nep-gth New Economics Papers
on Game Theory
Issue of 2018‒05‒21
twenty-two papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Stability of Equilibrium Outcomes under Deferred Acceptance: Acyclicity and Dropping Strategies By Tello Benjamín
  2. Experimental investigations of coordination games: high success rates, invariant behavior, and surprising dynamics By Jörg Spiller; Friedel Bolle
  3. God Does Not Play Dice, but Do We? By Backhaus, Teresa; Breitmoser, Yves
  4. CONDITIONS WHERE THE RULED CLASS UNITES FOR THE REVOLUTION -applicability of a game theory on social dilemmas- By Hiroshi Onishi
  5. Robust Design in Monotonic Matching Markets : A Case for Firm-Proposing Deferred-Acceptance By Lars EHLERS; Jordi MASSO
  6. Measuring Trust in Institutions By Carlsson, Fredrik; Demeke, Eyoual; Martinsson, Peter; Tesemma, Tewodros
  7. A revelation principle for obviously strategy-proof implementation By Mackenzie, Andrew
  8. How Do Sellers Benefit From Buy-It-Now Prices in Ebay Auctions? -- an Experimental Investigation By Grebe, Tim; Ivanova-Stenzel, Radosveta; Kröger, Sabine
  9. How does Altruism Enlarge a Climate Coalition? By Lin, Yu-Hsuan
  10. Neutralized Competition By Seungjin Han
  11. Fake News in Social Networks By Christoph Aymanns; Jakob Foerster; Co-Pierre Georg
  12. Political disagreement and information in elections By Alonso, Ricardo; Câmara, Odilon
  13. A Two-Party System under the Proportional Rule is Possible: Strategic Voting in the Lab By Francesco, De Sinopoli; Giovanna, Iannantuoni; Valeria, Maggian; Stefania, Ottone;
  14. The flip side of power By Friedel Bolle; Philipp E. Otto
  15. Why factors facilitating collusion may not predict cartel occurrence: Experimental evidence By Fonseca, Miguel A.; Li, Yan; Normann, Hans-Theo
  16. Commercial leases, terms and options in the light of game theory By Charles-Olivier Amédée-Manesme; Francois Des Rosiers; Philippe Grégoire
  17. Group Size, Collective Action and Complementarities in Efforts By Cheikbossian, Guillaume; Fayat, Romain
  18. An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly By Volker Nocke; Nicolas Schutz
  19. Club good mechanisms: from free-riders to citizen-shareholders, from impossibility to characterization By Mackenzie, Andrew; Trudeau, Christian
  20. Self-implementation of social choice correspondences in strong equilibrium By Bezalel Peleg; Hans Peters
  21. Simultaneous and Sequential Voting under General Decision Rules By Friedel Bolle
  22. Variation in Output Shares and Endogenous Matching in Land Rental Contracts By Brhanu , Desta; Holden , Stein T.

  1. By: Tello Benjamín
    Abstract: We consider the problem of matching a set of medical students to a set of medical residency positions (hospitals) under the assumption that hospitals' preferences over groups of students are responsive. In this context, we study the preference revelation game induced by the student proposing deferred acceptance mechanism. We show that the acyclicity of the hospitals' preference profile (Romero-Medina and Triossi, 2013a) is a necessary and sufficient condition to ensure that the outcome of every Nash equilibrium in which each hospital plays a dropping strategy is stable.
    Keywords: matching;stability;acyclicity;dropping strategies;Nash equilibria
    JEL: C78
    Date: 2018–04
  2. By: Jörg Spiller (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: Binary Threshold Public Good (BTPG) games are central for understanding cooperation and coordination. In the face of their tremendous number of completely different equilibria theoretical predictions about behavior in these games are extremely difficult. In our experiments, four players contribute or not to the production of a public good which is produced if at least k players contribute. The game with k=4 is the Stag Hunt game, k=1 is the Volunteer’s Dilemma. We investigate 16 different games with k=1,2,3,4. The regularities derived from these extensive variations (e.g. invariance concerning positive vs. negative frames and scaling of players; monotonicity concerning k and costs of contribution) can serve as the basis of a behavioral theory for BTPG games and beyond.
    Keywords: Binary Threshold Public Goods, framing, equilibrium selection, payoff dominance, risk dominance, efficiency, experiment
    JEL: C72 D72 H41
    Date: 2017–11
  3. By: Backhaus, Teresa (WZB); Breitmoser, Yves (HU Berlin)
    Abstract: When do we cooperate and why? This question concerns one of the most persistent divides between \"theory and practice\", between predictions from game theory and results from experimental studies. For about 15 years, theoretical analyses predict completely-mixed \"behavior\" strategies, i.e. strategic randomization rendering \"when\" and \"why\" questions largely moot, while experimental analyses seem to consistently identify pure strategies, suggesting long-run interactions are deterministic. Reanalyzing 145,000 decisions from infinitely repeated prisoner\'s dilemma experiments, and using data-mining techniques giving pure strategies the best possible chance, we conclude that subjects play semi-grim behavior strategies similar to those predicted by theory.
    Keywords: repeated game; behavior; tit-for-tat mixed strategy; memory; belief-free equilibrium; laboratory experiment;
    JEL: C72 C73 C92 D12
    Date: 2018–05–11
  4. By: Hiroshi Onishi (Faculty of Economics, Keio University)
    Abstract: Revolutions, typical cases of crucial social transformations, cannot be realized successfully without a large number of activists. Therefore, creating conditions favorable for acquiring enough participants should be an important topic of Marxist social science. In particular, this problem includes the "free-ride," because the benefits of revolutionaries' activities are gained not only by the activists but also by all other members. The paper analyzes problems such as this one, applying non-cooperative game theory to social dilemma problems. This leads to some interesting results. In this research, the problem of the workers' choice between unity or freeride is first defined using numerical examples of the gain structure. It is defined again in a more generalized form using other parameters. In so doing, we express both the cost of participating in the movement and the gains from the concession of the ruling class. Because this analysis focuses on the importance of the number of participants, the concession of the ruling class is framed as a function of the number of participants. The results of this analysis revealed that the economic foundation and superstructure accurately correspond in some game structures but not in others. In other words, the social dilemma presents either as a case of prisoners' dilemma or as a chicken game. Furthermore, this paper analyzes the influence of group size, and it was revealed that groups with a large number of members, such as a ruling class, find it particularly difficult to unite. This phenomenon is called the "large group dilemma." In these ways, this research shows that the aforementioned type of game theory can be used to analyze the difficulties and possibilities of social movements.
    Keywords: revolution, historical materialism, social dilemma, large group, chicken game
    JEL: B14 C72 D74 P16
    Date: 2018–04–25
  5. By: Lars EHLERS; Jordi MASSO
    Abstract: We study two-sided matching markets among workers and firms. Workers seek one position at a firm but firms may employ several workers. In many applications those markets are monotonic: leaving positions unfilled is costly as for instance, for hospitals this means not being able to provide full service to its patients. A huge literature has advocated the use of stable mechanisms for clearinghouses. The interests among workers and firms are polarized among stable mechanisms, most famously the firm-proposing DA and the worker-proposing DA. We show that for the firm-proposing DA ex-ante incentive compatibility and ex-post incentive compatibility are equivalent whereas this is not necessarily true for the worker-proposing DA. The firm-proposing DA turns out to be more robust than the worker-proposing DA under incomplete information when incentives of both sides of the market are important.
    Keywords: Many-to-one matching market, stability, incomplete information, monotonic responsive extensions, robust mechanism design
    JEL: C78 D81 J44
    Date: 2018
  6. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Demeke, Eyoual (Department of Economics, School of Business, Economics and Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Tesemma, Tewodros (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In empirical studies, survey questions are typically used to measure trust; trust games are also used to measure interpersonal trust. In this paper, we measure trust in different institutions by using both trust games and survey questions. We find that generalized trust is only weakly correlated with trust in specific institutions, when elicited both by using a trust game and by using survey questions. However, the correlation between trust in a specific institution elicited through a trust game and stated trust for the same institution is stronger and statistically significant. Thus, our findings suggest that generalized trust is not an appropriate measure of institutional trust and that more specific institutional trust measures should be used.
    Keywords: experiment; institutional trust; generalized trust
    JEL: C90 D01 D02 O43
    Date: 2018–05
  7. By: Mackenzie, Andrew (General Economics 1 (Micro))
    Abstract: We prove that if a stochastic (social choice) rule has an obviously strategy-proof (OSP) implementation (Li, 2016), then it has such an implementation through a randomized round table mechanism, where the administrator randomly selects a game form in which the agents take turns making public announcements about their private information. When restricted to deterministic rules, our result improves upon other recent revelation principles by relaxing all recall requirements and by allowing all game trees compatible with normal forms (Alós-Ferrer and Ritzberger, 2016); we also establish robustness to player randomization using novel solution concepts involving mixed strategies and behavioral strategies. We use our result to provide a justification for ordinal mechanisms in the spirit of Carroll (2017), and we provide a simple characterization of the deterministic rules with OSP-implementations using deterministic round table mechanisms and ordinary strategy-proofness.
    Keywords: economics, mathematical economics, microeconomics
    JEL: D82 D71
    Date: 2018–05–08
  8. By: Grebe, Tim; Ivanova-Stenzel, Radosveta (TU Berlin); Kröger, Sabine (Laval University)
    Abstract: In Buy-It-Now (BIN, hereafter) auctions, sellers can make a \"take-it-or-leave-it\" price offer (BIN price) prior to an auction. We analyse experimentally how eBay sellers set BIN prices and whether they benefit from offering them. Using the real eBay environment in the laboratory, we find that the eBay auction format supports deviations from truthful bidding leading to auction prices substantially below those expected in second-price auctions. Our results reveal that the observed price deviations are not an artefact due to the existence of the BIN price, rather a consequence of the specific features of the eBay-auction format - a mixture between sealed-bid and open second-price auction with a fixed end-time. Moreover, we find that information available on eBay can be used as indicator for the price deviation and that sellers respond strategically to this information. Seller risk aversion does not affect BIN prices and more experienced sellers ask for higher BIN prices. The introduction of BIN prices to eBay auctions has an enhancing effect: the eBay BIN auction is more efficient and generates significantly higher revenue compared to a standard eBay auction without a BIN price.
    Keywords: experience; online markets; ebay; bin price; private value; experiment;
    JEL: C72 C91 D44 D82
    Date: 2018–05–16
  9. By: Lin, Yu-Hsuan
    Abstract: This study examines the relationship between individual altruistic attitudes and the incentives of participating in a climate coalition by using a laboratory experiment. A dominant strategy solution design assigns players into two roles in the game: critical and non-critical players. The critical players have a weakly dominant strategy of joining and are essential to an effective coalition. On the other hand, the non-critical players have a dominant strategy of not-joining. The theory suggests that strong altruism would lead non-critical players to join a coalition. The experimental evidence supports that coalitions are therefore enlarged from the self-interest prediction. However, the result indicates that the individual incentives for participation seem to be negatively correlated with altruistic attitudes. It implies the stronger the altruistic tendencies the less likely individuals are to join a coalition. In other words, coalition formation may be expanded by egoistic players.
    Keywords: International environmental agreement, social preference, altruism, experimental design
    JEL: C91 D64 H41 Q54
    Date: 2018–05
  10. By: Seungjin Han
    Abstract: This paper proposes a tractable competing mechanism game where each seller simultaneously posts a trading contract that specifies a menu of dominant strategy incentive compatible (DIC) direct mechanisms conditional on an array of messages sent by buyers, and each seller subsequently chooses a DIC direct mechanism from his menu. The complete set of a seller's profits that are supportable in a (symmetric) equilibrium is the interval between the minmax value of his profit with respect to DIC direct mechanisms and his profit in the joint profit maximization. The set of a seller's equilibrium profits is robust to the possibility of a seller's deviation to any arbitrary mechanism in the standard environment with linear utilities and independent private type. Further, with no limited liability or with no capacity constraints, the set of a seller's equilibrium profits coincides with the set of his feasible (i.e., individually rational and incentive compatible) profits. Given a number of buyers, the number of sellers can be endogenized and is equal to the largest number at which a seller's profit in the joint profit maximization is non-negative: As the number of buyers increases, competition is neutralized because only the monopoly terms of trade prevails in the market, whereas the range of a seller's equilibrium profits shrinks to his reservation profit.
    Keywords: competing mechanisms, dominant strategy incentive compatible direct mechanisms, robust equilibrium allocations, market information
    JEL: C72 D82
    Date: 2018–05
  11. By: Christoph Aymanns; Jakob Foerster; Co-Pierre Georg
    Abstract: We model the spread of news as a social learning game on a network. Agents can either endorse or oppose a claim made in a piece of news, which itself may be either true or false. Agents base their decision on a private signal and their neighbors’ past actions. Given these inputs, agents follow strategies derived via multi-agent deep reinforcement learning and receive utility from acting in accordance with the veracity of claims. Our framework yields strategies with agent utility close to a theoretical, Bayes optimal benchmark, while remaining flexible to model re-specification. Optimized strategies allow agents to correctly identifymostfalseclaims, whenallagentsreceiveunbiasedprivatesignals. However, anadversary’s attempt to spread fake news by targeting a subset of agents with a biased private signal can be successful. Even more so when the adversary has information about agents’ network position or private signal. When agents are aware of the presence of an adversary they re-optimize their strategies in the training stage and the adversary’s attack is less effective. Hence, exposing agents to the possibility of fake news can be an effective way to curtail the spread of fake news in social networks. Our results also highlight that information about the users’ private beliefs and their social network structure can be extremely valuable to adversaries and should be well protected.
    Keywords: social learning, networks, multi-agent deep reinforcement learning
    Date: 2017–08
  12. By: Alonso, Ricardo; Câmara, Odilon
    Abstract: We study the role of re-election concerns in incumbent parties' incentives to shape the information that reaches voters. In a probabilistic voting model, candidates representing two groups of voters compete for office. In equilibrium, the candidate representing the majority wins with a probability that increases in the degree of political disagreement — the difference in expected payoffs from the candidates' policies. Prior to the election, the office-motivated incumbent party (IP) can influence the degree of disagreement through policy experimentation — a public signal about a payoff-relevant state. We show that if the IP supports the majority candidate, then it strategically designs this experiment to increase disagreement and, hence, the candidate's victory probability. We define conditions such that the IP chooses an upper-censoring experiment and the experiment's informativeness decreases with the majority candidate's competence. The IP uses the experiment to increase disagreement even when political disagreement is due solely to belief disagreement.
    Keywords: Disagreement; Bayesian persuasion; Strategic experimentation; Voting
    JEL: D72 D83
    Date: 2016–11–02
  13. By: Francesco, De Sinopoli; Giovanna, Iannantuoni; Valeria, Maggian; Stefania, Ottone;
    Abstract: In this study, we implement a series of voting games in the laboratory to test whether a strategic voting behavior in a proportional system would arise and induce a two-party system. In each voting game, a finite number of subjects with single-peaked preferences, uniformly distributed on a 0–20 line, are asked to vote for a number within the interval 0–20. The policy outcome is the average of the chosen numbers—a realistic representation of a compromise between parties in a parliament elected through the proportional rule. Our main result shows that polarization and strategic voting occur in the proposed proportional rule scenario. Moreover, experience and information concerning the electoral outcome of the previous period drive individuals to opt for strategic voting.
    Keywords: Proportional representation, strategic voting, polarization, political compromise, laboratory experiment, information
    JEL: C91 C92 D72
    Date: 2018–05–16
  14. By: Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Philipp E. Otto (European University Viadrina, Frankfurt (Oder))
    Abstract: Based on power indices as well as intuition, the chairman of a committee whose vote decides in the case of a draw has more power than ordinary voters. Even more powerful are members with veto right, who can block a majority vote. We pose the question whether giving one of the players in a majority voting game more power is beneficial for the powerful individual and/or the community. We find that, in our environment, the introduction of a powerful player is efficiency-improving, but that powerful players earn less than their ordinary co-players. Our environment is a Binary Threshold Public Good game which can also be interpreted as a general non- cooperative voting game. We supplement our investigation by successfully explaining behavior as a finite mixture of mostly equilibrium strategies.
    Keywords: veto power; tie-breaking power; binary threshold public goods; experiment
    JEL: D71 D72 H41
    Date: 2017–03
  15. By: Fonseca, Miguel A.; Li, Yan; Normann, Hans-Theo
    Abstract: Factors facilitating collusion may not successfully predict cartel occurrence: when a factor predicts that collusion (explicit and tacit) becomes easier, firms might be less inclined to set up a cartel simply because tacit coordination already tends to go in hand with supra-competitive profits. We illustrate this issue with laboratory data. We run n-firm Cournot experiments with written cheap-talk communication between players and we compare them to treatments without the possibility to talk. We conduct this comparison for two, four and six firms. We find that two firms indeed find it easier to collude tacitly but that the number of firms does not significantly affect outcomes with communication. As a result, the payoff gain from communication increases with the number of firms, at a decreasing rate.
    Keywords: cartels,collusion,communication,experiments,repeated games
    JEL: L42 C90 C70
    Date: 2018
  16. By: Charles-Olivier Amédée-Manesme; Francois Des Rosiers; Philippe Grégoire
    Abstract: In this paper, a lease rate valuation model is developed whereby the market rent is subject to binomial movements. We then consider a commercial leasing game where different renters, large and small, find a location in different buildings owned by competing landlords operating under a rent negotiation process. When supply for office space exceeds demand from large firms, the latter always pay an advantageous rent. We demonstrate theoretically that small firms are better off in a building containing a large firm and thus will accept to pay a premium to lodge in such buildings rather than opting for a lower rent in a building occupied by small firms. The conditions leading to opposite results are also discussed in the paper. Using data from New York City, Chicago and Los Angeles, we discuss lease rates in light of the predictions of our theoretical model.
    Keywords: Leases; Negotiation; Options; Rent contract
    JEL: R3
    Date: 2017–07–01
  17. By: Cheikbossian, Guillaume; Fayat, Romain
    Abstract: We revisit the group size paradox in a model where two groups of different sizes compete for a prize exhibiting a varying degree of rivalry and where group effort is given by a CES function of individual e¤orts. We show that the larger group can be more successful than the smaller group if the degree of complementarity is sufficiently high relative to the degree of rivalry of the prize.
    Keywords: group size paradox; group contest; complementarity; (impure) public good
    JEL: D72 D74
    Date: 2018–05
  18. By: Volker Nocke; Nicolas Schutz
    Abstract: Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the welfare distortions introduced by market power, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.
    JEL: D43 L13 L40
    Date: 2018–05
  19. By: Mackenzie, Andrew (General Economics 1 (Micro)); Trudeau, Christian (univ windsor, university of windsor)
    Abstract: Consider a community that shares a technology for producing a club good (Buchanan, 1965): any group of agents can “win” for an associated monetary cost. Who should win, and how should production be funded? To address this question, we seek rules (that is, direct mechanisms) where each agent participates voluntarily and is incentivized to report his valuation honestly, and where these reports are used to select winners efficiently without running a deficit. We find that whether or not there are such rules depends on the production technology. If costs are even “somewhat concave,” then there are no such rules: the free-rider problem (Wicksell, 1896; Samuelson, 1954; Green and Laffont, 1979) persists even when agents who do not contribute can be excluded. If costs are symmetric and convex, however, then there are such rules that moreover satisfy no-envy-in-trades (Kolm, 1971; Schmeidler and Vind, 1972). We characterize this class, whose Pareto-worst member is the familiar minimum-price Walrasian rule (Vickrey, 1961; Clarke, 1971; Groves, 1973; Demange, 1982; Leonard, 1983); the other rules do better by treating the agents as equal shareholders in the technology and offering social dividends (Lange, 1936).
    Keywords: Economics, Mathematical economics, Microeconomics
    JEL: D82 D61 H41 D44
    Date: 2018–05–08
  20. By: Bezalel Peleg; Hans Peters
    Abstract: A social choice correspondence is self-implementable in strong equilibrium if it is implementable in strong equilibrium by a social choice function selecting from the correspondence itself as a game form. We characterize all social choice correspondences implementable this way by an anonymous social choice function satisfying no veto power, given that the number of agents is large relative to the number of alternatives. It turns out that these are exactly the social choice correspondences resulting from feasible elimination procedures as introduced in Peleg (1978).
    Date: 2018–04
  21. By: Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder))
    Abstract: In an economic theory of voting, voters have positive or negative costs of voting in favor of a proposal and positive or negative benefits from an accepted proposal. When votes have equal weight then simultaneous voting mostly has a unique pure strategy Nash equilibrium which is independent of benefits. Voting with respect to (arbitrarily small) costs alone, however, often results in voting against the “true majority” (Groseclose and Milyo, 2010). If voting is sequential as in the roll call votes of the US Senate then, in the unique subgame perfect equilibrium, the ”true majority” prevails (Groseclose and Milyo, 2013). It is shown that the result for sequential voting holds also with different weights of voters (shareholders), with multiple necessary majorities (EU decision making), or even more general rules. Simultaneous voting in the general model has more differentiated results.
    Keywords: Voting, free riding, binary decisions, unique pure strategy equilibria
    JEL: H41 D71
    Date: 2018–05
  22. By: Brhanu , Desta (Mekelle University); Holden , Stein T. (Centre for Land Tenure Studies, Norwegian University of Life Sciences)
    Abstract: We investigate the extent of variation in output sharing in land rental contracts and alternative hypotheses to explain this variation. Close to half of the rental contracts in our study in northern Ethiopia have output shares that deviate from the dominant 50-50 equal sharing. Variation in land quality, the relative bargaining power of landlords and tenants, production risks and shocks are hypothesized to influence output shares. Matched data of landlords and tenants are used. The importance of endogenous matching of landlords and tenants is investigated by assessing how endogenous tenant characteristics are correlated with landlord characteristics. We find evidence of negative assortative matching for key resource characteristics. A control function approach is used to control for endogenous matching in the output share models. The results reveal that production risks as well as relative bargaining power affect output shares in the reverse tenancy setting with tenants being relatively wealthier and influential than landlords.
    Keywords: Land rental contracts; sharecropping; output shares; endogenous matching; control function approach
    JEL: Q15
    Date: 2018–01–15

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