nep-gth New Economics Papers
on Game Theory
Issue of 2018‒05‒28
fifteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Monotonicity and weighted prenucleoli: A characterization without consistency By Calleja, Pedro; Llerena, Francesc; Sudhölter, Peter
  2. Existence of justifiable equilibrium By Flesch, Janos; Vermeulen, Dries; Zseleva, Anna
  3. Collective Incentives and Cooperation in Teams with Imperfect Monitoring By Mengel, Friederike; Mohlin , Erik; Weidenholzer, Simon
  4. Reciprocity Reciprocity in Climate Coalition Formationin Climate Coalition Formation By Lin, Yu-Hsuan
  5. Strict Fairness of Equilibria in Mixed and Asymmetric Information Economies By Chiara Donnini; Maria Laura Pesce
  6. Relational Contracting, Negotiation, and External Enforcement By Miller, David; Olsen, Trond E.; Watson, Joel
  7. Is fairness intuitive? An experiment accounting for subjective utility differences under time pressure By Merkel, Anna; Lohse, Johannes
  8. Evaluating Trust and Trustworthiness in Social Groups and Networks By O'Higgins, Niall; Mazzoni, Clelia; Sbriglia, Patrizia
  9. Group Targeting under Networked Synergies By Mohamed Belhaj; Frédéric Deroïan
  10. International Environmental Agreements - Stability with Transfers among Countries By Effrosyni Diamantousi; Eftichios Sartzetakis; Stefania Strantza
  11. Polarization or Moderation? Intra-group heterogeneity in endogenous-policy contest By Daniel Cardona; Jenny De Freitas; Antoni Rubí-Barceló
  12. Unobserved Heterogeneity in Auctions under Restricted Stochastic Dominance By Yao Luo
  13. Simulation and Evaluation of Zonal Electricity Market Designs By Hesamzadeh, M.; Holmberg, P.; Sarfati, M.
  14. A Dynamic Analysis of Nash Equilibria in Search Models with Fiat Money By Federico Bonetto; Maurizio Iacopetta
  15. Compensation Schemes for Learning a Lingua Franca in the European Union By Victor Ginsburgh; Juan D. Moreno-Ternero

  1. By: Calleja, Pedro (Departament de Matematica Economica, Financera i Actuarial); Llerena, Francesc (Departament de Gestió d'Empreses); Sudhölter, Peter (Department of Business and Economics)
    Abstract: A solution on a set of transferable utility (TU) games satisfies strong aggregate monotonicity (SAM) if every player can improve when the grand coalition becomes richer. It satisfies equal surplus division (ESD) if the solution allows the players to improve equally. We show that the set of weight systems generating weighted prenucleoli that satisfy SAM is open which implies that for weight systems close enough to any regular system the weighted prenucleolus satisfies SAM. We also provide a necessary condition for SAM for symmetrically weighted nucleoli. Moreover, we show that the per capita nucleolus on balanced games is characterized by single-valuedness (SIVA), translation and scale covariance (COV), and equal adjusted surplus division (EASD), a property that is comparable but stronger than ESD. These properties together with ESD characterize the per capita prenucleolus on larger sets of TU games. EASD and ESD can be transformed to independence of (adjusted) proportional shifting and these properties may be generalized for arbitrary weight systems p to I(A)Sp. We show that the p-weighted prenucleolus on the set of balanced TU games is characterized by SIVA, COV, and IASp; and on larger sets by additionally requiring ISp.
    Keywords: TU games; weighted prenucleolus; equal surplus division
    JEL: C71
    Date: 2018–05–17
  2. By: Flesch, Janos (QE / Mathematical economics and game the); Vermeulen, Dries (QE / Operations research); Zseleva, Anna (higher school of economics, saint petersburg)
    Abstract: We present a general existence result for a type of equilibrium in normal-form games. We consider nonzero-sum normal-form games with an arbitrary number of players and arbitrary action spaces. We impose merely one condition: the payoff function of each player is bounded. We allow players to use finitely additive probability measures as mixed strategies. Since we do not assume any measurability conditions, for a given strategy profile the expected payoff is generally not uniquely defined, and integration theory only provides an upper bound, the upper integral, and a lower bound, the lower integral. A strategy profile is called a justifiable equilibrium if each player evaluates this profile by the upper integral, and each player evaluates all his possible deviations by the lower integral. We show that a justifiable equilibrium always exists. Our equilibrium concept and existence result are motivated by Vasquez (2017), who defines a conceptually related equilibrium notion, and shows its existence under the conditions of finitely many players, separable metric action spaces and bounded Borel measurable payoff functions. Our proof borrows several ideas from Vasquez (2017), but is more direct as it does not make use of countably additive representations of finitely additive measures by Yosida and Hewitt (1952).
    JEL: C72
    Date: 2018–05–17
  3. By: Mengel, Friederike (Department of Economics, University of Essex); Mohlin , Erik (Department of Economics, Lund University); Weidenholzer, Simon (Department of Economics, University of Essex)
    Abstract: We experimentally explore the role of collective incentives in sustaining cooperation in finitely repeated public goods games with imperfect monitoring. In our experiment players only observe noisy signals about individual contributions, while total output is perfectly observed. We consider sanctioning mechanisms that allow agents to commit to collective punishment in case total output fall short of a target. We find that cooperation is higher in the case of collective punishment compared to both the case of no punishment and the case of standard peer-to-peer punishment which conditions on the noisy signals. Further experiments indicate that both the commitment possibility and the collective nature of punishment matter for the positive effect of collective incentives on cooperation.
    Keywords: Public goods game; Team production; Punishment; Collective sanctions; Imperfect monitoring
    JEL: C72 D02 D23 D90
    Date: 2018–05–19
  4. By: Lin, Yu-Hsuan
    Abstract: This study investigates the impact of reciprocal altruistic attitudes on individual willingness to participate in a climate coalition with experimental evidences. The theoretical result suggested that the scope of the coalition’s formation could be enlarged by the participation of altruists. However, we found that a kind participant in the altruism test could behave unkindly to others in the public good game. Considering attitudes against reciprocal altruism, when participants thought they were being treated badly, they were more likely to join a coalition because of the threat of punishment. In contrast, when participants were noncritical to a coalition, such altruistic attitudes were insignificant to their decisions. This result implies that decisions in international conventions are not self-enforced. Overall, this study reveals that self-interest remains the key factor influencing individual participation in climate coalitions. Coalition formation can also be affected by reciprocal altruistic preferences.
    Keywords: social preference, experimental design, reciprocity, altruism, international environmental agreements
    JEL: C91 D64 H41 Q54
    Date: 2018
  5. By: Chiara Donnini (Università di Napoli Parthenope); Maria Laura Pesce (Università di Napoli Federico II)
    Abstract: We investigate the fairness property of equal-division competitive market equilibria (CME) in asymmetric information economies with a space of agents that may contain non-negligible (large) traders. We first propose an extension to our framework of the notion of strict fairness due to Zhou (1992). We prove that once agents are asymmetrically informed, any equal-division CME allocation is strictly fair, but a strictly fair allocation might not be supported by an equilibrium price. Then, we investigate the role of large traders and we provide two sufficient conditions under which, in the case of complete information economies, a redistribution of resources is strictly fair if and only if it results from a competitive mechanism.
    Keywords: Asymmetric information, mixed markets, strict fairness, competitive equilibrium.
    JEL: D43 D60 D82
    Date: 2018–05–23
  6. By: Miller, David (Dept. of Economics, University of Michigan); Olsen, Trond E. (Dept. of Business and Management Science, Norwegian School of Economics); Watson, Joel (Dept. of Economics, University of California, San Diego)
    Abstract: We study relational contracting and renegotiation in environments with external enforcement of long-term contractual arrangements. An external, long-term contract governs the stage games the contracting parties will play in the future (depending on verifiable stage-game outcomes) until they renegotiate. In a contractual equilibrium, the parties choose their individual actions rationally, they jointly optimize when selecting a contract, and they take advantage of their relative bargaining power. Our main result is that in a wide variety of settings, in each period of a contractual equilibrium the parties agree to a semi-stationary external contract, with stationary terms for all future periods but special terms for the current period. In each period the parties renegotiate to this same external contract, effectively adjusting the terms only for the current period. For example, in a simple principal-agent model with a choice of costly monitoring technology, the optimal contract specifies mild monitoring for the current period but intense monitoring for future periods. Because the parties renegotiate in each new period, intense monitoring arises only off the equilibrium path after a failed renegotiation.
    Keywords: Relational contracts; negotiation; external enforcement
    JEL: D00 D20 D21 D80 D86
    Date: 2018–05–18
  7. By: Merkel, Anna; Lohse, Johannes
    Abstract: Evidence from response time studies and time pressure experiments has led several authors to conclude that "fairness is intuitive". In light of conflicting findings we provide theoretical arguments showing under which conditions an increase in "fairness” due to time pressure indeed provides unambiguous evidence in favor of the "fairness is intuitive" hypothesis. Drawing on recent applications of the Drift Diffusion Model (Krajbich et al., 2015a), we demonstrate how the subjective diffculty of making a choice affects decisions under time pressure and time delay, there by making an unambiguous interpretation of time pressure effects contingent on the choice situation. To explore our theoretical considerations and to retest the "fairness is intuitive" hypothesis, we analyze choices in two-person binary dictator and prisoner’s dilemma games under time pressure or time delay. In addition, we manipulate the subjective difficulty of choosing the fair relative to the selfish option. Our main finding is that time pressure does not consistently promote fairness in situations where this would be predicted after accounting for choice difficulty. Hence, our results cast doubt on the hypothesis that "fairness is intuitive".
    Keywords: distributional preferences; cooperation; time pressure; response times; cognitive processes; drift diffusion models
    Date: 2018–05–16
  8. By: O'Higgins, Niall (ILO International Labour Organization); Mazzoni, Clelia (University of Campania-Luigi Vanvitelli); Sbriglia, Patrizia (University of Campania-Luigi Vanvitelli)
    Abstract: Trust and trustworthiness are important components of social capital and much attention has been devoted to their correct evaluation. In this paper, we argue that individuals' trust and trustworthiness are strongly dependent on the level of trust and trustworthiness of the social group in which subjects operate. Attitudinal indicators which are often used to measure trust and trustworthiness in economic and sociological studies are proxies of the individual's propensity to trust, but are insufficient measures of the effective level of trust since the latter may be strongly affected by the behaviour of the components of the individuals' social groups. In order to test our hypothesis, we use a rich dataset based on two experiments on the Trust Game (Berg et al.; 1995), where subjects also filled a questionnaire containing the main attitudinal questions the EVS (the European Value Survey) uses to measure individuals' trust. We then compare the ex-ante behavioural and attitudinal measures of trust with the ex post relative measures. Our main finding is that trust strongly varies once the individual is informed on the on the level of trustworthiness of the social group to which he\she has been allocated during the experiment. This difference is higher the higher is the family level of income and the parental education status of the subjects. We also find that relative behavioural measures are not correlated to attitudinal measures (Glaeser et al., 2000, Lazzarini, 2005), but they are strongly correlated to groups' trustworthiness. We also find that similar social preferences profiles (between Senders and Recipients) tend to enhance the degree of behavioural trust.
    Keywords: social capital, trust, experiments
    JEL: C91 C92
    Date: 2018–04
  9. By: Mohamed Belhaj (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Frédéric Deroïan (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE)
    Abstract: A principal targets agents organized in a network of local complementarities, in order to increase the sum of agents' effort. We consider bilateral public contracts à la Segal (1999). The paper shows that the synergies between contracting and non-contracting agents deeply impact optimal contracts: they can lead the principal to contract with a subset of the agents, and to refrain from contracting with central agents.
    Keywords: multi-agent contracting, Network, synergies, aggregate effort, optimal group targeting
    JEL: C72 D85
    Date: 2018–05
  10. By: Effrosyni Diamantousi (Department of Economics, Concordia University); Eftichios Sartzetakis (Department of Economics, University of Macedonia); Stefania Strantza (Department of Economics, Concordia University)
    Abstract: The paper examines the stability of self-enforcing International Environmental Agreements (IEAs) among heterogeneous countries, allowing for transfers. We employ a two-stage, non-cooperative model of coalition formation. In the ?first stage each country decides whether or not to join the agreement, while in the second stage countries choose their emissions simultaneously. Coalition members agree also to share the gains from cooperation in the fi?rst stage. We use quadratic benefi?t and environmental damage functions and assume two types of countries differing in their sensitivity to the global pollutant. In examining the impact of transfers on the coalition size, we apply the notion of Potential Internal Stability (PIS). Results show that transfers can increase cooperation among heterogeneous countries. However, the increase in the coalition size, relative to the case without transfers, comes only from countries belonging to the type with the lower environmental damages, which are drawn into the coalition by the transfers ordered. Furthermore, the level of cooperation increases with the degree of heterogeneity. However, the reduction in aggregate emissions achieved by the enlarged coalition is very small leading to dismal improvement in welfare, which con?firms the "paradox of cooperation".
    Keywords: Enviromental Economics.
    JEL: Q5
    Date: 2018–05
  11. By: Daniel Cardona (Universitat de les Illes Balears); Jenny De Freitas (Universitat de les Illes Balears); Antoni Rubí-Barceló (Universitat de les Illes Balears)
    Abstract: We analyze the selection of a policy platform by a group of heterogeneous agents to confront the status quo policy defended by another group in a subsequent contest. This policy choice results from the interaction between the inter-group effects that lead to strategic restraint and the intra-group effects due to the heterogeneity among challengers. We detail the conditions that give rise to polarization or moderation of the selected challenging policy with respect to what would be selected by this group in the absence of any struggle.
    Keywords: political processes; conflict; group contests; endogenous claims; intra-group heterogeneity
    JEL: D72 D74 C72
    Date: 2018
  12. By: Yao Luo
    Abstract: We study the identification of first-price auctions with nonseparable unobserved heterogeneity. In particular, we extend Hu, McAdams, and Shum (2013) by relaxing the first-order stochastic dominance condition. Instead, we assume restricted stochastic dominance relations among the value quantile functions and show that the same relations pass to the bid quantile functions. An ordered tree summarizes these relations and provides a total ordering. Relying on the proposed restricted stochastic dominance ordering, we extend a list of identification results in the empirical auction literature.
    Keywords: Restricted Stochastic Dominance, Unobserved Heterogeneity, Identification, Misclassification, Auction, Risk Aversion
    JEL: C14 D44
    Date: 2018–05–19
  13. By: Hesamzadeh, M.; Holmberg, P.; Sarfati, M.
    Abstract: Zonal pricing with countertrading (a market-based redispatch) gives arbitrage opportunities to the power producers located in the export-constrained nodes. They can increase their profit by increasing the output in the day-ahead market and decrease it in the real-time market (the inc-dec game). We show that this leads to large inefficiencies in a standard zonal market. We also show how the inefficiencies can be significantly mitigated by changing the design of the real-time market. We consider a two-stage game with oligopoly producers, wind-power shocks and real-time shocks. The game is formulated as a two-stage stochastic equilibrium problem with equilibrium constraints (EPEC), which we recast into a two-stage stochastic Mixed-Integer Bilinear Program (MIBLP). We present numerical results for a six-node and the IEEE 24-node system.
    Keywords: Two-stage game, Zonal pricing, Wholesale electricity market, Bilinear programming
    JEL: C61 C63 C72 D43 L13 L94
    Date: 2018–05–03
  14. By: Federico Bonetto; Maurizio Iacopetta
    Abstract: We study the rise in the acceptability fiat money in a Kiyotaki-Wright economy by developing a method that can determine dynamic Nash equilibria for a class of search models with genuine heterogenous agents. We also address open issues regarding the stability properties of pure strategies equilibria and the presence of multiple equilibria. Experiments illustrate the liquidity conditions that favor the transition from partial to full acceptance of fiat money, and the effects of inflationary shocks on production, liquidity, and trade.
    Date: 2018–05
  15. By: Victor Ginsburgh (ECARES, Université Libre de Bruxelles, Belgium and CORE, Université catholique de Louvain, Belgium); Juan D. Moreno-Ternero (Department of Economics, Universidad Pablo de Olavide;)
    Abstract: We discuss compensation schemes that should give incentives to EU countries and citizens to acquire a lingua franca. We consider three possible candidate languages: English, French and German, which are already the most widely spoken languages. In our model, countries can claim compensations linked to the number of (young) citizens who do not speak a given candidate language, and the distance between the official language in the country and the suggested lingua franca. We study two sharing schemes that are rooted in ancient sources: the Aristotelian proportional rule and the Talmud rule. The former prevents coalitional manipulations among countries, whereas the latter guarantees meaningful lower bounds in the sharing process for all countries.
    Keywords: European Union, lingua franca, compensation schemes
    JEL: D63
    Date: 2018–05

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