nep-gth New Economics Papers
on Game Theory
Issue of 2018‒10‒01
27 papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Power values and framing in game theory By Mágó, Mánuel
  2. Common ranking and stability of overlapping coalitions By MAULEON Ana,; ROEHL Nils,; VANNETELBOSCH Vincent,
  3. A Note on “Renegotiation in Repeated Games” [Games Econ. Behav. 1 (1989) 327–360] By Michael Günther; Christoph Kuzmics; Antoine Salomon
  4. Instrumental reciprocity as an error By Reuben, E.; Suetens, Sigrid
  5. Network formation with myopic and farsighted players By LUO Chenghong,; MAULEON Ana,; VANNETELBOSCH Vincent,
  6. Axiomatic Foundations of a Unifying Core By Stéphane Gonzalez; Aymeric Lardon
  7. Exploration vs exploitation, impulse balance equilibrium, and a specification test for the El Farol bar problem By Kirman, Alan P.; Laisney, François; Pezanis-Christou, Paul
  8. Managing Competition on a Two-Sided Platform By Paul Belleflamme; Martin Peitz
  9. Mean-Field Leader-Follower Games with Terminal State Constraint By Guanxing Fu; Ulrich Horst
  10. Organizing Time Banks: Lessons from Matching Markets By Tommy Andersson; Agnes Cseh; Lars Ehlers; Albin Erlanson
  11. Games with Private Timing By Sofia Moroni
  12. Other-Regarding Preferences and Giving Decision in Risky Environments: Experimental Evidence By Mickaël Beaud; Mathieu Lefebvre; Julie Rosaz
  13. A stochastic game and stochastic free boundary problem By Xin Guo; Wenpin Tang; Renyuan Xu
  14. Nash equilibrium of partially asymmetric three-players zero-sum game with two strategic variables By Atsuhiro Satoh; Yasuhito Tanaka
  15. A Two-Period Unionized Mixed Oligopoly Model: Public-Private Wage Differentials and “Eurosclerosis†Reconsidered By Minas Vlassis; Polyxeni Gioti
  16. Two-Party Agreements as Circular Sets By Barry O'Neill
  17. Matching in Dynamic Imbalanced Markets By Itai Ashlagi; Afshin Nikzad; Philipp Strack
  18. Piercing the 'Payoff Function' Veil: Tracing Beliefs and Motives By Guidon Fenig; Giovanni Gallipoli; Yoram Halevy
  19. The geopolitical impact of Nord Stream 2 By Balazs Sziklai; Laszlo A. Koczy; David Csercsik
  20. The Role of Morals in Three-Player Ultimatum Games By CASAL Sandro; FALLUCCHI Francesco; QUERCIA Simone
  21. Repeated Coordination with Private Learning By Pathikrit Basu; Kalyan Chatterjee; Tetsuya Hoshino; Omer Tamuz
  22. Short and Long term Effects of Water Markets By Rim Lahmandi-Ayed; Mohamed Matoussi
  23. Airline Alliances and Service Quality By Jan K. Brueckner; Ricardo Flores-Fillol
  24. Efficiency in Sequential Labor and Goods Markets By Petrosky-Nadeau, Nicolas; Wasmer, Etienne; Weil, Philippe
  25. R&D network formation with myopic and farsighted firms By MAULEON Ana,; SEMPERE-MONERRIS Jose J.,; VANNETELBOSCH Vincent,
  26. Oligopoly Price Discrimination: The Role of Inventory Controls By James D. Dana Jr.; Kevin R. Williams
  27. Farmland Lease, High-Rent Threat, and Contract Instability: Evidence from China By Zhu, Wenjue; Luo, Biliang; Paudel, Krishna

  1. By: Mágó, Mánuel (Tilburg University, School of Economics and Management)
    Abstract: This dissertation consists of five chapters and covers three topics, all in the broader field of game theory. There are three main chapters. In Chapter 3 the focus is on power measures, functions that assign a power to every node in any graph. The connectivity power measure is introduced and characterized on the class of graphs. The connectivity power measure assigns to every node in any graph the number of connected sets the node is a part of. Chapter 4 focuses on graph games, cooperative games with cooperation restricted by communication networks represented by graphs. The average connected contribution value and the larger family of power values are introduced and axiomatized on the class of graph games. The average connected contribution value of a player in a graph game is defined as the average of the player's marginal contributions in connected coalitions the player is a part of. In Chapter 5 a new framing of the well-studied prisoner’s dilemma game is introduced. The new framing is achieved by representing the game in an unconventional way by telling players that they are deciding what their opponents have to do. It is shown in a laboratory experiment that the framing affects the decisions of subjects.
    Date: 2018
  2. By: MAULEON Ana, (Université Saint-Louis Bruxelles and CORE); ROEHL Nils, (University of Paderborn); VANNETELBOSCH Vincent, (CORE, Université catholique de Louvain)
    Abstract: Mauleon, Roehl and Vannetelbosch (GEB, 2018) develop a general theoretical framework to study the stability of overlapping coalition settings. Each group possesses a constitution that contains the rules governing both the composition of the group and the conditions needed to leave the group and/or to become a new member of the group. They propose the concept of constitutional stability to study the group structures that are going to emerge at equilibrium in overlapping coalition settings. They combine requirements on constitutions and preferences for guaranteeing both the existence and the emergence of constitutionally stable group structures. In this paper, we show that an alternative way to exclude the ocurrence of closed cycles is to look for constitutions that allow for a common ranking.
    Keywords: overlapping coalitions, group structures, constitutions, stability, common ranking
    JEL: C72 C78 D85
    Date: 2018–09–05
  3. By: Michael Günther (University of Bielefeld, Germany); Christoph Kuzmics (University of Graz, Austria); Antoine Salomon (Université Paris-Dauphine, France)
    Abstract: In Renegotiation in Repeated Games [1989], J. Farell and E. Maskin present, among other results, sufficient conditions for payoffs to be “weakly renegotiation-proof”. We show that a step in the corresponding proof is not correct by giving a counterexample. We then provide a correct proof with slightly more demanding sufficient conditions.
    Keywords: (Weak) Renegotiation-Proofness; Infinitely Repeated Games
    JEL: C72 C73
    Date: 2018–09
  4. By: Reuben, E.; Suetens, Sigrid (Tilburg University, School of Economics and Management)
    Abstract: We study the strategies used by experimental subjects in repeated sequential prisoners’ dilemma games to identify the underlying motivations behind instrumental reciprocity—that is, reciprocating cooperation only as long as there is future interaction. Importantly, we designed the games so that instrumental reciprocity is a mistake for payoff-maximizing individuals irrespective of their beliefs. We find that, despite the fact instrumental reciprocity is suboptimal, it one of the most important reasons why subjects cooperate. Moreover, although the use of instrumental reciprocity is sensitive to the costs of deviating from the payoff-maximizing strategy, these costs alone cannot explain the high frequency with which subjects choose to reciprocate instrumentally.
    Date: 2018
  5. By: LUO Chenghong, (CORE, Université catholique de Louvain); MAULEON Ana, (Université Saint-Louis Bruxelles and CORE); VANNETELBOSCH Vincent, (CORE, Université catholique de Louvain)
    Abstract: We study the formation of networks where myopic and farsighted individuals decide with whom they want to form a link, according to a distance-based utility function that weighs the costs and benefits of each connection. We propose the notion of myopic-farsighted stable set to determine the networks that emerge when some individuals are myopic while others are farsighted. A myopic-farsighted stable set is the set of networks satisfying internal and external stability with respect to the notion of myopic-farsighted improving path. In the case of a homogeneous population (either all myopic or all farsighted), a conflict between stability and efficiency is likely to arise. But, once the population becomes mixed, the conflict vanishes if there are enough farsighted individuals. In addition, we characterize the myopic-farsighted stable set for any utility function when all individuals are myopic.
    Keywords: networks, stable sets, myopic and farsighted players, distance-based utility
    JEL: A14 C70 D20
    Date: 2018–09–05
  6. By: Stéphane Gonzalez (UJM - Université Jean Monnet [Saint-Étienne], GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Aymeric Lardon (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur)
    Abstract: We provide an axiomatic characterization of the core of games in effectiveness form. We point out that the core, whenever it applies to appropriate classes of these games, coincides with a wide variety of prominent stability concepts in social choice and game theory, such as the Condorcet winner, the Nash equilibrium, pairwise stability, and stable matchings, among others. Our characterization of the core invokes the axioms of restricted non-emptiness, coalitional unanimity, and Maskin invariance together with a principle of independence of irrelevant states, and uses in its proof a holdover property echoing the conventional ancestor property. Taking special cases of this general characterization of the core, we derive new characterizations of the previously mentioned stability concepts.
    Keywords: Effectiveness function,core,axiomatization,holdover property,consistency
    Date: 2018
  7. By: Kirman, Alan P.; Laisney, François; Pezanis-Christou, Paul
    Abstract: The paper reports on market-entry experiments that manipulate both payoff structures and payoff levels to assess two stationary models of behaviour: Exploration vs Exploitation (EvE, which is equivalent to Quantal Response Equilibrium) and Impulse Balance Equilibrium (IBE). These models explain the data equally well in terms of goodness-of-fit whenever the observed probability of entry is less than the symmetric Nash equilibrium prediction; otherwise IBE marginally outperforms EvE. When assuming agents playing symmetric strategies, and estimating the models with session data, IBE yields more theory-consistent estimates than EvE, no matter the payoff structure or level. However, the opposite occurs when the symmetry assumption is relaxed. The conduct of a specification test rejects the validity of the restrictions on entry probabilities imposed by EvE for agents with symmetric strategies, in 50 to 75% of sessions and it always rejects it in the case of IBE, which indicates that the symmetric variant of these models has little empirical support.
    Keywords: congestion games,exploration vs exploitation,quantal response equilibrium,impulse balance equilibrium,specification test,experimental economics
    JEL: C7 C92
    Date: 2018
  8. By: Paul Belleflamme (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Martin Peitz (Department of Economics and MaCCI, University of Mannheim)
    Abstract: On many two-sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition affects platform pricing, product variety, and the number of platforms that carry trade.
    Keywords: network effects, two-sided markets, platform competition, intermediation, pricing, Imperfect Competition
    JEL: D43 L13 L86
    Date: 2018–06
  9. By: Guanxing Fu; Ulrich Horst
    Abstract: We analyze linear McKean-Vlasov forward-backward SDEs arising in leader-follower games with mean-field type control and terminal state constraints on the state process. We establish an existence and uniqueness of solutions result for such systems in time-weighted spaces as well as a {convergence} result of the solutions with respect to certain perturbations of the drivers of both the forward and the backward component. The general results are used to solve a novel single-player model of portfolio liquidation under market impact with expectations feedback as well as a novel Stackelberg game of optimal portfolio liquidation with asymmetrically informed players.
    Date: 2018–09
  10. By: Tommy Andersson (Lund University, Department of Economics); Agnes Cseh (Hungarian Academy of Sciences, Centre for Economic and Regional Studies, Institute of Economics); Lars Ehlers (Université de Montréal, Département de Sciences Économiques); Albin Erlanson (Stockholm School of Economics, Department of Economics)
    Abstract: A time bank is a group of individuals and/or organizations in a local community that set up a common platform to trade services among themselves. There are several well-known problems associated with this type of banking, e.g., high overhead costs for record keeping and difficulties to identify feasible trades. This paper demonstrates that these problems can be solved by organizing time banks as a centralized matching market and, more specifically, by organizing trades based on a non-manipulable mechanism that selects an individually rational and time-balanced allocation which maximizes exchanges among the members of the time bank (and those allocations are efficient). Such a mechanism does not exist on the general preference domain but on a smaller yet natural domain where agents classify services as unacceptable and acceptable (and for those services agents have specific upper quotas representing their maximum needs). On the general preference domain, it is demonstrated that the proposed mechanism at least can prevent some groups of agents from manipulating the mechanism without dispensing individual rationality, efficiency, or time-balance.
    Keywords: market design; time banking; priority mechanism; non-manipulability
    JEL: D82
    Date: 2018–08
  11. By: Sofia Moroni
    Abstract: We study a class of games in which the timing of players' moves is privateinformation, but players have the option to disclose their moves byexerting a small cost. When the underlying game is a coordination game,we characterize the set of distributions of moving times such that the gamehas the following unique prediction: Players choose the best coordinationequilibrium and do not disclose their action. This implies that the possibilityof disclosure selects an equilibrium in which the best action pro le istaken but nothing is disclosed. In games of opposing interests, we providesufficient conditions for the fi rst-arriving player to disclose her action. Inextensions we allow for, among others, partial control over timing.
    Date: 2018–01
  12. By: Mickaël Beaud (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Mathieu Lefebvre (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Julie Rosaz (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper investigates if and how other-regarding preferences governing giving decisions in dictator games are affected in risky environments in which the payoff of the recipient is random. We demonstrate that, whenever the risk is actuarially neutral, the donation of dictators with a purely ex post view of fairness should, in general, be affected by the riskyness of the recipient's payoff, while dictators with a purely ex ante view should not be. Our experimental data give weak empirical support to the purely ex post view of fairness.
    Keywords: Laboratory experiments dictator games,background risk,other-regarding preferences,Inequality aversion,impure altruism,ex ante and ex post views of fairness
    Date: 2018–09–11
  13. By: Xin Guo; Wenpin Tang; Renyuan Xu
    Abstract: In this paper, we propose and analyze a class of stochastic $N$-player games where the original one player game is a two-dimensional stochastic control problem. Three different constraints are considered: pooling, dividing and sharing. The controlled dynamics under the Nash Equilibrium is derived via solving a system of free boundary problems where the boundary is "moving" in the sense that it depends on both the state of the players and the control strategies of other players. We call it a "moving free boundary" problem to highlight the difference between the standard control problem versus the stochastic games. We also show our NE strategies can be reformulated as controlled rank-dependent stochastic differential equations. Our result gives an economic interpretation that sharing will have lower cost than dividing with pooling yielding the lowest cost.
    Date: 2018–09
  14. By: Atsuhiro Satoh; Yasuhito Tanaka
    Abstract: We consider a partially asymmetric three-players zero-sum game with two strategic variables. Two players (A and B) have the same payoff functions, and Player C does not. Two strategic variables are $t_i$'s and $s_i$'s for $i=A, B, C$. Mainly we will show the following results. 1. The equilibrium when all players choose $t_i$'s is equivalent to the equilibrium when Players A and B choose $t_i$'s and Player C chooses $s_C$ as their strategic variables. 2. The equilibrium when all players choose $s_i$'s is equivalent to the equilibrium when Players A and B choose $s_i$'s and Player C chooses $t_C$ as their strategic variables. The equilibrium when all players choose $t_i$'s and the equilibrium when all players choose $s_i$'s are not equivalent although they are equivalent in a symmetric game in which all players have the same payoff functions.
    Date: 2018–09
  15. By: Minas Vlassis (Department of Economics, University of Crete, Greece); Polyxeni Gioti
    Abstract: In the present paper we develop a two-period unionized mixed duopoly model, furnished with second period- demand shocks, where decentralized firm-specific wage bargains are struck in each period before product market competition is in place.
    Keywords: Unions, Oligopoly, firing restrictions, Eurosclerosis
    JEL: C70 C71 C60
    Date: 2018–09–24
  16. By: Barry O'Neill
    Abstract: In making an agreement with someone, I conditionally promise to perform a certain action, conditioning my obligation on their both making a corresponding promise and performing their action. What promise should I require? That they simply commit to perform is not enough. I should demand the kind of promise I am making myself, and they should demand the same of me. This makes our promises indirectly self-referential. Assuming the performance actions are specified, my promise can be characterized as a set of available promises, all those the other could make to activate my obligation. We have an agreement if each one’s promise is a member of the other’s promise. Assume that the set P of available promises satisfies (1) Aczel’s axiom for circular sets; (2) transitivity: if the obligation of $p \in P$ is activated by $p’$, then $p’ \in P$; and (3) superset closure: if $p \in P$ is activated by $p’$, $p$ is activated by any promise that implies (is a superset of) $p’$. The focus is on bargaining procedures that treat the parties symmetrically (e.g., no specified offerer or accepter.) Each party chooses an agreement promise $p*$ such that (4) if both make $p*$ and one performs, the other is obligated to perform; (5) if one makes $p*$ and the other does not, the former is not unilaterally obligated. It is shown that among available promise sets of a given size, exactly one contains an agreement promise and contains exactly one of them.
    Date: 2018–09
  17. By: Itai Ashlagi; Afshin Nikzad; Philipp Strack
    Abstract: We study matching policies in a dynamic exchange market with random compatibility, in which some agents are easier to match than others. In steady state this asymmetry creates an endogenous imbalance: hard-to-match agents wait for partners, while easy-to-match agents can match almost immediately upon arrival and leave the market quickly. A greedy policy, which attempts to match agents upon arrival, does not account for the positive externality waiting agents generate as they make it easier to match agents that arrive in the future, and may result in more unmatched than other policies. While this trade-off between a "thicker market" and quick matching is present in small markets we show that it vanishes in large markets and the greedy policy nevertheless dominates any other dynamic matching policy. As arrival rate increases the greedy policy matches a (weakly) higher fraction of agents than any other policy and leads to (weakly) lower average waiting time than any other policy. We show that in a large market greedy matching strictly outperforms batching policies (e.g., weekly matching) and a patient policy, which attempts to match agents only as they are about to depart the market. We test our large market predictions with kidney exchange data from the National Kidney Registry (NKR). Numerical simulations show that, in line with our predictions, the greedy policy matches patient-donor pairs significantly faster (roughly 20-30 days) than other commonly used policies and at most 1\% percent fewer pairs than the patient policy.
    Date: 2018–09
  18. By: Guidon Fenig; Giovanni Gallipoli; Yoram Halevy
    Abstract: This paper develops an experimental methodology that allows the identification of decision-making processes in interactive settings using tracking of non-choice data. This non-intrusive and indirect approach provides essential information for the characterization of beliefs. The analysis reveals significant heterogeneity, which is reduced to two broad types, differentiated by the importance of pecuniary rewards in agents' payoff function. Most subjects maximize monetary rewards by best responding to beliefs shaped by recent history. Others are able to identify profit-maximizing actions but choose to systematically deviate from them. The interaction among different types is key to understanding aggregate outcomes.
    Keywords: non-choice data, typology, tracking, response-time, coordination, public goods, complementarity, altruism, joy of giving, competitiveness, joy of winning, laboratory experiment
    JEL: C9 C92 C72 D9 H41
    Date: 2018–09–20
  19. By: Balazs Sziklai (Game Theory Research Group Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Corvinus University of Budapest Department of Operations Research and Actuarial Sciences); Laszlo A. Koczy (Game Theory Research Group Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Keleti Faculty of Business and Management, Óbuda University, Budapest); David Csercsik (Pázmány Péter Catholic University, Budapest)
    Abstract: We investigate the geopolitical impact and the possible consequences of the construction of the Nord Stream 2 pipeline. We model the European gas network as a cooperative game between regions as players over the pipeline network, where LNG is also treated as a separate player. We focus on the change of influence of the players in three different scenarios. We investigate how the power of the agents shift when the Nord Stream pipeline is expanded, when the Ukrainian pipeline is shut down and finally when both of these happen. Our calculations show that when Nord Stream 2 is operational, Russia and Western Europe improve their position compared to the base scenario, while other suppliers, notably Norway, together with Central, Eastern and Southern Europe suffer losses, especially when the Ukrainian route is dismissed. The results highlight that both the supporters and adversaries of Nord Stream 2 are governed by self-interest and solidarity and trust, the values proclaimed by the EU and the Energy Union, remain but a slogan.
    Keywords: gas supply, pipeline network, Shapley value, cooperative games, Nord Stream
    JEL: C61 Q40
    Date: 2018–09
  20. By: CASAL Sandro; FALLUCCHI Francesco; QUERCIA Simone
    Abstract: We experimentally investigate the role of moral concerns in three-player ultimatum bargaining. In our experimental paradigm, proposers can increase the overall size of the pie at the expenses of an NGO that conducts humanitarian aid in emergency areas. In a first study, we find that responders are not willing to engage in ?immoral? transactions only when fully informed about proposers? behavior toward the NGO. Under complete information, their willingness to reject offers increases with the strength of the harm to the NGO. Moreover, the possibility to compensate the NGO through rejection further increases their willingness to reject. In a second study aimed at gauging the importance of different motives behind rejections, we show that the two most prevalent motives are to compensate the NGO or to diminish inequality between responders and proposers. Punishing proposers? unkind intentions towards the NGO or rejecting on the basis of pure deontological reasons constitute less important motives.
    Keywords: mini ultimatum game; morals; experiment
    JEL: C72 C91 D64
    Date: 2018–09
  21. By: Pathikrit Basu; Kalyan Chatterjee; Tetsuya Hoshino; Omer Tamuz
    Abstract: We study a repeated game with payoff externalities and observable actions where two players receive information over time about an underlying payoff-relevant state, and strategically coordinate their actions. Players learn about the true state from private signals, as well as the actions of others. They commonly learn the true state (Cripps et al., 2008), but do not coordinate in every equilibrium. We show that there exist stable equilibria in which players can overcome unfavorable signal realizations and eventually coordinate on the correct action, for any discount factor. For high discount factors, we show that in addition players can also achieve efficient payoffs.
    Date: 2018–08
  22. By: Rim Lahmandi-Ayed (UR MASE - Modélisation et Analyse Statistique et Economique - ESSAIT - Ecole Supérieure de la Statistique et de l'Analyse de l'Information - Université de Carthage); Mohamed Matoussi (Université de Tunis [Tunis])
    Abstract: We aim at checking from a theoretical viewpoint the claims made about water markets in the literature. We prove that water markets improve farmers' profits and production efficiency but do not necessarily improve total production and do not always encourage private investments. Taking into account the transaction cost of water markets and the social cost due to the inactivity of some farmers that may result from water markets, we prove that water markets do not always improve total surplus. JEL Classification: Q25, C72, O33.
    Keywords: Water markets,Water scarcity,Production efficiency,Total production,Private investment,Social costs,Transaction costs
    Date: 2018–08–28
  23. By: Jan K. Brueckner; Ricardo Flores-Fillol
    Abstract: Convenient scheduling, characterized by adequate flight frequency, is the main quality attribute for airline services. However, the effect of airline alliances on this important dimension of service quality has received almost no attention in the literature. This paper fills this gap by providing such an analysis in a model where flight frequency affects schedule delay and connecting layover time. While an alliance raises service quality when layover time has zero cost, the reverse occurs when layover time is costly. The source of this surprising result is that costly layovers eliminate the additive structure of the full trip price, which consists of the sum of the subfares plus the weighted sum of the reciprocal flight frequencies when layover cost is zero. The paper also shows that nonaligned carriers adjust frequencies to suit passenger preferences in business and leisure markets, while an alliance is less responsive to such preference differences. With hub-airport congestion, greater internalization by allied carriers tends to reduce frequency, but this force is not enough to overturn the positive alliance effect in the low-cost layover case.
    Keywords: service quality, alliance, double marginalization, congestion
    JEL: D43 L13 L40 L93 R40
    Date: 2018
  24. By: Petrosky-Nadeau, Nicolas (Federal Reserve Bank of San Francisco); Wasmer, Etienne (NYU Abu Dhabi); Weil, Philippe (ULB and CEPR)
    Abstract: This paper studies the optimal sharing of value added between consumers, producers, and labor. We first define a constrained optimum. We then compare it with the decentralized allocation. They coincide when the price maximizes the expected marginal revenue of the firm in the goods market, an outcome of the competitive search equilibrium, and when the wage exactly offsets the congestion externality of firm entry in the labor market, which is the traditional Hosios condition. Under price and wage bargaining, this allocation is achieved under a double Hosios condition combining the logic of competitive search and Hosios efficiency. The consumer receives a share of the goodsmarket trading surplus equal to the amount of externality occasioned by its search activity and the worker receives a share of the labor match surplus to offset the externality of firm entry in the matching process. A calibration of the model to the US economy indicates that the labor market is near efficient, and free-entry of consumers leads to excess excess consumer market power in setting prices. Restoring efficiency leads to a modest change in welfare.
    JEL: E24 E32 J63 J64
    Date: 2018–09–27
  25. By: MAULEON Ana, (Université Saint-Louis Bruxelles and CORE); SEMPERE-MONERRIS Jose J., (University of Valencia); VANNETELBOSCH Vincent, (CORE, Université catholique de Louvain)
    Abstract: We study the formation of R&D networks when each firrm benefits from the research done by other firms it is connected to. Firms can be either myopic or farsighted when deciding about the links they want to form. We propose the notion of myopic-farsighted stable set to determine the R&D networks that emerge in the long run. When the majority of firms is myopic, stability leads to R&D networks consisting of either two asymmetric components with the largest component comprises three-quarters of firms or two symmetric components of nearly equal size with the largest component having only myopic firms. But, once the majority of firms becomes farsighted, only R&D networks with two asymmetric components remain stable. Firms in the largest component obtain greater profits, with farsighted firms having in average more collaborations than myopic firms that are either loose-ends or central for spreading the innovation within the component. Besides myopic and farsighted -firms, we introduce yes-firms that always accept the formation of any link and never delete a link subject to the constraint of non-negative profits. We show that yes-firms can stabilize R&D networks consisting of a single component that maximize the social welfare. Finally, we look at the evolution of R&D networks and we find that R&D networks with two symmetric components will be rapidly dismantled, single component R&D networks will persist many periods, while R&D networks consisting of two asymmetric components will persist forever.
    Keywords: networks, R&D collaborations, oligopoly, myopia, farsightedness
    JEL: C70 L13 L20
    Date: 2018–09–05
  26. By: James D. Dana Jr. (Northwestern University); Kevin R. Williams (Cowles Foundation, Yale University)
    Abstract: Inventory controls, used most notably by airlines, are sales limits assigned to individual prices. While typically viewed as a tool to manage demand uncertainty, we argue that inventory controls can also facilitate intertemporal price discrimination in oligopoly. In our model, competing firms first choose quantity and then choose prices in a series of advance-purchase markets. When demand becomes less elastic over time, as is the case in airline markets, a monopolist can easily price discriminate; however, we show that oligopoly firms generally cannot. We also show that using inventory controls allows oligopoly firms to set increasing prices, regardless of whether or not demand is uncertain.
    Keywords: Capacity-pricing games, Intertemporal price discrimination, Oligopoly models, Inventory controls
    JEL: D21 D43 L13
    Date: 2018–06
  27. By: Zhu, Wenjue; Luo, Biliang; Paudel, Krishna
    Abstract: We develop a game theoretical model to understand the stability problem in the farmland lease contract in China where most land-owners are small landholders. When these small land-owners lease their land to large landholders, they take a high-rent-threaten strategy that can result in contract instability. Results obtained from doubly-robust estimation used on randomly selected interview data from 1611 households in nine provinces in China indicate that, (1) compared to those land-owners who transfer the farmland to the small landholders, the land-owners who transfer the farmland to large landholders will have a higher 46.57% possibility to ask for higher rent in the contract duration (high-rent-threaten strategy); (2) land-owners’ high-rent-threaten strategy will increase 4.49% possibility of the contract breaks; (3) in general, compared with those contracts that the transfer objects are not large landholders, the contracts that the transfer objects are large landholders has a 6.81% higher possibility of breakdown; (4) if we isolate the influence of land-owners’ high-rent-threaten strategy on the contract break, the contracts that the transfer objects are large landholders still has a 5.65% higher possibility of breakdown. The empirical results entail that, comparing to the stable farmland lease contract between two small farmers, contract instability can arise endogenously when large landholders lease farmlands. We conclude that a suitable rent control regime may be necessary to promote a large scale farmland transfer in China.
    Keywords: Farm Management, Institutional and Behavioral Economics, Risk and Uncertainty
    Date: 2018–01–17

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