nep-gth New Economics Papers
on Game Theory
Issue of 2018‒01‒22
ten papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Non-cooperative Bargaining for Side Payments Contract By Akira Okada
  2. Targeting Interventions in Networks By Galeotti, A.; Golub, B.; Goyal, S.;
  3. The Information Pharms Race and Competitive Dynamics of Precision Medicine: Insights from Game Theory By Ernst R. Berndt; Mark R. Trusheim
  4. Cryptocurrency Voting Games By Bhattacherjee, Sanjay; Sarkar, Palash
  5. Incomplete Contract and Verifiability By Akira Okada
  6. Mew method to detect convergence in simple multi-period market games By Jørgen-Vitting Andersen; Philippe De Peretti
  7. Cultural Identities and Resolution of Social Dilemmas By James C. Cox; Vjollca Sadiraj; Urmimala Sen
  8. Bayesian Social Learning in a Dynamic Environment By Krishna Dasaratha; Benjamin Golub; Nir Hak
  9. Incomplete English auction models with heterogeneity By Andrew Chesher; Adam Rosen
  10. Are Lemons Sold First? Dynamic Signaling in the Mortgage Market By Manuel Adelino; Kristopher Gerardi; Barney Hartman-Glaser

  1. By: Akira Okada (Kyoto University)
    Abstract: We present a non-cooperative sequential bargaining game for side payments contracting. Players voluntarily participate in negotiations. If any player does not participate, then renegotiation will take place in the next round, given an on-going contract. We show that if the stop- ping probability of negotiations is sufficiently small, then there exists an efficient Markov perfect equilibrium where all players immediately par- ticipate in negotiations and agree to the Nash bargaining solution. The efficiency result is strengthened by the asymptotically efficient one that in every Markov perfect equilibrium, all players participate in negotia- tions through a process of renegotiations in the long run with probability one. Finally, we illustrate international negotiations for climate change as an application of the result.
    Keywords: Coase theorem, contract, efficiency, externality, Nash bar- gaining solution, non-cooperative bargaining, side payments
    JEL: C71 C72 C78
    Date: 2018–01
  2. By: Galeotti, A.; Golub, B.; Goyal, S.;
    Abstract: Individuals interact strategically with their network neighbours, as in effort investment with spillovers among peers, or production decisions among firms connected by a supply chain. A planner can shape their incentives in pursuit of some goal-for instance, maximizing utilitarian welfare or minimizing the volatility of aggregate activity. We offer an approach to solving such intervention problems that exploits the singular value decomposition of network interaction matrices. The approach works by (i) describing the game in new coordinates given by the singular value decomposition of the network on which the game is played; and (ii) using that to deduce which components, and hence which individuals, a given type of intervention will focus on. Across a variety of intervention problems, simple orderings of the principal components characterize the planner's priorities.
    Date: 2017–10–19
  3. By: Ernst R. Berndt; Mark R. Trusheim
    Abstract: Precision medicines inherently fragment treatment populations, generating small-population markets, creating high-priced "niche busters" rather than broadly prescribed "blockbusters". It is plausible to expect that small markets will attract limited entry in which a small number of interdependent differentiated product oligopolists will compete, each possessing market power. Multiple precision medicine market situations now resemble game theory constructs such as the prisoners' dilemma and Bertrand competition. The examples often involve drug developer choices created by setting the cut-off value for the companion diagnostics to define the precision medicine market niches and their payoffs. Precision medicine game situations may also involve payers and patients who attempt to change the game to their advantage or whose induced behaviors alter the payoffs for the developers. The variety of games may predictably array themselves across the lifecycle of each precision medicine indication niche and so may become linked into a sequentially evolving meta-game. We hypothesize that certain precision medicine areas such as inflammatory diseases are becoming complex simultaneous multi-games in which distinct precision medicine niches compete. Those players that learn the most rapidly and apply those learnings the most asymmetrically will be advantaged in this ongoing information pharms race.
    JEL: I11 L13 L65
    Date: 2017–11
  4. By: Bhattacherjee, Sanjay; Sarkar, Palash
    Abstract: This work shows that weighted majority voting games occur in cryptocurrencies. In particular, two such games are highlighted. The first game, which we call the Rule Game, pertains to the scenario where the entities in the system engage in a voting procedure to accept or reject a change of rules. The second game, which we call the Attack Game, refers to the scenario where a group of entities in a cryptocurrency system can form a coalition to engage in double spending. For the Rule Game we provide analysis to argue that the Coleman’s preventive power measure is the appropriate tool for measuring a player’s influence in the game while for the Attack Game, we define a notion of stability based on the notion of minimal winning coalitions. For both the Rule Game and the Attack Game, we show how to analyse the games based on a snapshot of real world data for Bitcoin which is presently the most popular of all the cryptocurrencies.
    Keywords: Voting games, Cryptocurrency, Bitcoin, preventive power, stability
    JEL: C15 C71 D72 D74 Y10 Y20 Y80
    Date: 2017–11–30
  5. By: Akira Okada (Kyoto University)
    Abstract: While the theory of incomplete contracts has contributed greatly to our understanding many topics such as the nature and financial struc- ture of the firm, its rigorous foundation has been debated. Maskin and Tirole (1999) show that the usual "observable but not verifiable" as- sumption is not sufficient for the incomplete contract to be optimal, provided that parties can commit themselves not to renegotiate. We show that the assumption is not necessary, either. In sequential bar- gaining where parties can write a contract contingent on (ex post) veri- fiable variables, an equilibrium contract turns out to be a null contract (the ex post Nash bargaining solution). A key to our result is endoge- nous revealing of private information during contract negotiations. The possibility of renegotiations is irrelevant.
    Keywords: incomplete contract; ex post Nash bargaining solution; information revealing; sequential bargaining; verifiability
    JEL: C72 C78 D82
    Date: 2018–01
  6. By: Jørgen-Vitting Andersen (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Philippe De Peretti (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We introduce a new methodology that enables the detection onset of convergence towards Nash equilibria, in simple market games with infinite larges strategy spaces. The method works by constraining on a special and finite subset of strategies. We illustrate how the method can be used to … in a series of experiments.
    Date: 2017–12
  7. By: James C. Cox; Vjollca Sadiraj; Urmimala Sen
    Abstract: An experiment is reported for payoff-equivalent public good and common pool games with high caste and low caste West Bengali villagers. Tests are reported for models of unconditional social preferences, models of reciprocity, and cultural identity. Results from the artefactual field experiment indicate that when information about caste is withheld no significant difference is observed in the efficiency of play between the villagers and student subjects at American universities in games with positive and negative externalities. In contrast, making the hereditary class structure salient induces different behavior among villagers. Providing caste information leads to: (i) the lowest level of efficiency when low caste first movers interact with a low caste second mover, and (ii) the highest level of efficiency when high caste first movers interact with a high caste second mover. Cross-caste play generates intermediate levels of efficiency.
    JEL: C93 C70 H41
    Date: 2017–12
  8. By: Krishna Dasaratha; Benjamin Golub; Nir Hak
    Abstract: Bayesian agents learn about a moving target, such as a commodity price, using private signals and their network neighbors' estimates. The weights agents place on these sources of information are endogenously determined by the precisions and correlations of the sources; the weights, in turn, determine future correlations. We study stationary equilibria-ones in which all of these quantities are constant over time. Equilibria in linear updating rules always exist, yielding a Bayesian learning model as tractable as the commonly-used DeGroot heuristic. Equilibria and the comparative statics of learning outcomes can be readily computed even in large networks. Substantively, we identify pervasive inefficiencies in Bayesian learning. In any stationary equilibrium where agents put positive weights on neighbors' actions, learning is Pareto inefficient in a generic network: agents rationally overuse social information and underuse their private signals.
    Date: 2018–01
  9. By: Andrew Chesher (Institute for Fiscal Studies and University College London); Adam Rosen (Institute for Fiscal Studies and Duke University)
    Abstract: This paper studies identification and estimation of the distribution of bidder valuations in an incomplete model of English auctions. As in Haile and Tamer (2003) bidders are assumed to (i) bid no more than their valuations and (ii) never let an opponent win at a price they are willing to beat. Unlike the model studied by Haile and Tamer (2003), the requirement of independent private values is dropped, enabling the use of these restrictions on bidder behavior with affiliated private values, for example through the presence of auction specific unobservable heterogeneity. In addition, a semiparametric index restriction on the effect of auction-specific observable heterogeneity is incorporated, which, relative to nonparametric methods, can be helpful in alleviating the curse of dimensionality with a moderate or large number of covariates. The identification analysis employs results from Chesher and Rosen (2017) to characterize identified sets for bidder valuation distributions and functionals thereof.
    Date: 2017–05–31
  10. By: Manuel Adelino; Kristopher Gerardi; Barney Hartman-Glaser
    Abstract: A central result in the theory of adverse selection in asset markets is that informed sellers can signal quality and obtain higher prices by delaying trade. This paper provides some of the first evidence of a signaling mechanism through trade delays using the residential mortgage market as a laboratory. We find a strong relationship between mortgage performance and time to sale for privately securitized mortgages. Additionally, deals made up of more seasoned mortgages are sold at lower yields. These effects are strongest in the "Alt-A" segment of the market, where mortgages are often sold with incomplete hard information, and in cases where the originator and the issuer of mortgage-backed securities are not affiliated.
    JEL: D0 G0
    Date: 2018–01

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