nep-gth New Economics Papers
on Game Theory
Issue of 2018‒02‒05
twenty-two papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Equilibria in Bottleneck Games By Ryo Kawasaki; Hideo Konishi; Junki Yukawa
  2. On the empirical validity of axioms in unconstrained bargaining By Noemí Navarro; Róbert Veszteg
  3. Axiomatizations of the proportional Shapley value By Besner, Manfred
  4. How Bargaining in Marriage Drives Marriage Market Equilibrium By Robert A. Pollak
  5. Pairwise stable matching in large economies By Michael Greinecker; Christopher Kah
  6. Repercussions of Endogenous Fast Rising Top Inequality By Seungjin Han
  7. Efficiency of weighted networks By Olaizola Ortega, María Norma; Valenciano Llovera, Federico
  8. Reconciliating Relational Contracting and Hold-up: A Model of Repeated Negotiations By Goldl�cke, Susanne; Kranz, Sebastian
  9. Gender Differences in Alternating-Offer Bargaining: An Experimental Study By Hernandez-Arenaz,; Iriberri, Nagore
  10. Buyer Group and Buyer Power When Sellers Compete By Jeon, Doh-Shin; Menicucci, Domenico
  11. Matching with Waiting Times: The German Entry-Level Labor Market for Lawyers By Dimakopoulos, Philipp D.; Heller, C.-Philipp
  12. Do Children Cooperate Conditionally? Adapting the Strategy Method for First-Graders By Florian Hett; Mario Mechtel; Henning Müller; Felix Schmidt; Daniel Schunk; Valentin Wagner
  13. Behavior Mining in h-index Ranking Game By Tagiew, Rustam; Ignatov, Dmitry I.
  14. Mistrust and Opposition to Large-Scale Projects : An Experiment on the Role of Uncertainty By Ghidoni, Riccardo
  15. Experiments on cooperation, institutions, and social preferences By Xu, Xue
  16. Positional goods and legal orderings By Ugo Pagano; Massimiliano Vatiero
  17. Fake News By Grunewald, Andreas; Kräkel, Matthias
  18. Endogenous timing with a socially responsible firm By Garcia, Arturo; Leal, Mariel; Lee, Sang-Ho
  19. Private eradication of mobile public bads By Christopher Costello; Nicolas Querou; Agnès Tomini
  20. Starting Small to Communicate By Alp Atakan; Levent Kockesen; Elif Kubilay
  21. Fairness in Markets and Market Experiments By Engelmann, Dirk; Friedrichsen, Jana; Kübler, Dorothea
  22. Strategic Decentralization and the Provision of Global Public Goods By Foucart, Renaud; Wan, Cheng

  1. By: Ryo Kawasaki; Hideo Konishi (Boston College); Junki Yukawa
    Abstract: This paper introduces a bottleneck game with finite sets of commuters and departing time slots as an extension of congestion games by Milchtaich (1996). After characterizing Nash equilibrium of the game, we provide sufficient conditions for which the equivalence between Nash and strong equilibria holds. Somewhat surprisingly, unlike in congestion games, a Nash equilibrium in pure strategies may often fail to exist, even when players are homogeneous. In contrast, when there is a continuum of atomless players, the existence of a Nash equilibrium and the equivalence between the set of Nash and strong equilibria hold as in congestion games (Konishi, Le Breton, and Weber, 1997a).
    Keywords: congestion game, bottleneck model, Nash equlibrium, strong equilibrium, equivalence, existence
    JEL: C72 R41
    Date: 2018–01–20
  2. By: Noemí Navarro; Róbert Veszteg
    Abstract: We report experimental results and test cooperative models of unstructured bargaining by checking the empirical relevance of underlying axioms. Our data support strong efficiency, symmetry, independence of irrelevant alternatives and monotonicity, and reject scale invariance. Individual rationality is violated by a significant fraction of agreements when in conflict to implement the equal split. The three well-known bargaining solutions that satisfy the confirmed properties explain the observed agreements reasonably well. The most frequent agreement in our sample is the egalitarian solution. In terms of the average Euclidean distance, the theoretical solution that best explains the data is the deal-me-out solution (Binmore et al., 1989; Binmore et al., 1991), followed very closely by the equal-gains solution (Roth and Malouf, 1979). Popular solutions that satisfy scale invariance and individual rationality, as the well-known Nash or Kalai-Smorodinsky bargaining solutions, perform poorly in the laboratory.
    Keywords: bilateral bargaining, experiments, Nash bargaining solution, egalitarian solution, deal-me-out solution, individual rationality, scale invariance
    JEL: C78 C91 D63
    Date: 2017
  3. By: Besner, Manfred
    Abstract: We provide new axiomatic characterizations of the proportional Shapley value, a weighted value with the worths of the singletons as weights. This value satisfies anonymity and therefore symmetry just as the Shapley value and has characterizations which are proportional counterparts to the famous characterizations of the Shapley value in Shapley (1953b), Myerson (1980) and Young (1985a). If the stand alone worths are plausible weights the proportional Shapley value is a convincing alternative to the Shapley value for example in cost allocation. We introduce two new axioms, called proportionality and player splitting respectively. Each of which gives a main difference between the proportional Shapley value and the Shapley value.
    Keywords: Cost allocation; Dividends; Proportional Shapley value; (Weighted) Shapley value; Proportionality; Player splitting
    JEL: C7 C71
    Date: 2017–07–19
  4. By: Robert A. Pollak (Washington University in St. Louis)
    Abstract: This paper investigates marriage market equilibrium under the assumption that Bargaining In Marriage (BIM) determines allocation within marriage. Prospective spouses, when they meet in the marriage market, are assumed to foresee the outcome of BIM and rank prospective spouses on the basis of the utilities they foresee emerging from BIM. Under these assumptions, the marriage market is the first stage of a multi-stage game -- in the simplest case, a two-stage game -- that must be solved by backwards induction. The marriage market determines both who marries and, among those who marry, who marries whom. Bargaining in the second and any subsequent stages determines allocation within each marriage. When BIM determines allocation within marriage, the appropriate framework for analyzing marriage market equilibrium is the Gale-Shapley matching model. In contrast, the standard model of marriage market equilibrium assumes that prospective spouses make Binding Agreements in the Marriage Market (BAMM) that determine allocation within marriage. If we assume BAMM and transferable utility, then the appropriate framework for analyzing marriage market equilibrium is the Koopmans-Beckmann-Shapley-Shubik assignment model. BIM and BAMM have different implications not only for allocation within marriage but also for who marries, who marries whom, the number of marriages, and the Pareto efficiency of marriage market equilibrium.
    Keywords: Binding Agreements in the Marriage Market, BAMM, bargaining in marriage, marital bargaining, marriage market
    JEL: D10 J12 K36
    Date: 2018
  5. By: Michael Greinecker (University of Graz, Austria); Christopher Kah (University of Innsbruck, Austria)
    Abstract: We formulate a general model and stability notion for two-sided pairwise matching problems with individually insignificant agents. Matchings are formulated as joint distributions over the characteristics of the populations to be matched. These characteristics can be high-dimensional and need not be included in compact spaces. Stable matchings exist with and without transfers and stable matchings correspond exactly to limits of stable matchings for finite agent models. We can embed existing continuum matching models and stability notions with transferable utility as special cases of our model and stability notion. In contrast to finite agent matching models, stable matchings exist under a general class of externalities. This might pave the way for integrating matching problems in other economic models.
    Keywords: Stable matching; Economies in distributional form; Large markets
    JEL: C62 C71 C78
    Date: 2018–01
  6. By: Seungjin Han
    Abstract: This paper develops a fully-solvable equilibrium matching model of incomplete information with early skill acquisition to provide general theoretical insights into fast rising top income inequality observed in the United States. First, fast rising top income inequality is endogenously accommodated: In response to a change in each factor contributing to rising inequality, the equilibrium percentage changes in skill investment, income, and firm earnings are monotonically increasing in individual type, switching from negative to positive at respective cutoff types. Second, rising fractal top income inequality is associated with a downward shift in the Lorenz curve even when the whole income distribution is not Pareto. Third, rising income inequality has serious repercussions on welfare and efficiency. A change in each factor contributing to rising inequality makes individuals of type below a corresponding cutoff type worse off but individuals of type above better off. However, only changes in firm-related factors necessarily improve efficiency
    Keywords: matching, pre-match investment, incomplete information, fast rising top inequality, individual welfare, efficiency
    JEL: C78 D31 D82 G32 J30
    Date: 2018–01
  7. By: Olaizola Ortega, María Norma; Valenciano Llovera, Federico
    Abstract: In this paper, we address the question of the efficiency of weighted networks in a setting where nodes derive utility from their direct and indirect connections. Under rather general conditions, based on a set of assumptions about the value that connections in a weighted network generate, and about link-formation technology, we prove that any network is dominated by a special type of nested split graph weighted network. These conditions include some of the models in the literature, which are seen as particular cases of this general model.
    Keywords: weighted, network, efficiency, nested, split, graph
    JEL: A14 C72 D85
    Date: 2017–11–14
  8. By: Goldl�cke, Susanne; Kranz, Sebastian
    Abstract: We propose a unified framework to study relational contracting and hold-up problems in infinite horizon stochastic games with monetary transfers. Starting from the observation that the common formulation of relational contracts as Pareto-optimal public perfect equilibria is in stark contrast to fundamental assumptions of hold-up models, we develop a model in which relational contracts are repeatedly negotiated in a relationship. New negotiations take place with positive probability each period and treat previous informal agreements as bygones. The concept nests relational contracting and hold-up models as opposite corner cases. Allowing for intermediate cases sheds light on many plausible trade-offs that do not arise in these corner cases.
    Keywords: hold-up; negotiations; relational contracting; Stochastic Games
    JEL: C73 C78 D23 L14
    Date: 2017–12
  9. By: Hernandez-Arenaz,; Iriberri, Nagore
    Abstract: A laboratory study is carried out to study gender differences and gender interaction effects in structured alternating-offer bargaining. In a symmetric environment, where the 50:50 split is the expected sharing norm, we find no gender differences. In asymmetric environments, where there is no clear sharing norm, but one bargaining party is expected to get more than the other (due to empowerment, entitlement and informational asymmetries), we find that men are less likely to reach an agreement, and that when they do, they bargain for longer and obtain a larger share of the pie. When gender differences are compared between symmetric and asymmetric bargaining environments, gender is not an effect-modifying factor.
    Date: 2018–01
  10. By: Jeon, Doh-Shin; Menicucci, Domenico
    Abstract: We study how buyer group affects buyer power when sellers compete with non-linear tariffs and buyers operate in separate markets. In the baseline model of two symmetric sellers and two symmetric buyers, we characterize the set of equilibria under buyer group, the set without buyer group and compare both. We find that the interval of each buyer's equilibrium payoffs without buyer group is a strict subset of the interval under buyer group if each seller's cost function is strictly convex, whereas the two intervals are identical if the cost function is concave. Our result implies that buyer group has no effect when the cost function is concave. When it is strictly convex, buyer group strictly reduces the buyers' payoff as long as, under buyer group, we select the Pareto-dominant equilibrium in terms of the sellers' payoffs. We extend this result to asymmetric settings with an arbitrary number of buyers.
    Keywords: Buyer Group; Buyer Power; Common Agency; Competition in Non-linear Tariffs; Discriminatory Offers
    JEL: D4 K21 L41 L82
    Date: 2017–12
  11. By: Dimakopoulos, Philipp D. (Humboldt University Berlin); Heller, C.-Philipp (Humboldt University Berlin)
    Abstract: We study the allocation of German lawyers to regional courts for legal trainee-ships. Because of excess demand in some regions lawyers often have to wait before being allocated. The currently used \"Berlin\" mechanism is not weakly Pareto efficient, does not eliminate justified envy and does not respect improvements. We introduce a mechanism based on the matching with contracts literature, using waiting time as the contractual term. The resulting mechanism is strategy-proof, weakly Pareto efficient, eliminates justified envy and respects improvements. We extend our proposed mechanism to allow for a more flexible allocation of positions over time.
    Keywords: many-to-one matching; matching with contracts; stability; slot-specific choice functions; waiting time; legal education;
    JEL: D82 C78 H75 I28
    Date: 2018–01–22
  12. By: Florian Hett (Goethe-University Frankfurt am Main); Mario Mechtel (Leuphana University Lüneburg); Henning Müller (NHH Bergen); Felix Schmidt (Johannes Gutenberg University Mainz); Daniel Schunk (Johannes Gutenberg University Mainz); Valentin Wagner (Düsseldorf Institute for Competition Economics)
    Abstract: We develop a public goods game (PGG) to measure cooperation and conditional cooperation in young children. Our design addresses several obstacles in adapting simultaneous and sequential PGGs to children who are not yet able to read or write, do not possess advanced abilities to calculate payo s, and only have a very limited attention span at their disposal. It features the combination of haptic online explanation, fully standardized audiovisual instructions, computerized choices based on touchscreens, and a suitable incentive scheme. Applying our experimental protocol to a sample of German first-graders, we find that already 6-year-olds cooperate conditionally and that the relative frequency of di erent cooperation types matches the findings for adult subjects. We also find that neither survey items from teachers nor from parents predict unconditional or conditional cooperation behavior; this underlines the value of incentivized experimental protocols for measuring cooperation in children.
    Keywords: Conditional cooperation, strategy method, public goods game, revealed preferences, measurement, children, ingroup bias, group identity
    JEL: H41 C71 C91
    Date: 2018–01–31
  13. By: Tagiew, Rustam; Ignatov, Dmitry I.
    Abstract: Academic rewards and honors are proven to correlate with h-index, although it was not the decision criterion for them till recent years. Once h-index becomes the rule-setting scientometric ranking measure in the zero-sum game for academic positions and research resources as suggested by its advocates, the rational behavior of competing academics is expected to converge towards its game-theoretic solution. This paper derives the game-theoretic solution, its evidence in scientometric data and discusses its consequences on the development of science. DBLP database of 07/2017 was used for mining. Additionally, the openly available scientometric datasets are introduced as a good alternative to commercial datasets of comparable size for public research in behavioral sciences.
    Keywords: h-index, scientometrics, behavior mining, behavioral game theory, experimental economics, data science, social networks, research funding, R&D budget, innovation management
    JEL: C10 C4 C72 D78
    Date: 2017–09–17
  14. By: Ghidoni, Riccardo (Tilburg University, Center For Economic Research)
    Abstract: The realization of large-scale projects such as landfills, power plants, etc. is often hindered by the opposition of the possible host community. I study the case in which the opposition emerges from the mistrust of the host community toward the proposer of the project due to an informational asymmetry on the project's returns. In a novel laboratory experiment, I compare a baseline opposition game to treatments including the possibility to endogenously disclose information about the project or to offer compensatory transfers to the host. Both tools are more effective than expected in mitigating oppositions, but have heterogeneous impacts on the creation of social surplus and its allocation among the stakeholders.
    Keywords: trust; NIMBY; Information disclosure; Compensatory transfers
    JEL: C70 C90 D03 Q53
    Date: 2017
  15. By: Xu, Xue (Tilburg University, School of Economics and Management)
    Abstract: This thesis consists of three chapters in experimental economics. It involves various dimensions in which laboratory experiments can play a role: testing the validity of a game theory, helping understand institutions, and measuring (the change in) social preferences. It relates to the effects of different institutions on cooperation and social preferences. Chapter 2 studies to what extent an overlapping membership structure, which in theory affects the incentives of short-lived players, is conducive to cooperation. Chapter 3 examines whether the presence of decentralized punishment, especially the possibility of retaliating a centralized enforcer, has an impact on the decisions of the enforcer and group cooperation. Chapter 4 studies whether interactions with out-group members matter for in-group-out-group differences in altruism and whether the nature of these interactions matters for in-group-out-group differences.
    Date: 2018
  16. By: Ugo Pagano; Massimiliano Vatiero
    Abstract: People consume because others consume, maintained Veblen in 1899. More recently, theoretical, empirical and experimental articles have argued that people constantly compare themselves to their environments and care greatly about their relative positions. Given that competition for positions may produce social costs, we adopt a Law and Economics approach (i) to suggest legal remedies for positional competition, and (ii) to argue that, because legal relations are characterized in turn by positional characteristics, such legal remedies do not represent ‘free lunches’
    JEL: B41 D01 D62 K00
    Date: 2017–01
  17. By: Grunewald, Andreas (University of Bonn); Kräkel, Matthias (University of Bonn)
    Abstract: In the last decade, social media and the Internet have amplified the possibility to spread false information, a.k.a. fake news, which has become a serious threat to the credibility of politicians, organizations, and other decision makers. This paper proposes a framework for investigating the incentives to strategically spread fake news under different institutional configurations and payoff structures. In particular, we show under what conditions institutions that foster transparency in the media cause more fake news. Complementary, we study what kind of environments are particularly susceptible to the production of fake news.
    Keywords: campaigning, electoral competition, signal jamming, vertical product differentiation
    JEL: D72 D8 H0 L1
    Date: 2017–12
  18. By: Garcia, Arturo; Leal, Mariel; Lee, Sang-Ho
    Abstract: This study considers a mixed duopoly in which a socially responsible firm competes with a private firm by incorporating environmental externality and clean technology. We analyze the endogenous market structure in which both firms strategically decides quantities sequentially or simultaneously, which also affects abatement activities. We show that depending on the relative concerns on environment and consumers surplus, the socially responsible firm can be less or more aggressive in the production and abatement. Thus, not only the signifiicance of externality but also the instrumental conflict of social concerns are crucial factors in determining the equilibrium of endogenous timing game, in which the socially responsible firm might earn higher profits.
    Keywords: endogenous timing; socially responsible firm; mixed duopoly; clean technology; environmental externality
    JEL: L13 L31 Q5
    Date: 2018–01–18
  19. By: Christopher Costello (Bren School of Environmental Science and Managemen); Nicolas Querou (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - 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, CNRS - Centre National de la Recherche Scientifique); Agnès Tomini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille)
    Abstract: We consider analytically the non-cooperative behavior of many private property owners who each controls the stock of a public bad such as an invasive weed species, infectious disease, fire, or agricultural pest. The stock of the public bad can grow and disperse across a spatial domain of arbitrary size. In this setting, we characterize the conditions under which private property owners will control or eradicate, and determine how this decision depends on property-specific environmental features and on the behavior of other landowners. We show that high mobility or lower control by others result in lower private control. But when the marginal dynamic cost of the bad is sufficiently large, we find that complete eradication may be privately optimal (despite the lack of consideration of others’ welfare) – in these cases, eradication arises in the non-cooperative game and is also socially optimal so there is, in effect, no externality. Finally, when property harboring the bad is not owned, or is owned in common, we derive the side payments required to efficiently control the mobile public bad.
    Keywords: externality,espèce invasive,externalité,éradication
    Date: 2017
  20. By: Alp Atakan (Koc University, QueenMary Univ. of London); Levent Kockesen (Koc University); Elif Kubilay (Institute for Social and Economic Research, University of Essex)
    Abstract: We analyze a repeated cheap-talk game in which the receiver is privately informed about the conflict of interest between herself and the sender and either the sender or the receiver controls the stakes involved in their relationship. We focus on payoff-dominant equilibria that satisfy a Markovian property and show that if the potential conflict of interest is large, then the stakes increase over time, i.e., “starting small” is the unique equilibrium arrangement. In each period, the receiver plays the sender’s ideal action with positive probability and the sender provides full information as long as he has always observed his ideal actions in the past. We also show that as the potential conflict of interest increases, the extent to which the stakes are back-loaded increases, i.e., stakes are initially smaller but grow faster.
    Keywords: Communication, Cheap Talk, Reputation, Repeated Games, Career Path, Gradualism, Starting Small.
    JEL: D82 D83 D23
    Date: 2018–01
  21. By: Engelmann, Dirk (Humboldt University Berlin); Friedrichsen, Jana (Humboldt University Berlin and DIW); Kübler, Dorothea (WZB and TU Berlin)
    Abstract: Whether pro-social preferences identified in economic laboratories survive in natural market contexts is an important and contested issue. We investigate how fairness in a laboratory experiment framed explicitly as a market exchange relates to preferences for fair trade products before and after the market experiment. We find that the willingness to buy at a higher price when higher wages are paid to the worker correlates both with the choice for a fair trade product before the laboratory experiment and with whether the participants are willing to pay a positive fair trade premium, elicited at the end of the experiment. These results support the notion that fairness preferences as assessed in laboratory experiments capture preferences for fair behavior in comparable situations outside the laboratory.
    Keywords: fairness; market experiments; external validity; fair trade;
    JEL: C91 D01 D91
    Date: 2018–01–18
  22. By: Foucart, Renaud (Humboldt University Berlin); Wan, Cheng (Shanghai University of Finance and Economics)
    Abstract: We study strategic decentralization in the provision of a global public good. A federation, with the aim of maximizing the aggregate utility of its members, may find it advantageous to decentralize the decision-making, so that its members act autonomously to maximize their own utility. If utility is fully transferable within a federation, the larger a federation is or the more sensitive it is to the public good, the more it has incentives to remain centralized. If an overall increase in the sensitivity to the public good induces some federation(s) to decentralize, it may lead to a decrease in the aggregate provision. With non-transferable utility within a federation, those members that are smaller or less sensitive to the public good are more likely to prefer decentralization. Some members within a federation becoming more sensitive to the public good may thus lead to a lower aggregate provision, because the increased heterogeneity of the federation makes it more inclined to decentralize.
    Keywords: ;
    Date: 2018–01–18

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