nep-gth New Economics Papers
on Game Theory
Issue of 2017‒11‒19
24 papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Static versus Dynamic Deferred Acceptance in School Choice: Theory and Experiment By Joana Pais; Flip Klijn; Marc Vorsatz
  2. Mate Choice Mechanism for Solving a Quasi-Dilemma By Tatsuyoshi Saijo; Junyi Shen
  3. Group behaviour in tacit coordination games with focal points: An experimental investigation By Stefania Sitzia; Jiwei Zheng
  4. Peer sanctioning in isomorphic provision and appropriation social dilemmas By Abhijit Ramalingam; Antonio J. Morales; James M. Walker
  5. Bayesian Game Theorists and Non-Bayesian Players By Guilhem Lecouteux
  6. Does strategy fairness make inequality more acceptable? By Mengjie Wang
  7. Decentralized Matching Markets With(out) Frictions: A Laboratory Experiment By Joana Pais; Ágnes Pintér; Róbert F. Veszteg
  8. Behavioural types in public goods games: A re-analysis by hierarchical clutering By Francesco Fallucchi; R. Andrew Luccasen; Theodore L. Turocy
  9. Optimal Favoritism in All-Pay Auctions and Lottery Contests By Jörg Franke; Wolfgang Leininger; Cédric Wasser
  10. The productivity puzzle and the problem with the rich: An experiment on competition, inequality and "team spirit" By Shaun P. Hargeaves Heap; Abhijit Ramalingam; Brock V. Stoddard
  11. The Impact of Social Media On Belief Formation By Schwarz, Marco A.
  12. Revisiting Gender Differences in Ultimatum Bargaining: Experimental Evidence from the US and China By Shuwen Li; Xiandong Qin; Daniel Houser
  13. The attraction and compromise effects in bargaining: Experimental evidence By Fabio Galeotti; Maria Montero; Anders Poulsen
  14. Obvious Mistakes in a Strategically Simple College Admissions Environment By Ran I. Shorrer; Sandor Sovago
  15. NTU-Bankruptcy Problems : Consistency and the Relative Adjustment Principle By Dietzenbacher, Bas; Borm, Peter; Estevez Fernandez, M.A.
  16. The Dollar Auction Game: A laboratory comparison between Individuals and Groups By Morone, Andrea; Nuzzo, Simone; Caferra, Rocco
  17. The role of morals in three-player ultimatum games By Sandro Casal; Francesco Fallucchi; Simone Quercia
  18. Sharing Costs and the Compromise Solution By José, Alcalde; Josep E., Peris
  19. Giving in dictator games: Experimenter demand effect or preference over the rules of the game? By Nadine Chlass; Peter G. Moffatt
  20. Urban Interactions By Kim, Jun Sung; Patacchini, Eleonora; Picard, Pierre M; Zenou, Yves
  21. The effect of horizontal mergers, when firms compete in prices and investments By Motta, Massimo; Tarantino, Emanuele
  22. Market Power and Welfare in Asymmetric Divisible Good Auctions By Carolina Manzano; Xavier Vives
  23. Price competition and limited attention By Karpov, Aleksandr
  24. The Effect of Positive Mood on Cooperation in Repeated Interaction By Proto, Eugenio; Sgroi, Daniel; Mahnaz Nazneen, Mahnaz

  1. By: Joana Pais; Flip Klijn; Marc Vorsatz
    Abstract: In the context of school choice, we experimentally study how behavior and outcomes are affected when, instead of submitting rankings in the student proposing or receiving deferred acceptance (DA) mechanism, participants make decisions dynamically, going through the steps of the underlying algorithms. Our main results show that, contrary to theory, (a) in the dynamic student proposing DA mechanism, participants propose to schools respecting the order of their true preferences slightly more often than in its static version while, (b) in the dynamic student receiving DA mechanism, participants react to proposals by always respecting the order and not accepting schools in the tail of their true preferences more often than in the corresponding static version. As a consequence, for most problems we test, no significant differences exist between the two versions of the student proposing DA mechanisms in what stability and average payoffs are concerned, but the dynamic version of the student receiving DA mechanism delivers a clear improvement over its static counterpart in both dimensions. In fact, in the aggregate, the dynamic school proposing DA mechanism is the best performing mechanism.
    Keywords: dynamic school choice, deferred acceptance, stability, efficiency
    JEL: C78 C91 C92 D78 I20
    Date: 2017–09
  2. By: Tatsuyoshi Saijo (Research Center for Future Design, Kochi University of Technology); Junyi Shen (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: Saijo, Okano, and Yamakawa (2015) showed that the mate choice mechanism for a symmetric prisoner's dilemma (PD) game implements cooperation in backward elimination of weakly dominated strategies (BEWDS), and it attained almost full cooperation in their experiment. This study theoretically shows, first, that this mechanism works well in the class of quasi-dilemma (QD) games, such as asymmetric PD games and coordination games. Second, the class of BEWDS-implementable games is exactly the same as the class of QD games. Third, the mechanism cannot implement cooperation in a subgame perfect equilibrium. Finally, we confirm that the mate choice mechanism works well experimentally for an asymmetric PD game.
    Keywords: Asymmetric prisoner's dilemma, Quasi-dilemma, Mate choice mechanism
    JEL: C72 C92 D74 P43
    Date: 2017–10
  3. By: Stefania Sitzia (University of East Anglia); Jiwei Zheng (Universtiy of East Anglia)
    Abstract: This paper reports an experimental investigation where we compare groups and individual behavior on coordination games with payoff- irrelevant cues. We employ the disc game (Blume and Gneezy, 2010), the pie game (Crawford et al., 2008) and the bargaining table (Isoni et al., 2013). Our results show that groups choose more often according to the focal point cue than individuals when interests are aligned. Groups also perform better when identifying the focal point requires some level of cognition. In line with previous findings (Crawford et al., 2008; Isoni et al., 2013), when conflict of interest is introduced through payoff asymmetry, expected coordination rates fall for both groups and individuals, and they further decline as the payoff asymmetry increases. Additionally, groups' performance, unlike individuals' one, does not change across games, and this is due to groups using more effectively the focal cue to restrict their choices to only two strategies. Finally, groups that choose the not self-evident focal point tend to choose more often the focal point in the other games where instead it is easily identifiable.
    JEL: C72 C78 C91 C92
    Date: 2017
  4. By: Abhijit Ramalingam (University of East Anglia); Antonio J. Morales (University of Malaga); James M. Walker (Indiana University)
    Abstract: This study brings together two strands of experimental literature, positive versus negative frames of social dilemmas and the effectiveness of peer sanctioning in promoting cooperation. Examining provision and appropriation games that are strategically and payoff isomorphic, we find evidence of less cooperation in the appropriation game. We also find that peer sanctioning is able to overcome the decrease in cooperation in the appropriation game, leading to greater relative increases in contributions and earnings in that decision setting. This result is linked to the fact that low contributors are targeted for punishment more frequently in the appropriation game. All the experimental findings are compatible with the existence of reciprocal preferences a la Cox, Friedman and Sadiraj (2008).
    Keywords: social dilemma, experiment, provision, appropriation, cooperation, punishment, reciprocal preferences
    JEL: C72 C91 C92 D02 H41
    Date: 2017–04–11
  5. By: Guilhem Lecouteux (Université Côte d'Azur; GREDEG CNRS)
    Abstract: Bayesian game theorists claim to represent players as Bayes rational agents, maximising their expected utility given their beliefs about the choices of other players. I argue that this narrative is inconsistent with the formal structure of Bayesian game theory. This is because (i) the assumption of common belief in rationality is equivalent to equilibrium play, as in classical game theory, and (ii) the players' prior beliefs are a mere mathematical artefact and not actual beliefs hold by the players. Bayesian game theory is thus a Bayesian representation of the choice of players who are committed to play equilibrium strategy profiles.
    Keywords: Bayesianism, common belief in rationality, epistemic game theory, interactive epistemology, prior beliefs
    JEL: B21 C72 D81
    Date: 2017–11
  6. By: Mengjie Wang (University of East Anglia)
    Abstract: This paper proposes a new concept of fairness: strategy fairness. The conjecture is that inequalities will tend to be seen as acceptable if they come about through the workings of fair rules, even though they are the result of self-interested intentions. A model of strategy fairness is provided to show how the concept of strategy fairness can be incorporated into a more complete model. The concept of strategy fairness is tested using an experiment. It turns out that subjects are more willing to accept inequalities that are the result of fair procedures. The surprising result emerges that procedural unfairness makes both disadvantaged and advantaged players more likely to take.
    Keywords: procedural fairness, inequality, competition
    JEL: C72 C91 D63 D74
    Date: 2017–10–24
  7. By: Joana Pais; Ágnes Pintér; Róbert F. Veszteg
    Abstract: In a series of laboratory experiments, we explore the impact of different market features (the level of information, search costs, and the level of commitment) on agents’ behaviour and on the outcome of decentralized matching markets. In our experiments, subjects on each side of the market actively search for a partner, make proposals, and are free to accept or reject any proposal received at any time throughout the game. Our results suggest that a low information level boosts market activity but does not affect stability or efficiency of the final outcome, unless coupled with search costs. Search costs have a significant negative impact on market activity, and on both stability and efficiency. Finally, commitment harms stability slightly but acts as a disciplinary device to market activity and is associated with higher efficiency levels of the final outcome.
    Keywords: decentralized markets, two-sided matching, stability, efficiency, laboratory experiments
    JEL: C78 C91 D82
    Date: 2017–09
  8. By: Francesco Fallucchi (University of East Anglia); R. Andrew Luccasen (Mississippi University for Women); Theodore L. Turocy (University of East Anglia)
    Abstract: We re-analyse participant behaviour in standard economics experiments studying voluntary contributions to a public good. Previous approaches were based in part on a priori models of decision-making, such as maximising personal earnings, or reciprocating the behaviour of others. Many participants however do not conform to one of these models exactly, requiring ad hoc adjustments to the theoretical baselines to identify them as belonging to a given behavioural type. We construct a typology of behaviour based on a similarity measure between strategies using hierarchical clustering analysis. We identify four clearly distinct behavioural types which together account for over 90% of participants in six experimental studies. The resulting type classification distinguishes behaviour across groups more consistently than previous approaches.
    Keywords: behavioural types, cluster analysis, cooperation, public goods
    JEL: C65 C71 H41
    Date: 2017–08–08
  9. By: Jörg Franke; Wolfgang Leininger; Cédric Wasser
    Abstract: We analyze the revenue-enhancing potential of favoring specific contestants in complete information all-pay auctions and lottery contests with several heterogeneous contestants. Two instruments of favoritism are considered: Head starts that are added to the bids of specific contestants and multiplicative biases that give idiosyncratic weights to the bids. In the all-pay auction, head starts are more effective than biases while optimally combining both instruments even yields first-best revenue. In the lottery contest, head starts are less effective than biases and combining both instruments cannot further increase revenue. As all-pay auctions revenue-dominate lottery contests under optimal biases, we thus obtain an unambiguous revenue-ranking of all six combinations of contest formats and instruments.
    Keywords: all-pay auction, lottery contest, favoritism, head start, revenue dominance
    JEL: C72 D72
    Date: 2016
  10. By: Shaun P. Hargeaves Heap (King's College London); Abhijit Ramalingam (University of East Anglia); Brock V. Stoddard (University of South Dakota)
    Abstract: This paper examines with an experiment a new way that inequality and competition may interact to affect productivity: through team public goods contributions. While inequality within a team diminishes team cooperation in the absence of competition, we find there is no effect of inequality when teams compete. Competition boosts cooperation and more so in unequal teams. Thus, a decline in competition accompanied by growing inequality has a doubly adverse effect on productivity. The difference in the effect of inequality is driven by the behaviour of the 'rich'. They disengage from their teams but recover their 'team spirit' under competition.
    Keywords: public goods, experiment, team competition, inequality, endowment, within-group
    JEL: C72 C91 C92 D31 D63 D72 H41
    Date: 2017–04–05
  11. By: Schwarz, Marco A. (University of Innsbruck)
    Abstract: Social media are becoming increasingly important in our society and change the way people communicate, how they acquire information, and how they form beliefs. Experts are concerned that the rise of social media may make interaction and information exchange among like-minded individuals more pronounced and therefore lead to increased disagreement in a society. This paper analyzes a learning model with endogenous network formation in which people have different types and live in different regions. I show that when the importance of social media increases, the amount of disagreement in the society first decreases and then increases. Simultaneously people of the same type hold increasingly similar beliefs. Furthermore, people who find it hard to communicate with people in the same region may interact with similar people online and consequently hold extreme beliefs. Finally, I propose a simple way to model people who neglect a potential correlation of signals and show that these people may be made worse off by social media.
    Keywords: social media; network formation; social learning; polarization; homophily; correlation neglect;
    JEL: C72 D72 D83 D85 Z10 Z19
    Date: 2017–11–09
  12. By: Shuwen Li (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Xiandong Qin (Department of Applied Economics, Shanghai Jiao Tong University); Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: We report results from a replication of Solnick (2001), which finds using an ultimatum game that, in relation to males, more is demanded from female proposers and less is offered to female responders. We conduct Solnick’s (2001) game using participants from a large US university and a large Chinese university. We find little evidence of gender differences across proposer and responder decisions in both locations. We do however find that, in comparison to Chinese participants, US proposers are more generous, while US responders are more demanding.
    Keywords: gender differences, cultural differences, laboratory experiment, ultimatum game, bargaining
    JEL: C78 C92 J16 Z10
    Date: 2017–10
  13. By: Fabio Galeotti (University of Lyon); Maria Montero (University of Nottingham); Anders Poulsen (University of East Anglia)
    Abstract: The Attraction Effect and Compromise Effect (AE and CE) were introduced for individual choice situations. We define and experimentally investigate the AE and CE for bargaining situations. Our data suggest that the AE and CE are significant in bargaining, when certain conditions, related to focal equilibrium selection criteria based on payoff equality, efficiency, and symmetry, are met.
    Keywords: bargaining, attraction effect, compromise effect, focality, equality, efficiency, symmetry
    JEL: C70 C72 C92
    Date: 2017–08–02
  14. By: Ran I. Shorrer (Pennsylvania State University, United States of America); Sandor Sovago (Vrije Universiteit Amsterdam)
    Abstract: In a centralized marketplace that was designed to be simple, we identify participants whose choices are dominated. Using administrative data from Hungary, we show that college applicants make obvious mistakes: they forgo the free opportunity to receive a tuition waiver worth thousands of dollars. At least 10 percent of the applicants made such mistakes in 2013. Costly mistakes have externalities: they transfer tuition waivers from high- to low-socioeconomic status students, and increase the number of students attending college. To shed light on the mechanisms underlying mistakes, we exploit a reform that substantially increased the selectivity of admission with financial aid in some fields of study. Increased admission selectivity raises the likelihood of making obvious mistakes, especially among high-socioeconomic status and low-achieving applicants. Our results suggest that mistakes are more common when their expected cost is lower. Still, the average cost of a mistake in 2013 was 114-365 dollars.
    Keywords: College admissions, dominated strategies, market design, obvious misrepresentation, school choice, strategy-proof
    JEL: C70 D61 D63
    Date: 2017–11–10
  15. By: Dietzenbacher, Bas (Tilburg University, Center For Economic Research); Borm, Peter (Tilburg University, Center For Economic Research); Estevez Fernandez, M.A. (Tilburg University, Center For Economic Research)
    Abstract: This paper axiomatically studies bankruptcy problems with nontransferable utility by adequately generalizing and analyzing properties for bankruptcy rules. In particular, we discuss several consistency notions and introduce the class of parametric bankruptcy rules. Moreover, we introduce the class of adjusted bankruptcy rules and study the relative adjustment principle based on relative symmetry, truncation invariance, and minimal rights first.
    Keywords: NTU-bankruptcy problem,; axiomatic analysis; consistency; parametric bankruptcy rules; adjusted bankruptcy rules; relatived adjustment principle
    JEL: C79 D63 D74
    Date: 2017
  16. By: Morone, Andrea; Nuzzo, Simone; Caferra, Rocco
    Abstract: The aim of this paper is to analyze bidders’ behavior, comparing individuals and groups’ decisions within the dollar auction framework. This game induces subjects to fall prey into the paradigm of escalation, which is driven by agents’ commitment to higher and higher bids. Whenever each participant commits himself to a bid, the lower bidder, motivated by the wish to win as well as to defend his prior investment, finds it in his best interest to place a higher bid to overcome his opponent. The latter mechanism may lead subjects to overbid. We find that the Nash equilibrium of the game is only rarely attained. Second, we detect clean evidence that groups’ decisions are, on average, superior to individuals’ decisions. Learning over time is clearly evident, leading individuals to perform nearly as good as groups in the final rounds of the game.
    Keywords: escalation,winner’s curse
    JEL: C91
    Date: 2017
  17. By: Sandro Casal (University of Milan); Francesco Fallucchi (University of East Anglia); Simone Quercia (University of Bonn)
    Abstract: We experimentally investigate the role of responders' moral concerns in three-player ultimatum bargaining. In our experiment, proposers can increase their share of the pie at the expenses of an NGO that conducts humanitarian aid in emergency areas. We find that responders are not willing to engage in 'immoral' transactions only when fully informed about proposers' behavior toward the NGO. Under complete information, their willingness to reject offers increases with the strength of the harm to the NGO. Moreover, the possibility to nullify the effects of the negative externality through rejection further increases their willingness to reject. We show that the latter result is better explained by a model of consequentialist moral concerns toward the NGO rather than deontological morality about own actions.
    Keywords: three-player ultimatum game, moral reasoning, experiment
    JEL: C72 C91 D6
    Date: 2017–05–10
  18. By: José, Alcalde (University of Alicante, D. Quantitative Methods and Economic Theory); Josep E., Peris (University of Alicante, D. Quantitative Methods and Economic Theory)
    Abstract: This paper introduces the Compromise rule for cost sharing problems. This rule fairly combines the equity and the growth-encouraging key principles. The way in which it is described also allows to endogenously identify the agents belonging to a “middle class” depending on how the costs of satisfying individual demands are distributed.
    Keywords: Cost Sharing Rule; Local Progressiveness; Compromise Rule
    JEL: C71 D63 D71
    Date: 2017–11–13
  19. By: Nadine Chlass (University of Jena); Peter G. Moffatt (University of East Anglia)
    Abstract: Which preference underlies giving in dictator games? To date, the experimental evidence has either been interpreted as a preference over the distribution of pay-offs, or as an experimenter demand effect. We show that under strict dictator-dictator as well as strict dictator-recipient anonymity, giving in dictator games springs from a preference over the distribution of decision rights. In contrast, concerns which trigger experimenter demand (Andreoni and Bernheim 2009) are negatively correlated with dictator game giving. Our experiments cover a series of dictator game variants which have sparked the experimenter demand debate. In addition, we identify the sets of ethical ideals that dictators em-ploy to derive the 'right' course of action in a formal moral judgement test and model dictator transfers econometrically by means of dictators' actual ethical ideals. Our results explain the lion’s share of results from the literature: lower transfers when dictators earn the pie (Cherry et al. 2002); lower transfers when 'take' options are available (List 2007; Bardsley 2008); lower transfers when anonymity is lifted (Hoffmann et al. 1994); generous dictators consistently pre-ferring to avoid the game altogether, if given the option (Lazear et al. 2012), and findings that social norms and beliefs cause dictator transfers (Krupka and Weber 2013; Di Tella et al. 2015; Kimbrough and Vostroknutov 2015).
    Keywords: altruism, dictator games, moral judgement, experimenter demand effect, equality of decision rights, purely procedural preferences
    JEL: C91 D63 D64
    Date: 2017–07–03
  20. By: Kim, Jun Sung; Patacchini, Eleonora; Picard, Pierre M; Zenou, Yves
    Abstract: This paper studies social-tie formation when individuals care about the geographical location of other individuals. In our model, the intensity of social interactions can be chosen at the same time as friends. We characterize the equilibrium in terms of both social interactions and social capital (the value of social interactions offered by each agent) for a general distribution of individuals in the urban geographical space. We show that greater geographical dispersion decreases the incentives to socially interact. We also show that the equilibrium frequency of interactions is lower than the effcient one. Using a unique geo-coded dataset of friendship networks among adolescents in the United States, we estimate the model and validate that agents interact less than the social first best optimum. Our policy analysis suggests that, given the same cost, subsidizing social interactions yields a higher total welfare than subsidizing transportation costs.
    Keywords: policies.; Social interactions; urban economic
    JEL: R1 R23 Z13
    Date: 2017–11
  21. By: Motta, Massimo; Tarantino, Emanuele
    Abstract: It has been suggested that mergers, by increasing concentration, raise incentives to invest and hence are pro-competitive. To study the effects of mergers, we rewrite a game with simultaneous price and cost-reducing investment choices as one where firms only choose prices, and make use of aggregative game theory. We find no support for that claim: absent effciency gains, the merger lowers total investments and consumer surplus.Only if it entails suffcient effciency gains, will it be pro-competitive. We also show there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments.
    JEL: K22 D43 L13 L41
    Date: 2017
  22. By: Carolina Manzano; Xavier Vives
    Abstract: We analyze a divisible good uniform-price auction that features two groups each with a finite number of identical bidders. Equilibrium is unique, and the relative market power of a group increases with the precision of its private information but declines with its transaction costs. In line with empirical evidence, we find that an increase in transaction costs and/or a decrease in the precision of a bidding group.s information induces a strategic response from the other group, which thereafter attenuates its response to both private information and prices. A “stronger†bidding group -which has more precise private information, faces lower transaction costs, and is more oligopsonistic- has more market power and so will behave competitively only if it receives a higher per capita subsidy rate. When the strong group values the asset no less than the weak group, the expected deadweight loss increases with the quantity auctioned and also with the degree of payoff asymmetries. Market power and the deadweight loss may be negatively associated.
    Keywords: demand/supply schedule competition, private information, liquidity auctions, treasury auctions, electricity auctions
    JEL: D44 D82 G14 E58
    Date: 2016
  23. By: Karpov, Aleksandr
    Abstract: The paper develops a model of price competition in presence of consumers with limited attention. Education and obfuscation marketing strategies are studied. It is shown that firms in highly competitive industries have incentives to obfuscate, but firms in low competitive industries have not.
    Keywords: bounded rationality,hotelling linear city model,consideration set,limited attention,unawareness
    JEL: D03 D11 D43
    Date: 2017
  24. By: Proto, Eugenio (DepartmentofEconomics,University of Warwick, CAGE and IZA); Sgroi, Daniel (Department of Economics, University of Warwick,CAGE and Nuffield College, University of Oxford); Mahnaz Nazneen, Mahnaz (Department of Economics, University of Warwick)
    Abstract: Existing research supports two opposing mechanisms through which positive mood might affect cooperation. Some studies have suggested that positive mood produces more altruistic, open and helpful behavior, fostering cooperation. However, there is contrasting research supporting the idea that positive mood produces more assertiveness and inward-orientation and reduced use of information, hampering cooperation. We find evidence that suggests the second hypothesis dominates when playing the repeated Prisoner's Dilemma. Players in an induced positive mood tend to cooperate less than players in a neutral mood setting. This holds regardless of uncertainty surrounding the number of repetitions or whether pre-play communication has taken place. This finding is consistent with a text analysis of the pre-play communication between players indicating that subjects in a more positive mood use more inward-oriented, more negative and less positive language. To the best of our knowledge we are the rst to use text analysis in pre-play communication.
    Date: 2017

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