nep-gth New Economics Papers
on Game Theory
Issue of 2016‒06‒25
twelve papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Implementing Tax Coordination and Harmonization through Voluntary Commitment By Grégoire ROTA-GRAZIOSI
  2. Strategic schools under the Boston mechanism revisited By Bó, Inácio; Heller, C.-Philipp
  3. Cognitive load and mixed strategies: On brains and minimax By Duffy, Sean; Naddeo, JJ; Owens, David; Smith, John
  4. A "fractal" solution to the chopstick auction By Christian Ewerhart
  5. Decisiveness, Peace, and Inequality in Games of Conflict By Juan A. Lacomba; Francisco M. Lagos; Ernesto Reuben; Frans Van Winden
  6. Reputation Building under Uncertain Monitoring By Joyee Deb; Yuhta Ishii
  7. Kidney Exchange over the Blood Group Barrier By Andersson, Tommy; Kratz , Jörgen
  8. Shapley value regression and the resolution of multicollinearity By Mishra, SK
  9. Strategy-Proofness and Efficiency for Non-quasi-linear Common-Tiered-Object Preferences: Characterization of Minimum Price Rule By Yu Zhou; Shigehiro Serizawa
  10. Virtual Demand and Stable Mechanisms By Jan Christoph Schlegel
  11. Guilt-averse or reciprocal? Looking at behavioural motivations in the trust game By Yola Engler; Rudolf Kerschbamer; Lionel Page
  12. Group (Re-)formation in Public Good Games: The Tale of the Bad Apple By Grund, Christian; Harbring, Christine; Thommes, Kirsten

  1. By: Grégoire ROTA-GRAZIOSI (Centre d'Etudes et de Recherches sur le Développement International(CERDI))
    Abstract: Pareto-improving tax coordination, and even tax harmonization, are Nash implementable between sovereign countries without any supranational tax authorities. Following Schelling's approach, we consider voluntary commitment, which constrains countries' respective tax rate choices. We develop a commitment game where countries choose their strategy sets in preliminary stages and play consistently during the final one. We determine the set of tax rates, which are implementable by commitment. This allows countries to reach Pareto-improving equilibriums. We also establish that complete tax harmonization may emerge as the subgame perfect Nash equilibrium of the commitment game as long as the asymmetry between countries remains limited. Our analysis contributes to the rationale of tax ranges and, more broadly, of non binding but self-enforcing commitments (not equivalent to cheap talk) in the context of tax competition.
    Keywords: Tax coordination, Commitment.
    JEL: C72 H30
    Date: 2016–06
  2. By: Bó, Inácio; Heller, C.-Philipp
    Abstract: We show that Ergin & Sönmez's (2006) results which show that for schools it is a dominant strategy to truthfully rank the students under the Boston mechanism, and that the Nash equilibrium outcomes in undominated strategies of the induced game are stable, rely crucially on two assumptions. First, (a) that schools need to be restricted to find all students acceptable, and (b) that students cannot observe the priorities set by the schools before submitting their preferences. We show that relaxing either assumption eliminates the strategy dominance, and that Nash equilibrium outcomes in undominated strategies for the simultaneous induced game in case (a) and subgame perfect Nash equilibria in case (b) may contain unstable matchings. We also show that when able to manipulate capacities, schools may only have an incentive to do so if students submit their preferences after observing the reported capacities.
    Keywords: Mechanism Design,Two-Sided Matching,Boston Mechanism,School Choice
    JEL: C78 D63 D78 D82
    Date: 2016
  3. By: Duffy, Sean; Naddeo, JJ; Owens, David; Smith, John
    Abstract: It is well-known that laboratory subjects often do not play mixed strategy equilibrium games according to the equilibrium predictions. In particular, subjects often mix with the incorrect proportions and their actions often exhibit serial correlation. However, little is known about the role of cognition in these observations. We conduct an experiment where subjects play a repeated hide and seek game against a computer opponent programmed to play either a strategy that can be exploited by the subject (a naive strategy) or designed to exploit suboptimal play of the subject (an exploitative strategy). The subjects play with either fewer available cognitive resources (under a high cognitive load) or with more available cognitive resources (under a low cognitive load). While we observe that subjects do not mix in the predicted proportions and their actions exhibit serial correlation, we do not find strong evidence these are related to their available cognitive resources. This suggests that the standard laboratory results on mixed strategies are not associated with the availability of cognitive resources. Surprisingly, we find evidence that subjects under a high load earn more than subjects under a low load. However, we also find that subjects under a low cognitive load exhibit a greater rate of increase in earnings across rounds than subjects under a high load.
    Keywords: bounded rationality, experimental economics, working memory load, cognition, learning, mixed strategies
    JEL: C72 C91
    Date: 2016–06–08
  4. By: Christian Ewerhart
    Abstract: The present paper constructs a novel solution to the chopstick auction, and thereby disproves a conjecture of Szentes and Rosenthal (Games and Economic Behavior, 2003a, 2003b). In contrast to the existing solution, the identi fied equilibrium strategy allows a simple and intuitive characterization. Moreover, its best-response set has the same Hausdorff dimension as its support, which may be seen as a robustness property. The analysis also reveals some new links to the literature on Blotto games.
    Keywords: Chopstick auction, exposure problem, self-similarity, blotto games
    JEL: C02 C72 D44
    Date: 2016–06
  5. By: Juan A. Lacomba (Department of Economic Theory and Economic History, University of Granada.); Francisco M. Lagos (Department of Economic Theory and Economic History, University of Granada.); Ernesto Reuben (Columbia University.); Frans Van Winden (University of Amsterdam.)
    Abstract: In this paper, we study two games of conflict characterized by unequal access to productive resources and finitely repeated interaction. In the Noisy Conflict game, the winner of the conflict is randomly determined depending on a players’ relative conflict expenditures. In the Decisive Conflict game, the winner of the conflict is simply the player who spends more on conflict. By comparing behavior in the two games, we evaluate the effect that “decisiveness” has on the allocation of productive resources to conflict, the resulting inequality in the players’ final wealth, and the likelihood that players from long-lasting peaceful relations..
    Keywords: conflict; decisiveness; inequality; peace; rent seeking
    JEL: D72 D74 C92
    Date: 2016–05–30
  6. By: Joyee Deb (School of Management, Yale University); Yuhta Ishii (Cowles Foundation, Yale University & Centro de Investigacion Economica, ITAM)
    Abstract: We study a canonical model of reputation between a long- run player and a sequence of short-run opponents, in which the long-run player is privately informed about an uncertain state that determines the monitoring structure in the reputation game. The long-run player plays a stage-game repeatedly against a sequence of short-run opponents. We present necessary and sufficient conditions (on the monitoring structure and the type space) to obtain reputation building in this setting. Specifically, in contrast to the previous literature, with only stationary commitment types, reputation building is generally not possible and highly sensitive to the inclusion of other commitment types. However, with the inclusion of appropriate dynamic commitment types, reputation building can again be sustained while maintaining robustness to the inclusion of other arbitrary types.
    JEL: C73 D82 L14
    Date: 2016–05
  7. By: Andersson, Tommy (Department of Economics, Lund University); Kratz , Jörgen (Department of Economics, Lund University)
    Abstract: This paper investigates a pairwise kidney exchange program that includes patient-donor pairs in which the patients can receive a kidney across the blood group barrier from their own donors. Patients in such pairs gain strictly by an exchange if they are matched to a fully compatible donor. We study the set of priority matchings where the number of patients matched to fully compatible donors is maximized among all priority matchings and where all matched patients that can receive a kidney across the blood group barrier from their own donors are matched to fully compatible donors. The main result demonstrates that matchings in this set can be identified by solving an appropriately defined maximum weight matching problem. It is also demonstrated that the inclusion of patients that can receive a kidney across the blood group barrier from their own donors will not reduce the number of transplants for patients with incompatible donors, as all patients involved in an exchange before the inclusion are still involved in an exchange after the inclusion.
    Keywords: market design; pairwise kidney exchange; blood group incompatibility; priority matchings; half-compatibility priority matchings
    JEL: C78 D02 D63 D78
    Date: 2016–06–17
  8. By: Mishra, SK
    Abstract: Multicollinearity in empirical data violates the assumption of independence among the regressors in a linear regression model that often leads to failure in rejecting a false null hypothesis. It also may assign wrong sign to coefficients. Shapley value regression is perhaps the best methods to combat this problem. The present paper simplifies the algorithm of Shapley value decomposition of R2 and provides a computer program that executes it. However, Shapley value regression becomes increasingly impracticable as the number of regressor variables exceeds 10, although, in practice, a good regression model may not have more than ten regressors.
    Keywords: Multicollinearity, Shapley value, regression, computational algorithm, computer program, Fortran
    JEL: C13 C4 C63 C71
    Date: 2016–06–17
  9. By: Yu Zhou; Shigehiro Serizawa
    Abstract: We consider the allocation problem of assigning heterogeneous objects to a group of agents and determining how much they should pay. Each agent receives at most one object. Agents have non-quasi-linear preferences over bundles, each consisting of an object and a payment. Especially, we focus on the cases: (i) objects are linearly ranked, and as long as objects are equally priced, agents commonly prefer a higher ranked object to a lower ranked one, and (ii) objects are partitioned into several tiers, and as long as objects are equally priced, agents commonly prefer an object in the higher tier to an object in the lower tier. The minimum price rule assigns minimum price (Walrasian) equilibrium to each preference profile. We establish: (i) on a common-object-ranking domain, the minimum price rule is the only rule satisfying efficiency, strategy-proofness, individual rationality and no subsidy, and (ii) on a common-tiered-object domain, the minimum price rule is the only rule satisfying these four axioms.
    Date: 2016–05
  10. By: Jan Christoph Schlegel
    Abstract: We study conditions for the existence of stable, strategy-proof mechanisms in a many-to-one matching model with discrete salary space (the discrete Kelso-Crawford model). Workers and firms want to match many-to-one and agree on the terms of their match. Firms demand different sets of workers at different salaries. Workers have preferences over different firm-salary combinations. Workers' preferences are monotone in salaries. We show that for this model a descending auction mechanism is the only candidate for a stable mechanism that is strategy-proof for workers. Moreover, we identify a maximal domain of demand functions for firms, such that the mechanism is stable and strategy-proof. For each demand function in our domain, we can construct a related demand function that we call a virtual demand function. Replacing demand functions by virtual demand functions will not change the outcome of our mechanism. Known conditions (gross substitutability and the law of aggregate demand) can be applied to the virtual demand profile to check whether the mechanism is stable and strategy-proof. Our result gives a sense in which gross substitutability and the law of aggregate demand are necessary for the existence of a stable and strategy-proof mechanism. In the special case where demand functions are generated by quasi-linear profit functions, demand functions and virtual demand functions agree. Thus for this case, our domain reduces to the domain of demand functions under which workers are gross substitutes.
    Keywords: Matching with contracts; Matching with salaries; Gross Substitutes; Virtual Demand
    JEL: C78 D47
    Date: 2016–06
  11. By: Yola Engler; Rudolf Kerschbamer; Lionel Page
    Abstract: For the trust game, recent models of belief-dependent motivations make opposite predictions regarding the correlation between back-transfers and second- order beliefs of the trustor: While reciprocity models predict a negative correlation, guilt-aversion models predict a positive one. This paper tests the hypothesis that the inconclusive results in previous studies investigating the reaction of trustees to their beliefs are due to the fact that reciprocity and guilt-aversion are behaviorally relevant for different subgroups and that their impact cancels out in the aggregate. We find little evidence in support of this hypothesis and conclude that type heterogeneity is unlikely to explain previous results.
    JEL: C25 C70 C91 D63 D64
    Date: 2016–06
  12. By: Grund, Christian (RWTH Aachen University); Harbring, Christine (RWTH Aachen University); Thommes, Kirsten (Brandenburg University of Technology Cottbus)
    Abstract: We analyze how different previous roles as partners or strangers in public good games affect an individual's subsequent cooperation in a partner setting. We systematically vary a group's composition from all individuals being partner over blended groups of partners and strangers to all individuals being stranger in each round. Our results show that previous group composition does not affect cooperation in the subsequent partner setting with one exception: Groups cooperate significantly less compared to all other settings, when one stranger entered the group. We further analyze this situation in-depth and find that individuals may labor under an ultimate attribution error: They feel that the newcomer is a "bad apple". The cooperativeness towards the newcomer, but also among oldtimers is disturbed in this case. We conduct additional treatments to back up this result and to show how certain information can prevent such an error.
    Keywords: cooperation, economic experiments, group composition, public good game, teams
    JEL: C9 M5
    Date: 2016–06

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