nep-gth New Economics Papers
on Game Theory
Issue of 2017‒10‒01
seventeen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Clash of the Temperaments: Why Vendettas Perpetuate By Friedel BOLLE; Jonathan H.W. TAN
  2. Handbook of Game Theory and Industrial Organization, Volume II: Applications. An Introduction By Corchon, Luis; Marini, Marco A.
  3. Handbook of Game Theory and Industrial Organization, Volume I: Theory. An Introduction By Corchon, Luis; Marini, Marco A.
  4. Better response dynamics and Nash equilibrium in discontinuous games By Kukushkin, Nikolai S.
  5. The Role of Noise in Alliance Formation and Collusion in Conflicts By Boudreau, James W.; Sanders, Shane; Shunda, Nicholas
  6. Externalities and the Nucleolus By Mikel ÁLVAREZ-MOZOS; Lars EHLERS
  7. Games of Threats By Elon Kohlberg; Abraham Neyman
  8. (Il)legal Assignments in School Choice By Lars EHLERS; Thayer MORRILL
  9. Group strategy-proof stable mechanisms in priority-based resource allocation under multi-unit demand: a note By Triossi, Matteo; Romero Medina, Antonio
  10. Top Trading Cycles, Consistency, and Acyclic Priorities for House Allocation with Existing Tenants By Mehmet Karakaya; Bettina Klaus; Jan Christoph Schlegel
  11. Optimal stopping and a non-zero-sum Dynkin game in discrete time with risk measures induced by BSDEs By Miryana Grigorova; Marie-Claire Quenez
  12. Optimal Design and Defense of Networks Under Link Attacks By Christophe Bravard; Liza Charroin; Corinne Touati
  13. Solidarity for public goods under single-peaked preferences: Characterizing target set correspondences By Bettina Klaus; Panos Protopapas
  14. Selling 'Money' on EBay: a Field Study of Surplus Division By Alia Gizatulina; Olga Gorelkina
  15. On Non-monetary Incentives for the Provision of Public Goods By Michela Chessa; Patrick Loiseau
  16. The Shapley-Shubik power index for dichotomous multi-type games By Sébastien Courtin; Zéphirin Nganmeni; Bertrand Tchantcho
  17. Hybrid All-Pay and Winner-Pay Contests By Johan N. M. Lagerlöf

  1. By: Friedel BOLLE (European University Viadrina, Germany.); Jonathan H.W. TAN (University of Nottingham, UK.)
    Abstract: The Vendetta Game dynamically models conflict resolution processes in which players can take turns to steal from one another probabilities of winning a prize. Vendettas are far more prevalent in the laboratory than predicted in equilibrium, assuming self-interest or even spite. To make sense of this, we identify four behavioral types each with their temperaments: melancholic Gamesmen (27%) who play equilibrium, antisocially sanguine Sharks (53%) who optimistically demand more than their equilibrium share, choleric Educators (17%) who punish greedy co-players or otherwise play equilibrium, and phlegmatic Meeks (3%) who demand less than their equilibrium share. Within games, i.e. through the course of stealing and counter-stealing, non-Sharks become greedier. Across games, the characteristic profiles of subject types sharpen with experience. Sharks earn least and Meeks earn most. The clash of temperaments perpetuates feuds. We compare our four types with the types of players observed in the related Repeated Prisoner’s Dilemma game.
    Keywords: conflict; vendetta game; experiment; temperaments; types
    JEL: C72 D74
    Date: 2017–08
  2. By: Corchon, Luis; Marini, Marco A.
    Abstract: We introduce here the second volume of the Handbook of Game Theory and Industrial Organization, by L. C. Corchón and M. A. Marini (ed.), Edward Elgar, Cheltenam, UK and Northampton, MA, describing its main aim and its basic structure.
    Keywords: Industrial Organization, Game Theory.
    JEL: A1 C0 C5 C7 C70 C71 C72 C73 C78 C79 L0 L1 L13 L3 L30 L4 L40 L41
    Date: 2017–09–01
  3. By: Corchon, Luis; Marini, Marco A.
    Abstract: We introduce here the first volume of Handbook of Game Theory and Industrial Organization: Theory, by L. C. Corchón and M. A. Marini (eds.), Edward Elgar, Cheltenam, UK and Northampton, MA, by describing its main aim and its basic structure.
    Keywords: Industrial Organization, Game Theory
    JEL: A1 C4 C5 C6 C65 C7 C71 C72 C78 D6 L0 L1 L2
    Date: 2017–09–01
  4. By: Kukushkin, Nikolai S.
    Abstract: Philip Reny's approach to games with discontinuous utility functions can work outside its original context. The existence of Nash equilibrium and the possibility to approach the equilibrium set with a finite number of individual improvements are established, under conditions weaker than the better reply security, for three classes of strategic games: potential games, games with strategic complements, and aggregative games with appropriate monotonicity conditions.
    Keywords: discontinuous game; potential game; Bertrand competition; strategic complements; aggregative game
    JEL: C72
    Date: 2017–09–19
  5. By: Boudreau, James W.; Sanders, Shane; Shunda, Nicholas
    Abstract: Many real-world conflicts are to some extent determined randomly by noise. The way in which noise is modeled in contest success functions (CSFs) has has important implications both for the possibility of forming cooperative relationships as well as for the features of such relationships. In a one-shot conflict, we find that when noise is modeled as an exponential parameter in the CSF, there is a range of values for which an alliance between two parties can be beneficial, whereas that is not the case for an additive noise parameter. In an infinitely repeated conflict setting with additive noise, sustaining collusion via Nash reversion strategies is easier the more noise there is and more difficult the larger the contest's prize value, while an increase in the contest's number of players can make sustaining collusion either more or less difficult, all in marked contrast to the case of an exponential noise parameter. Which noise specification is appropriate is therefore an important consideration for modeling any conflict situation.
    Keywords: Contests; conflict; alliance paradox; collusion; noise
    JEL: C72 C73 D72 D74
    Date: 2017–09–22
    Abstract: In most economic applications, externalities prevail: the worth of a coalition depends on how the other players are organized. We show that there is a unique natural way of extending the nucleolus from (coalitional) games without externalities to games with externalities. This is in contrast to the Shapley value and the core for which many different extensions have been proposed.
    Keywords: externalities, partition function, nucleolus, reduced game
    Date: 2017
  7. By: Elon Kohlberg (Harvard Business School, Strategy Unit); Abraham Neyman (The Hebrew University of Jerusalem)
    Abstract: A game of threats on a finite set of players, N, is a function d that assigns a real number to any coalition, S ? N, such that d(S) = -d(N\S). A game of threats is not necessarily a coalitional game as it may fail to satisfy the condition d(Ø) = 0. We show that analogs of the classic Shapley axioms for coalitional games determine a unique value for games of threats. This value assigns to each player an average of the threat powers, d(S), of the coalitions that include the player.
    Date: 2017–09
  8. By: Lars EHLERS; Thayer MORRILL
    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
  9. By: Triossi, Matteo; Romero Medina, Antonio
    Abstract: In this note we prove that group strategy-proofness and strategyproofness are equivalent requirements on stable mechanisms in prioritybased resource allocation problems with multi-unit demand.
    Keywords: Essential homogeneity; Group Strategy proofness; Strategy-proofness; Stability; Multi-unit demand; Matching
    JEL: J44 D78 D71 C78 C71
    Date: 2017–09–01
  10. By: Mehmet Karakaya; Bettina Klaus; Jan Christoph Schlegel
    Abstract: We study the house allocation with existing tenants model (introduced by Abdulkadiroglu and Sonmez, 1999) and consider rules that allocate houses based on priorities. We introduce a new acyclicity requirement for the underlying priority structure which is based on the acyclicity conditions by Ergin (2002) and Kesten (2006) for house allocation with quotas and without existing tenants. We show that for house allocation with existing tenants a top trading cycles rules is consistent if and only if its underlying priority structure satisfies our acyclicity condition. Moreover, even if no priority structure is a priori given, we show that a rule is a top trading cycles rule based on ownership adapted acyclic priorities if and only if it satisfies Pareto-optimality, individual-rationality, strategy-proofness, reallocation-proofness, and consistency.
    Keywords: consistency; house allocation; matching; strategy-proofness; top trading cycles
    JEL: C78 D70 D78
    Date: 2017–09
  11. By: Miryana Grigorova (Institut für Mathematik [Humboldt] - Humboldt Universität zu Berlin [Berlin]); Marie-Claire Quenez (LPMA - Laboratoire de Probabilités et Modèles Aléatoires - UPMC - Université Pierre et Marie Curie - Paris 6 - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We first study an optimal stopping problem in which a player (an agent) uses a discrete stopping time in order to stop optimally a payoff process whose risk is evaluated by a (non-linear) $g$-expectation. We then consider a non-zero-sum game on discrete stopping times with two agents who aim at minimizing their respective risks. The payoffs of the agents are assessed by g-expectations (with possibly different drivers for the different players). By using the results of the first part, combined with some ideas of S. Hamadène and J. Zhang, we construct a Nash equilibrium point of this game by a recursive procedure. Our results are obtained in the case of a standard Lipschitz driver $g$ without any additional assumption on the driver besides that ensuring the monotonicity of the corresponding $g$-expectation.
    Keywords: dynamic risk measure,game option,Nash equilibrium,optimal stopping,non-zero-sum Dynkin game,g-expectation
    Date: 2016
  12. By: Christophe Bravard (GAEL - Laboratoire d'Economie Appliquée de Grenoble - INRA - Institut National de la Recherche Agronomique - Université Grenoble Alpes - Grenoble 2); Liza Charroin (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, UL2 - Université Lumière - Lyon 2); Corinne Touati (Inria Grenoble - Rhône-Alpes - Inria - Institut National de Recherche en Informatique et en Automatique)
    Abstract: Networks facilitate the exchange of goods and information and create benefits. We consider a network with n complementary nodes, i.e. nodes that need to be connected to generate a positive payoff. This network may face intelligent attacks on links. To study how the network should be designed and protected, we develop a strategic model inspired by Dziubi´nskiDziubi´nski and Goyal (2013) with two players: a Designer and an Adversary. First, the Designer forms costly protected and non-protected links. Then, the Adversary attacks at most k links given that attacks are costly and that protected links cannot be removed by her attacks. The Adversary aims at disconnecting the network shaped by the Designer. The Designer builds a protected network that minimizes her costs given that it has to resist the attacks of the Adversary. We establish that in equilibrium the Designer forms a minimal 1-link-connected network which contains only protected links, or a minimal (k + 1, n)-link-connected network which contains only non-protected links, or a network which contains one protected link and (n − 1)(k + 1)/2 non-protected links. We also examine situations where the Designer can only create a limited number of protected links and situations where protected links are imperfect, that is, protected links can be removed by attacks with some probabilities. We show that if the available number of protected links is limited, then, in equilibrium , there exists a network which contains several protected and non-protected links. In the imperfect defense framework, we provide conditions under which the results of the benchmark model are preserved.
    Keywords: Network defense,Attacks on links,Network design
    Date: 2016
  13. By: Bettina Klaus; Panos Protopapas
    Abstract: We consider the problem of choosing a set of locations of a public good on the real line R. Similarly to Klaus and Storcken (2002), we ordinally extend the agents' preferences over compact subsets of R, and extend the results of Ching and Thomson (1996), Vohra 1999), and Klaus (2001) to choice correspondences. Specifically, we show that efficiency}and either population-monotonicity or one-sided replacement-dominance characterize the class of target set correspondences on the domains of single-peaked preferences and symmetric single-peaked preferences.
    Keywords: single-peaked preferences; population-monotonicity; replacement-dominance; target set correspondences
    JEL: C71 D63 D78 H41
    Date: 2017–09
  14. By: Alia Gizatulina (Max Planck Institute for Research on Collective Goods); Olga Gorelkina (University of Liverpool)
    Abstract: We study the division of trade surplus in a natural field experiment on German eBay. Acting as a seller, we offer Amazon gift cards with face values of up to 500 Euro. A random selection of buyers, the subjects of our experiment, make price offers according to the rules of eBay. Using a novel decomposition method, we infer the offered shares of trade surplus from the data and find that the average share proposed to the seller amounts to about $30 \%$. Additionally, we document: (i) insignificant effects of stake size; (ii) poor use of strategically relevant public information; and (iii) differences between East and West German subjects.
    Keywords: Field experiment, surplus division, bargaining, Internet trade, eBay
    JEL: C72 C93
    Date: 2017–08
  15. By: Michela Chessa (Université Côte d'Azur, France; GREDEG CNRS); Patrick Loiseau (EURECOM; Max Planck Institute for Software Systems (MPI-SWS))
    Abstract: We propose a non-monetary incentive mechanism to encourage high levels of contribution in public good provision. Based on a generic public good game, we implement a variation that imposes a minimum individual contribution level and offers individuals the choice between respecting it if they decide to contribute, or contributing zero. Restricting the individuals' strategy space in that way can stimulate them toward higher eorts while leaving them the possibility of contributing zero ensures that such eorts remain voluntary. We investigate how to tune the minimum contribution level in order to maximize the total contribution and to reach a stable outcome where no individual has incentive to free-ride. Exploiting the potential nature of the game, we show that one can set the minimum contribution level such that there exists a unique potential maximizer equilibrium in which all the individuals contribute to the public good. Our work is of particular relevance to the growing eld of information economics. Specically, we provide an application of our model to data analytics projects using information with privacy implications, a domain where individuals (and regulatory provisions) consider as fundamental to be able to exercise control and where monetary compensation has so-far received little traction in practical scenarios.
    Keywords: Public goods, Potential games, Non-monetary incentives, Minimum contribution level
    JEL: C72 H41
    Date: 2017–09
  16. 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 multi-type games in which there are a number of non-ordered types in the input, while the output consists of a single real value. When considering the dichotomous case, we extend the Shapley-Shubik power index and provide a full characterization of this extension. Our results generalize the literature on classical cooperative games.
    Keywords: Game theory, Multi-type games, Simple games, Shapley-Shubik index
    Date: 2016
  17. By: Johan N. M. Lagerlöf (Department of Economics, University of Copenhagen)
    Abstract: In many contests in economic and political life, both all-pay and winner-pay expenditures matter for winning. This paper studies such hybrid contests under symmetry and asymmetry. The symmetric model is very general but still yields a simple closed-form solution. More contestants tend to lead to substitution toward winner-pay investments, and total expenditures are always lower than in the corresponding all-pay contest. With a biased decision process and two contestants, the favored contestant wins with a higher likelihood, chooses less winner-pay investments, and contributes more to total expenditures. An endogenous bias that maximizes total expenditures disfavors the high-valuation contestant but still makes her the more likely one to win.
    Keywords: rent-seeking, lobbying, influence activities, multiple influence channels, producer theory
    JEL: C72 D24 D72 D74
    Date: 2017–09–26

This nep-gth issue is ©2017 by László Á. Kóczy. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.