nep-gth New Economics Papers
on Game Theory
Issue of 2016‒04‒16
sixteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Equilibria of Deferred Acceptance with Complete Lists By Bettina Klaus; Flip Klijn
  2. Iterated Kalai-Smorodinsky-Nash Compromise By Saglam, Ismail
  3. In Gov We Trust, Voluntary compliance in networked investment games By Natalia BORZINO; Enrique FATAS; Emmanuel PETERLE
  4. Sharing is caring - is this always true? A note on sharing gains and losses in modified dictator games. By Kene Boun My; Nicolas Lampach
  5. Trading in Networks: Theory and Experiments By Syngjoo Choi; Andrea Galeotti; Sanjeev Goyal;
  6. Characterizations of solutions for games with precedence constraints By Michel Grabisch; Peter Sudhölter
  7. Anticipated communication in the ultimatum game By Mario Capizzani; Luigi Mittone; Andrew Musau; Antonino Vaccaro
  8. The Rules of the Game: What Rules? Which Game? By Shepsle, Kenneth A.
  9. The Principle of Minimum Differentiation Revisited: Return of the Median Voter By Nobuyuki Hanaki; Emily Tanimura; Nicolaas J. Vriend
  10. Nonparametric Identification of Dynamic Games with Multiple Equilibria and Unobserved Heterogeneity By Ruli Xiao
  11. Shadow banks and systemic risks By Rui Gong; Frank Page
  12. Morals and markets: The case of ultimatum bargaining By Sandro Casal; Francesco Fallucchi; Simone Quercia
  13. The Agent-Based Model of the Closed Market of the One Commodity with Finite Automata as Participants of the Market By Voronovitsky, Mark
  14. The effect of kinship on intergenerational cooperation: A lab experiment with three generations By José Alberto Molina; Alfredo Ferrer; José Ignacio Gimenez-Nadal; Carlos Gracia-Lazaro; Yamir Moreno; Angel Sanchez
  15. A Simple Model of Homophily in Social Networks By Sergio Currarini; Jesse Matheson; Fernando Vega Redondo
  16. Government and Central Bank Interaction under uncertainty : A Differential Games Approach By Engwerda, Jacob; Mahmoudinia, D.; Isfahani, Rahim Dalali

  1. By: Bettina Klaus; Flip Klijn
    Abstract: We study the structure of the set of (Nash) equilibria of a deferred acceptance game with complete lists: for a given marriage market with complete lists, men propose to women truthfully while women can accept or reject proposals strategically throughout the deferred-acceptance algorithm. Zhou (1991) studied this game and showed that a matching that is stable with respect to the true preferences can be supported by some preference profile (possibly a non-equilibrium one) if and only if it can be supported by an equilibrium as well. In particular, this result implies the existence of equilibria since the men-optimal stable matching is supported by true preferences and hence an equilibrium outcome. We answer an open question Zhou posed by showing that there need not exist an equilibrium matching that weakly dominates all other equilibrium matchings from the women's point of view (Theorem 1). We complement Zhou's and our findings by showing that the set of equilibrium matchings also need not be "connected'" (Example 2).
    Keywords: Matching, stability, complete lists, Nash equilibria
    JEL: C72 C78
    Date: 2016–04
  2. By: Saglam, Ismail
    Abstract: In this paper, we present a new n-person bargaining solution, which we call Iterated Kalai-Smorodinsky-Nash Compromise. We show that this solution is the unique solution satisfying a new axiom called Kalai-Smorodinsky-Nash Decomposability.
    Keywords: Cooperative bargaining; Nash solution; Kalai-Smorodinsky solution
    JEL: C71 C78
    Date: 2016–04–09
  3. By: Natalia BORZINO (University of East Anglia); Enrique FATAS (University of East Anglia); Emmanuel PETERLE (CRESE EA3190 Univ. Bourgogne Franche-Comté)
    Abstract: We conduct a controlled laboratory experiment to investigate trust and trustworthiness in a networked investment game in which two senders interact with a receiver. We investigate to what extent senders and receivers comply with an exogenous and non-binding recommendation. We also manipulate the level of information available to senders regarding receiver’s behavior in the network. We compare a baseline treatment in which senders are only informed about the actions and outcomes of their own investment games to two information treatments. In the reputation treatment, senders receive ex ante information regarding the average amount returned by the receiver in the previous period. In the transparency treatment, each sender receives ex post additional information regarding the returning decision of the receiver to the other sender in the network. Across all treatments and for both senders and receivers, the non-binding rule has a significant and positive impact on individual decisions. Providing senders with additional information regarding receiver’s behavior affects trust at the individual level, but leads to mixed results at the aggregate level. Our findings suggest that reputation building, as well as allowing for social comparison could be efficient ways for receivers to improve trust within networks.
    Keywords: Experimental economics, Taxation, Trust, Information, Investment game.
    JEL: C72 C91 D03 H26
    Date: 2016–04
  4. By: Kene Boun My; Nicolas Lampach
    Abstract: This note highlights in a very simple way the result gained from eliciting a subject’s aversion to inequity when this works to their own advantage, in a modified dictator game related to the domains of gains and losses. Our result demonstrates that individuals experience a stronger reaction to inequity in the domain of losses than in the domain of gains.
    Keywords: inequity aversion, modified dictator game, laboratory experiment.
    JEL: C70 C91 D63
    Date: 2016
  5. By: Syngjoo Choi; Andrea Galeotti; Sanjeev Goyal;
    Abstract: We propose a model of posted prices in networks. The model maps traditional concepts of market power, competition and double marginalization into networks, allowing for the study of pricing in complex structures of intermediation such as supply chains, transportation and communication networks and financial brokerage. We provide a complete characterization of equilibrium prices. Our experiments complement our theoretical work and point to node criticality as an organizing principle for understanding pricing, efficiency and the division of surplus in networked markets.
    Keywords: Intermediation, competition, market power, double marginalization.
    JEL: C70 C71 C91 C92 D40
    Date: 2014–05–16
  6. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics); Peter Sudhölter (University of Southern Denmark)
    Abstract: We generalize the characterizations of the positive core and the positive prekernel to TU games with precedence constraints and show that the positive core is characterized by non-emptiness (NE), boundedness (BOUND), covariance under strategic equivalence, closedness (CLOS), the reduced game property (RGP), the reconfirmation property (RCP) for suitably generalized Davis-Maschler reduced games, and the possibility of nondiscrimination. The bounded positive core, i.e., the union of all bounded faces of the positive core, is characterized similarly. Just RCP has to be replaced by a suitable weaker axiom, a weak version of CRGP (the converse RGP) has to be added, and CLOS can be deleted. For classical games the prenucleolus is the unique further solution that satisfies the axioms, but for games with precedence constraints it violates NE as well as the prekernel. The positive prekernel, however, is axiomatized by NE, anonymity, reasonableness, the weak RGP, CRGP, and weak unanimity for two-person games (WUTPG), and the bounded positive prekernel is axiomatized similarly by requiring WUTPG only for classical two-person games and adding BOUND.
    Keywords: TU games,restricted cooperation,game with precedence constraints,positive core,bounded core,positive prekernel,prenucleolus
    Date: 2016
  7. By: Mario Capizzani; Luigi Mittone; Andrew Musau; Antonino Vaccaro
    Abstract: Anticipated verbal feedback in a dictator game has been shown to induce altruistic behavior. Xiao and Houser (2009), and Ellingsen and Johannesson (2007), find that when the allocator donates an amount to a recipient, and the recipient sends an anonymous written message after learning of the amount, donations are higher in relation to the standard (no-communication) condition. We experimentally investigate whether strategic considerations crowd out anticipatory effects of communication in an ultimatum game, and find that such effects still persist in the pres- ence of two-sided communication.
    Keywords: ultimatum game; anticipated communication; experiment
    JEL: C78 C91 D03
    Date: 2016
  8. By: Shepsle, Kenneth A. (Harvard University)
    Abstract: Douglass North is famous for, among other things, making institutions the centerpiece of studies of political economy. Institutions are, for him, the humanly constructed rules of the game, a game form in the language of game theory. An alternative conceptualization, associated with Schotter (1981) and Calvert (1995), and responsive to concerns articulated by Riker (1980), conceives of North’s game form as part of a more allencompassing equilibrium of rational human behavior. Whereas North takes the rules of the game as exogenous and seeks to identify the equilibria that arise when agents, abiding by the rules, bring particular preferences to a situation, what Shepsle (1979) called a structure-induced equilibrium, Schotter and Calvert allow for the possibility of noncompliance with extant rules and, indeed, for moves that alter the game form altogether. In the present paper, these two approaches are developed more fully. Examples drawn from the US Congress are used to exhibit the ways in which rules arise, change endogenously, and are sometimes even violated. Rational, self-governing agents are not, as in North’s formulation, absolutely bound by exogenous constraints, and are often able to reformulate the ways they do their business.
    Keywords: JEL Classification:
    Date: 2016
  9. By: Nobuyuki Hanaki (GREDEG, Université Nice Sophia-Antipolis, Skema Business School, and Université Côte d’Azur); Emily Tanimura (Université Paris 1); Nicolaas J. Vriend (Queen Mary University of London)
    Abstract: We study a linear location model (Hotelling, 1929) in which n (with n ≥ 2 ) boundedly rational players follow (noisy) myopic best-reply behavior. We show through numerical and mathematical analysis that such players spend almost all the time clustered together near the center, re-establishing the "Principle of Minimum Differentiation" that had been discredited by equilibrium analyses. Thus, our analysis of the best-response dynamics shows that when considering market dynamics as well as their policy and welfare implications, it may be important to look beyond equilibrium analyses.
    Keywords: Hotelling location model, Principle of Minimum Differentiation, Nash equilibrium, Best-response dynamics, Stochastic stability, Invariant measures
    JEL: C72 D72 L13 R30
    Date: 2016–04
  10. By: Ruli Xiao (Indiana University)
    Abstract: This paper provides sufficient conditions for non-parametrically identifying dynamic games with incomplete information, allowing for both multiple equilibria and unobserved heterogeneity. The identification proceeds in two steps. The first step mainly involves identifying the equilibrium conditional choice probabilities and the state transitions using results developed in the measurement error literature. The existing measurement error literature relies on monotonicity assumptions to determine the order of the latent types. This paper, in contrast, explores the identification structure to match the order, which is important for identifying the payoff primitives. The second step follows existing literature to identify the payoff parameters based on the equilibrium conditions with exclusion restrictions. Multiple equilibria and unobserved heterogeneity can be distinguished through comparison of payoff primitives.
    Keywords: Multiple equilibria, Unobserved heterogeneity, Discrete games, Dynamic games, Non-parametric identification
    Date: 2016–03
  11. By: Rui Gong; Frank Page
    Abstract: We answer the following question: Does regulating the banking network increase systemic risk in the entire financial network in the presence of unregulated shadow banks? In order to answer this question, we introduce a formal definition of systemic risk based on the equilibrium state dynamics generated by a stochastic game of network formation with banks and shadow banks. Based on the equilibrium dynamics, we discuss the properties of equilibrium financial networks. The predictions of the model are consistent with empirical evidence in the literature. Our analysis makes clear the systemic importance of connections between commercial banks and shadow banks in determining the health of the entire financial network. Lastly, but most importantly, we give a definition of systemic risk based on equilibrium dynamics, and therefore, a definition which takes into account the strategic interactions of financial institutions when facing different regulatory policies. Given our definition of systemic risk, we discuss various policies for regulating the financial system. Then, specializing our dynamic stochastic game model to a more basic model in which banks and shadow banks form a network including connections to the real economy, we show, via numerical simulations of our stochastic game model under various regulatory regimes, that imposing bank regulations not faced by shadow banks does indeed increase systemic risk throughout the financial network.
    Keywords: Systemic risk; shadow banking regulation; discounted stochastic games; endogenous network formation; multi-layered financial network
    JEL: J1 F3 G3
    Date: 2016–02–15
  12. By: Sandro Casal (University of Milan); Francesco Fallucchi (University of East Anglia); Simone Quercia (University of Bonn)
    Abstract: We conduct an experiment to investigate the acceptable boundaries of immoral behavior in barganing situations. We find that subjects are willing to punish at their own cost only an extremely immoral action of their counterpart that affects a third party. However, the possibility to nullify the negative effects of the immoral action and to restore the ex-ante situation for the third party increases the willingness to punish.
    Keywords: mini ultimatum game, morals
    JEL: C72 C91 D6
    Date: 2016–04
  13. By: Voronovitsky, Mark
    Abstract: The model of market of one commodity , in which there is in each moment of time the same quantity of goods and the same quantity of money was formulated and researched in this paper. Each partner of the market in the one moment of time can be in one of three status: to be buyer, be seller and do not take part in trade in this moment of time. Partners of market change their statuses and prices, by using the personal information of each of them about trade in the previous moment of time only.. The nature of dynamics of the set of prices of participants was investigated analytically.. The central result of the investigation is the using some finite automata with two action(careful and risky) as a model of a participant of market. The convergence of trajectory of our system to stationary set of states with average price of trade which is close to some constant when behavior of all agent is careful and bounded hesitation of this trajectory when there are risky agents only. These facts are established by series of experiments with computer realization of the model. in the cases when all agents can fulfil only one kind of action and when all agents are identical simple determinate automata with linear tactic with careful and risky actions.. Some cases of the herd behavior of participants were considered in this investigation. We investigate our agent based models first of all as models of trade, but it will be useful to note that these models are example of some complicated self-adjusting systems also. This work was fulfiled by me only.I certify that I have the right to deposit the contribution with MPRA
    Keywords: mathematical model, closed market, one commodity market, dynamics of prices, trajectory, stationary set, steady state, rational choice.
    JEL: D49
    Date: 2015
  14. By: José Alberto Molina (University of Zaragoza; Boston College); Alfredo Ferrer (University of Zaragoza); José Ignacio Gimenez-Nadal (University of Zaragoza); Carlos Gracia-Lazaro (University of Zaragoza); Yamir Moreno (University of Zaragoza); Angel Sanchez (University of Zaragoza)
    Abstract: In this paper, we analyze how kinship among family members affects intergenerational cooperation in a public good game. 165 individuals from 55 families, comprising three generations (youths, parents, and grandparents), play a public good game in three different treatments: one in which three members of the same family play each other (family), a second with the youth and two non-family members but preserving the previous generational structure (intergenerational), and a third in which three randomly-selected players play each other (random). We find that players contribute more to the public good when they play with other family members, than when they play with non-family members. This effect is present in all three generations, and is independent of the gender of the players. We also observe the significant result that older generations contribute more to the public good, relative to their children.
    Keywords: Intergenerational cooperation, Evolutionary game theory, Public Goods game, Kinship, Social networks
    JEL: D03 D64 D70
    Date: 2016–03–01
  15. By: Sergio Currarini; Jesse Matheson; Fernando Vega Redondo
    Abstract: Biases in meeting opportunities have been recently shown to play a key role for the emergence of homophily in social networks (see Currarini, Jackson and Pin 2009). The aim of this paper is to provide a simple microfoundation of these biases in a model where the size and typecomposition of the meeting pools are shaped by agents' socialization decisions. In particular, agents either inbreed (direct search only to similar types) or outbreed (direct search to population at large). When outbreeding is costly, this is shown to induce stark equilibrium behavior of a threshold type: agents \inbreed" (i.e. mostly meet their own type) if, and only if, their group is above certain size. We show that this threshold equilibrium generates patterns of in-group and cross-group ties that are consistent with empirical evidence of homophily in two paradigmatic instances: high school friendships and interethnic marriages.
    Keywords: Homophily, social networks, segregation.
    JEL: D7 D71 D85 Z13
    Date: 2016–04
  16. By: Engwerda, Jacob (Tilburg University, Center For Economic Research); Mahmoudinia, D. (Tilburg University, Center For Economic Research); Isfahani, Rahim Dalali
    Abstract: Today, debt stabilization in an uncertain environment is an important issue. In particular, the question how fiscal and monetary authorities should deal with this uncertainty is very important. Especially for some developing countries such as Iran, in which on average 60 percent of government revenues comes from oil, and consequently uncertainty about oil prices has a large effect on budget planning, this is an important question. For this reason, we extend in this paper the well-known debt stabilization game introduced by Tabellini (1986). We incorporate deterministic noise into that framework. We solve this extended game under a Non-cooperative, Cooperative and Stackelberg setting assuming a feedback information structure. The main result shows that under all three regimes, more active policies are used to track debt to its equilibrium level and this equilibrium level becomes smaller, the more fiscal and monetary authorities are concerned about noise. Furthermore, the best-response policy configuration if policymakers are confronted with uncertainty seems to depend on the level of anticipated uncertainty.
    Keywords: fiscal and monetary policy interaction; differential game; dynamic system; uncertainty
    JEL: E61 E62 E52 C7 C6
    Date: 2016

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