nep-gth New Economics Papers
on Game Theory
Issue of 2018‒04‒09
thirteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. On some decisive players for linear efficient and symmetric values in cooperative games with transferable utility By Nembua Célestin, Chameni; Wendji Clovis, Miamo
  2. Strategic Reasoning in Persuasion Games: An Experiment By Ying Xue Li; Burkhard Schipper
  3. Information Design: A Unified Perspective By Dirk Bergemann; Stephen Morris
  4. The Midpoint-Constrained Egalitarian Bargaining Solution By Karos, Dominik; Rachmilevitch, Shiran
  5. A theory of cooperation in games with an application to market socialism By John E. Roemer
  6. Number of bidders and the winner’s curse By Ronald Peeters; Anastas P. Tenev
  7. Edgeworth trading on networks By Daniele Cassese; Paolo Pin
  8. Dynamic Refugee Matching By Andersson, Tommy; Ehlers, Lars; Martinello, Alessandro
  9. A Note on Manipulability in School Choice with Reciprocal Preferences By Claus-Jochen Haake; Nadja Stroh-Maraun
  10. Optimal Pollution Control in a Mixed Oligopoly with Research Spillovers By Shoji Haruna; Rajeev K. Goel
  11. Spatial resource wars: A two region example By Giorgio Fabbri; Silvia Faggian; Giuseppe Freni
  12. Sequential Bargaining in the Field: Evidence from Millions of Online Bargaining Interactions By Matthew Backus; Thomas Blake; Bradley Larsen; Steven Tadelis
  13. Smart TWAP Trading in Continuous-Time Equilibria By Jin Hyuk Choi; Kasper Larsen; Duane J. Seppi

  1. By: Nembua Célestin, Chameni; Wendji Clovis, Miamo
    Abstract: The main goal of the paper is to shed light on economic allocations issues, in particular by focusing on individuals who receive nothing (that is an amount of zero allocation or payoff). It is worth noting that such individuals may be considered, in some contexts, as poor or socially excluded. To this end, our study relies on the notion of cooperative games with transferable utility and the Linear Efficient and Symmetric values (called LES values) are considered as allocation rules. Null players in Shapley sense are extensively studied ; two broader classes of null players are introduced. The analysis is facilitated by the help of a parametric representation of LES values. It is clearly shown that the control of what a LES value assigns as payoffs to null players gives significant information about the characterization of the value. Several axiomatic characterizations of subclasses of LES values are provided using our approach.
    Keywords: TU-game, Linear Efficient and Symmetric value, Null players, Average null players, Shapley value, Solidarity value.
    JEL: C71 D31 D71
    Date: 2017
  2. By: Ying Xue Li; Burkhard Schipper (Department of Economics, University of California Davis)
    Abstract: We study experimentally persuasion games in which a sender (e.g., a seller) with private information provides verifiable but potentially vague information (e.g., about the quality of a product) to a receiver (e.g., a buyer). Various theoretical solution concepts such as sequential equilibrium or iterated admissibility predict unraveling of information. Iterative admissibility also provides predictions for every finite level of reasoning about rationality. Overall we observe behavior consistent with relatively high levels of reasoning. While iterative admissibility implies that the level of reasoning required for unraveling is increasing in the number of quality levels, we find only insignificantly more unraveling in a game with two quality levels compared to a game with four quality levels. There is weak evidence for learning higher-level reasoning in later rounds of the experiments. Participants display difficulties in transferring learning to unravel in a game with two quality levels to a game with four quality levels. Finally, participants who score higher on cognitive abilities in Raven's progressive matrices test also display significantly higher levels of reasoning in our persuasion games although the effect-size is small.
    Keywords: Persuasion games, verifiable information, communication, disclosure, unraveling, iterated admissibility, prudent rationalizability, common strong cautious belief in rationality, level-k reasoning, experiments, cognitive ability.
    JEL: C72 C92 D82 D83
    Date: 2018–02–20
  3. By: Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University)
    Abstract: Given a game with uncertain payo?s, information design analyzes the extent to which the provision of information alone can influence the behavior of the players. Information design has a literal interpretation, under which there is a real information designer who can commit to the choice of the best information structure (from her perspective) for a set of participants in a game. We emphasize a metaphorical interpretation, under which the information design problem is used by the analyst to characterize play in the game under many di?erent information structures. We provide an introduction into the basic issues and insights of a rapidly growing literature in information design. We show how the literal and metaphorical interpretations of information design unify a large body of existing work, including that on communication in games (Myerson (1991)), Bayesian persuasion (Kamenica and Gentzkow (2011)) and some of our own recent work on robust predictions in games of incomplete information.
    Keywords: Information design, Bayesian persuasion, correlated equilibrium, incomplete information, robust predictions, information structure
    JEL: C72 D82 D83
    Date: 2017–03
  4. By: Karos, Dominik (General Economics 1 (Micro)); Rachmilevitch, Shiran (university of haifa)
    Abstract: A payoff allocation in a bargaining problem is midpoint dominant if each player obtains at least one n-th of her ideal payoff. The egalitarian solution of a bargaining problem may select a payoff configuration which is not midpoint dominant. We propose and characterize the solution which selects for each bargaining problem the feasible allocation that is closest to the egalitarian allocation, subject to being midpoint dominant. Our main axiom, midpoint monotonicity, is new to the literature; it imposes the standard monotonicity requirement whenever doing so does not result in selecting an allocation which is not midpoint dominant. In order to prove our main result we develop a general extension theorem for bargaining solutions that are order-preserving with respect to any order on the set of bargaining problems.
    Keywords: bargaining, egalitarianism, midpoint domination
    JEL: C71 C78 D61 D63
    Date: 2018–03–29
  5. By: John E. Roemer (Dept. of Political Science & Cowles Foundation, Yale University)
    Abstract: Economic theory has focused almost exclusively on how humans compete with each other in their economic activity, culminating in general equilibrium (Walras) and game theory (Nash). Cooperation in economic activity is, however, important, and is virtually ignored. Because our models influence our view of the world, this theoretical lacuna biases economists’ interpretation of economic behavior. Here, I propose models that provide micro-foundations for how cooperation is decentralized by economic agents. It is wrong, in particular, to view competition as decentralized and cooperation as organized only by central diktat. My approach is not to alter preferences, which is the strategy behavioral economists have adopted to produce cooperation, but rather to alter the way that agents optimize. Whereas Nash optimizers view other players in the game as part of the environment (parameters), Kantian optimizers view them as part of action. When formalized, this approach resolves the two major failures of Nash optimization from a welfare viewpoint -- the Pareto inefficiency of equilibria in common-pool resource problems (the tragedy of the commons) and the inefficiency of equilibria in public-good games (the free rider problem). An application to market socialism shows that the problems of efficiency and distribution can be completely separated: the dead-weight loss of taxation disappears.
    Keywords: Kantian equilibrium, cooperation, tragedy of the commons, free rider problem, market socialism
    JEL: D50 D60 D70
    Date: 2018–03
  6. By: Ronald Peeters (Department of Economics, University of Otago, New Zealand); Anastas P. Tenev (Department of Economics, Maastricht University)
    Abstract: Within an affiliated value auction setting, we study the relationship between the number of bidders and the winner’s curse in terms of its occurrence and its expected harm. From a design perspective, we find that both the number of bidders and the level of affiliation are instrumental when choosing an auction format and whether to encourage or discourage bidder participation.
    Keywords: Winner’s curse; number of bidders; affiliated value auctions
    JEL: D44 D82 H57
    Date: 2018–01
  7. By: Daniele Cassese; Paolo Pin
    Abstract: We define a class of pure exchange Edgeworth trading processes that under minimal assumptions converge to a stable set in the space of allocations, and characterise the Pareto set of these processes. Choosing a specific process belonging to this class, that we define fair trading, we analyse the trade dynamics between agents located on a weighted network. We determine the conditions under which there always exists a one-to-one map between the set of networks and the set of stable equilibria. This result is used to understand what is the effect of the network topology on the trade dynamics and on the final allocation. We find that the positions in the network affect the distribution of the utility gains, given the initial allocations
    Date: 2018–03
  8. By: Andersson, Tommy (Department of Economics, Lund University); Ehlers, Lars (Département de sciences économiques, Université de Montréal); Martinello, Alessandro (Department of Economics, Lund University)
    Abstract: Asylum seekers are often assigned to a locality in their host country directly upon arrival based on some type of uninformed dynamic matching system which does not take the background of the asylum seekers into consideration. This paper proposes an informed, intuitive, easy-to-implement and computationally efficient dynamic mechanism for matching asylum seekers to localities. This mechanism can be adopted in any dynamic refugee matching problem given locality-specific quotas and that asylum seekers can be classified into specific types. We demonstrate that any matching selected by the proposed mechanism is Pareto efficient and that envy between localities is bounded by a single asylum seeker. Via simulation, we evaluate the performance of the proposed mechanism in settings that resemble the US and the Swedish situations, and show that our mechanism outperforms uninformed mechanisms even in presence of severe misclassification error in the estimation of asylum seeker types.
    Keywords: forced migration; market design; refugee matching; dynamics; envy; efficiency
    JEL: C71 C78 D71 D78 F22
    Date: 2018–03–27
  9. By: Claus-Jochen Haake (Paderborn University); Nadja Stroh-Maraun (Paderborn University)
    Abstract: We show that the Boston school choice mechanism (BM), the student proposing deferred acceptance algorithm (DA) and the top trading cycles algorithm (TTC) generate the same outcome when the colleges’ priorities are modified according to students’ preferences in a “first preferences first” manner. This outcome coincides with the BM outcome under original priorities. As a result, the DA and TTC mechanism that are non-manipulable under original priorities become vulnerable to strategic behavior.
    Date: 2018–01
  10. By: Shoji Haruna; Rajeev K. Goel
    Abstract: We study optimal pollution abatement under a mixed oligopoly game when firms engage in emissions-reducing R&D that is imperfectly appropriable. The regulator uses a tax to curb emissions. Results show that in a mixed oligopoly, the public firm has positive emissions reduction in equilibrium; however, emissions reductions of the private firm could be positive or zero. Under certain conditions, the optimal pollution tax is positive; otherwise, the tax reverts to a subsidy. Comparing mixed and private duopolies, privatization leads to reductions in R&D and output, but to an increase in overall emissions, so privatization tends to make the environment worse.
    Keywords: mixed oligopoly, R&D, pollution, spillovers, taxation, subsidy
    JEL: D43 D62 O33 Q55
    Date: 2018
  11. By: Giorgio Fabbri (Univ.Grenoble Alpes, CNRS, INRIA, Grenoble INP, GAEL, Grenoble, France); Silvia Faggian (Department of Economics, University Of Venice Ca’ Foscari, Italy); Giuseppe Freni (Department of Business and Economics, University of Naples “Parthenope”, Naples, Italy.)
    Abstract: We develop a spatial resource model in continuous time in which two agents strategically exploit a mobile resource in a two-location setup. In order to contrast the overexploitation of the resource (the tragedy of commons) that occurs when the player are free to choose where to fish/hunt/extract/harvest, the regulator can establish a series of spatially structured policies. We compare the three situations in which the regulator: (a) leaves the player free to choose where to harvest; (b) establishes a natural reserve where nobody is allowed to harvest; (c) assigns to each player a specific exclusive location to hunt. We show that when preference parameters dictate a low harvesting intensity, the policies cannot mitigate the overexploitation and in addition they worsen the utilities of the players. Conversely, in a context of harsher harvesting intensity, the intervention can help to safeguard the resource, preventing the extinction and also improving the welfare of both players.
    Keywords: Spatial harvesting problems, Markov perfect equilibrium, Environmental protection policies, Differential Games
    JEL: Q28 C72 Q23 C61 R12
    Date: 2018
  12. By: Matthew Backus; Thomas Blake; Bradley Larsen; Steven Tadelis
    Abstract: We study patterns of behavior in bilateral bargaining situations using a rich, new dataset describing over 88 million listings from eBay's Best Offer platform, with back-and-forth bargaining occurring in over 25 million of these listings. We document patterns of behavior and relate them to "rational" and "psychological" theories of bargaining and find that bargaining patterns are consistent with elements of both approaches. Most notably, players with more bargaining strength typically receive better outcomes, and players exhibit equitable behavior by making offers that split-the-difference between negotiating positions. We are publicly releasing this new dataset to support additional empirical bargaining research.
    JEL: C7 D0 L0
    Date: 2018–02
  13. By: Jin Hyuk Choi; Kasper Larsen; Duane J. Seppi
    Abstract: This paper presents a continuous-time equilibrium model of liquidity provision in a market with multiple strategic investors with intraday trading targets. We show analytically that there are infinitely many Nash equilibria. We solve for the welfare-maximizing equilibrium and the competitive equilibrium, and we illustrate that these equilibria are different. The model is easily computed numerically, and we provide a number of numerical illustrations.
    Date: 2018–03

This nep-gth issue is ©2018 by Sylvain Béal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.