nep-gth New Economics Papers
on Game Theory
Issue of 2017‒06‒11
thirteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. A Notion of Prominence for Strategic Games By Alessandro Sontuoso; Sudeep Bhatia
  2. Equilibria in Second-Price Auctions with Private Participation Costs By Xiaoyong Cao; Guofu Tan; Guoqiang Tian; Okan Yilankaya
  3. Spillover Effects of Institutions on Cooperative Behavior, Preferences and Beliefs By Engl, Florian; Riedl, Arno; Weber, Roberto A.
  4. Guiding the Economy Toward the Target Inflation Rate: An Evolutionary Game Theory Approach By Yasushi Asako; Tatsushi Okuda
  5. (Il)legal assignments in school choice By EHLERS, Lars; MORRILL, Thayer
  6. The utopia of cooperation: does intra-group competition drive out free riding? By Annarita Colasante; Aurora García-Gallego; Andrea Morone; Tiziana Temerario
  7. Mechanism design without quasilinearity By Tomoya Kazumura; Debasis Mishra; Shigehiro Serizawa
  8. Resale in Second-Price Auctions with Costly Participation By Gorkem Celik; Okan Yilankaya
  9. A Game of Nontransitive Dice By Artem Hulko; Mark Whitmeyer
  10. A Dynkin game on assets with incomplete information on the return By De Angelis, Tiziano; Gensbittel, Fabien; Villeneuve, Stéphane
  11. How to choose a non-manipulable delegation? By Burak Can; Peter Csoka; Emre Ergin
  12. Competition and Subsequent Risk-Taking Behaviour: Heterogeneity across Gender and Outcomes By Filippin, Antonio; Gioia, Francesca
  13. Panic bank runs By Hubert Janos Kiss; Ismael Rodriguez-Lara; Alfonso Rosa-Garcia

  1. By: Alessandro Sontuoso (Philosophy, Politics and Economics, University of Pennsylvania); Sudeep Bhatia
    Abstract: Identifying the best course of action in games with multiple equilibria is a long-standing unresolved issue in strategic interaction. The concept of prominence as a criterion for equilibrium selection has been suggested, but has remained for the most part an informal notion, without a psychologically grounded characterization. In this paper we propose one such characterization: by drawing on existing theories of human memory, language, and decision making we define prominence in terms of frequency of exposure. In particular, we consider games where strategies are denoted by natural language labels, and we measure the prominence of each strategy by how often its label occurs in natural language corpora. Our specification of prominence yields sharp quantitative predictions about behavior in coordination and discoordination problems. Here we present three studies designed to test such predictions, and show that individuals do select strategies that fulfil our definition of prominence and they furthermore do so in a (boundedly) rational manner.
    Keywords: focal points, salience, accessibility, coordination, hide-and-seek, level-k
    JEL: C72 C91
    Date: 2017–05
  2. By: Xiaoyong Cao (Department of Economics, University of International Business andEconomics, Beijing, China); Guofu Tan (Department of Economics, University of Southern California, Los Angeles); Guoqiang Tian (Department of Economics, Texas AM University, College Station); Okan Yilankaya
    Abstract: We study equilibria in second-price auctions where bidders are independently and pri- vately informed about both their values and participation costs, and where the joint dis- tributions of these values and costs across bidders are not necessarily identical. We show that there always exists an equilibrium in this general setting with two dimensional types of ex ante heterogeneous bidders. When bidders are ex ante homogeneous, there is a unique symmetric equilibrium, but asymmetric equilibria may also exist. We provide conditions under which the equilibrium is unique (not only among symmetric ones). We find that the marginal density of participation costs and the concentration of values matter for the uniqueness. The presence of private information on participation costs tends to reduce multiplicity of participation equilibria, although multiplicity still persists.
    Keywords: two-dimensional types, private participation costs, second-price auctions, existence and uniqueness of equilibrium
    JEL: C62 C72 D44 D61 D82
    Date: 2016–12
  3. By: Engl, Florian (University of Cologne); Riedl, Arno (Maastricht University); Weber, Roberto A. (University of Zurich)
    Abstract: Institutions are an important means for fostering prosocial behaviors, but in many contexts their scope is limited and they govern only a subset of all socially desirable acts. We use a laboratory experiment to study how the presence and nature of an institution that enforces prosocial behavior in one domain affects behavior in another domain and whether it also alters prosocial preferences and beliefs about others' behavior. Groups play two identical public good games. We vary whether, for only one game, there is an institution enforcing cooperation and vary also whether the institution is imposed exogenously or arises endogenously through voting. Our results show that the presence of an institution in one game generally enhances cooperation in the other game thus documenting a positive spillover effect. These spillover effects are economically substantial amounting up to 30 to 40 percent of the direct effect of institutions. When the institution is determined endogenously spillover effects get stronger over time, whereas they do not show a trend when it is imposed exogenously. Additional treatments indicate that the main driver of this result is not the endogeneity but the temporal trend of the implemented institution. We also find that institutions of either type enhance prosocial preferences and beliefs about others' prosocial behavior, even toward strangers, suggesting that both factors are drivers of the observed spillover effects.
    Keywords: public goods, institutions, spillover effect, social preferences, beliefs
    JEL: C92 D02 D72 H41
    Date: 2017–05
  4. By: Yasushi Asako (Associate Professor, Faculty of Political Science and Economics, Waseda University (E-mail:; Tatsushi Okuda (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: Under what condition is the target inflation rate attainable even after the monetary policy rate hits its lower bound? This study examines the question using a dynamic model based on evolutionary game theory. In the model, entrepreneurs and workers iteratively play a stage game to make investment decisions. In the presence of complementarity between entrepreneurs f and workers f investments, two long-run equilibria exist: all players invest or no player invests. The study shows two conditions for successfully guiding the economy toward the long-run equilibrium that all players invest at the target inflation rate. First, the type of entrepreneurs f investments needs to be demand- creating innovation rather than cost-reducing innovation. Second, the proportions of entrepreneurs and workers currently investing must be sufficiently large.
    Keywords: Target inflation rate, Evolutionary game, Best-response dynamics, Perfect-foresight dynamics, Multiple long-run equilibria, Capital-skill complementarity, Demand-creating innovation
    JEL: C72 C73 E31 E52
    Date: 2017–05
  5. By: EHLERS, Lars; MORRILL, Thayer
    Abstract: In public school choice, students with strict preferences are assigned to schools. Schools are endowed with priorities over students. Incorporating different constraints from applications, priorities are often modeled as choice functions over sets of students. It has been argued that the most desirable criterion for an assignment is fairness; there should not be a student having justified envy in the following way: he prefers some school to his assigned school and has higher priority than some student who got into that school. Justified envy could cause court cases. We propose the following fairness notion for a set of assignments: a set of assignments is legal if and only if any assignment outside the set has justified envy with some assignment in the set and no two assignments inside the set block each other via justified envy. We show that under very basic conditions on priorities, there always exists a unique legal set of assignments, and that this set has a structure common to the set of fair assignments: (i) it is a lattice and (ii) it satisfies the rural-hospitals theorem. This is the first contribution providing a "set-wise" solution for many-to-one matching problems where priorities are not necessarily responsive and schools are not active agents.
    JEL: C78 D61 D78 I20
    Date: 2017
  6. By: Annarita Colasante (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Aurora García-Gallego (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Andrea Morone (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Tiziana Temerario (IVIE and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: We study whether intra-group competition fosters cooperation even when cooperate is not a dominant strategy. We arranged an experimental Public Good Game comparing contributions in a risky treatment with contributions in a baseline standard treatment. The intra-group competition was induced by assigning different marginal per capita return (MPCR) in accordance to the size of the contribution itself. Results show that risky MPCR are detrimental for cooperation, while intra-group competition significantly reduces free riding.
    Keywords: cooperation; public good; intra-group competition; uncertainty
    JEL: C72 C92 D80 H41
    Date: 2017
  7. By: Tomoya Kazumura; Debasis Mishra; Shigehiro Serizawa
    Abstract: This paper studies a model of mechanism design with transfers where agents' preferences need not be quasilinear. In such a model, (1) we characterize dominant strategy incentive compatible mechanisms using a monotonicity property; (2) we establish a revenue uniqueness result: for every dominant strategy implementable allocation rule, there is a unique payment rule that can implement it; and (3) we show that every dominant strategy incentive compatible, individually rational, and revenue-maximizing mechanism must charge zero transfer for the worst alternative (outside option). These results are applicable in a wide variety of problems (single object auction, multiple object auction, public good provision etc.) under suitable richness of type space. In particular, our results can be applied to models where preferences of agents are arbitrarily small perturbations of quasilinear preferences and illustrate the (non)-robustness of some of the classic results in mechanism design with quasilinearity. We show various applications of our results.
    Date: 2017–06
  8. By: Gorkem Celik (ESSEC Business School and THEMA Research Center, France); Okan Yilankaya
    Abstract: We study sealed-bid second-price auctions with costly participation and resale. Each bidder chooses to participate in the auction if her valuation is higher than her optimally chosen participation cutoff. If resale is not allowed and the bidder valuations are drawn from a strictly convex distribution function, the symmetric equilibrium (where all bidders use the same cutoff) is less efficient than a class of two-cutoff asymmetric equilibria. Existence of these equilibria without resale is sufficient for existence of similarly constructed two-cutoff equilibria with resale. Moreover, the equilibria with resale are more asymmetric and (under a sufficient condition) more efficient than the corresponding equilibria without resale.
    Keywords: second price auctions, resale, participation cost, endogenous entry, endogenous valuations
    JEL: C72 D44 D82
    Date: 2016–11
  9. By: Artem Hulko; Mark Whitmeyer
    Abstract: We consider a two player simultaneous-move game where the two players each select any permissible $n$-sided die for a fixed integer $n$. A player wins if the outcome of his roll is greater than that of his opponent. Remarkably, for $n>3$, there is a unique Nash Equilibrium in pure strategies. The unique Nash Equilibrium is for each player to throw the Standard $n$-sided die, where each side has a different number. Our proof of uniqueness is constructive. We introduce an algorithm with which, for any nonstandard die, we may generate another die that beats it.
    Date: 2017–06
  10. By: De Angelis, Tiziano; Gensbittel, Fabien; Villeneuve, Stéphane
    Abstract: This paper studies a 2-players zero-sum Dynkin game arising from pricing an option on an asset whose rate of return is unknown to both players. Using filtering techniques we first reduce the problem to a zero-sum Dynkin game on a bi-dimensional diffusion (X; Y ). Then we characterize the existence of a Nash equilibrium in pure strategies in which each player stops at the hitting time of (X; Y ) to a set with moving boundary. A detailed description of the stopping sets for the two players is provided along with global C1 regularity of the value function.
    Date: 2017–05
  11. By: Burak Can (Maastricht University, School of Business and Economics); Peter Csoka (“Momentum” Game Theory Research Group, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Corvinus University of Budapest); Emre Ergin (PhD, Maastricht University, School of Business and Economics)
    Abstract: This paper analyzes how to choose a delegation, a committee to represent a society such as in a peace conference. We propose normative conditions and seek optimal, consistent, neutral, and non-manipulable ways to choose a delegation. We show that a class of threshold rules are characterized by these criteria. The rules do not choose a fixed number of delegates, but instead require different sizes of delegations, depending on the heterogeneity in society. Therefore the resulting delegations are very inclusive, and with t delegates the ratio of individuals whose opinions are not included is always below (0:5)t, following the well-known Zeno's dichotomy. For instance a delegation of size 2 should have at least 75% support from the society and therefore only less than 25% of the opinion pool can be neglected.
    Keywords: Aggregation Rules, Committee Selection, Conflict Management, Kemeny Distance, Strategy-proofness
    JEL: C70 D71
    Date: 2017–05
  12. By: Filippin, Antonio (University of Milan); Gioia, Francesca (University of Edinburgh)
    Abstract: This paper studies if competition affects subsequent risk-taking behaviour by means of a laboratory experiment that manipulates the degree of competitiveness of the environment under equivalent monetary incentives. We find that competition increases risk aversion, especially for males, but not in a significant manner. When conditioning on the outcome, we find that males become significantly more risk averse after losing the tournament than after randomly earning the same low payoff. In contrast, males do not become more risk-seeking after winning the tournament, while females' average risk-taking behaviour is unaffected by tournament participation and outcomes. We interpret our findings in terms of males' reaction to negative outcomes driven by intrinsic motives, such as emotions or a shift in the locus of control from internal to external.
    Keywords: competition, risk attitudes, gender
    JEL: C81 C91 D81
    Date: 2017–05
  13. By: Hubert Janos Kiss (Institute of Economics, Research Centre for Economic and Regional Studies and Eötvös Loránd University); Ismael Rodriguez-Lara (Middlesex University London, Department of Economics, Business School); Alfonso Rosa-Garcia (Universidad Catolica de Murcia, Facultad de Ciencias Juridicas y de la Empresa)
    Abstract: We provide experimental evidence that panic bank runs occur in the absence of problems with fundamentals and coordination failures among depositors, the two main culprits identified in the literature. Depositors withdraw when they observe that others do so, even when theoretically they should not. Our findings suggest that panic also manifests itself in the beliefs of depositors, who overestimate the probability that a bank run is underway. Loss-aversion has a predictive power on panic behavior, while risk or ambiguity aversion do not.
    Keywords: bank runs, beliefs, panic, coordination, observability, loss aversion
    JEL: C7 C9 D8 G2
    Date: 2017–04

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