nep-gth New Economics Papers
on Game Theory
Issue of 2017‒10‒29
seventeen papers chosen by
László Á. Kóczy
Magyar Tudományos Akadémia

  1. Coalition Formation with Externalities: The Case of the Northeast Atlantic Mackerel Fishery in a Pre and Post Brexit Context By Toumasatos, Evangelos; Steinshamn, Stein Ivar
  2. Adaptive Learning in Weighted Network Games By Bayer, Péter; Herings, P. Jean-Jacques; Peeters, Ronald; Thuijsman, Frank
  3. Why Should Majority Voting Be Unfair? By Breitmoser, Yves; Tan, Jonathan H.W.
  4. Transparency is overrated: communicating in a coordination game with private information By Cabrales, Antonio; Drouvelis, Michalis; Gurguc, Zeynep; Ray, Indrajit
  5. Voluntary agreements as correlated equilibria of a subscription game : on the impact of a background regulatory threat By Anne-Sarah Chiambretto
  6. Decentralized Bargaining in Matching Markets: Efficient Stationary Equilibria and the Core By Elliott, M.; Nava, F.
  7. Beyond perfect substitutability in public good games: heterogeneous structures of preferences By Marion Dupoux
  8. Team vs. Individual, Hypothesis Testing vs. Model Selection, and the Minimax Model By Yoshitaka Okano
  9. Nice to You, Nicer to Me: Does Self-Serving Generosity Diminish the Reciprocal Response? By Woods, Daniel; Servátka, Maroš
  10. Cooperation through Coordination in Two Stages By Todd R. Kaplan, Bradley J. Ruffle, Ze'ev Shtudiner
  11. On the viability of energy communities By Abada, I.; Ehrenmann, A.; Lambin, X.
  12. Group Influence in Sharing Experiments By Daniela Di Cagno; Werner Güth; Marcello Puca; Patrizia Sbriglia
  13. Commitment and (In)Efficiency: A Bargaining Experiment By Agranov, M.; Elliott, M.
  14. Uninformed buyers and market efficiency By Maier, Carl G.; Marencak, Michal
  15. Mean Field Game Approach to Production and Exploration of Exhaustible Commodities By Michael Ludkovski; Xuwei Yang
  16. Bureaucratic Identity and the Shape of Public Policy: A Game Theoretic Analysis By Naseer, Shaheen; Heine, Klaus
  17. Teaching microeconomic principles with smartphones – lessons from classroom experiments with classEx By Marcus Giamattei; Humberto Llavador

  1. By: Toumasatos, Evangelos (SNF - Centre for Applied Research at NHH); Steinshamn, Stein Ivar (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: In this paper we apply the so-called partition function approach to study coalition formation in the North-east Atlantic mackerel fishery in the presence of externalities. Atlantic mackerel is mainly exploited by the European Union (EU), the United Kingdom (UK), Norway, the Faroe Islands and Iceland. Two games are considered. First, a four-player game where the UK is still a member of the EU. Second, a five-player game where the UK is no longer a member of the union. Each game is modelled in two stages. In the first stage, players form coalitions following a predefined set of rules. In the second stage, given the coalition structure that has been formed, each coalition choose the economic strategy that maximises its own net present value of the fishery given the behaviour of the other coalitions. The game is solved using backward induction to obtain the set of Nash equilibria coalition structures in pure strategies, if any. We find out that the current management regime is among the stable coalition structures in all eight scenarios of the four-player game, but in only one case of the five-player game. In addition, stability in the five-player game is sensitive to the growth function applied and the magnitude of the stock elasticity parameter.
    Keywords: Mackerel dispute; straddling fish stock; brexit; games in partition function form; externalities; coalition formation; coalition structure stability
    JEL: C71 C72 Q22 Q57
    Date: 2017–10–18
  2. By: Bayer, Péter (General Economics 1 (Micro)); Herings, P. Jean-Jacques (General Economics 1 (Micro)); Peeters, Ronald (General Economics 1 (Micro)); Thuijsman, Frank (DKE Scientific staff)
    Abstract: This paper studies adaptive learning in the class of weighted network games. This class of games includes applications like research and development within interlinked firms, crime within social networks, the economics of pollution, and defense expenditures within allied nations. We show that for every weighted network game, the set of pure Nash equilibria is non-empty and, generically, finite. Pairs of players are shown to have jointly profitable deviations from interior Nash equilibria. If all interaction weights are either non-negative or non-positive, then Nash equilibria are Pareto inefficient. We show that quite general learning processes converge to a Nash equilibrium of a weighted network game if every player updates with some regularity.
    Keywords: Networks, Learning, Public Goods, Potential Games
    JEL: C72 D74 D83 D85 H41
    Date: 2017–10–24
  3. By: Breitmoser, Yves (Humboldt University Berlin); Tan, Jonathan H.W. (Nottingham University)
    Abstract: The common use of majority rule in group decision making is puzzling. In theory, it inequitably favors the proposer, and paradoxically, it disadvantages voters further if they are inequity averse. In practice, however, outcomes are equitable. The present paper analyzes data from a novel experimental design to identify the underlying social preferences. Our experiment compares one-shot and indefinite horizon versions of random-proposer majority bargaining (the Baron-Ferejohn game) which allow us to disentangle behaviors compatible with altruism, inequity aversion, and reference dependent altruism. Most subjects are classified as reference-dependent altruists, around 10% are inequity averse. Subjects are egoistic when their payoff is below their reference point, they become efficiency concerned when satisfied, and the reference point is either the ex ante expectation or the opponent\'s payoff. Finally, we successfully test RDA out-of-sample on a number of distribution and bargaining games from three seminal social preference experiments.
    Keywords: bargaining; voting; experiment; social preferences; quantal response equilibrium;
    JEL: C72 C78 D72
    Date: 2017–10–26
  4. By: Cabrales, Antonio; Drouvelis, Michalis; Gurguc, Zeynep; Ray, Indrajit
    Abstract: We consider an experiment with a version of the Battle of the Sexes game with two-sided private information, allowing a possible round of either one-way or two-way cheap talk before the game is played. We compare different treatments to study truthful revelation of information and subsequent payoffs from the game. We find that the players are overall truthful about their types in the cheap-talk phase in both one-way or two-way talk. Furthermore, the unique symmetric cheap-talk equilibrium in the two-way cheap talk game is played when they players fully reveal their information; however, they achieve higher payoffs in the game when the talk is one-way as the truthful reports facilitate desired coordination.
    Keywords: Battle of the Sexes; cheap talk; coordination; private information
    JEL: C72 C92 D83
    Date: 2017–10
  5. By: Anne-Sarah Chiambretto (CESAER)
    Abstract: We develop a n-player subscription game, modified so as to represent firms’ incentives to participate to an environmental Voluntary Agreement (VA). Specifically, the latter is assumed to be preemptive, i.e. to occur under the threat of a mandatory regulation. We suggest the use of a correlation device to strengthen firms’ participation decisions, formalized by the concept of correlated equilibrium (CE). The multiple pure and mixed Nash equilibria (NE) of the game without the correlation device are characterized. It is shown that the unique symmetric mixed NE can be implemented by using the correlation device. Furthermore, we find that such a device not only solves the problem raised by multiplicity of NE, but also ensures that a higher expected aggregate payoff is reached for any given level of threat, t. We thus provide a comparative efficiency analysis and study the impact of the threat stringency. Our general results are illustrated in a specified example of pollution abatement model.
    Keywords: voluntary approaches, correlated equilibrium
    JEL: Q53 C72 H41
    Date: 2017–10
  6. By: Elliott, M.; Nava, F.
    Abstract: This paper studies market clearing in matching markets. The model is non-cooperative, fully decentralized, and in Markov strategies. Workers and firms bargain with each other to determine who will be matched to whom and at what terms of trade. Once a worker-firm pair reach agreement they exit the market. Alternative possible matches affect agents' bargaining positions. We ask when do such markets clear efficiently and find that inefficiencies - mismatch and delay - often feature. Mismatch occurs whenever an agent's bargaining position is at risk of deteriorating. Delay occurs whenever agents expect their bargaining position to improve. Delay can be extensive and structured with vertically differentiated markets endogenously clearing from the top down.
    Date: 2017–10–17
  7. By: Marion Dupoux (University of Gothenburg)
    Abstract: The literature on public good games is very focused on the additive separability of the values of the private and the public goods. Yet, the additive structure underlies a perfect substitutability relationship between private and public goods, which is a strong assumption. This paper studies the effect of payoff/preference structures on contributions to the public good within a voluntary contributions experiment in both homogeneous and heterogeneous groups. Within the structure of substitutability, I find that subjects free-ride more often when they interact with subjects of the other type (complementarity) for whom it is optimal to contribute. Introducing such a heterogeneity may provide a method for the identification of free-riders. Nonetheless, an advantageous inequality aversion emerges as well. This means that under perfect substitutability, subjects tend to dislike earning too much compared to their group member whose payoffs underlie complementarity, a more constraining structure.
    Keywords: public good game, substitutability/complementarity, structure of payoffs, free-riding, inequality
    JEL: C71 C90 C92 D70 H41
    Date: 2017–10
  8. By: Yoshitaka Okano (School of Economics and Management, Kochi University of Technology)
    Abstract: We report results of an experiment comparing team and individual behavior in a two-player zero-sum game, and assess the predictive power of the minimax model. Based on hypothesis testing, the play of teams is consistent with the minimax hypothesis in the first half of the experiment, but the play of teams in the second half, and that of individuals in both halves are not. Based on model selection, the aggregated behavior of teams in the first half is best fitted by a belief-based learning model, whereas that of teams in the second half and that of individuals in both halves are best fitted by the minimax model. At the decision-maker level, the minimax model is best for about half of the teams and individuals.
    Keywords: Minimax, team decision-making, model selection, learning
    JEL: C72 C92
    Date: 2017–10
  9. By: Woods, Daniel; Servátka, Maroš
    Abstract: Reciprocity has been shown to be sensitive to perceived intentions, however, not much is known about the intensity of reciprocal responses to the precise nature of those intentions. For example, a person can strategically appear to be kind while being self-serving or can be selflessly (genuinely) kind. Do these two intentions elicit different reciprocal reactions? We propose a conjecture that self-serving but generous actions diminish the positively reciprocal response, compared to selfless generous actions. We classify actions that increase a recipient’s maximum payoff, but by less than the giver’s maximum payoff, as being self-serving generous actions, while classifying actions that increase a recipient’s maximum payoff by more than the giver’s as selfless generous actions. We hypothesize that selfless generous actions are considered more generous than self-serving generous actions, and that self-serving generous actions will therefore result in a diminished reciprocal response. We test this conjecture using two novel experimental designs. We find some evidence that subjects perceive self-serving generous actions as being less generous than selfless generous actions, but no empirical support for our conjecture on the diminished reciprocal response.
    Keywords: Reciprocity, generosity, self-serving, genuine, experiment, Revealed Altruism, lost wallet game, investment game
    JEL: C7 C72 C9 C91
    Date: 2017–09–26
  10. By: Todd R. Kaplan, Bradley J. Ruffle, Ze'ev Shtudiner (Wilfrid Laurier University)
    Abstract: Efficient cooperation often requires coordination, such that exactly one of two players takes an available action. If the decisions whether to pursue the action are made simultaneously, then neither or both may acquiesce leading to an inefficient outcome. However, inefficiency may be reduced if players move sequentially. We test this experimentally by introducing repeated two-stage versions of such a game where the action is individually profitable. In one version, players may wait in the first stage to see what their partner did and then coordinate in the second stage. In another version, sequential decision-making is imposed by assigning one player to move in stage one and the other in stage two. Although there are fewer cooperative decisions in the two-stage treatments, we show that overall subjects coordinate better on efficient cooperation and on avoiding both acquiescing. Yet, only some pairs actually achieve higher profits, while the least cooperative pairs do worse in the two-stage games than their single-stage counterparts. For these, rather than facilitating coordination, the additional stage invites attempts to disguise uncooperative play, which are met with punishment.
    Keywords: experimental economics, cooperation, efficiency, two-stage games, turntaking
    JEL: C90 Z13
    Date: 2017–09–30
  11. By: Abada, I.; Ehrenmann, A.; Lambin, X.
    Abstract: Following the development of decentralized production technologies, energy communities have become a topic of increased interest. While the potential benefits have been described, we use the framework of cooperative game theory to test the ability of such communities to adequately share the gains. Indeed, despite the potential value created by such coalitions, there is no guarantee that they will be viable: a subset of participants may find it profitable to exit the community and create another one of their own. We take the case of a neighborhood, having access to a limited resource e.g. a shared roof or piece of land which they can exploit if they invest in some renewable production capacity. By joining the community, participants also enjoy aggregation gains in the form of reduced network fees. We find conditions depending on the structure of renewable installation costs, on the magnitude of the aggregation effect and coordination costs and, most importantly, on the chosen sharing rule, under which the whole energy community is stable. Efficiency could require the intervention of a social planner or a change in network tariff structures.
    Keywords: Energy communities, Cooperative game theory, Decentralized power production, Consumer participation, Micro-grids
    JEL: C71 Q42 Q48 Q55 Q21
    Date: 2017–10–18
  12. By: Daniela Di Cagno; Werner Güth; Marcello Puca; Patrizia Sbriglia
    Abstract: We experimentally study how group identity and social influence affect proposers and recipients in Ultimatum and Impunity Games. To induce group identity and social effects, we assign individuals to different color groups and inform them about the median choice of their own group. When testing the relevance of this social signal for intentions and decisions we distinguish uni- and bi-dimensional behavior, the latter to let individuals select on which rule of conduct of the others to condition own behavior. When disagreement and conflicting views are possible, coordinating with group behavior may be less important and individuals may prefer self-serving. The bi-dimensional design apparently allows for more variety: tracking both group medians, only one or none.Social influence significantly affects behavior in Ultimatum but has much weaker impact in Impunity experiments. Social information seems to act in two ways: as a coordination device and as a learning device. However, the marginal impact of the signal and the direction of its influence is strongly role dependent.
    Keywords: ultimatum Game, impunity game, social influence, group identity, fairness, experiments.
    JEL: C90 C91
    Date: 2017–10
  13. By: Agranov, M.; Elliott, M.
    Abstract: We conduct an experimental investigation of decentralized bargaining over the terms of trade in matching markets. We study if/when efficient matches are reached, and the terms of trade agreed upon. We find that mismatch is extensive, and persists as we change the nature of bargaining by moving from a structured experimental protocol to permitting free-form negotiations. We identify two sources of inefficiencies. Inefficiencies are driven by (a) players' rational responses to their bargaining positions changing as others reach agreement, and (b) the existence of players who are unwilling to accept low, inequitable payoffs.
    Date: 2017–10–17
  14. By: Maier, Carl G.; Marencak, Michal
    Abstract: Empirical evidence shows that low cost of signaling interest in offers can result in a significant number of inappropriate signals. This paper provides a theoretical explanation for this observation as an equilibrium outcome of a model with utility maximizing fully rational agents that decide to signal their interest without knowing whether the offer suits them or not. We show that falling transaction costs can decrease market efficiency and social welfare.
    JEL: C72 D83 E24
    Date: 2017
  15. By: Michael Ludkovski; Xuwei Yang
    Abstract: In a game theoretic framework, we study energy markets with a continuum of homogenous producers who produce energy from an exhaustible resource such as oil. Each producer simultaneously optimizes production rate that drives her revenues, as well as exploration effort to replenish her reserves. This exploration activity is modeled through a controlled point process that leads to stochastic increments to reserves level. The producers interact with each other through the market price that depends on the aggregate production. We employ a mean field game approach to solve for a Markov Nash equilibrium and develop numerical schemes to solve the resulting system of non-local HJB and transport equations with non-local coupling. A time-stationary formulation is also explored, as well as the fluid limit where exploration becomes deterministic.
    Date: 2017–10
  16. By: Naseer, Shaheen; Heine, Klaus
    Abstract: The paper proposes a theoretical framework to explain policy drift, when identity moderates the principle-agent relation between the legislator and the bureaucracy. Our model points to the subtle interaction between different administrative levels of bureaucracy and how this interaction shapes the structure and size of budgetary allocations. Conceptually we enrich the public choice tradition of modeling bureaucracies by insights which fall broadly into the study of organizational behavior.
    JEL: D73 H11
    Date: 2017
  17. By: Marcus Giamattei; Humberto Llavador
    Abstract: Classroom experiments as a teaching tool increase understanding and especially motivation. Traditionally, experiments have been run using pen-and-paper or in a computer lab. Pen-and-paper is time and resource consuming. Experiments in the lab require appropriate installations and impede the direct interaction among students. During the last two years, we have created fully elaborated packages to run a complete course in microeconomics principles using face-to-face experiments with mobile devices. The experiments are based on Bergstrom-Miller (2000), and we used classEx, a free online tool, to run them in the classroom.The packages were used at Universitat Pompeu Fabra with over 500 undergraduate students in the fall 2016. This paper presents our experience on classEx and the Bergstrom-Miller approach working in combination, and the lessons learned.
    Keywords: experiential learning, microeconomics, mobile devices, classroom experiments, classEx
    JEL: A22 C72 C90 D00
    Date: 2017–10

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