nep-gth New Economics Papers
on Game Theory
Issue of 2018‒09‒17
twenty-one papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Efficient Partnership Formation in Networks By Bloch, Francis; Dutta, Bhaskar; Manea, Mihai
  2. Communicaiton games with optional verification By SCHOPOHL Simon,
  3. Approval voting and Shapley ranking By DEHEZ Pierre,; GINSBURGH Victor,
  4. An analysis of the two-bidder all-pay auction with common values By Chi, Chang Koo
  5. Allocation rules for cooperative games with graph and hypergraph communication structure By Zhang, Guang
  6. On uniqueness of equilibrium prices in a Bayesian assignment game By David Cantala; Damián Gibaja
  7. Bargaining and Hold-up: The Role of Arbitration By Gabuthy, Yannick; Muthoo, Abhinay
  8. Consumer Noisy Persuasion By Elias Tsakas; Nikolas Tsakas
  9. The Entitlement Effect in the Ultimatum Game - Does It Even Exist? By Elif E. Demiral; Johanna Mollerstrom
  10. Learned Generosity? An Artefactual Field Experiment with Parents and their Children By Avner Ben-Ner; John List; Louis Putterman; Anya Samek
  11. Asset Dissemination Through Dealer Markets By Colliard, Jean-Edouard; Demange, Gabrielle
  12. Market Power and Welfare in Asymmetric Divisible Good Auctions By Manzano, Carolina; Vives, Xavier
  13. Asymmetric Budget Constraints in a First Price Auction By Bobkova, Nina
  14. Strategy-Proof Allocation of Objects Revisited By Andersson, Tommy; Svensson, Lars-Gunnar
  15. Not all Group Members are created Equal: Heterogeneous Abilities in Inter-group Contests By FALLUCCHI Francesco; FATAS Enrique; KÖLLE Felix; WEISEL Ori
  16. Tax Evasion with a Conscience By Dufwenberg, Martin; Nordblom, Katarina
  17. Private information, price discrimination, and collusion By Peiseler, Florian; Rasch, Alexander; Shekhar, Shiva
  18. Pricing behavior in partial cartels By Odenkirchen, Johannes
  19. Save the planet or close your eyes? Testing strategic ignorance in a charity context By Lind, Jo Thori; Nyborg, Karine; Pauls, Anna
  20. Race to Burn the Last Ton of Carbon and the Risk of Stranded Assets By Rick can der Ploeg
  21. Sustaining Rainforests and Smallholders by Eliminating Payment Delay in a Commodity Supply Chain--It Takes a Village By de Zegher, Joann F.; Iancu, Dan A.; Plambeck, Erica

  1. By: Bloch, Francis (Université Paris 1 and Paris School of Economics); Dutta, Bhaskar (University of Warwick and Ashoka University); Manea, Mihai (Stanford University)
    Abstract: We analyze the formation of partnerships in social networks. Players need favors at random times and ask their neighbors in the network to form exclusive long-term partnerships that guarantee reciprocal favor exchange. Refusing to provide a favor results in the automatic removal of the under lyinglink. When favors are costly, players agree to provide the first favor in a partnership only if they otherwise face the risk of eventual solitude. In equilibrium,the players essential for realizing every maximum matching can avoid this risk and enjoy higher payoffs than in essential players. Although the search for partners is decentralized and reflects local incentives, the strength of essential players drives efficient partnership formation in everynetwork. When favors are costless, players enter partnerships at any opportunity and every maximal matching can emerge in equilibrium.In this case,efficiency is limited to special linking patterns : complete and complete bipartite networks, locally balanced biprtit enetworks with positive surplus, and factor-critical networks. JEL classification numbers: D85 ; C78
    Keywords: networks ; partnerships ; matchings ; efficiency ; decentralizedmarkets ; favor exchange ; completely elementary networks ; locally balanced networks
    Date: 2018
  2. By: SCHOPOHL Simon, (CEREC, Université Saint-Louis and CORE, UCLouvain)
    Abstract: We analyse a Sender-Receiver game in which the Sender can choose between a costless cheap-talk message and a costly verifiable message. The Sender knows the true state of the world, while the Receiver only learns about the state through the message of the Sender. The utility of both players depends on an action the Receiver chooses. We keep the assumptions about the utility functions and about the messages to a minimum and state conditions for fully revealing equilibria. Under the assumption of "smooth" preferences and utility functions we show that a fully revealing equilibrium in which the Sender uses both her message types can only exist as long as the state space and action space are discrete. We illustrate this result for the classical example of quadratic loss utilities. In a continuous setting we show that there can only exist a fully revealing equilibrium in which the Sender uses different message types in different states if we allow for costless verification in some states of the world or if the utility function of at least one player is discontinuous.
    Keywords: cheap-talk, communication, costly disclosure, full revelation, Sender-Receiver game, verifiable information
    JEL: C72 D82
    Date: 2018–04–25
  3. By: DEHEZ Pierre, (Université catholique de Louvain, CORE, Belgium); GINSBURGH Victor, (Université libre de Bruxelles and CORE)
    Abstract: Approval voting allows voters to list any number of candidates. Their scores are obtained by summing the votes cast in their favor. Fractional voting instead follows the One-person-one-vote principle by endowing voters with a single vote that they may freely distribute among candidates. In this paper, we show that fairness requires the distribution of votes to be uniform. Uniform fractional voting corresponds to Shapley ranking that was introduced to rank wines as the Shapley value of a cooperative game with transferable utility. Here we analyze the properties of these "ranking games" and provide an axiomatic foundation to Shapley ranking. We also analyze Shapley ranking as a social welfare function and compare it to approval ranking.
    Keywords: approval voting, Shapley value
    JEL: D71 C71
    Date: 2018–04–18
  4. By: Chi, Chang Koo (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: This paper studies a symmetric two-bidder all-pay auction where the bidders compete for a prize whose unknown common value is either high or low. The bidders’ private signals (or types) are discrete and affiliated through the value. Even with Affiliated signals, monotonicity of equilibria can fail in the sense that the bidder With a higher signal does not always win the auction. I show that when monotonicity fails, there exist multiple symmetric equilibria but the bidder’s type-dependent payoff is invariant across the equilibria. The paper provides a closed-form formula for the equilibrium payoffs and a condition for rent dissipation.
    Keywords: All-pay auctions; common values; correlated signals; non-monotone equilibria; rent dissipation rent dissipation
    JEL: D44 D72
    Date: 2018–08–28
  5. By: Zhang, Guang (Tilburg University, School of Economics and Management)
    Abstract: The thesis is devoted to the study of graph and hypergraph games, which are cooperative games with cooperation restricted by communication structures represented by graphs or hypergraphs. There are four main chapters. Chapter 3 studies a class of graph games, in which several players are selected a priori as main players. A value for graph games with main players is introduced and its characterization is provided in case the underlying communication structure contains no cycles or is a cycle with one main player. Chapters 4 and 5 investigate two generalizations of the average tree solution for graph games to values for hypergraph games and provide several axiomatic characterizations of the new values. Chapter 6 introduces the degree value for hypergraph games. This value highlights the players’ abilities to communicate directly with other players in the communication structure. Characterizations of the value are provided for cycle-free hypergraph games and for arbitrary hypergraph games
    Date: 2018
  6. By: David Cantala (El Colegio de México); Damián Gibaja (Universidad Popular Autonoma del estado de Puebla)
    Abstract: In the Assignment Game [Shapley and Shubik, 1971], most solution concepts yield a multiplicity of solutions. We study the Assignment game in a Bayesian environment where neither buyers nor sellers know the valuation of other players, and derive conditions on the distribution of valuations to guarantee the uniqueness of equilibrium. Also, we provide a closed-form solution when valuations follow an exponential distribution.
    Keywords: assignment game, uniqueness, Newton's method, contraction mapping
    Date: 2018–05
  7. By: Gabuthy, Yannick (University of Lorraine, University of Strasbourg, CNRS, BETA, Nancy, France); Muthoo, Abhinay (Department of Economics, University of Warwick)
    Abstract: This paper analyses arbitration as a surrogate for complete contracts. We embed this idea in a simple model of a long-term relationship between a firm and its workforce, in which they can make productive-enhancing, relationship-specific investments, and then negotiate over the division of the resultant surplus. It is shown that the mere presence of the arbitrator (in the background of negotiations) may enhance investment incentives ex-ante by minimising each party's ability to engage in hold-up behaviours ex-post. Furthermore, we highlight notably that the partners should optimally commit to call an arbitrator ensuring a compromise by awarding a reasonable share of the surplus to the worker. Indeed, this type of arbitrator would harmonise the parties' bargaining powers and then weight their investment incentives optimally.
    JEL: D74 J52 K41
    Date: 2018
  8. By: Elias Tsakas; Nikolas Tsakas
    Abstract: We study the effect of noise due to exogenous information distortions in the context of Bayesian persuasion. In particular, we ask whether more noise is always harmful for the information designer (viz., the sender). We show that in general this is not the case. That is, more noise is often beneficial for the sender. However, when we compare noisy channels with “similar basic structures”, more noise cannot be beneficial for the sender. We apply our theory to applications from the literatures on voting and cognitive biases.
    Keywords: Bayesian persuasion; data distortions; optimal signal; garbling
    JEL: C72 D72 D82 D83 K40 M31
    Date: 2018–09
  9. By: Elif E. Demiral; Johanna Mollerstrom
    Abstract: Since the seminal paper of Hoffman et al. (1994), an entitlement effect is believed to exist in the Ultimatum Game, in the sense that proposers who have earned their role (as opposed to having it randomly allocated) offer a smaller share of the pie to their matched responder. The entitlement effect is at the core of experimental Public Choice – not just because it concerns the topics of bargaining and negotiations, but also because it relates to the question about under which circumstances actors behave more rational. We conduct three experiments, two in the laboratory and one online, with more than 1,250 participants. Our original motivation was to study gender differences, but ultimately we could not replicate the entitlement effect in the Ultimatum Game in any of our three experiments. Potential reasons for why the replication attempts fail are discussed.
    Keywords: Ultimatum game, public choice, experiment, entitlement, negotiations, bargaining, replications, gender
    JEL: C7 C9 D72 J16
    Date: 2018
  10. By: Avner Ben-Ner; John List; Louis Putterman; Anya Samek
    Abstract: An active area of research within the social sciences concerns the underlying motivation for sharing resources and engaging in other pro-social actions. In this paper we ask: do parents model social preference behavior to children, and do children emulate this behavior? We develop a theoretical framework to examine this question, and conduct an experiment with 147 3 to 5 year old children and their parents, using dictator games to measure generosity. We find (1) evidence of parental teaching/modeling in the case of fathers and in that of parents of relatively generous children, and (2) an emulation effect such that children who initially share less than half of their endowment subsequently share more the more they see a parent or other adult share. We find little correlation between baseline sharing of children and the parents, with the possible exception of the oldest children.
    Date: 2017
  11. By: Colliard, Jean-Edouard (HEC Paris - Finance Department); Demange, Gabrielle (Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research))
    Abstract: Many financial assets are disseminated to final investors via chains of over-the-counter transactions between dealers. We model such an intermediation process as a game with successive take-it-or-leave-it offers: A dealer buys several units of an asset, and can sell some of them to his customers or to a second dealer, who can sell to his customers or to a third dealer, and so on. In equilibrium, the asset is disseminated through a sequence of OTC transactions between dealers. The number of dealers involved, the inventories they keep, and the prices and quantities they offer are endogenously determined. Our model gives a framework to analyze how assets are disseminated through OTC markets, how liquidity evolves along a sequence of transactions, and varies across different sequences of different lengths.
    Keywords: intermediation chains; liquidity; OTC markets; dealer markets
    JEL: C78 D85 G21 G23
    Date: 2018–07–27
  12. By: Manzano, Carolina (Rovira i Virgili University); Vives, Xavier (IESE Business School)
    Abstract: We analyze a divisible good uniform-price auction that features two groups each with a finite number of identical bidders. Equilibrium is unique, and the relative market power of a group increases with the precision of its private information but declines with its transaction costs. In line with empirical evidence, we .nd that an increase in transaction costs and/or a decrease in the precision of a bidding group.s information induces a strategic response from the other group, which thereafter attenuates its response to both private information and prices. A "stronger" bidding group -which has more precise private information, faces lower transaction costs, and is more oligopsonistic- has more market power and so will behave competitively only if it receives a higher per capita subsidy rate. When the strong group values the asset no less than the weak group, the expected deadweight loss increases with the quantity auctioned and also with the degree of payoff asymmetries. Market power and the deadweight loss may be negatively associated.
    Keywords: demand/supply schedule competition; private information; liquidity auctions; Treasury auctions; electricity auctions;
    JEL: D44 D82 E58 G14
    Date: 2017–01–16
  13. By: Bobkova, Nina
    Abstract: I solve a first-price auction for two bidders with asymmetric budget distributions and known valuations for one object. I show that in any equilibrium, the expected utilities and bid distributions of both bidders are unique. If budgets are sufficiently low, the bidders will bid their entire budget in any equilibrium. For sufficiently high budgets, mass points in the equilibrium strategies arise. A less restrictive budget distribution could make both bidders strictly worse off. If the budget distribution of a bidder is dominated by the budget distribution of his opponent in the reverse-hazard rate order, the weaker bidder will bid more aggressively than his stronger opponent. In contrast to existing results for symmetric budget distributions, with asymmetric budget distributions, a second-price auction can yield a strictly higher revenue than a first-price auction. Under an additional assumption, I derive the unique equilibrium utilities and bid distributions of both bidders in an all-pay auction.
    Keywords: Budget Constraints; First Price Auctions; Asymmetric Bidders
    JEL: C72 D44 D82
    Date: 2017–02–03
  14. By: Andersson, Tommy (Department of Economics, Lund University); Svensson, Lars-Gunnar (Department of Economics, Lund University)
    Abstract: We consider an allocation problem with a finite number of objects, and agents that demand at most one of the objects. The study provides a characterization of a class of strategy-proof price mechanisms. A mechanism belongs to the class if and only if the price space is restricted in a special way and, given that restriction, the outcome prices are minimal. The domain of the mechanisms is the set of general preference profiles (R_1,R_2,…,R_n), i.e., where R_a is agent a's rational, monotonic and continuous preference ordering over objects and prices.
    Keywords: Characterization; House-allocation; Strategy-proofness; Multiobject auction
    JEL: D44 D63 D78 D82
    Date: 2018–09–03
  15. By: FALLUCCHI Francesco; FATAS Enrique; KÖLLE Felix; WEISEL Ori
    Abstract: Competition between groups is ubiquitous in social and economic life, and groups are typically not created equal. Here we experimentally investigate the implications of this general observation on the unfolding of symmetric and asymmetric competition between groups that are either homogeneous or heterogeneous in the ability of their members to contribute to the success of the group. Our main finding is that, in contrast with a number of theoretical predictions, efforts in contests involving heterogeneous groups are higher than in contests involving only homogeneous groups, leading to reduced earnings (to contest participants) and increased inequality. This effect is particularly pronounced in asymmetric contests, where both homogeneous and heterogeneous groups increase their efforts. We find that asymmetry between groups changes the way group members condition their efforts on those of their peers. Implications for contest designers are discussed.
    Keywords: Contests; groups; abilities; heterogeneity; experiments
    JEL: C72 C92 D72 H40
    Date: 2018–09
  16. By: Dufwenberg, Martin (University of Arizona, University of Gothenburg); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: How do moral concerns affect tax compliance and the need for audits? We propose answers by exploring an inspection game, modified to incorporate belief-dependent taxpayer guilt, unawareness, and third-party audience effects. Novel conclusions are drawn regarding whose behavior is affected by moral concerns (it's the authority's more than the citizen's) and regarding policy, in particular fines vs. jail, the role of information campaigns, and the use of a principle of public access whereby tax returns are made public information.
    Keywords: tax evasion; guilt; inspection game; policy
    JEL: D03 H26 H83
    Date: 2018–08
  17. By: Peiseler, Florian; Rasch, Alexander; Shekhar, Shiva
    Abstract: We analyze firms' ability to sustain collusion in a setting in which horizontally differentiated firms can price-discriminate based on private information regarding consumers' preferences. In particular, firms receive private signals which can be noisy (e.g., big data predictions). We find that there is a non-monotone relationship between signal quality and sustainability of collusion. Starting from a low level, an increase in signal precision first facilitates collusion. However, there is a turning point from which on any further increase renders collusion less sustainable. Our analysis provides important insights for competition policy. In particular, a ban on price discrimination can help to prevent collusive behavior as long as signals are sufficiently noisy.
    Keywords: Big Data,Collusion,Loyalty,Private Information,Third-Degree Price Discrimination
    JEL: L13 D43 L41
    Date: 2018
  18. By: Odenkirchen, Johannes
    Abstract: We analyze the pricing behavior of firms when explicit partial cartels have formed in experimental markets through communication. Using a repeated, asymmetric capacity constraint price game, we show that, in line with theory, a partial cartel is sufficient to increase market prices for all firms. Moreover, we find that prices of cartel insiders and outsiders are not necessarily on the same level what contradicts common theoretical predictions. This is because communication allows cartel members to overcome a potential coordination problem and enables an equilibrium in (joint) mixed strategies to emerge. The results therefore underline the importance of communication in explicit cartels and the resulting market outcomes.
    Keywords: partial cartels,explicit collusion,umbrella effects,experiments
    JEL: C92 D03 L13 L41
    Date: 2018
  19. By: Lind, Jo Thori (Dept. of Economics, University of Oslo); Nyborg, Karine (Dept. of Economics, University of Oslo); Pauls, Anna (Dept. of Economics, University of Oslo)
    Abstract: Our lab experiment tests for strategic ignorance about the environmental consequences of one’s actions. In a binary dictator situation based on the design by Dana, Weber, and Kuang (2007), we test whether the option to remain ignorant about the receiver’s payoffs reduces generosity. Our receiver is a charity that engages in carbon offset. Contrary to previous findings by Dana, Weber, and Kuang (2007) and replications, the option to remain ignorant does not decrease generosity. Only 22% of dictators choose ignorance. We test social interaction by allowing another subject to force the dictator to learn the receiver’s payoff, and by allowing the dictator to sanction that subject. When information can be imposed by another subject, almost all dictators choose information themselves, but this does not increase generosity. The possibility of sanctions does not discourage subjects from providing information to dictators.
    Keywords: strategic ignorance; dictator game; experiment; social sanctions; carbon offset
    JEL: C92 D63 Q50
    Date: 2018–09–04
  20. By: Rick can der Ploeg
    Abstract: A cap on global warming implies a tighter carbond bufget which can be enforced with a crecible second-best renewable energy subsidy design to lock up fossil fuel and curb manipulative emissions. Such a subsidy brings forward the end of hte fossil fuel era, but accelerates fossil fuel exctraction and global warming in the short run. A weaker fossil fuel oligopoly implies that anticipation of the a given global carbon budget induces fossil producers to deplete reserves more voraciously and accelerate global warming. This ran to burn the last ton o carbon is more intensive for the feedback than open-loop Nash equilibrium, so that the Green Paradox effect of a renewable energy subsidy is stronger. There is an intermideiate phase of limit pricing to keep renewable energy prodyucers at bay, which becomes much more relevant when a cap on global warming is enforced. A stronger fossil fuel oligopoly lengthens the period of limit pricing and typically brings forward the carbon-free era. Finally, the mere risk of a cap on global warming being enforced at some uknown, future date makes fossil fuel extraction more voracious and accelerates global warming.
    Keywords: Second-best climate policy, Green Paradox, carbon budget, strnaded assets, oligopolistic resource marker, limit pricing, voracious extraction, regime shift
    JEL: H21 Q51 Q54
    Date: 2017
  21. By: de Zegher, Joann F. (Stanford University); Iancu, Dan A. (Stanford University); Plambeck, Erica (Stanford University)
    Abstract: Millions of poor smallholder farmers produce global commodities, often through illegal deforestation. Multinational commodity buyers have committed to halt illegal deforestation and improve farmers' livelihoods in their supply chains. We propose a profitable way to do so, motivated by field research in Indonesia's palm oil industry. Currently, farmers suffer from delay in payment by processors, and buyers expensively attempt to avoid sourcing from illegally-deforested land by monitoring individual farmers. Instead, we propose that buyers reward all farmers in a village by eliminating payment delay if no production occurs on illegally-deforested land in the village. Using field data, dynamic programming and game theory, we show how eliminating payment delay improves productivity and profitability for farmers, processors and buyers, and how village-level incentives best halt illegal deforestation.
    Date: 2018–06

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