nep-gth New Economics Papers
on Game Theory
Issue of 2018‒08‒27
23 papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Persuasion with Limited Communication Capacity By Le Treust, Maël; Tomala, Tristan
  2. Subgame maxmin strategies in zero-sum stochastic games with tolerance levels By Flesch, Janos; Herings, P. Jean-Jacques; Maes, Jasmine; Predtetchinski, Arkadi
  3. Climate games: Who's on first? What's on second? By Margaret Insley; Peter A. Forsyth
  4. Stackelberg Mixed Triopoly Games with State-Owned, Labour-Managed and Capitalist Firms By Ohnishi, Kazuhiro
  5. Weighted Shapley hierarchy levels values By Besner, Manfred
  6. The Doors of Perception By Gary Charness; Alessandro Sontuoso; ;
  7. Reputation and Sovereign Default By Manuel Amador; Christopher Phelan
  8. International Environmental Agreements - The Impact of Heterogeneity among Countries on Stability By Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
  9. International Environmental Agreements - Stability with Transfers among Countries By Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
  10. Wage-Rise Contract and Labour-Managed Cournot Oligopoly with Complementary Goods By Ohnishi, Kazuhiro
  11. Order on Types based on Monotone Comparative Statics By Kunimoto, Takashi; Yamashita, Takuro
  12. Strategic interactions and uncertainty in decisions to curb greenhouse gas emissions By Margaret Insley; Tracy Snoddon; Peter A. Forsyth
  13. Inventory Holding and a Mixed Duopoly with a Foreign Joint-Stock Firm By Ohnishi, Kazuhiro
  14. Network-based Referral Mechanism in a Crowdfunding-based Marketing Pattern By Yongli Li; Zhi-Ping Fan; Wei Zhang
  15. Learning What is Similar: Precedents and Equilibrium Selection By Argenziano, Rossella; Gilboa, Itzhak
  16. Revenue guarantees in auctions with a (correlated) common prior and additional information By Yamashita, Takuro
  17. Asymmetric information allocation to avoid coordination failure By Moriya, Fumitoshi; Yamashita, Takuro
  18. Inequality, envy and personality in public goods: An experimental study By Bereket Kebede; Nicole Gross-Camp; Adrian Martin; Shawn McGuire; Joseph Munyarukaza
  19. Revenue-capped efficient auctions By Muto, Nozomu; Shirata, Yasuhiro; Yamashita, Takuro
  20. Learning in repeated multiple unit combinatorial auctions: An experimental study By Iftekhar, M. S.; Tisdell, J. G.
  21. Why Is the Practice of Levirate Marriage Disappearing in Africa? HIV/AIDS as an Agent of Institutional Change By Kudo, Yuya
  22. Advance Selling, Competition, and Brand Substitutability By Oksana Loginova
  23. On Competing Mechanisms under Exclusive Competition By Andrea Attar; Eloisa Campioni; Gwenaël Piaser

  1. By: Le Treust, Maël; Tomala, Tristan
    Abstract: We consider a Bayesian persuasion problem where the persuader and the decision maker communicate through an imperfect channel which has a fixed and limited number of messages and is subject to exogenous noise. Imperfect communication entails a loss of payoff for the persuader. We establish an upper bound on the payoffs the persuader can secure by communicating through the channel. We also show that the bound is tight: if the persuasion problem consists of a large number of independent copies of the same base problem, then the persuader can achieve this bound arbitrarily closely by using strategies which tie all the problems together. We characterize this optimal payoff as a function of the information-theoretic capacity of the communication channel.
    Keywords: Bayesian persuasion problem; imperfect communication channel
    JEL: C72 D82 D83
    Date: 2017–12–15
  2. By: Flesch, Janos (QE / Mathematical economics and game the); Herings, P. Jean-Jacques (General Economics 1 (Micro)); Maes, Jasmine (General Economics 1 (Micro)); Predtetchinski, Arkadi (General Economics 1 (Micro))
    Abstract: We study subgame φ-maxmin strategies in two-player zero-sum stochastic games with finite action spaces and a countable state space. Here φ denotes the tolerance function, a function which assigns a non-negative tolerated error level to every subgame. Subgame φ-maxmin strategies are strategies of the maximizing player that guarantee the lower value in every subgame within the subgame-dependent tolerance level as given by φ. First, we provide necessary and sufficient conditions for a strategy to be a subgame φ-maxmin strategy. As a special case we obtain a characterization for subgame maxmin strategies, i.e. strategies that exactly guarantee the lower value at every subgame. Secondly, we present sufficient conditions for the existence of a subgame φ-maxmin strategy. Finally, we show the possibly surprising result that the existence of subgame φ-maxmin strategies for every positive tolerance function φ is equivalent to the existence of a subgame maxmin strategy.
    Keywords: stochastic games, zero-sum games, subgame φ-maxmin strategies
    JEL: C73
    Date: 2018–08–14
  3. By: Margaret Insley (Department of Economics, University of Waterloo); Peter A. Forsyth (Cheriton School of Computer Science, University of Waterloo)
    Abstract: We study three different climate change games and compare with the outcome of choices by a Social Planner. In a dynamic setting, two players choose levels of carbon emissions. Rising atmospheric carbon stocks increase average global temperature which damages player utilities. Temperature is modeled as a stochastic differential equation. We contrast the results of a Stackelberg game with a game in which both players as leaders (a Leader-Leader or Trumpian game). We also examine a game, called an Interleaved game, where there is a significant time interval between player decisions. One or both players may be better off in these alternative games compared to the Stackelberg game, depending on state variables. We conclude that it is important to consider alternate game structures in examining strategic interactions in pollution games. We also demonstrate that the Stackelberg game is the limit of the Interleaved game as the time between decisions goes to zero.
    JEL: C61 C73 Q52 Q54
    Date: 2018–05–16
  4. By: Ohnishi, Kazuhiro
    Abstract: This paper investigates three sequential-move games with a capitalist firm, a labour-managed firm and a state-owned firm. The first game is as follows. In stage one, the capitalist firm chooses its output level. In stage two, the other firms choose their output levels simultaneously and independently. In stage three, the market opens and all firms sell their outputs. The structures of the second and third games are nearly identical and differ only in order in which the firms choose output levels in the first two stages. The paper discusses the equilibrium outcomes of the three sequential-move games.
    Keywords: Stackelberg games; Capitalist firm; Labour-managed firm; State-owned firm
    JEL: C72 D21 L30
    Date: 2018–06–03
  5. By: Besner, Manfred
    Abstract: In this paper we present a new class of values for cooperative games with level structure. We use a multi-step proceeding, suggested first in Owen (1977), applied to the weighted Shapley values. Our first axiomatization is an generalisation of the axiomatization given in Gómez-Rúa and Vidal-Puga (2011), itselves an extension of a special case of an axiomatization given in Myerson (1980) and Hart and Mas-Colell (1989) respectively by efficiency and weighted balanced contributions. The second axiomatization is completely new and extends the axiomatization of the weighted Shapley values introduced in Hart and Mas-Colell (1989) by weighted standardness for two player games and consistency. As a corollary we obtain a new axiomatization of the Shapley levels value.
    Keywords: Cooperative game; Consistency; Level structure; (Weighted) Shapley (levels) value; Weighted balanced contributions
    JEL: C7 C71
    Date: 2018–07–24
  6. By: Gary Charness (Department of Economics, University of California, Santa Barbara); Alessandro Sontuoso (Philosophy, Politics and Economics, University of Pennsylvania); ;
    Abstract: We investigate how a player’s strategic behavior is affected by the set of notions she uses in thinking about the game, i.e., the “frame”. To do so, we consider matching games where two players are presented with a set of objects, from which each player must privately choose one (with the goal of matching the counterpart’s choice). We propose a behavioral theory positing that different player types are aware of different attributes of the strategy options, hence different frames; we then rationalize why differences in players’ frames may lead to differences in choice behavior. Unlike previous theories of framing, our model features an epistemic structure allowing for the case in which an individual learns new frames, given some initial unawareness (of the fact that her perception of attributes may be incomplete). To test our model, we introduce an experimental design in which we bring about different frames by manipulating subjects’ awareness of various attributes. The experimental results provide striking support for our theory.
    Keywords: frames, focal points, unawareness, coordination games
    JEL: C72 C91
    Date: 2018–08
  7. By: Manuel Amador; Christopher Phelan
    Abstract: This paper presents a continuous-time model of sovereign debt. In it, a relatively impatient sovereign government's hidden type switches back and forth between a commitment type, which cannot default, and an optimizing type, which can default at any time, and assume outside lenders have particular beliefs regarding how a commitment type should borrow for any given level of debt and bond price. If these beliefs satisfy reasonable assumptions, in any Markov equilibrium, the optimizing type mimics the commitment type when borrowing, revealing its type only by defaulting on its debt at random times. Further, in such Markov equilibria (the solution to a simple pair of ordinary differential equations), there are positive gross issuances at all dates, constant net imports as long as there is a positive equilibrium probability that the government is the optimizing type, and net debt repayment only by the commitment type. For countries that have recently defaulted, the interest rate the country pays on its debt is a decreasing function of the amount of time since its last default, and its total debt is an increasing function of the amount of time since its last default. For countries that have not recently defaulted, interest rates are constant.
    JEL: F3 F34
    Date: 2018–06
  8. By: Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
    Abstract: The present paper examines the stability of self-enforcing International Environmental Agreements (IEAs) among heterogeneous countries in a twostage emission game. In the first stage each country decides whether or not to join the agreement, while in the second stage the quantity of emissions is chosen simultaneously by all countries. We use quadratic benefit and environmental damage functions and assume k types of countries that differ in their sensitivity to the global pollutant. We find that the introduction of heterogeneity does not yield larger stable coalitions. In particular, we show that, in the case of two types, when stable coalitions exist their size is very small, and, if the asymmetry is strong enough, they include only one type of countries. Moreover, heterogeneity can reduce the scope of cooperation relative to the homogeneous case. We demonstrated that introducing asymmetry into a stable, under symmetry, agreement can disturb stability.
    Keywords: Environmental Economics and Policy
    Date: 2018–07–10
  9. By: Diamantoudi, Effrosyni; Sartzetakis, Eftichios; Strantza, Stefania
    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 first stage. We use quadratic benefit 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 offered. 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 confirms the "paradox of cooperation".
    Keywords: Environmental Economics and Policy
    Date: 2018–06–07
  10. By: Ohnishi, Kazuhiro
    Abstract: This paper considers a quantity-setting oligopoly model with complementary goods where labour-managed firms are allowed to offer wage-rise contracts as a strategic commitment. The following two stages are considered. In the first stage, each firm independently decides whether or not to adopt a wage-rise contract as a strategic commitment device. In the second stage, each firm independently chooses and sells its actual output. The paper analyses the equilibrium of the labour-managed oligopoly model.
    Keywords: Cournot competition; Labour-managed oligopoly; Wage-rise contract; Complementary goods
    JEL: C72 D21 L13
    Date: 2018–07–26
  11. By: Kunimoto, Takashi; Yamashita, Takuro
    Keywords: common certainty of optimism; least equilibrium; greatest equilibrium;;interim correlated rationalizaibility; monotone comparative statics;supermodularity; universal type space
    JEL: C72 D78 D82
    Date: 2018–07
  12. By: Margaret Insley (Department of Economics, University of Waterloo); Tracy Snoddon (Department of Economics, Wilfrid Laurier University); Peter A. Forsyth (Cheriton School of Computer Science, University of Waterloo)
    Abstract: This paper examines the strategic interactions of two large regions making choices about greenhouse gas emissions in the face of rising global temperatures. Optimal decisions are modelled in a fully dynamic, closed loop Stackelberg pollution game. Global average temperature is modelled as a mean reverting stochastic process. A numerical solution of a coupled system of HJB equations is implemented. We explore the impact of temperature volatility and regional asymmetries on emissions, contrasting the outcomes from the Stackelberg game with the choices made by a social planner. When players are identical, a classic tragedy of the commons is demonstrated in which players in the game choose higher carbon emissions and have lower utility as compared to the outcome with a social planner. Over certain values of state variables, the tragedy of the commons is shown to be exacerbated by increased temperature volatility and regional asymmetries in climate damages. Asymmetries in environmental preferences can, under certain conditions, result in a green paradox whereby green sentiments in one region cause the other region to increase emissions. Interestingly, we also found that a contrary "green bandwagon" effect is possible. At high levels of the carbon stock, green preferences in one region can cause the other region to reduce emissions.
    JEL: C73 Q52 Q54 Q58
    Date: 2018–01–06
  13. By: Ohnishi, Kazuhiro
    Abstract: This paper investigates a mixed duopoly model in which there is a state-owned firm competing with a foreign joint-stock firm. The following situation is considered. In the first period, each firm non-cooperatively decides how many it sells in the current market. In addition, each firm can hold inventory for the second-period market. By holding large inventory, a firm may be able to commit to large sales in the next period. In the second period, each firm non-cooperatively chooses its second-period output. At the end of the second period, each firm sells its first-period inventory and its second-period output and holds no inventory. The paper traces out the firms’ reaction functions in the mixed duopoly model.
    Keywords: Inventory holding, state-owned firm, foreign joint-stock firm, reaction curves
    JEL: C72 D43 F23 L30
    Date: 2018–04–29
  14. By: Yongli Li; Zhi-Ping Fan; Wei Zhang
    Abstract: Crowdfunding is gradually becoming a modern marketing pattern. By noting that the success of crowdfunding depends on network externalities, our research aims to utilize them to provide an applicable referral mechanism in a crowdfunding-based marketing pattern. In the context of network externalities, measuring the value of leading customers is chosen as the key to coping with the research problem by considering that leading customers take a critical stance in forming a referral network. Accordingly, two sequential-move game models (i.e., basic model and extended model) were established to measure the value of leading customers, and a skill of matrix transformation was adopted to solve the model by transforming a complicated multi-sequence game into a simple simultaneous-move game. Based on the defined value of leading customers, a network-based referral mechanism was proposed by exploring exactly how many awards are allocated along the customer sequence to encourage the leading customers' actions of successful recommendation and by demonstrating two general rules of awarding the referrals in our model setting. Moreover, the proposed solution approach helps deepen an understanding of the effect of the leading position, which is meaningful for designing more numerous referral approaches.
    Date: 2018–08
  15. By: Argenziano, Rossella; Gilboa, Itzhak
    Abstract: We argue that a precedent is important not only because it changes the relative frequency of a certain event, making it positive rather than zero, but also because it changes the way that relative frequencies are weighed. Specifically, agents assess probabilities of future events based on past occurrences, where not all of these occurrences are deemed equally relevant. More similar cases are weighed more heavily than less similar ones. Importantly, the similarity function is also learnt from experience by "second-order induction". The model can explain why a single precedent affects beliefs above and beyond its effect on relative frequencies, as well as why it is easier to establish reputation at the outset than to re-establish it after having lost it. We also apply the model to equilibrium selection in a class of games dubbed "Statis- tical Games", suggesting the notion of Similarity-Nash equilibria, and illustrate the impact of precedents on the play of coordination games.
    Keywords: precedents; second-order induction; Similarity-Nash equilibria
    JEL: A10
    Date: 2018–03–01
  16. By: Yamashita, Takuro
    Abstract: This paper considers auction environments with a (possibly correlated) common prior over bidders' values, where each bidder may have additional information (e.g., through information acquisition). Under certain conditions, we characterize the optimal mechanisms in terms of the expected revenue that is guaranteed given whatever additional information is available to the bidders. Even if the values are correlated,we do not necessarily have full-surplus extraction, and moreover, the optimal mechanism resembles those in the independently distributed cases. Specifically, we show that (i) a second-price auction is optimal among all the efficient mechanisms, and (ii) it is rate-optimal among all the mechanisms.
    Keywords: Mechanism design; Auction; Correlated private information;Information acquisition; Revenue guarantee
    Date: 2018–07
  17. By: Moriya, Fumitoshi; Yamashita, Takuro
    Abstract: In the context of team production, this paper studies the optimal (deterministic and stochastic) information allocation that implements desired effort levels as the unique Bayesian equilibrium. We show that, under certain conditions, it is optimal to asymmetrically inform agents even though they may be ex ante symmetric. The main intuition is that informing the agents asymmetrically can be effective in avoiding "bad" equilibria, that is, equilibria with coordination failure.
    Keywords: Moral hazard; Unique implementation; Asymmetric information allocation
    JEL: D21 D23 D86
    Date: 2018–07
  18. By: Bereket Kebede; Nicole Gross-Camp; Adrian Martin; Shawn McGuire; Joseph Munyarukaza
    Abstract: This paper examines the impact of inequality on contributions to public goods focusing on the mediating role of personality using an inequality aversion model as a theoretical framework and experimental data from rural Rwanda. As predicted by the theoretical model, low-income players contribute less. We examine the predictive power of two personality approaches. The first is a person-centred approach using latent class analysis (LCA) to identify types of individuals with specific constellation of Big Five dimensions. The second focuses on individual dimensions of Big Five. While the person-centred approach has no explanatory power, one dimension of Big Five, Extraversion, is a significant and robust determinant; low-income players with higher Extraversion significantly reduce their contribution. Further exploratory analyses focusing on two dimensions of Big Five reveal that it does not provide any additional explanation compared to when each dimension is considered.
    Keywords: public goods games; personality; inequality; envy; Rwanda
    JEL: C93 H41 D63 O12 O55
    Date: 2018
  19. By: Muto, Nozomu; Shirata, Yasuhiro; Yamashita, Takuro
    Abstract: We study an auction that maximizes the expected social surplus under an upperbound constraint on the seller's expected revenue, which we call a revenue cap. Such a constrained-efficient auction may arise, for example, when: (i) the auction designer is "pro-buyer", that is, he maximizes the weighted sum of the buyers' and seller's auction payoffs, where the weight for the buyers is greater than that for the seller; (ii) the auction designer maximizes the (unweighted) total surplus in a multi-unit auction in which the number of units the seller owns is private information; or (iii) multiple sellers compete to attract buyers before the auction. We characterize the mechanisms for constrained-efficient auctions and identify their important properties. First, the seller sets no reserve price and sells the good for sure. Second, with a nontrivial revenue cap, "bunching" is necessary. Finally, with a sufficiently severe revenue cap, the constrained-efficient auction has a bid cap, so that bunching occurs at least "at the top," that is, "no distortion at the top" fails.
    Date: 2018–07
  20. By: Iftekhar, M. S.; Tisdell, J. G.
    Abstract: The motivation of this paper is to understand trader behaviour and learning in a complex setting where finding a best strategy might not be intuitive. The assertion made is that feedback information can help in updating strategies through repeated bidding processes. The paper explores this assertion through the results of a series of repeated multiple unit combinatorial auction laboratory experiments where item and package traders interact under three information treatments: 1) basic information feedback on market prices and status of their own bids; 2) basic information feedback and all winning bids; and 3) market prices and the status of all bids. We compare bidding behavior with a local optimal package selection model. We then estimate an experience weighted attraction learning (EWA) model of bidding behavior. We observe that package traders follow price feedback information more closely than item traders, especially in the basic treatment information. With additional information package traders substantially deviate from best response bidding strategy resulting in a loss of efficiency. Finally, item traders tend to remember their past experiences more than package traders in low information environments. In high information environments the trend is reversed. The implications of this study could be significant for market design. The standard assumption that more information in combinatorial market design is better for traders may not hold in all cases.
    Keywords: Environmental Economics and Policy
    Date: 2018–01–25
  21. By: Kudo, Yuya
    Abstract: Levirate marriage, whereby a widow is inherited by male relatives of her deceased husband, has anecdotally been viewed as an informal safety net for widows who have limited property rights. This study investigates why this widespread practice in sub-Saharan Africa has recently been disappearing. A developed game-theoretic analysis reveals that levirate marriage arises as a pure strategy subgame perfect equilibrium when a husband's clan desires to keep children of the deceased within its extended family and widows have limited independent livelihood means. Female empowerment renders levirate marriage redundant because it increases widows' reservation utility. HIV/AIDS also discourages a husband's clan from inheriting a widow who loses her husband to HIV/AIDS, reducing her remarriage prospects and thus, reservation utility because she is likely to be HIV positive. Consequently, widows' welfare tends to decline (resp., increase) in step with the deterioration of levirate marriage driven by HIV/AIDS (female empowerment). By exploiting long-term household panel data drawn from rural Tanzania and testing multiple theoretical predictions relevant to widows' welfare and women's fertility, this study finds that HIV/AIDS is primarily responsible for the deterioration of levirate marriage. Young widows in Africa may need some form of social protection against the influence of HIV/AIDS.
    Keywords: cultural institution, female empowerment, HIV/AIDS, safety net, levirate marriage, widowhood protection
    JEL: J12 J13 J16 K11 Z13
    Date: 2018–08–08
  22. By: Oksana Loginova (University of Missouri)
    Abstract: This paper studies the impact of competition on the benefits of advance selling. I construct a two-period price-setting game with two firms that produce different brands serving heterogeneous consumers. Some consumers prefer one brand, others prefer the other brand. Consumers derive common value from their preferred brand, but they differ in how strongly they dislike their less preferred brand. One of the firms can offer consumers the opportunity to pre-order its product in advance of the regular selling season. I calculate the benefits of advance selling when this firm faces competition from the other firm in the regular selling season and when it does not. Competition is shown to enhance the benefits of advance selling when in the advance selling season consumers are uncertain about which brand they will prefer. Comparative statics analysis with respect to brand substitutability reveal some interesting results.
    Keywords: advance selling, price competition, strategic consumers, valuation uncertainty, consumer heterogeneity, substitutability of brands
    JEL: C72 D42 D43 L12 L13 M31
    Date: 2016–10
  23. By: Andrea Attar (DEF & CEIS, Università di Roma Tor Vergata and Toulouse School of Economics (CNRS)); Eloisa Campioni (DEF & CEIS, Università di Roma Tor Vergata); Gwenaël Piaser (IPAG Business School)
    Abstract: We study games in which several principals design mechanisms in the presence of privately informed agents. Competition is exclusive: each type of each agent can participate with at most one principal and meaningfully communicate only with him. Economic models of exclusive competition restrict principals to use standard direct mechanisms, which induce truthful revelation of agents’ exogenous private information. This paper investigates the rationale for this restriction. We provide two results. First, we construct examples showing that direct mechanisms fail to completely characterize equilibrium outcomes even if we restrict to pure strategy equilibria. Second, we show that truth-telling strongly robust equilibrium outcomes survive against principals’ unilateral deviations toward arbitrary mechanisms.
    Keywords: Competing Mechanisms, Exclusive Competition, Incomplete Information
    JEL: D82
    Date: 2018–08–09

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