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on Game Theory |
| By: | Claudia Cerrone (Max Planck Institute for Research on Collective Goods) |
| Abstract: | This paper develops a strategic model of procrastination in which present-biased agents prefer to do an onerous task in the company of someone else. This turns their decision of when to do the task into a procrastination game – a dynamic coordination game between present-biased players. The model characterises the conditions under which interaction mitigates or exacerbates procrastination. Surprisingly, a procrastinator matched with a worse procrastinator may do her task earlier than she otherwise would: she wants to avoid the increased temptation that her peer's company would generate. Procrastinators can thus use bad company as a commitment device to mitigate their self-control problem. Principals can reduce procrastination by matching procrastinators with each other, but the efficient matching may not be stable. |
| JEL: | C72 C73 D03 D91 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2016_10&r=gth |
| By: | Pandit, Parthe; Kulkarni, Ankur |
| Abstract: | Recently Bramoulle and Kranton presented a model for the provision of public goods over a network and showed the existence of a class of Nash equilibria called specialized equilibria wherein some agents exert maximum effort while other agents free ride. We examine the efficiency, effort and cost of specialized equilibria in comparison to other equilibria. Our main results show that the welfare of a particular specialized equilibrium approaches the maximum welfare amongst all equilibria as the concavity of the benefit function tends to unity. For forest networks a similar result also holds as the concavity approaches zero. Moreover, without any such concavity conditions, there exists for any network a specialized equilibrium that requires the maximum weighted effort amongst all equilibria. When the network is a forest, a specialized equilibrium also incurs the minimum total cost amongst all equilibria. For well-covered forest networks we show that all welfare maximizing equilibria are specialized and all equilibria incur the same total cost. Thus we argue that specialized equilibria may be considered as a refinement of the equilibrium of the public goods game. We show several results on the structure and efficiency of equilibria that highlight the role of dependants in the network. |
| Keywords: | Network games; public goods; specialized equilibria; independent sets; linear complementarity problems |
| JEL: | C7 C72 |
| Date: | 2016–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:72425&r=gth |
| By: | Abhijit Ramalingam (University of East Anglia); Antonio J. Morales (University of Malaga); James M. Walker (Indiana University) |
| Abstract: | This study brings together two strands of experimental literature, positive versus negative frames of social dilemmas and the effectiveness of peer sanctioning in promoting cooperation. Examining provision and appropriation games that are strategically and payoff isomorphic, we find evidence of less cooperation in the appropriation game. However, we also find that peer sanctioning is able to overcome the decrease in cooperation in the appropriation game, leading to greater relative increases in contributions and earnings in that decision setting. This result appears to be linked to the fact that low contributors are targeted for punishment more frequently in the appropriation game. |
| Keywords: | social dilemma, experiment, provision, appropriation, cooperation, punishment |
| JEL: | C72 C91 C92 D02 H41 |
| Date: | 2016–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-09&r=gth |
| By: | Stéphane Gonzalez (Université de Lyon, Lyon F- 69007, France; CNRS, GATE L-SE, Ecully, F- 69130, France; Université J. Monnet, Saint-Etienne, F- 42000, France); Aymeric Lardon (University of Nice Sophia-Antipolis, CNRS, GREDEG UMR 7321, F-06560 Valbonne, France) |
| Abstract: | We introduce axiomatically a new solution concept for cooperative games with transferable utility inspired by the core. While core solution concepts have investigated the sustainability of cooperation among players, our solution concept, called contraction core, focuses on the deterrence of cooperation. The main interest of the contraction core is to provide a monetary measure of the robustness of cooperation into the grand coalition. We motivate this concept by providing optimal fine imposed by competition authorities for the dismantling of cartels in oligopolistic markets. We characterize the contraction core on the set of balanced cooperative games with transferable utility by four axioms: the two classic axioms of non-emptiness and individual rationality, a superadditivity principle and a new axiom of consistency. |
| Keywords: | TU-game, contraction core, optimal fine, Cournot oligopoly, axiomatization |
| JEL: | C71 D43 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1621&r=gth |
| By: | Tadashi Sekiguchi; Katsutoshi Wakai |
| Abstract: | We study the repeated Cournot duopoly with recursive utility where the players discount gains more than losses. First, as in the standard model of discounted utility, we confirm that the optimal punishment equilibrium has a stick-and-carrot structure. Next, we explore its exact form in relation to the role of the asymmetry in discounting. We find that the discount factor used to evaluate losses controls the deterrence of a given punishment, while the discount factor used to evaluate gains influences the enforceability of the penalty. An increase in one of the two discount factors increases the most collusive equilibrium profit unless full collusion is already sustainable. However, the key to collusion is the loss discount factor: regardless of the level of the gain discount factor, full cooperation can be achieved if the loss discount factor is sufficiently high. |
| Keywords: | Cournot duopoly, gain/loss asymmetry, optimal penal code, repeated game, recursive utility, utility smoothing |
| JEL: | C73 D20 D90 L13 |
| Date: | 2016–07 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-16-006&r=gth |
| By: | Roland Pongou (Department of Economics, University of Ottawa); Roberto Serrano (Department of Economics, Brown University) |
| Abstract: | We study the long-run stability of trade networks in a two-sided economy. Each agent desires relationships with the other side, but having multiple partners is costly. This cost-benefit tradeoff results in each agent having a single-peaked utility over the number of partners-the volume of trade-, the peak being greater for agents on one side than those on the other. We propose a stochastic matching process in which self-interested agents form and sever links over time. Links can be added or deleted, sometimes simultaneously by a single agent. While the unperturbed process yields each pairwise stable network as an absorbing state, stochastic stability in two perturbed processes provides a significant refinement, leading respectively to egalitarian and anti-egalitarian pairwise stable networks. These distinct network configurations have implications for the concentration on each side of the market of a random information shock, which may affect structurally identical economies differently. The analysis captures stylized facts, related to herd behavior, market fragmentation, concentration and contagion asymmetry, in several two-sided economies. It also rationalizes long-run population imbalance between the two sides of certain buyer-seller markets. |
| Keywords: | Two-sided economies, trade networks, pairwise stability, stochastic stability, herd behavior, fragmentation, concentration, contagion asymmetry |
| JEL: | C73 D01 D03 D85 F16 J00 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:1602e&r=gth |
| By: | Mishra, SK |
| Abstract: | This paper proposes a method to construct composite index, which is a linear combination of several variables, by deriving weights on the criterion of Shapley value (from cooperative game theory) that a constituent variable has in making the composite index. In practice it is found oftentimes that the most common method of principal component analysis has a tendency to ignore (or poorly weigh) those constituent variables that do not have strong correlation with the sister variables. This elitist nature of PCA forces a compromise upon the analyst’s desire and need to incorporate those weakly correlated (but theoretically and practically important) variables into the composite index. In that case, one must construct a composite index that is more inclusive in nature. The Shapley value based composite index meets that requirement. |
| Keywords: | Shapley value, Composite index, Principal Component Analysis, Inclusive indices, Global optimization |
| JEL: | C43 C61 C63 C71 |
| Date: | 2016–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:72330&r=gth |
| By: | Alex Dickson (Department of Economics, University of Strathclyde); Ian A MacKenzie (School of Economics, University of Queensland); Petros Sekeris (Department of Economics & Finance, University of Portsmouth) |
| Abstract: | This article investigates contests when heterogeneous players compete to obtain a share of a prize. We prove the existence and uniqueness of the Nash equilibrium when players have general preference structures. Our results show that many of the standard conclusions obtained in the analysis of contests - such as aggregate effort increasing in the size of the prize and the dissipation ratio invariant to the size of the prize - may no longer hold under a general preference setting. We derive the key conditions on preferences, which involve the rate of change of the marginal rate of substitution between a player's share of the prize and their effort within the contest, under which these counter-intuitive results may hold. Our approach is able to nest conventional contest analysis - the study of (quasi-)linear preferences - as well as allowing for a much broader class of utility functions, which include both separable and non-separable utility structures. |
| Keywords: | contest, general preferences, aggregative game |
| JEL: | C72 D72 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:1608&r=gth |
| By: | Shaun P. Hargreaves Heap (King's College London); Abhijit Ramalingam (University of East Anglia); Brock V. Stoddard (University of South Dakota) |
| Abstract: | We present a clean test of whether inequality in endowments affects contributions to a public good. It is a clean test because, to our knowledge, it is the first to control for possible endowment effects. We find that inequality only has an adverse effect because the rich reduce their contributions when there is inequality. |
| Keywords: | public goods, experiment, inequality, wealth, cooperation |
| JEL: | C91 C92 D31 D63 H41 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:16-10&r=gth |
| By: | Ingebretsen Carlson, Jim (Department of Economics, Lund University) |
| Abstract: | This paper presents a combinatorial auction which is of particular interest when short completion times are of importance. It is based on a method for approximating the bidders' preferences over two types of items when complementarity between the two may exist. The resulting approximated preference relation is shown to be complete and transitive at any given price vector. It is shown that an approximated Walrasian equilibrium always exists if the approximated preferences of the bidders comply with the gross substitutes condition. This condition also ensures that the set of approximated equilibrium prices forms a complete lattice. A process is proposed which is shown to always reach the smallest approximated Walrasian price vector. |
| Keywords: | Approximate auction; approximated preferences; non-quasi-linear preferences |
| JEL: | D44 |
| Date: | 2016–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2016_012&r=gth |
| By: | Helios Herrera (University of Warwick); Aniol Llorente-Saguer (Queen Mary University of London); Joseph C. McMurray (Brigham Young University) |
| Abstract: | This paper proposes a rational model of voter participation by generalizing a common-value model of costless voting to include not just pivotal voting but also marginal voting incentives. A new strategic incentive for abstention arises in that case, to avoid the marginal voter's curse of pushing the policy outcome in the wrong direction. The marginal voter's curse presents a larger disincentive for voting than the swing voter's curse. Moreover, marginal motivations are shown to dominate pivotal motivations in large elections. Model predictions are confirmed in a laboratory experiment and applied in a comparative analysis of electoral rules. |
| Keywords: | Turnout, Information aggregation, Underdog effect, Experiment |
| JEL: | C72 C92 D70 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp798&r=gth |
| By: | Yves SPRUMONT |
| Abstract: | We model social choices as acts mapping states of the world to (social) outcomes. A (social choice) rule assigns an act to every profile of subjective expected utility preferences over acts. A rule is strategy-proof if no agent ever has an incentive to misrepresent her beliefs about the world or her valuation of the outcomes; it is ex-post efficient if the act selected at any given preference profile picks a Pareto-efficient outcome in every state of the world. We show that every two-agent ex-post efficient and strategy-proof rule is a top selection : the chosen act picks the most preferred outcome of some (possibly different) agent in every state of the world. The states in which an agentís top outcome is selected cannot vary with the reported valuations of the outcomes but may change with the reported beliefs. We give a complete characterization of the ex-post efficient and strategy-proof rules in the two-agent, two-state case, and we identify a rich class of such rules in the two-agent case. |
| Keywords: | social choice under uncertainty, strategy-proofness, subjective expected utility |
| JEL: | D71 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:mtl:montec:07-2016&r=gth |
| By: | Basak Bayramoglu (Economie Publique, INRA, AgroParisTech, Université Paris-Saclay); Michael Finus (Department of Economics, University of Bath); Jean-François Jacques (Université Paris-Est, ERUDITE, and LEDa-CGEMP, Université Paris-Dauphine) |
| Abstract: | We study the strategic interaction between mitigation (public good) and adaptation (private good) strategies in a climate agreement. We show that these two strategies are strategic substitutes considering various definitions of substitutability. Moreover, adaptation may cause mitigation levels between different countries to be no longer strategic substitutes but complements. We analyze under which conditions this leads to more succesful self-enforcing agreements. We argue that our results extend to many important externality problems involving public goods. |
| Keywords: | C71, D62, D74, H41, Q54 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2016.17&r=gth |