nep-gth New Economics Papers
on Game Theory
Issue of 2018‒04‒23
twenty-six papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. A Variational Approach to Network Games By Emerson Melo
  2. News and Archival Information in Games By Spiegler, Ran
  3. Comparative Statics in the Multiple-Partners Assignment Game By David Pérez-Castrillo; Marilda Sotomayor
  4. Indefinitely Repeated Contests: An Experimental Study By Philip Brookins; Dmitry Ryvkin; Andrew Smyth
  5. Sion's minimax theorem and Nash equilibrium of symmetric three-players zero-sum game By Satoh, Atsuhiro; Tanaka, Yasuhito
  6. Strategic Default in Financial Networks By Nizar Allouch; Maya Jalloul
  7. We Can Be Heroes. Trust and Resilience in Corrupted Economic Environments By Leonardo Becchetti; Luca Corazzini; Vittorio Pelligra
  8. Identification and Estimation of Large Network Games with Private Link Information By Hulya Eraslan; Xun Tang
  9. Selling 'Money' on EBay: a Field Study of Surplus Division By Alia Gizatulina; Olga Gorelkina
  10. Stochastic petropolitics: The dynamics of institutions in resource-dependent economies By Raouf Boucekine; Fabien Prieur; Chrysovalantis Vasilakis; Benteng Zou
  11. Gender & Collaboration By Lorenzo Ductor; Sanjeev Goyal
  12. Voting in the Goods and Service Tax Council of India By Bhattacherjee, Sanjay; Sarkar, Palash
  13. Does equity induce inefficiency? An experiment on coordination By Mamadou Gueye; Nicolas Quérou; Raphael Soubeyran
  14. Shapley Value Methods for Attribution Modeling in Online Advertising By Kaifeng Zhao; Seyed Hanif Mahboobi; Saeed R. Bagheri
  15. Policy Experimentation, Redistribution and Voting Rules By Anesi, Vincent; Bowen, T. Renee
  16. Minimax theorem and Nash equilibrium of symmetric three-players zero-sum game with two strategic variables By Hattori, Masahiko; Satoh, Atsuhiro; Tanaka, Yasuhito
  17. Designing Feedback in Voluntary Contribution Games - The Role of Transparency By Bernd Irlenbusch; Rainer Michael Rilke; Gari Walkowitz
  18. Mine, Ours or Yours? Unintended Framing Effects in Dictator Games By Bergh, Andreas; Wichardt, Philipp C.
  19. Effectiveness of Connected Legislators By Marco Battaglini; Valerio Leone Sciabolazza; Eleonora Patacchini
  20. Gender differences in altruism on mechanical turk: Expectations and actual behaviour By Brañas-Garza, Pablo; Capraro, Valerio; Rascon-Ramirez, Ericka
  21. Capital Accumulation Game with Quasi-Geometric Discounting and Consumption Externalities By Koichi Futagami; Kiyoka Akimoto
  22. Benevolent Mediation in the Shadow of Conflict By Andrea Canidio; Joan-Maria Esteban
  23. Dynamic Mechanism Design: An Introduction By Dirk Bergemann; Juuso Valimaki
  24. How Product Innovation Can Affect Price Collusion By Andrew Smyth
  25. Equilibrium in a dynamic model of congestion with large and small users By Robin Lindsey; André De Palma; Hugo Silva
  26. Ranking Supply Function and Cournot Equilibria in a Differentiated Product Duopoly with Demand Uncertainty By Saglam, Ismail

  1. By: Emerson Melo (Indiana University, Department of Economics)
    Abstract: This paper studies strategic interaction in networks. We focus on games of strategic substitutes and strategic complements, and departing from previous literature, we do not assume particular functional forms on players' payoffs. By exploiting variational methods, we show that the uniqueness, the comparative statics, and the approximation of a Nash equilibrium are determined by a precise relationship between the lowest eigenvalue of the network, a measure of players' payoff concavity, and a parameter capturing the strength of the strategic interaction among players. We apply our framework to the study of aggregative network games, games of mixed interactions, and Bayesian network games.
    Keywords: Network Games, Variational Inequalities, Lowest Eigenvalue, Shock Propagation
    JEL: C72 D85 H41 C61 C62
    Date: 2018–02
  2. By: Spiegler, Ran
    Abstract: I enrich the typology of players in the standard model of games with incomplete information, by allowing them to have incomplete "archival information" - namely, piecemeal knowledge of correlations among relevant variables. A player is characterized by the conventional Harsanyi type (a.k.a "news-information") as well as the novel "archive-information", formalized as a collection of subsets of variables. The player can only learn the marginal distributions over these subsets of variables. The player extrapolates a well-specified probabilistic belief according to the maximum-entropy criterion. This formalism expands our ability to capture strategic situations with "boundedly rational expectations." I demonstrate the expressive power and use of this formalism with some examples.
    Keywords: archival information; causal models; high-order beliefs; maximum entropy; non-rational expectations
    JEL: C70 D01
    Date: 2018–03
  3. By: David Pérez-Castrillo; Marilda Sotomayor
    Abstract: The multiple partners game (Sotomayor, 1992) extends the assignment game to a matching model where the agents can have several partners, up to their quota, and the utilities are additively separable. The present work fills a gap in the literature of that game by studying the effects on agents’ payoffs caused by the entrance of new agents in the market under both the cooperative and the competitive approaches. The results obtained have no parallel in the one-to-one assignment game.
    Keywords: Matching, stability, Competitive Equilibrium, comparative statics.
    JEL: C78 D78
    Date: 2018–04
  4. By: Philip Brookins (Max Planck Institute for Research on Collective Goods and Crowd Innovation Lab, Harvard University); Dmitry Ryvkin (Department of Economics,Florida State University); Andrew Smyth (Department of Economics, Marquette University and Economic Science Institute, Chapman University)
    Abstract: We experimentally explore indefinitely repeated contests. Theory predicts more cooperation, in the form of lower expenditures, in indefinitely repeated contests with a longer expected time horizon, yet our data do not support this prediction. Theory also predicts more cooperation in indefinitely repeated contests compared to finitely repeated contests of the same expected length, but we find no significant difference empirically. When controlling for risk and gender, we actually find significantly higher long-run expenditure in some indefinite contests relative to finite contests. Finally, theory predicts no difference in cooperation across indefinitely repeated winner-take-all and proportional-prize contests. We find significantly less cooperation in the latter, because female participants expend more on average than their male counterparts in our data. Our paper extends the experimental literature on indefinitely repeated games to contests and, more generally, contributes to an infant empirical literature on behavior in indefinitely repeated games with “large” strategy spaces.
    Keywords: contest, repeated game, cooperation, experiment
    JEL: C72 C73 C91 D72
    Date: 2018
  5. By: Satoh, Atsuhiro; Tanaka, Yasuhito
    Abstract: About a symmetric three-players zero-sum game we will show the following results. 1. A modified version of Sion's minimax theorem with the coincidence of the maximin strategy and the minimax strategy are proved by the existence of a symmetric Nash equilibrium. 2. The existence of a symmetric Nash equilibrium is proved by the modified version of Sion's minimax theorem with the coincidence of the maximin strategy and the minimax strategy. Thus, they are equivalent. If a zero-sum game is asymmetric, maximin strategies and minimax strategies of players do not correspond to Nash equilibrium strategies. If it is symmetric, the maximin strategies and the minimax strategies constitute a Nash equilibrium. However, without the coincidence of the maximin strategy and the minimax strategy there may exist an asymmetric equilibrium in a symmetric three-players zero-sum game.
    Keywords: three-players zero-sum game, Nash equilibrium, Sion's minimax theorem
    JEL: C72
    Date: 2018–03–24
  6. By: Nizar Allouch (University of Kent); Maya Jalloul (Queen Mary University of London)
    Abstract: This paper investigates a model of strategic interactions in financial networks, where the decision by one agent on whether or not to default impacts the incentives of other agents to escape default. Agents' payoffs are determined by the clearing mechanism introduced in the seminal contribution of Eisenberg and Noe (2001). We first show the existence of a Nash equilibrium of this default game. Next, we develop an algorithm to find all Nash equilibria that relies on the financial network structure. Finally, we explore some policy implications to achieve efficient coordination.
    Keywords: Systemic risk, default, financial networks, coordination games, central clearing, counterparty, financial regulation
    JEL: C72 D53 D85 G21 G28 G33
    Date: 2018–02–06
  7. By: Leonardo Becchetti (CEIS & DEF, University of Rome Tor Vergata); Luca Corazzini (Università di Venezia “Ca Foscari”); Vittorio Pelligra (Università di Cagliari, CRENoS)
    Abstract: We use an original variant of the standard trust game, in order to study the effect of corruption on trust and trustworthiness. In this game, both the trustor and the trustee know that part of the surplus they can generate may be captured by a third “corrupted” player under different expected costs of audit and prosecution. We find slightly higher trustor’s giving in presence of corruption, matched by a significant effect of excess reciprocity from the trustee. Both the trustor and the trustee expect on average corruption acting as a tax, inelastic to changes in the risk of corruptor audit. Expectations are correct for the inelasticity assumption, and for the actual value of the “corruption tax”. Our experimental findings lead to the rejection of four standard hypotheses based on purely self-regarding preferences. We discuss how the apparently paradoxical excess reciprocity effect is consistent with the cultural role of heroes in history where examples of commendable giving were used to stimulate emulation of the ordinary people. Our results suggest that the excess reciprocity component of the trustee makes trustor’s excess giving a rational and effective strategy
    Keywords: corruption, extended trust game, lab experiment
    JEL: C72 C91
    Date: 2018–04–11
  8. By: Hulya Eraslan (Rice University, Department of Economics); Xun Tang (Rice University, Department of Economics)
    Abstract: We study the identification and estimation of large network games where each individual holds private information about its links and payoffs. Extending Galeotti, Goyal, Jackson, Vega-Redondo and Yariv (2010), we build a tractable empirical model of network games where the individuals are heterogeneous with private link and payoff information, and characterize its unique, symmetric pure-strategy Bayesian Nash equilibrium. We then show that the parameters in individual payoffs are identified under "large market" asymptotics, whereby the number of individuals increases to infinity in a fixed and small number of networks. We also propose a consistent two-step m-estimator for individual payoffs. Our method is distribution-free in that it does not require parametrization of the distribution of shocks in individual payoffs. Monte Carlo simulation show that our estimator has good performance in moderate-sized samples.
    Date: 2018–03
  9. By: Alia Gizatulina (Max Planck Institute for Research on Collective Goods); Olga Gorelkina (University of Liverpool)
    Abstract: We study the division of trade surplus in a natural field experiment on German eBay. Acting as a seller, we offer Amazon gift cards with face values of up to 500 Euro. A random selection of buyers, the subjects of our experiment, make price offers according to the rules of eBay. Using a novel decomposition method, we infer the offered shares of trade surplus from the data and find that the average share proposed to the seller amounts to about $30 \%$. Additionally, we document: (i) insignificant effects of stake size; (ii) poor use of strategically relevant public information; and (iii) differences between East and West German subjects.
    Keywords: Field experiment, surplus division, bargaining, Internet trade, eBay
    JEL: C72 C93
    Date: 2017–08
  10. By: Raouf Boucekine (Aix-Marseille University (IMéRA and AMSE), CNRS and EHESS); Fabien Prieur (EconomiX, University Paris Nanterre); Chrysovalantis Vasilakis (University of Bangor and IRES, Université catholique de Louvain); Benteng Zou (CREA, Université du Luxembourg)
    Abstract: We provide an analysis of institutional dynamics under uncertainty by means of a stochastic differential game of lobbying with two players (conservatives vs liberals) and three main ingredients. The first one is uncertainty inherent in the institutional process itself. The second considers resource windfalls volatility impact on economic and institutional outcomes. Last but not least, the resource windfall level matters in the relative bargaining power of the players. We compute a unique closed-loop equilibrium with linear feedbacks. We show that the legislative state converges to an invariant distribution. Even more importantly, we demonstrate that the most likely asymptotic legislative state is favorable to the liberals. However, the more volatile resource windfalls, the less liberal is the most likely asymptotic state. Finally, we assess the latter prediction on a database covering 91 countries over the period 1973-2005. We focus on financial liberalization policies. We find that as the resources revenues volatility increases, the financial liberalization index goes down. We also find that this property remains robust across different specifications and sample distinctions.
    Keywords: Institutional dynamics, petropolitics, lobbying games, revenue-dependent lobbying, power, stochastic dynamic games, stochastic stability
    JEL: D72 C73 Q32
    Date: 2018
  11. By: Lorenzo Ductor (Middlesex University London); Sanjeev Goyal (University of Cambridge and Christ’s College)
    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: 2018–03–11
  12. By: Bhattacherjee, Sanjay; Sarkar, Palash
    Abstract: In 2017, India enacted a new taxation law called the Goods and Services Tax (GST). This law created a GST Council with representatives of the Union government and the Provincial governments. The decision making procedure in the GST Council is specified to be by weighted voting. This work performs a detailed study of such a mechanism using the framework of formal voting games. On a theoretical note, we introduce several new notions regarding blocking dynamics of voting games. These are then applied to the study of voting in the GST context. We identify a set of basic desiderata and propose some modifications to the voting rule in the GST Act.
    Keywords: Goods and Services Tax (GST); GST Council; Weighted majority voting games; Winning and blocking coalition; Blocking power; Efficiency; Influence
    JEL: C71 D7 D72 D73 G28 H1 H2 H71 H77 Y10 Z18
    Date: 2018–04–16
  13. By: Mamadou Gueye; Nicolas Quérou; Raphael Soubeyran
    Abstract: In this paper, we use a laboratory experiment to analyze the relationship between equity and coordination success in a game with Pareto ranked equilibria. Equity is decreased by increasing the coordination payoffs of some subjects while the coordination payoffs of others remain unchanged. Theoretically, in this setting, difference aversion may lead to a positive relationship between equity and coordination success, while social welfare motivations may lead to a negative relationship. Using a within-subject experimental design, we find that less equity unambiguously leads to a higher level of coordination success. Moreover, this result holds even for subjects whose payoffs remain unchanged. Our results suggest that social welfare motivations drives the negative relationship between equity and coordination success found in this experiment. Moreover, our data suggest that the order of treatment matters. Groups facing first the treatment with high inequality in coordination payoffs, then the treatment with low inequality in coordination payoffs, reach the Pareto dominant equilibrium more often in both treatments compared to groups playing first the treatment with low inequality in coordination payoffs, then the treatment with high inequality in coordination payoffs.
    Keywords: coordination game, equity, effciency, difference aversion, social welfare motivation
    JEL: C70 C72 C92 C91 D63
    Date: 2018–04
  14. By: Kaifeng Zhao; Seyed Hanif Mahboobi; Saeed R. Bagheri
    Abstract: This paper re-examines the Shapley value methods for attribution analysis in the area of online advertising. As a credit allocation solution in cooperative game theory, Shapley value method directly quantifies the contribution of online advertising inputs to the advertising key performance indicator (KPI) across multiple channels. We simplify its calculation by developing an alternative mathematical formulation. The new formula significantly improves the computational efficiency and therefore extends the scope of applicability. Based on the simplified formula, we further develop the ordered Shapley value method. The proposed method is able to take into account the order of channels visited by users. We claim that it provides a more comprehensive insight by evaluating the attribution of channels at different stages of user conversion journeys. The proposed approaches are illustrated using a real-world online advertising campaign dataset.
    Date: 2018–04
  15. By: Anesi, Vincent; Bowen, T. Renee
    Abstract: We study conditions under which optimal policy experimentation can be implemented by a committee. We consider a dynamic bargaining game in which, each period, committee members choose to implement a risky reform or implement a policy with known returns. We first show that when no redistribution is allowed the unique equilibrium outcome is generically inefficient. When committee members are allowed to redistribute resources (even arbitrarily small amounts), there always exists an equilibrium that supports optimal experimentation for any non-collegial voting rule. With collegial voting rules, however, optimal policy experimentation is possible only with a sufficient amount of redistribution. We conclude that veto rights, not constraints on redistribution, constitute the main obstacle to optimal policy experimentation.
    Keywords: Committees; Endogenous Status Quo; Experimentation; redistribution; reforms; Voting rules
    JEL: C73 C78 D61 D71 H23
    Date: 2018–03
  16. By: Hattori, Masahiko; Satoh, Atsuhiro; Tanaka, Yasuhito
    Abstract: We consider a symmetric three-players zero-sum game with two strategic variables. Three players are Players A, B and C. Two strategic variables are ti and si, i = A;B;C. They are related by invertible functions. Using the minimax theorem by Sion (1958) and the fixed point theorem by Glicksberg (1952) we will show that Nash equilibria in the following four states are equivalent. 1. All players, Players A, B and C choose ti; i = A;B;C, (as their strategic variables). 2. Two players choose ti's, and one player chooses si. 3. One player chooses ti, and two players choose si's. 4. All players, Players A, B and C choose si; i = A;B;C.
    Keywords: symmetric three-person zero-sum game, Nash equilibrium, two strategic variables
    JEL: C72
    Date: 2018–03–26
  17. By: Bernd Irlenbusch; Rainer Michael Rilke; Gari Walkowitz
    Abstract: We analyze the effects of limited feedback on beliefs and contributions in a repeated public goods game setting. In a first experiment, we test whether exogenously determined feedback about a good example (i.e., the maximum contribution in a period) in contrast to a bad example (i.e., the minimum contribution in a period) induces higher contributions. We find that when the type of feedback is not transparent to the group members, good examples boost cooperation while bad examples hamper it. There is no difference when the type of feedback is transparent. In a second experiment, feedback is endogenously chosen by a group leader. The results show that a large majority of the group leaders count on the positive effect of providing a good example. This is true regardless whether they choose the feedback type to be transparent or non-transparent. Half of the group leaders make the type of feedback transparent. With endogenously chosen feedback about good examples no difference in contributions can be observed among transparent and non-transparent feedback selection. In both experiments feedback shapes subjects’ beliefs. With exogenously chosen feedback, transparent feedback tends to reduce beliefs when good examples are provided as feedback and tends to increase beliefs in when bad examples are provided as feedback compared to the respective non-transparent cases. Our results shed new light on the design of feedback provision in public goods settings.
    Keywords: Feedback Design, Transparency, Public Goods, Imperfect Conditional Cooperation, Experiment
    JEL: H41 C92 D82
    Date: 2018–04–04
  18. By: Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Wichardt, Philipp C. (Kiel Institute for the World Economy)
    Abstract: This paper reports results from a classroom dictator game comparing the effects of three different sets of standard instructions. As was shown by Oxoby and Spraggon (2008), inducing a feeling of entitlement – one subject earning the endowment – strongly affects allocations in dictator games towards the owner of the money (both dictator and receiver). The present results show that seemingly small differences in instructions induce fundamentally different perceptions regarding entitlement. Behavior is affected accordingly, i.e. instructions inducing subjects to perceive the task as distributive rather than a task of generosity lead to higher allocations to receivers (average 52% vs. 35%). A theoretical explanation integrating monetary as well as social incentives and emphasizing potential effects of uncertainty about the latter is discussed (cf. Bergh and Wichardt, 2018).
    Keywords: Dictator games; Framing effects; Property rights; Social preferences
    JEL: C70 C91 D63
    Date: 2018–03–28
  19. By: Marco Battaglini; Valerio Leone Sciabolazza; Eleonora Patacchini
    Abstract: In this paper, we study the extent to which social connections influence the legislative effectiveness of members of the U.S. Congress. We propose a new model of legislative effectiveness that formalizes the role of social connections and generates simple testable predictions. The model predicts that a legislator's equilibrium effectiveness is proportional to a specific weighted Katz-Bonacich centrality in the network of social connections, where the weights depend on the legislators' characteristics. We then propose a new empirical strategy to test the theoretical predictions using the network of cosponsorship links in the 109th-113th Congresses. The strategy addresses network endogeneity by implementing a two-step Heckman correction based on an original instrument: the legislators' alumni connections. We find that, in the absence of a correction, all measures of centrality in the cosponsorship network are significant. When we control for network endogeneity, however, only the measure suggested by the model remains significant, and the fit of the estimation is improved. We also study the influence of legislators' characteristics on the size of network effects. In doing so, we provide new insights into how social connectedness interacts with factors such as seniority, partisanship and legislative leadership in determining legislators' effectiveness.
    JEL: D72 D85
    Date: 2018–03
  20. By: Brañas-Garza, Pablo; Capraro, Valerio; Rascon-Ramirez, Ericka
    Abstract: Whether or not there are gender differences in altruistic behaviour in Dictator Game experiments has attracted considerable attention in recent years. Earlier studies found women to be more altruistic than men. However, this conclusion has been challenged by more recent accounts, which have argued that gender differences in altruistic behaviour may be a peculiarity of student samples and may not extend to random samples. Here we study gender differences in altruistic behaviour and, additionally, in expectations of altruistic behaviour, in a sample of Amazon Mechanical Turk crowdworkers living in the US. In Study 1, we report a mega-analysis of more than 3,500 observations and we show that women are significantly more altruistic than men. In Study 2, we show that both women and men expect women to be more altruistic than men.
    Keywords: dictator game, gender differences, altruism, expectations.
    JEL: C93 C99 J7 J71
    Date: 2018–04–01
  21. By: Koichi Futagami (Graduate School of Economics, Osaka University); Kiyoka Akimoto (Faculty of Sociology, Nara University)
    Abstract: This study introduces quasi-geometric discounting into a simple growth model of common capital accumulation that takes consumption externalities into account. We examine how present bias affects economic growth and welfare, and we consider two equilibrium concepts: the noncooperative Nash equilibrium (NNE) and the cooperative equilibrium (CE). We show that the growth rate in the NNE can be higher than that in the CE if individuals strongly admire the consumption of others regardless of the magnitude of present bias. Contrary to the results in the time-consistent case, we show that, when present bias is incorporated, the welfare level in the NNE can be higher than that in the CE in the initial period. However, in later periods, this relationship can be reversed depending on the difference in the speed of capital accumulation.
    Keywords: Capital accumulation game, Quasi-geometric discounting, Consumption externalities
    JEL: C73 E21 Q21
    Date: 2018–04
  22. By: Andrea Canidio; Joan-Maria Esteban
    Abstract: Before the start of a negotiation, the negotiating parties may try to affect the disagreement outcome of the negotiation by making socially-wasteful investments, such as purchasing weapons or asking for legal opinions. The incentives to make such investments depend on how the negotiation is conducted. We study the problem of a benevolent mediator who wishes to minimize pre-negotiation wasteful investments. Or main result is that the mediator should favor the strongest player, who has the lowest incentive to make wasteful investments. This result is robust to different specifications of the information available to the mediator. We therefore highlight a conflict between fairness and efficiency arising in negotiations.
    Keywords: bargaining, negotiation, mediation, conflict
    JEL: D74 F51 J51
    Date: 2018–03
  23. By: Dirk Bergemann (Cowles Foundation, Yale University); Juuso Valimaki (Aalto School of Economics)
    Abstract: We provide an introduction into the recent developments of dynamic mechanism design with a primary focus on the quasilinear case. First, we describe socially optimal (or efficient) dynamic mechanisms. These mechanisms extend the well known Vickrey-Clark-Groves and D’Aspremont-Gérard-Varet mechanisms to a dynamic environment. Second, we discuss results on revenue optimal mechanism. We cover models of sequential screening and revenue maximizing auctions with dynamically changing bidder types. We also discuss models of information management where the mechanism designer can control (at least partially) the stochastic process governing the agent’s types. Third, we consider models with changing populations of agents over time. This allows us to address new issues relating to the properties of payment rules. After discussing related models with risk-averse agents, limited liability, and different performance criteria for the mechanisms, we conclude by discussing a number of open questions and challenges that remain for the theory of dynamic mechanism design.
    Keywords: Dynamic Mechanism Design, Sequential Screening, Dynamic Pivot Mechanism, Bandit Auctions, Information Management
    JEL: D44 D82 D83
    Date: 2017–08
  24. By: Andrew Smyth (Department of Economics, Marquette University and Economic Science Institute, Chapman University)
    Abstract: Price conspiracies appear endemic in many markets. This paper conjectures that low expected returns from product innovation can affect price collusion in certain markets. This conjecture is tested—and supported—by both archival and experimental data. In particular, average market prices in low innovation experiments are significantly greater than those in high innovation, but otherwise identical experiments, because price collusion is more successful in the low innovation experiments.
    Keywords: price collusion, product innovation, antitrust, experimental economics
    JEL: L41 L10 O33 C92
    Date: 2017
  25. By: Robin Lindsey (University of Alberta [Edmonton]); André De Palma (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Hugo Silva (Instituto Superior Técnico - Technical University of Lisbon)
    Abstract: Individual users often control a significant share of total traffic flows. Examples include airlines, rail and maritime freight shippers, urban goods delivery companies and passenger transportation network companies. These users have an incentive to internalize the congestion delays their own vehicles impose on each other by adjusting the timing of their trips. We investigate simultaneous trip-timing decisions by large users and small users in a dynamic model of congestion. Unlike previous work, we allow for heterogeneity of trip-timing preferences and for the presence of small users such as individual commuters and fringe airlines. We derive the optimal fleet departure schedule for a large user as a best-response to the aggregate departure rate of other users. We show that when the vehicles in a large user's fleet have a sufficiently dispersed distribution of desired arrival times, there may exist a pure-strategy Nash-equilibrium (PSNE) in which the large user schedules vehicles when there is a queue. This resolves the problem of non-existence of a PSNE identified in Silva et al. (2017) for the case of symmetric large users. We also develop some examples to identify under what conditions a PSNE exists. The examples illustrate how self-internalization of congestion by a large user can affect the nature of equilibrium and the travel costs that it and other users incur.
    Keywords: departure-time decisions,bottleneck model,congestion,schedule delay costs,large users,user heterogeneity,existence of Nash equilibrium $
    Date: 2018–04–06
  26. By: Saglam, Ismail
    Abstract: In this paper, we provide a welfare ranking for the equilibria of the supply function and quantity competitions in a differentiated product duopoly with demand uncertainty. We prove that the expected consumer surplus is always higher under the supply function competition. By numerical simulations, we also show that if the degree of product substitution is extremely low, then the supply function competition can become a superior form of competition for the duopolistic producers, as well. However, if the degree of product substitution is not extremely low, then the expected producer profits under the supply function competition can be lower than under the quantity competition in situations where the size of the demand uncertainty is below a critical level. We find that this critical level is non-decreasing in the degree of product substitution, while non-increasing both in the marginal cost of producing a unit output and in the own-price sensitivity of each inverse demand curve. Our results imply that in electricity markets with differentiated products, the regulators should not intervene to impose the quantity competition in favor of the supply function competition unless the degree of product substitution is sufficiently high and the predicted demand fluctuations are sufficiently small.
    Keywords: Supply function competition; Cournot competition; duopoly; differentiated products; uncertainty
    JEL: D43 L13
    Date: 2018

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