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on Game Theory |
| By: | Fehr, Dietmar; Schmid, Julia |
| Abstract: | Contest designers or managers who want to maximize the overall revenue of a contest (relative performance scheme) are frequently concerned with a trade-off between contest homogeneity and inclusion of contestants with high valuations. In our experimental study, we find that it is not profitable to exclude the most able bidder in favor of greater homogeneity among the remaining bidders, even if the theoretical exclusion principle predicts otherwise. This is because the strongest bidders are willing to give up a substantial part of their expected rent and prefer a strategy that ensures a lower but secure pay-off. |
| Keywords: | all-pay auction,contests,heterogeneity,superstars,experiments |
| JEL: | C72 C92 D84 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbmbh:spii2017202&r=gth |
| By: | Asako, Yasushi (Waseda University); Funaki, Yukihiko (Waseda University); Ueda, Kozo (Waseda University); Uto, Nobuyuki (Waseda University) |
| Abstract: | Asymmetric information has been necessary to explain a bubble in past theoretical models. This study experimentally analyzes traders’ choices, with and without asymmetric information, based on the riding-bubble model. We show that traders have an incentive to hold a bubble asset for longer, thereby expanding the bubble in a market with symmetric, rather than asymmetric information. However, when traders are more experienced, the size of the bubble decreases, in which case bubbles do not arise, with symmetric information. In contrast, the size of the bubble is stable in a market with asymmetric information. |
| JEL: | C72 D82 D84 E58 G12 G18 |
| Date: | 2017–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:312&r=gth |
| By: | Sahm, Marco |
| Abstract: | I examine sequential round-robin tournaments with three and four symmetric players. Each player is matched once with each other player. If the matches are organized as Tullock contests (all-pay auctions), the tournament will be almost fair (highly discriminatory): subject to the position of their matches in the sequence of the tournament, the differences in players' ex-ante winning probabilities and expected payoffs will be small (large). The differing results originate from the higher discriminating power of the all-pay auction. Moreover, the resulting discouragement effect in tournaments with all-pay auctions implies lower aggregate effort than in tournaments with suitable Tullock contests. The fairness of round-robin tournaments may be improved by the use of an endogenous sequence of matches or the requirement that players fix their effort ex-ante. |
| Keywords: | Sequential Round-Robin Tournament,Contest Success Function,Discriminatory Power,Tullock Contest,All-Pay Auction |
| JEL: | C72 D72 Z20 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:121&r=gth |
| By: | Bettina Klaus; Alexandru Nichifor |
| Abstract: | We propose a new set of mechanisms, which we call serial dictatorship mechanisms with reservation prices for the allocation of one indivisible good. We show that a mechanism satisfies minimal tradability, individual rationality, strategy-proofness, consistency, and non wasteful tie-breaking if and only if there exists a reservation price vector and a priority ordering such that the mechanism is a serial dictatorship mechanism with reservation prices. We obtain a second characterization by replacing individual rationality with non-imposition. In both our characterizations the reservation price vector, the priority ordering, and the mechanism are all found simultaneously and endogenously from the properties. In addition, we show that in our model a mechanism satisfies Pareto efficiency, strategy-proofness, and consistency if and only if it is welfare equivalent to a classical serial dictatorship. Finally, we illustrate how the normative requirements governing the functioning of some real life markets and the mechanisms that these markets use are reasonably well captured by our model and results. |
| Keywords: | serial dictatorship; individual reservation prices; strategy-proofness; consistency |
| JEL: | C78 D47 D71 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:17.07&r=gth |
| By: | Günther, Michael (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | In Farrell and Maskin (1989), the authors present sufficient conditions for weakly renegotiation-proof payoffs in their Theorem 1 (p. 332). We show that a step in the proof of this theorem is not correct by giving a counterexample. Nevertheless, the sufficient conditions remain true, and we offer a correction of the proof. |
| Keywords: | (Weak) Renegotiation-Proofness, Infinitely Repeated Games |
| Date: | 2017–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:572&r=gth |
| By: | Sahm, Marco |
| Abstract: | I examine the impact of risk preferences on efforts and winning probabilities in generalised Tullock contests between two players. The theoretical analysis yields two main results. First, I specify a sufficient condition on the agents' comparative prudence under which a higher common level of risk aversion leads to lower aggregate effort in symmetric contests. Second, I show that for a certain range of parameters in asymmetric contests, higher risk-aversion will be a disadvantage if the agent is comparatively prudent. |
| Keywords: | Tullock Contest,Risk Aversion,Prudence |
| JEL: | C72 D72 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:120&r=gth |
| By: | Karlan, Dean S. |
| Abstract: | The reality television show Survivor has been a ratings success on CBS for over 16 years. In the show, 16 strangers are marooned in a remote location, required to compete in physical and mental challenges, and periodically vote to eliminate players from the game. The last person remaining wins one million dollars. I use this popular television show to demonstrate three important lessons from principles of microeconomics: (a) for individual decision-making, concepts like pride and honor may belong in the utility function, alongside more classical components such as consumption of goods and services, (b) thinking through how others will respond to your action is critical for good economic and strategic thinking, and (c) repeated interaction can help collusive behavior hold. |
| Keywords: | Behavioral economics; Game theory; preferences; Survivor |
| JEL: | A22 C70 C73 D10 D11 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12015&r=gth |
| By: | Eloisa Campioni (DEF and CEIS, Università di Roma "Tor Vergata",); Vittorio Larocca (Luiss Guido Carli); Loredana Mirra (DEF, Università di Roma "Tor Vergata",); Luca Panaccione (DEF and CEIS, Università di Roma "Tor Vergata",) |
| Abstract: | In this experimental study on the determinants of bank run, participants anonymously interact via an experimental bank deciding whether to withdraw or not their deposit. As in Diamond and Dybvig (1983), runs result from a fundamental coordination problem. We elicit subjects’ financial literacy and study whether revealing this information helps in solving the equilibrium coordination in such games with multiple equilibria. As a control we also use information about elicited general knowledge. Within the same framework, we let the bank size vary to investigate how it affects coordination on bank run. We find that, when no information is revealed, the likelihood of runs increases with bank size. Whereas, when information on financial literacy is revealed, the likelihood of runs increases in small and decreases in large banks. Our analyses also show that subjects react to information on financial literacy and general knowledge in a different way. Getting to know that a group has higher financial literacy reduces the probability of run. While, when information about general knowledge is revealed, risk aversion at group level becomes relevant and positively affects the probability of bank run. In all specifications, bank run occurrence is positively affected by short-run withdrawal history and by subjects’ experience. |
| Keywords: | Bank runs,Experimental studies,Financial literacy,Coordination games |
| JEL: | C70 C92 D80 G21 |
| Date: | 2017–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:402&r=gth |