nep-gth New Economics Papers
on Game Theory
Issue of 2018‒04‒02
eleven papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Targeting the Key Player: An Incentive-Based Approach By Mohamed Belhaj; Frédéric Deroïan
  2. Strategy-Proofness and Efficiency of Probabilistic Mechanisms for Excludable Public Good By Kazuhiko Hashimoto; Kohei Shiozawa
  3. Designing Coalition-Based Fair and Stable Pricing Mechanisms Under Private Information on Consumers' Reservation Prices By Hélène Le Cadre; Bernardo Pagnoncelli; Tito Homem-De-Mello; Olivier Beaude
  4. Transparency and cooperation in repeated dilemma games : A meta study By Fiala, Lenka; Suetens, Sigrid
  5. Demand response as a common pool resource game: Nudges versus prices By Penelope Buckley; Daniel Llerena
  6. Algorithmic Trading with Partial Information: A Mean Field Game Approach By Philippe Casgrain; Sebastian Jaimungal
  7. Collusion in mixed oligopolies and the coordinated effects of privatization By João Correia-da-Silva; Joana Pinho
  8. Gender & Collaboration By Ductor, L; Goyal, S.; Prummer, A.
  9. An efficient and implementable auction for environmental rights By Peyman Khezr; Ian A. MacKenzie
  10. R&D investments and spillovers under endogenous absorptive capacity: Competitive R&D cannot take full-advantage of complementarity in absorptive capacity while cooperative R&D can By Mário Alexandre Patrício Martins da Silva
  11. How much does book value data tell us about systemic risk and its interactions with the macroeconomy? A Luxembourg empirical evaluation By Xisong Jin

  1. By: Mohamed Belhaj (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Frédéric Deroïan (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)
    Abstract: We consider a network game with local complementarities. A policymaker, aiming at minimizing or maximizing aggregate effort, contracts with a single agent on the network to trade effort change against transfer. The policymaker has to find the best agent and the optimal contract to offer. Our study shows that for all utilities with linear best-responses, it only takes two statistics about the position of each agent on the network to identify the key player: the Bonacich centrality and a weighted measure of the number of closed walks originating from the agent. We also characterize key players under linear quadratic utilities for various contractual arrangements.
    Keywords: key player,network,linear interaction,incentives,contract,limited budget
    Date: 2018–02
  2. By: Kazuhiko Hashimoto; Kohei Shiozawa
    Abstract: We study strategy-proof probabilistic mechanisms in a binary excludable public good model. We construct a new class of probabilistic mechanisms satisfying strategy-proofness, called mechanisms. We first show that the mechanisms are second-best efficient. Next, we identify the optimal mechanism with respect to the supremal welfare loss, and show that it improves the inefficiency of the equal cost sharing with maximal participation mechanism [Moulin (1994)] and the anonymous augmented serial mechanisms [Ohseto (2005)].
    Date: 2018–01
  3. By: Hélène Le Cadre (EnergyVille); Bernardo Pagnoncelli (Santiago - University Adolfo Ibanez); Tito Homem-De-Mello (Santiago - University Adolfo Ibanez); Olivier Beaude (L2S - Laboratoire des signaux et systèmes - UP11 - Université Paris-Sud - Paris 11 - CentraleSupélec - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We model the relation between an aggregator and consumers joining a coalition to reduce the risk resulting from the unpredictability of their base load demand, as a Stackelberg game formulated as a mathematical bilevel program with private information on the consumers' reservation prices. At the upper-level of the Stackelberg game, the aggregator optimizes his daily price profile so as to reach a net targeted profit which is the maximum value guaranteeing that no consumer will leave the coalition - to contract with a conventional retailer considered here as a fixed alternative - while meeting fairness criterion imposed by the cost-sharing mechanism. At the lower-level, the consumers are asked to provide in day ahead an estimate of their base load hourly demand profile and to schedule their shiftable loads depending on the price signal sent by the aggregator. We provide algorithms that determine the unique price profile and consumer shiftable load schedules as functions of the reservation price estimates. The Stackelberg game between the aggregator and the consumers being repeated for a period of time, the aggregator has the possibility to update his estimates of the reservation prices relying on a feedback function which depends on the percentage of activated loads. A randomized algorithm for consumers' reservation price learning based on regret minimization is provided. For four cost-sharing mechanisms such as uniform allocation, stand-alone cost, Shapley value, separable and non-separable costs, we determine the closed form of the aggregator's optimal net targeted profit guaranteeing the stability of the coalition. We also determine conditions guaranteeing the core non-emptiness and prove that for a profit-maximizing aggregator, the stand-alone cost is always preferable to the Shapley value, which coincides with the uniform allocation. Furthermore, the optimal size of the coalition - in terms of the aggregator's profit - can be determined analytically when the Shapley value is implemented as cost-sharing mechanism. The results are illustrated on a case study where we show that there exists an optimal net targeted profit below which the consumers energy bill is lower when joining the aggregator than with the conventional retailer. Coalition dynamics is also analyzed numerically depending on the consumer inertia in their energy supplier choice process, for each cost-sharing mechanism.
    Keywords: Coalition Formation,Game Theory,Load Scheduling,Forecast Algorithm
    Date: 2018–02–15
  4. By: Fiala, Lenka (Tilburg University, School of Economics and Management); Suetens, Sigrid (Tilburg University, School of Economics and Management)
    Abstract: We use data from experiments on finitely repeated dilemma games with fixed matching to investigate the effect of different types of information on cooperation. The data come from 71 studies using the voluntary contributions paradigm, covering 122 data points, and from 18 studies on decision-making in oligopoly, covering another 50 data points. We find similar effects in the two sets of experimental games. We find that transparency about what everyone in a group earns reduces contributions to the public good, as well as the degree of collusion in oligopoly markets. In contrast, transparency about choices tends to lead to an increase in contributions and collusion, although the size of this effect varies somewhat between the two settings. Our results are potentially useful for policy making, because they provide guidance on the type of information to target in order to stimulate or limit cooperation.
    Date: 2017
  5. By: Penelope Buckley (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Daniel Llerena (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes)
    Abstract: The aim of demand response is to make energy consumption more flexible during peak periods. Using a contextualised CPR framework, we study energy consumption choices. Subjects decide the consumption level of five activities during 10 periods. The total consumption of these activities is the CPR contribution, and payoffs depend on own consumption and the amount consumed by the group. In the nudge treatment, subjects are nudged towards the socially optimal level of consumption using injunctive norms. The average consumption observed in the nudge treatment is used to calculate the price implemented in the price treatment. The objective is to quantify the nudge via an equivalent price. The main hypotheses are: consumption choices will be lower in the treatment groups compared to the control groups; when the price level is fixed according to the nudge result, consumption choices in the price treatment will be equivalent to those in the nudge treatment. Across all 10 periods, consumption is significantly lower in the nudge treatment, and higher for control groups. In the price treatment, consumption remains between the two at or slightly above the target. We conclude that the nudge treatment performs as well as an equivalent price without the implied loss of welfare. When comparing decisions under the nudge and price treatments to the control groups, the consumption decisions are significantly different from period 2 for the nudge and, consistently different from period 7 for the price. We conclude that the nudge is understood and integrated into subjects' decision making quicker than an equivalent price.
    Keywords: common pool resource, Demand Response, incentives, laboratory experiment, nudge, price
    Date: 2018–02–07
  6. By: Philippe Casgrain; Sebastian Jaimungal
    Abstract: Financial markets are often driven by latent factors which traders cannot observe. Here, we address an algorithmic trading problem with collections of heterogeneous agents who aim to perform statistical arbitrage, where all agents filter the latent states of the world, and their trading actions have permanent and temporary price impact. This leads to a large stochastic game with heterogeneous agents. We solve the stochastic game by investigating its mean-field game (MFG) limit, with sub-populations of heterogenous agents, and, using a convex analysis approach, we show that the solution is characterized by a vector-valued forward-backward stochastic differential equation (FBSDE). We demonstrate that the FBSDE admits a unique solution, obtain it in closed-form, and characterize the optimal behaviour of the agents in the MFG equilibrium. Moreover, we prove the MFG equilibrium provides an $\epsilon$-Nash equilibrium for the finite player game. We conclude by illustrating the behaviour of agents using the optimal MFG strategy through simulated examples.
    Date: 2018–03
  7. By: João Correia-da-Silva (CEF.UP and Faculdade de Economia, Universidade do Porto.); Joana Pinho (CEF.UP and Faculdade de Economia, Universidade do Porto.)
    Abstract: We study the sustainability of collusion in mixed oligopolies where private and public firms only differ in their objective: private firms maximize profits, while public firms maximize total surplus. If marginal costs are increasing, public firms do not supply the entire market, leaving room for private firms to produce and possibly cooperate by restricting output. The presence of public firms makes collusion among private firms harder to sustain, and maybe even unprofitable. As the number of private firms increases, collusion may become easier or harder to sustain. Privatization makes collusion easier to sustain, and is socially detrimental whenever firms are able to collude after privatization (which is always the case if they are sufficiently patient). Coordinated effects thus reverse the traditional result according to which privatization is socially desirable if there are many firms in the industry.
    Keywords: Collusion; Mixed oligopoly; Privatization; Coordinated effects
    JEL: D43 H44 L13 L41
    Date: 2017–07
  8. By: Ductor, L; Goyal, S.; Prummer, A.
    Abstract: The fraction of women in economics has grown significantly over the last forty years. In spite of this, the differences in research output between men and women are large and persistent. These output differences are related to differences in the co-authorship networks of men and women: women have fewer collaborators, collaborate more often with the same co-authors, and a higher fraction of their co-authors are co-authors of each other. Moreover, women collaborate more and do so with more senior co-authors. Standard models of homophily and discrimination cannot account for these differences. We discuss how differences in risk aversion and an adverse environment for women can explain them.
    Keywords: Gender Inequality, Network Formation, Discrimination, Homophily, Risk Taking.
    JEL: D8 D85 J7 J16 O30
    Date: 2018–03–13
  9. By: Peyman Khezr (School of Economics, The University of Queensland); Ian A. MacKenzie (School of Economics, The University of Queensland)
    Abstract: This article proposes a simple and efficient auction design to allocate environmental rights, such as tradable pollution permits. We show that if the auctioneer limits the number of bids that each buyer submits—coupled with a simple ex-post supply adjustment rule—then truthful bidding is obtained. Consequently, the uniform-price auction becomes efficient and revenue superior to conventional uniform-price auctions that are currently observed in pollution markets.
    Keywords: auctions; multi-unit; uniform-price; efficiency, pollution.
    JEL: D44 D82 L10 Q50
    Date: 2018–02–27
  10. By: Mário Alexandre Patrício Martins da Silva (Faculdade de Economia do Porto)
    Abstract: We show that the setting up of general conditions on complementarity in absorptive capacity gives rise to different, if not opposite Nash equilibrium outcomes to those found when absorptive capacity is assumed to be determined only by the similarity of R&D orientations. Firms that cooperate in R&D can take full advantage of complementarity in R&D by adopting firm-specific R&D paths, which appears to contradict Kamien and Zang’s (2000) findings, and so would contradict Weithaus’ (2005) predictions. Oddly, firms competing in R&D cannot gain the most from the potential of complementarity in knowledge by not choosing firm-specific R&D approaches in equilibrium under even milder conditions, which is contrary to another prediction of the Kamien and Zang’s and Weithaus’ models.
    Keywords: Absorptive capacity, complementarities, R&D, knowledge spillovers
    JEL: O33
    Date: 2017–11
  11. By: Xisong Jin
    Abstract: In order to effciently capture the contribution to the aggregated systemic risk of each financial institution arising from various important balance-sheet items, this study proposes a comprehensive approach of “Mark-to-Systemic-Risk" to integrate book value data of Luxembourg financial institutions into systemic risk measures. It first characterizes systemic risks and risk spillovers in equity returns for 33 Luxembourg banks, 30 European banking groups, and 232 investment funds.1 The forward-looking systemic risk measures delta CoES, Shapley – delta CoES, SRISK and conditional concentration risk are estimated by using a large-scale dynamic grouped t-copula, and their common components are determined by the generalized dynamic factor model. Several important facts are documented during 2009-2016: (1) Measured by delta CoES of equity returns, Luxembourg banks were more sensitive to the adverse events from investment funds compared to European banking groups, and investment funds were more sensitive to the adverse events from banking groups than from Luxembourg banks. (2) Ranked by Shapley - delta CoES values, money market funds had the highest marginal contribution to the total risk of Luxembourg banks while equity funds exhibited the least share of the risk, and the systemic risk contribution of bond funds, mixed funds and hedge funds became more important toward the end of 2016. (3) The macroeconomic determinants of the aggregate systemic risk of banking groups, Luxembourg banks and investment funds, and the marginal contributions from 15 countries to the aggregate systemic risk of Luxemburg banks and their parent banking groups are all different.
    Keywords: _nancial stability; systemic risk; macro-prudential policy; dynamic copulas; value at risk; shapley values; risk spillovers
    JEL: C1 E5 F3 G1
    Date: 2018–02

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