nep-gth New Economics Papers
on Game Theory
Issue of 2017‒09‒10
fourteen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. A Generalization of the Harsanyi NTU Value to Games with Incomplete Information By Andrés Salamanca
  2. Axiomatic and bargaining foundations of an allocation rule for ordered tree TU-games By Sylvain Béal; Sylvain Ferrières; Eric Rémila; Phillippe Solal
  3. All-pay auctions with affiliated values. By Chi, Chang Koo; Murto, Pauli; Välimäki, Juuso
  4. Dichotomous multi-type games with a coalition structure By Sébastien Courtin; Zéphirin Nganmeni; Bertrand Tchantcho
  5. Learning and Equilibrium Refinements in Signalling Games By Drew Fudenberg; Kevin He
  6. Self-Allocation in Contests By Bernergård, Axel; Wärneryd, Karl
  7. De nouveaux éclairages sur le théorème de Coase et la vacuité du coeur By Stéphane Gonzalez; Alain Marciano
  8. Exclusion and Reintegration in a Social Dilemma By Alice Solda; Marie Claire Villeval
  9. Bargaining over waiting time in gain and loss framed ultimatum games By Doll, Monika; Seebauer, Michael; Tonn, Maren
  10. Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets By Kate Ho; Robin Lee
  11. Stability, Fairness and Random Walks in the Bargaining Problem By Jakob Kapeller; Stefan Steinerberger
  12. Stress induces contextual blindness in lotteries and coordination games By Brocas, Isabelle; Carrillo, Juan D; Kendall, Ryan
  13. An Invitation to Market Design By Scott Kominers; Alexander Teytelboym; Vincent Crawford
  14. Cross-border Exchange and Sharing of Generation Reserve Capacity By Baldursson, Fridrik M; Lazarczyk, Ewa; Ovaere, Marten; Proost, Stef

  1. By: Andrés Salamanca (TSE - Toulouse School of Economics - Toulouse School of Economics)
    Abstract: In this paper, we introduce a solution concept generalizing the Harsanyi non-transferable utility (NTU) value to cooperative games with incomplete information. The so-defined H-solution is characterized by virtual utility scales that extend the Harsanyi-Shapley fictitious weighted-utility transfer procedure. We construct a three-player cooperative game in which Myerson's [Cooperative games with incomplete information. Int. J. Game Theory, 13, 1984, pp. 69-96] generalization of the Shapley NTU value does not capture some "negative" externality generated by the adverse selection. However, when we explicitly compute the H-solution in this game, it turns out that it prescribes a more intuitive outcome taking into account the informational externality mentioned above.
    Keywords: incomplete information,virtual utility,Cooperative games
    Date: 2016–02–01
  2. By: Sylvain Béal (Université de Bourgogne Franche-Comté, CRESE); Sylvain Ferrières (Université de Bourgogne Franche-Comté, CRESE); Eric Rémila (Université de Saint-Etienne, Gate); Phillippe Solal (Université de Saint-Etienne, Gate)
    Abstract: We introduce the class of tree TU-games augmented by a total order over the links which re ects the formation process of the tree. We rst characterize a new allocation rule for this class of cooperative games by means of three axioms, Standardness, Top-consistency and Link Amalgamation. Then, we provide a bargaining foundation for this allocation rule by designing a mechanism, including a bidding stage followed by a bargaining stage, which supports this allocation rule in subgame Nash equilibrium provided that the underlying game is superadditive.
    Keywords: Amalgamation, Bargaining, Consistency, Tree TU-games, Total order
    Date: 2017–07
  3. By: Chi, Chang Koo (Dept. of Economics, Norwegian School of Economics and Business Administration); Murto, Pauli (Aalto University School of Business); Välimäki, Juuso (Aalto University School of Business)
    Abstract: This paper analyzes all-pay auctions where the bidders have affiliated values for the object for sale and where the signals take binary values. Since signals are correlated, high signals indicate a high degree of competition in the auction and since even losing bidders must pay their bid, non-monotonic equilibria arise. We show that the game has a unique symmetric equilibrium, and that whenever the equilibrium is non-monotonic the contestants earn no rents. All-pay auctions result in low expected rents to the bidders, but also induce inefficient allocations in models with affiliated private values. With two bidders, the effect on rent extraction dominates, and all-pay auction outperforms standard auctions in terms of expected revenue. With many bidders, this revenue ranking is reversed for some parameter values and the inefficient allocations persist even in large auctions.
    Keywords: All-pay auctions; common values; affiliated signals
    JEL: D44 D82
    Date: 2017–06–17
  4. By: Sébastien Courtin (CREM - Centre de Recherche en Economie et Management - UNICAEN - Université Caen Normandie - UR1 - Université de Rennes 1 - CNRS - Centre National de la Recherche Scientifique); Zéphirin Nganmeni (THEMA - Théorie économique, modélisation et applications - Université de Cergy Pontoise - CNRS - Centre National de la Recherche Scientifique); Bertrand Tchantcho (ENSP - Ecole Nationale Supérieure Polytechnique [Yaoundé] - Université de Yaoundé I [Yaoundé])
    Abstract: This work focuses on the evaluation of voting power in dichotomous multi-type games endowed with a coalition structure. Dichotomous multi-type games, introduced by Courtin et al. [2016], model games in which there is a number of non-ordered types of support in the input, while the output is dichotomous, i.e. the proposal is either accepted or rejected. In a game with a coalition structure, it is supposed that players organize themselves into disjoint coalitions wich are defined a priori. We extend the well-known Owen index (Owen [1977]) and Banzhaf-Owen index (Owen [1981]) to this class of games. A full characterization of these power indices is provided.
    Keywords: Dichotomous multi-type games, Coalition structure, Owen power index, Banzhaf-Owen power index
    Date: 2017
  5. By: Drew Fudenberg; Kevin He
    Abstract: We propose two new signalling-game refinements that are microfounded in a model of patient Bayesian learning. Agents are born into player roles and play the signalling game against a random opponent each period. Inexperienced agents know their opponents' payoff functions but not the prevailing distribution of opponents' play. One refinement corresponds to an upper bound on the set of possible learning outcomes while the other provides a lower bound. Both refinements are closely related to divine equilibrium (Banks and Sobel, 1987).
    Date: 2017–08
  6. By: Bernergård, Axel (Department of Social Sciences); Wärneryd, Karl (Dept. of Economics)
    Abstract: We consider contestants who must choose exactly one contest, out of several, to participate in. We show that when the contest technology is of a certain type, or when the number of contestants is large, a self-allocation equilibrium, i.e., one where no contestant would wish to change his choice of contest, results in the allocation of players to contests that maximizes aggregate equilibrium effort. For a class of oligopoly models that are equivalent to contests, this implies output maximization.
    Keywords: Contests; self-allocation; effort maximization; quantity competition.
    JEL: C72 D43 D44 D72 D74 L13
    Date: 2017–08–27
  7. By: Stéphane Gonzalez (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Etienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Alain Marciano (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)
    Abstract: This paper is a contribution to the literature which uses the theory of cooperative game in order to show the non validity of the Coase Theorem in a 3-player game. We examine new situations which give rise to the refinement of the conditions under which the core of a game with three players is (non)empty and put forward three main results. First, we demonstrate that the nonemptiness of the core depends on the liability rules and the allocation of rights. Second, we show that when the externality is non transferable, the core is nonempty if the polluter is not liable but also that the core is always nonempty when the negotiations over a pollution level require unanimity. We provide a counterexample of the nonemptiness of the core in all other situations. Third, we show that, if the externality is non transferable, then an agent who does not negotiate can nevertheless influence the outcome of the negociation.
    Abstract: Cet article contribue à la littérature sur les conditions de validité du théorème de Coase. En modélisant sous la forme d'un jeu coopératif des situations de négociations entre un pollueur et deux pollués, nous affinons les conditions sous lesquelles le coeur associé est non vide. Premièrement, nous montrons que la (non)vacuité du coeur dépend des règles de responsabilités et de la répartition des droits. Deuxièmement, nous montrons que lorsque l'externalité est non-transférable, le coeur est non vide si le pollueur est non responsable mais que le coeur est toujours non vide lorsque le pollueur est responsable et ne peut polluer qu'après avoir obtenu l'accord unanime de ses victimes. Nous construisons des contre-exemples à la non-vacuité du coeur dans toutes les autres situations. Enfin, nous montrons que si l'externalité est non-transférable, alors un individu qui ne participe pas à une négociation peut malgré tout en influencer le résultat.
    Keywords: Coase theorem, externality, negociation, cooperative game, core,Théorème de Coase, externalités, jeux coopératifs, coeur
    Date: 2017
  8. By: Alice Solda (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France); Marie Claire Villeval (Univ Lyon, CNRS, GATE L-SE UMR 5824, F-69130 Ecully, France)
    Abstract: The existing literature on ostracism in social dilemma games has focused on the impact of the threat of exclusion on cooperation within groups but so far, little attention has been paid to the behavior of the excluded members after their reintegration. This paper studies the effect of exclusion by peers followed by reintegration on cooperation once excluded individuals are readmitted in their group. Using a negatively framed public good game, we manipulate the length of exclusion and whether this length is imposed ex-ogenously or results from a vote. We show that people are willing to exclude the least cooperators although it is not an equilibrium strategy. Exclusion has a positive impact on cooperation and compliance to the group norm of withdrawal after reintegration when exclusion is followed by a quick rather than a slow reintegration and that the length of exclusion is chosen by the group. In this environment, a quicker reintegration also limits retaliation. Post-exclusion cooperation and forgiveness de end not only on the length of exclusion but also on the perceived intentions of others when they punish.
    Keywords: Ostracism, exclusion, reintegration, social dilemma, cooperation, experiment
    JEL: C92 H41 D23
    Date: 2017
  9. By: Doll, Monika; Seebauer, Michael; Tonn, Maren
    Abstract: We implement waiting time as a currency in an ultimatum game in an experimental laboratory study. Subjects had to split 60 minutes of waiting time. We analyze bargaining behavior in varying situations connected to waiting time as well as gain and loss framing. Different situations that follow waiting time have no influence on bargaining behavior. Regarding gain and loss framing, we do not find differences in proposers' behavior. Responders show less willingness to wait when the bargaining outcome is framed as a loss compared to being framed as a gain of time. Displaying less willingness to wait, responders show a higher propensity to risk a rejection of the proposers' offers.
    Keywords: Ultimatum Game,Waiting Time,Experimental Currency,Leaving the Laboratory,Framing
    JEL: C91 C70
    Date: 2017
  10. By: Kate Ho (Columbia University); Robin Lee (Harvard University Department of Economics)
    Abstract: Why do insurers choose to exclude medical providers, and when would this be socially desirable? We examine network design from the perspective of a profit-maximizing insurer and a social planner to evaluate the welfare effects of narrow networks and restrictions on their use. An insurer may engage in exclusion to steer patients to less expensive providers, cream-skim enrollees, and negotiate lower reimbursement rates. Private incentives for exclusion may diverge from social incentives: in addition to the standard quality distortion arising from market power, there is a “pecuniary” distortion introduced when insurers commit to restricted networks in order to negotiate lower rates. We introduce a new bargaining solution concept for bilateral oligopoly, Nash-in-Nash with Threat of Replacement, that captures such bargaining incentives and rationalizes observed levels of exclusion. Pairing our framework with hospital and insurance demand estimates from Ho and Lee (2017), we compare social, consumer, and insurer-optimal hospital networks for the largest non-integrated HMO carrier in California across several geographic markets. We find that both an insurer and consumers prefer narrower networks than the social planner in most markets. The insurer benefits from lower negotiated reimbursement rates (up to 30% in some markets), and consumers benefit when savings are passed along in the form of lower premiums. A social planner may prefer a broader network if it encourages the utilization of more efficient insurers or providers. We predict that, on average, network regulation prohibiting exclusion has no significant effect on social surplus but increases hospital prices and premiums and lowers consumer surplus. However, there are distributional effects, and regulation may prevent harm to consumers living close to excluded hospitals.
    Keywords: health insurance, narrow networks, selective contracting, hospital prices, bargaining, bilateral oligopoly
    JEL: C78 I11 L13
    Date: 2017–09
  11. By: Jakob Kapeller (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Stefan Steinerberger (Department of Mathematics, Yale University, US)
    Abstract: We study the classical bargaining problem and its two canonical solutions, (Nash and Kalai-Smorodinsky), from a novel point of view: we ask for stability of the solution if both players are able distort the underlying bargaining process by reference to a third party (e.g. a court). By exploring the simplest case, where decisions of the third party are made randomly we obtain a stable solution, where players do not have any incentive to refer to such a third party. While neither the Nash nor the Kalai-Smorodinsky solution are able to ensure stability in case reference to a third party is possible, we found that the Kalai-Smorodinsky solution seems to always dominate the stable allocation which constitutes novel support in favor of the latter.
    Date: 2017–08
  12. By: Brocas, Isabelle; Carrillo, Juan D; Kendall, Ryan
    Abstract: In this paper, we study how stress affects risk taking in three tasks: individual lotteries, Stag Hunt (coordination) games and Hawk-Dove (anti-coordination) games. Both control and stressed subjects take more risks in all three tasks when the value of the safe option is decreased and in lotteries when the expected gain is increased. Also, subjects take longer to take decisions when stakes are high, when the safe option is less attractive and in the conceptually more difficult Hawk-Dove game. Stress (weakly) increases reaction times in those cases. Finally, our main result is that the behavior of stressed subjects in lotteries, Stag Hunt and Hawk-Dove are all highly predictive of each other (p-value
    Date: 2017–08
  13. By: Scott Kominers (Harvard Business School); Alexander Teytelboym (Institute for New Economic Thinking at the Oxford Martin School, University of Oxford); Vincent Crawford (Oxford University)
    Abstract: Market design seeks to translate economic theory and analysis into practical solutions to real-world problems. By redesigning both the rules that guide market transactions and the infrastructure that enables those transactions to take place, market designers can address a broad range of market failures. In this paper, we illustrate the process and power of market design through three examples: the design of medical residency matching programs; a scrip system to allocate food donations to food banks; and the recent “Incentive Auction” that reallocated wireless spectrum from television broadcasters to telecoms. Our lead examples show how effective market design can encourage participation, reduce gaming, and aggregate information, in order to improve liquidity, efficiency, and equity in markets. We also discuss a number of fruitful applications of market design in other areas of economic and public policy.
    Keywords: matching, auctions, trading, scrip, liquidity, Efficiency, equity, allocation rules, marketplaces, market design
    JEL: C78 D44 D82 D02 D51 D71 D61 D62 D63
    Date: 2017–09
  14. By: Baldursson, Fridrik M (Reykjavik University); Lazarczyk, Ewa (University of Reykjavik); Ovaere, Marten (KU Leuven); Proost, Stef (KU Leuven)
    Abstract: This paper develops a stylized model of cross-border balancing. We distinguish three degrees of cooperation: autarky, reserves exchange and reserves sharing. The model shows that TSO cooperation reduces costs. The gains of cooperation increase with cost asymmetry and decrease with correlation of real-time imbalances. Based on actual market data of reserves procurement of positive and negative automatic frequency restoration reserves in Belgium, France, Germany, the Netherlands, Portugal and Spain, we estimate the procurement cost decrease of exchange to be 160 million euro per year and of sharing to be 500 million euro per year. The model also shows that voluntary cross-border cooperation could be hard to achieve, as TSOs do not necessarily have correct incentives.
    Keywords: Cross-border balancing; Generation reserves; Multi-TSO interactions; Electricity transmission reliability
    JEL: C78 D61 L94
    Date: 2017–08–25

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