-00011&r=gth |