nep-gth New Economics Papers
on Game Theory
Issue of 2017‒01‒08
fourteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Cheating on Your Spouse: A Game-Theoretic Analysis By Batabyal, Amitrajeet; Beladi, Hamid
  2. Giochi evolutivi, evoluzione della cooperazione e materialismo storico By Stefano Vannucci
  3. Persistence of Power: Repeated Multilateral Bargaining By Marina Agranov; Christopher Cotton; Chloe Tergiman
  4. Malice in the Rubinstein bargaining game By Guha, Brishti
  5. The formation of partnerships in social networks By Bloch, Francis; Dutta, Bhaskar; Robin, Stéphane; Zhu, Min
  6. Epistemically robust strategy subsets By Asheim, Geir; Voorneveld, Mark; Weibull, Jörgen W.
  7. Sharing the proceeds from a hierarchical venture By Jens L. Hougaard; Juan D. Moreno-Ternero; Mich Tvede; Lars P. Osterdal
  8. Reciprocity under moral wiggle room: is it a preference or a constraint? By Tobias Regner
  9. Elected Officials’ Opportunistic Behavior on Third-Party Punishment: An experimental Analysis By Natalia Jimenez; Angel Solano-Garcia
  10. Nash Equilibrium and Party Polarization in an Electoral Competition Model By Shino Takayama; Yuki Tamura; Terence Yeo
  11. Strategic Decisions: Behavioral Differences Between CEOs and Others By Holm, Håkan J.; Nee, Victor; Opper, Sonja
  12. Clustering of R&D collaboration in Cournot oligopoly By Mauro Caminati
  13. Existence of monotone equilibrium in first price auctions with private risk aversion and private initial wealth By Matthew Gentry; Tong Li; Jingfeng Lu
  14. Waiting for a haircut? A bargaining perspective on sovereign debt restructuring By Ghosal, Sayantan; Miller, Marcus; Thampanishvong, Kannika

  1. By: Batabyal, Amitrajeet; Beladi, Hamid
    Abstract: In this note we analyze a game model of marital infidelity. The husband can either be faithful to or cheat on his wife. The wife can either monitor or not monitor her husband. We first determine the best response correspondences of the two players. Second, we explain why there is no pure-strategy Nash equilibrium in the game under study. Third, we show that there exists a unique mixed-strategy Nash equilibrium in the game. Finally, we demonstrate the nexus between our marital infidelity game and the prominent Matching Pennies game.
    Keywords: Cheating, Faithfulness, Monitoring, Mixed-Strategy, Static Game
    JEL: C72 D81 J12
    Date: 2016–09–06
  2. By: Stefano Vannucci
    Abstract: An evolutionary game is a game endowed with a population of agents for each player role, a probability matching space and - possibly - an explicit evolutionary dynamics, on a state space that is defi?ned by means of some parameters of the game. Evolutionary games are an essential tool in modeling several issues related to the evolution of cooperation. In particular, by varying appropriately the underlying basic game and its dynamics, evolutionary games can be deployed to provide a neat representation of distinct versions of the ?evolution of cooperation?- problem, including the evolution of altruism, the evolution of distribution conventions, and the evolution of common-interest coordination. It is argued that, according to a plausible formulation of ?'historical materialism'? , the latter essentially amounts to the thesis that in games with common interest the evolution of the common interest equilibrium is typically to be expected even when it is risk-dominated.
    JEL: C70 C73
    Date: 2016–10
  3. By: Marina Agranov (California Institute of Technology); Christopher Cotton (Queen's University); Chloe Tergiman (Penn State University)
    Abstract: We develop a model of repeated multilateral bargaining that links cycles via the identity of the agenda setter. In sharp contrast to the standard history-independent equilibrium predictions, in an experiment, we observe stable and persistent coalitions in terms of member identity, allocations to coalition partners, and agenda-setter identity. Our results call into question the validity of restricting attention to static, history-independent strategies in dynamic bargaining games. We show that weakening the standard equilibria concepts to allow players to condition on a single piece of history is enough to generate equilibria which are consistent with observed laboratory outcomes.
    Keywords: experiment, legislative bargaining, vote of confidence, legislative decision making, political institutions, dynamic bargaining
    JEL: C78 C92 D02 C73 D72
    Date: 2016–12
  4. By: Guha, Brishti
    Abstract: This is the first paper to incorporate malice into the Rubinstein alternating offers bargaining game. Initially, I examine outcomes with one-sided malice, allowing one of the bargaining players to be malicious in the sense that he obtains a positive payoff in every period in which the other player does not obtain any piece of the pie. This “malice payoff” is independent of whether the malicious player himself obtains the pie or not. I identify a unique SPNE of the bargaining game, and find that malice confers bargaining advantage; if the respondent is malicious, this can in some cases completely erode and even reverse first mover advantage. I then examine two-sided malice. I find that the proposer’s share when both players are malicious may either increase or decrease relative to the traditional Rubinstein shares. Even with two-sided malice, the proposer may end up with a lower share than the respondent. The results remain qualitatively similar under an alternative “continuous” formulation of malice. I contrast them with the case of envious preferences.
    Keywords: Malice, Rubinstein alternating offers game, disagreement.
    JEL: C7 C72
    Date: 2016–12–20
  5. By: Bloch, Francis (Université Paris 1 and Paris School of Economics); Dutta, Bhaskar (University of Warwick and Ashoka University); Robin, Stéphane (Université de Lyon); Zhu, Min (Beijing Normal University)
    Abstract: This paper analyzes the formation of partnerships in social networks. Agents randomly request favors and turn to their neighbors to form a partnership. If favors are costly, agents have an incentive to delay the formation of the partnership. In that case, for any initial social network, the unique Markov Perfect equilibrium results in the formation of the maximum number of partnerships when players become infinitely patient. If favors provide benefits, agents rush to form partnerships at the cost of disconnecting other agents and the only perfect initial networks for which the maximum number of partnerships are formed are the complete and complete bipartite networks. The theoretical model is tested in the lab. Subjects generally play according to their equilibrium strategy and the efficient outcome is obtained over 78% of the times. Decisions are affected by the complexity of the network. Two behavioral rules are observed during the experiment: subjects accept the formation of the partnership too often and reject partnership offers when one of their neighbors is only connected to them.
    Keywords: social networks ; partnerships ; matchings in networks ; non-stationary networks ; laboratory experiments JEL classification numbers: D85 ; C78 ; C91
    Date: 2017
  6. By: Asheim, Geir (Dept. of Economics, University of Oslo); Voorneveld, Mark (Department of Economics, Stockholm School of Economics,); Weibull, Jörgen W. (Department of Economics, Stockholm School of Economics)
    Abstract: We define a concept of epistemic robustness in the context of an epistemic model of a finite normal game where a player type corresponds to a belief over the profiles of opponent strategies and types. A Cartesian product X of pure strategy subsets is epistemically robust if there is a Cartesian product Y of player type subsets with X as the associated set of best reply profiles such that the set Yi contains all player types that believe with sufficient probability that the others are of types in Y-i and play best replies. This robustness concept provides epistemic foundations for set-valued generalizations of strict Nash equilibrium, applicable also to games without strict Nash equilibria. We relate our concept to closedness under rational behavior and thus to strategic stability and to the best reply property and thus to rationalizability.
    Keywords: Epistemic game theory; epistemic robustness; rationalizability; closedness under rational behavior; mutual p-belief
    JEL: C72 D83
    Date: 2016–11–01
  7. By: Jens L. Hougaard (Department of Food and Resource Economics, University of Copenhagen); Juan D. Moreno-Ternero (Department of Economics, Universidad Pablo de Olavide; CORE, Université catholique de Louvain); Mich Tvede (Newcastle University Business School, UK); Lars P. Osterdal (Department of Business and Economics, 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 the \textit{no-transfer} rule (where no revenue bubbles up) and the \textit{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 or multi-level marketing.
    Keywords: Hierarchies, Joint ventures, Resource allocation, Geometric rules, MIT strategy.
    JEL: C71 D63 L24 M31 M52
    Date: 2016
  8. By: Tobias Regner (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze reciprocal behavior when moral wiggle room exists. Dana et al. (2007) show that giving in a dictator game is only partly due to distributional preferences as the giving rate drops when situational excuses for selfish behavior are provided. Our binary trust game closely follows their design. Only a preceding stage (safe outside option vs. enter the game) is added in order to introduce reciprocity. We find significantly higher rates of selfish choices in our treatments that feature moral wiggle room manipulations (between 37.5% and 45%) in comparison to the baseline (6.25%). It seems that reciprocal behavior is not only due to people liking to reciprocate but also because they feel obliged to do so.
    Keywords: social preferences, pro-social behavior, experiments, reciprocity, moral wiggle room, self-image concerns, trust game
    JEL: C72 C91 D03 D80
    Date: 2017–01–02
  9. By: Natalia Jimenez (Department of Economics, Universidad Pablo de Olavide & Middlesex University); Angel Solano-Garcia (Departamento de Teoria e Historia Economica, University of Granada & Globe)
    Abstract: In this paper, we analyze how the punishment behavior of a democratically elected official varies when facing an electoral process (opportunism). To this aim, we conduct an economic experiment in which officials are third party punishers in a public goods game. We consider two different scenarios which differ in the degree of cooperation within the society. We find that officials increase their punishment when they face elections in both scenarios. Contrary to candidates’ expectations, voters always vote for the least severe candidate.
    Keywords: Opportunism, Punishment, Public Goods Games, Voting, Experiments.
    JEL: C92 D72 H4
    Date: 2016
  10. By: Shino Takayama (School of Economics, The University of Queensland); Yuki Tamura (Department of Economics, University of Rochester); Terence Yeo (School of Economics, The University of Queensland)
    Abstract: We study the existence problem of Nash equilibrium as well as party polarization in an electoral competition model. In our model, political parties also value holding office (office rent) in addition to maximizing their party members’ utility. A class of models with an uncertainty about the median voter position has been increasingly important and Drouvelis, Saporiti and Vriend (2014) present an experimental study to support a model with office rent. But the inclusion of office rent renders the payoff of each party discontinuous. This makes it difficult to apply a usual fixed point argument to prove the existence of Nash equilibrium. By using a recently developed concept, C-security in McLennan, Monteiro and Tourky (2011), we provide conditions under which a pure strategy Nash equilibrium (PSE) or a mixed strategy Nash equilibrium (MSE) exists within a fairly general setting, and further the analysis by presenting conditions under which various types of policy choices, including polarization, arise in equilibrium.
    Keywords: Noncooperative games, electoral competition, existence of equilibrium
    Date: 2016–12–22
  11. By: Holm, Håkan J. (Department of Economics, Lund University); Nee, Victor (Department of Sociology, Cornell University); Opper, Sonja (Department of Economics, Lund University)
    Abstract: Differences in strategic decision making between CEOs and other people are interesting since CEOs make important economic decisions and impact values and norms in society. Our study combines a large stratified random sample of 199 CEOs of medium-size firms with a carefully selected control group of 200 comparable people. All subjects participated in three different incentivized strategic games — Prisoner’s Dilemma, Chicken, Battle-of-the-Sexes. We report substantial and robust differences in both behavior and beliefs between the CEOs and the control group. The CEOs are closer to the socially optimal strategy profile in all games. Hence, as a group the CEOs out-competes the control-group members and thereby receives higher average earnings, but not by being smarter (in the narrow “rationalistic” sense) or more selfish, but by being more cooperative and less aggressive.
    Keywords: Strategies; Efficiency; Nash equilibrium; Incentivized behavior; CEOs
    JEL: C70 C93 D22 L26
    Date: 2016–12–13
  12. By: Mauro Caminati
    Abstract: This paper complements the Cournot collaboration game outlined in Goyal and Joshi (2003, sect. 4), with the hypothesis that pairwise R&D alliance is constrained by knowledge distance. Potential asymmetry of distance between two knowledge sets is formalized through a quasi-metric in knowldge space. If the knowledge constraints to collaboration are weak enough, the paper replicates the result by Goyal and Joshi (2003, sect. 4), that a ?firm is either isolated, or is connected to every other ?firm in the industry. If absoprtion of ideas from one?s potential partner requires sufficiently high knowledge proximity, the stable R&D networks in Cournot oligopoly are shown to display the clustering property, that is characteristic of real-world industry networks, and of social networks more generally.
    Keywords: Cournot collaboration game, directed knowledge distance, R&D networks, degree assortativity, clustering
    JEL: D85 L13 O30
    Date: 2016–10
  13. By: Matthew Gentry; Tong Li; Jingfeng Lu
    Abstract: In this paper, we study the existence of monotone equilibrium in first price auctions where bidders have a three-dimensional private type, i.e. their private values, degrees of risk aversion and initial wealth. Bidders' utility functions belong to the class of constant relative risk aversion (CRRA) or constant absolute risk aversion (CARA). The bidders' types are independent across bidders, while a bidder's private value, initial wealth and degree of risk aversion are allowed to be correlated. We show that a monotone equilibrium always exists in a general setting allowing for asymmetric bidders. Moreover, with symmetric bidders, a symmetric monotone equilibrium strategy must exist. A bidder's equilibrium strategy increases with bidders' private values and degrees of risk aversion. When bidders have CRRA utility, equilibrium bids decrease with initial wealth; when bidders have CARA utility, equilibrium bids are invariant to initial wealth.
    Keywords: constant absolute risk aversion (CARA); constant relative risk aversion (CRRA); auction; initial wealth; monotone equilibrium
    JEL: C7 D7
    Date: 2015–11
  14. By: Ghosal, Sayantan; Miller, Marcus; Thampanishvong, Kannika
    Abstract: Recent investigation of sovereign debt negotiations finds that prompt, market-friendly "reprofiling" often fails to achieve sustainability; but serious debt restructuring typically involves delay. We develop an incomplete information bargaining model to account for this, highlighting economic recovery and sustainability considerations as complementary reasons for delay. Some recent settlements are discussed, along with some policy implications of excessive profiling.
    Keywords: asymmetric information; debt restructuring; delay; growth; sustainability
    JEL: C78 F34
    Date: 2016–12

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