nep-gth New Economics Papers
on Game Theory
Issue of 2018‒10‒15
nineteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Extensions of the Shapley Value for Environments with Externalities By Inés Macho-Stadler; David Pérez-Castrillo; David Wettstein
  2. The attack and defense of weakest-link networks By Kovenock, Dan; Roberson, Brian; Sheremeta, Roman
  3. Shapley-like values without symmetry By Jacob North Clark; Stephen Montgomery-Smith
  4. Belief-weighted Nash aggregation of Savage preferences By SPRUMONT, Yves
  5. Ordered Leniency: An Experimental Study of Law Enforcement with Self-Reporting By Claudia M. Landeo; Kathryn E. Spier
  6. Robust scoring rules By Tsakas, Elias
  7. Why Echo Chambers are Useful By Ole Jann
  8. Collective Action and Application of Tax Regulation in the Mining Industry in Development Countries: the Case of Cameroon By Biloa Essimi, Jean Aristide
  9. Organizing time banks: Lessons from matching markets By ANDERSSON, Tommy; CSEH, Ágnes; EHLERS, Lars; ERLANSON, Albin
  10. Heterogeneous Beliefs and School Choice Mechanisms By Adam Kapor; Christopher A. Neilson; Seth D. Zimmerman
  11. In the Shadow of Coase By Kevin Berry; Anthony R. Delmond; Rémi Morin Chassé; John C. Strandholm; Jason F. Shogren
  12. Farmland values and bidder behavior in first-price land auctions By Odening, Martin; Huettel, Silke; Croonenbroeck, Carsten
  13. All or Nothing: State Capacity and Optimal Public Goods Provision By Felix Bierbrauer; Justus Winkelmann
  14. Fairness and Efficiency for Probabilistic Allocations with Endowments By Federico Echenique; Antonio Miralles; Jun Zhang
  15. Why do voters elect less qualified candidates? By Mizuno, Nobuhiro; Okazawa, Ryosuke
  16. Water Transactions along a River: A Multilateral Bargaining Experiment with a Veto Player By Li, Zhi; Zhang, Xin; Xu, Wenchao
  17. Modeling Horizontal Shareholding with Ownership Dispersion By Duarte Brito; Einer Elhauge; Ricardo Ribeiro; Helder Vasconcelos
  18. Harnessing the Double-edged Sword via Routing: Information Provision on Ride-hailing Platforms By Leon Yang Chu; Zhixi Wan; Dongyuan Zhan
  19. Optimal Law Enforcement with Ordered Leniency By Claudia M. Landeo; Kathryn E. Spier

  1. By: Inés Macho-Stadler; David Pérez-Castrillo; David Wettstein
    Abstract: Shapley (1953a) formulates his proposal of a value for cooperative games with transferable utility in characteristic function form, that is, for games where the resources every group of players has available to distribute among its members only depend on the members of the group. However, the worth of a coalition of agents often depends on the organization of the rest of the players. The existence of externalities is one of the key ingredients in most interesting economic, social, or political environments. Thrall and Lucas (1963) provide the first formal description of settings with externalities by introducing the games in partition function form. In this chapter, we present the extensions of the Shapley value to this larger set of games. The different approaches that lead to the Shapley value in characteristic function form games (axiomatic, marginalistic, potential, dividends, non-cooperative) provide alternative routes for addressing the question of the most suitable extension of the Shapley value for the set of games in partition function form.
    Keywords: shapley value, Externalities
    JEL: C71 D62
    Date: 2018–10
  2. By: Kovenock, Dan; Roberson, Brian; Sheremeta, Roman
    Abstract: We experimentally test the qualitatively different equilibrium predictions of two theoretical models of attack and defense of a weakest-link network of targets. In such a network, the attacker’s objective is to assault at least one target successfully and the defender’s objective is to defend all targets. The models differ in how the conflict at each target is modeled — specifically, the lottery and auction contest success functions (CSFs). Consistent with equilibrium in the auction CSF model, attackers utilize a stochastic “guerrilla-warfare” strategy, which involves attacking at most one target arbitrarily with a random level of force. Inconsistent with equilibrium in the lottery CSF model, attackers use the “guerrilla-warfare” strategy and assault only one target instead of the equilibrium “complete-coverage” strategy that attacks all targets. Consistent with equilibrium in both models, as the attacker’s valuation increases, the average resource expenditure, the probability of winning, and the average payoff increase (decrease) for the attacker (defender).
    Keywords: Colonel Blotto, weakest-link, best-shot, multi-dimensional resource allocation, experiments
    JEL: C72 C91 D72 D74
    Date: 2018–05–25
  3. By: Jacob North Clark; Stephen Montgomery-Smith
    Abstract: Following the work of Lloyd Shapley on the Shapley value, and tangentially the work of Guillermo Owen, we offer an alternative non-probabilistic formulation of part of the work of Robert J. Weber in his 1978 paper "Probabilistic values for games." Specifically, we focus upon efficient but not symmetric allocations of value for cooperative games. We offer an alternative condition "reasonableness," and retain standard efficiency and linearity to replace the usual axioms. In the pursuit of the result, we discover properties of the linear maps that describe the allocations. This culminates in a special class of games for which any other map that is "reasonable, efficient" can be written as a convex combination of members of this special class of allocations, via an application of the Krein-Milman theorem.
    Date: 2018–09
  4. By: SPRUMONT, Yves
    Abstract: The 'belief-weighted Nash social welfare functions' are methods for aggregating Savage preferences defined over a set of acts. Each such method works as follows. Fix a 0-normalized subjective expected utility representation of every possible preference and assign a vector of individual weights to each profile of beliefs. To compute the social preference at a given preference profile, rank the acts according to the weighted product of the individual 0-normalized subjective expected utilities they yield, where the weights are those associated with the belief profile generated by the preference profile. We show that these social welfare functions are characterized by the weak Pareto principle, a continuity axiom, and the following informational robustness property : the social ranking of two acts is unaffected by the addition of any outcome that every individual deems at least as good as the one she originally found worst. This makes the belief-weighted Nash social welfare functions appealing in contexts where the 'best' relevant outcome for an individual is difficult to identify.
    Keywords: Preference aggregation; uncertainty; subjective expected utility; Nash product
    JEL: D63 D71
    Date: 2018
  5. By: Claudia M. Landeo; Kathryn E. Spier
    Abstract: This paper reports the results of an experiment designed to assess the ability of an enforcement agency to detect and deter harmful short-term activities committed by groups of injurers. With ordered-leniency policies, early cooperators receive reduced sanctions. We replicate the strategic environment described by Landeo and Spier (2018). In theory, the optimal ordered-leniency policy depends on the refinement criterion applied in case of multiplicity of equilibria. Our findings are as follows. First, we provide empirical evidence of a "race-to-the-courthouse" effect of ordered leniency: Mild and Strong Leniency induce the injurers to self-report promptly. These findings suggest that the injurers' behaviors are aligned with the risk-dominance refinement. Second, Mild and Strong Leniency significantly increase the likelihood of detection of harmful activities. This fundamental finding is explained by the high self-reporting rates under ordered-leniency policies. Third, as a result of the increase in the detection rates, the averages fines are significantly higher under Mild and Strong Leniency. As expected when the risk-dominance refinement is applied, Mild Leniency exhibits the highest average fine.
    JEL: C72 C90 D86 K10 L23
    Date: 2018–09
  6. By: Tsakas, Elias (General Economics 1 (Micro))
    Abstract: We study elicitation of latent (prior) beliefs when the agent can acquire information via a costly attention strategy. We introduce a mechanism that simultaneously makes it strictly dominant to (a) not acquire any information, and (b) report truthfully. We call such a mechanism a robust scoring rule. Robust scoring rules are important for different reasons. Theoretically, they are crucial both for establishing that decision-theoretic models under uncertainty are testable. From an applied point of view, they are needed for eliciting unbiased estimates of population beliefs. We prove that a robust scoring rule exists under mild axioms on the attention costs. These axioms are shown to characterize the class of posterior-separable cost functions. Our existence proof is constructive, thus identifying an entire class of robust scoring rules. Subsequently, we show that we can arbitrarily approximate the agent's prior beliefs with a quadratic scoring rule. The same holds true for a discrete scoring rule. Finally, we show that the prior beliefs can be approximated, even when we are uncertain about the exact specification of the agent's attention costs.
    Keywords: belief elicitation, prior beliefs, rational inattention, hidden information costs, posterior-separability, Shannon entropy, population beliefs, testing decision-theoretic models
    JEL: C91 D81 D82 D83 D87
    Date: 2018–10–08
  7. By: Ole Jann
    Abstract: Ole Jann, Christoph Schottmüller Why do people appear to forgo information by sorting into “echo chambers†? We construct a highly tractable multi-sender, multi-receiver cheap talk game in which players choose with whom to communicate. We show that segregation into small, homogeneous groups can improve everybody’s information and generate Pareto-improvements. Polarized preferences create a need for segregation; uncertainty about preferences magnifies this need. Using data from Twitter, we show several behavioral patterns that are consistent with the results of our model.
    Keywords: Asymmetric Information, Echo Chambers, Polarization, Debate, Cheap Talk, Information Aggregation, Twitter
    JEL: D72 D82 D83 D85
    Date: 2018–10–02
  8. By: Biloa Essimi, Jean Aristide
    Abstract: This paper highlights civil society actors involved in collecting and monitoring the tax obligations of mining companies in Cameroon. To achieve this goal, we used data collection from leaders or members of civil society companies through semi-structured interviews using a questionnaire developed for this purpose on the one hand and the tools of game theory and sociology of behavior on the other hand. The study shows that there are two civil society organization groups (CSOs) in the extractive sector: CSO leaders and CSO followers. They are all grouped together in the "Cameroon Coalition Publish What You Pay". They are characterized by a lack of specialization, a strong identity withdrawal and a lack of expertise in public finances because the promoters are recruited in various sectors of the working life. One could speak of an inadequacy training job and a game indefinitely repeated between the actors.
    Keywords: Engagement, Citizenship, Training, Governance, Game Theory, Cameroon
    JEL: C7 H2 O1 O12
    Date: 2018–06–29
  9. By: ANDERSSON, Tommy; CSEH, Ágnes; EHLERS, Lars; ERLANSON, Albin
    Abstract: A time bank is a group of people that set up a common platform to trade services among themselves. There are several well-known problems associated with this type of time banking, e.g., high overhead costs and difficulties to identify feasible trades. This paper constructs 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). The mechanism works on a domain of preferences where agents classify services as unacceptable and acceptable (and for those services agents have specific upper quotas representing their maximum needs).
    Keywords: Market design; time banking; priority mechanism; non-manipulability
    JEL: D82
    Date: 2018
  10. By: Adam Kapor; Christopher A. Neilson; Seth D. Zimmerman
    Abstract: This paper studies how welfare outcomes in centralized school choice depend on the assignment mechanism when participants are not fully informed. Using a survey of school choice participants in a strategic setting, we show that beliefs about admissions chances differ from rational expectations values and predict choice behavior. To quantify the welfare costs of belief errors, we estimate a model of school choice that incorporates subjective beliefs. We evaluate the equilibrium effects of switching to a strategy-proof deferred acceptance algorithm, and of improving households’ belief accuracy. Allowing for belief errors reverses the welfare comparison to favor the deferred acceptance algorithm.
    JEL: I20
    Date: 2018–09
  11. By: Kevin Berry (Institute of Social and Economic Reesarch, Department of Economics, University of Alaska Anchorage); Anthony R. Delmond (The University of Tennessee at Martin); Rémi Morin Chassé (University of Quebec at Chicoutimi); John C. Strandholm (University of South Carolina Upstate); Jason F. Shogren (Department of Economics, University of Wyoming)
    Abstract: We explore how three parties bargain over a public good created by development on only one party’s property. With strong property rights, parties secure equal payment. With weak rights, parties reimburse costs and divide surplus so the developer is indifferent.
    Keywords: public good, bargaining, experiment
    JEL: C7 C92 H41 D63
    Date: 2018–08
  12. By: Odening, Martin; Huettel, Silke; Croonenbroeck, Carsten
    Keywords: Ag Finance and Farm Management, Research Methods/Econometrics/Stats, Demand and Price Analysis
    Date: 2018–06–20
  13. By: Felix Bierbrauer; Justus Winkelmann
    Abstract: We study the provision of public goods. Different public goods can be bundled provided there is enough capacity, i.e. resources to pay for all the public goods in the bundle. The analysis focuses on the all-or-nothing-mechanism: Expand provision as much as resource feasible if no one vetoes - otherwise stick to the status quo. We show that the probability of the all-outcome converges to one as the capacity becomes unbounded. We also provide conditions under which the all-or-nothing-mechanism is ex ante welfare-maximizing - even though, ex post, it involves an overprovision of public goods.
    Keywords: public goods, bundling, state capacity, mechanism design
    JEL: D79 D82 H41
    Date: 2018
  14. By: Federico Echenique; Antonio Miralles; Jun Zhang
    Abstract: We propose to use endowments as a policy instrument in market design. Endowments give agents the right to enjoy certain resources. For example in school choice, one can ensure that low-income families have a shot at high-quality schools by endowing them with a chance of admission. Common policy objectives, such as walkzone or sibling placement can be achieved through endowments (arguably more transparently than via priorities). We introduce two new criteria in resource allocation problems with endowments. The first adapts the notion of justified envy to a model with endowments, while the second is based on market equilibrium. Using either criteria, we show that fairness (understood as the absence of justified envy) can be obtained together with efficiency and individual rationality.
    Keywords: efficiency, fairness and endowments
    JEL: D50 D63
    Date: 2018–09
  15. By: Mizuno, Nobuhiro; Okazawa, Ryosuke
    Abstract: Voters sometimes vote for seemingly less qualified candidates; the winners of elections are sometimes less competent than the losers in light of candidates' observable characteristics such as their past careers. To explain this fact, we develop a political agency model with repeated elections in which a voter elects a policy maker among candidates with different competency (valence) levels. We show that politicians' competency relates negatively with political accountability when the challenger in the future election is likely to be incompetent. When this negative relation exists, voters prefer to elect an incompetent candidate if they emphasize politicians' policy choices over their competency. The negative relation between competency and accountability is possible because voters cannot commit to future voting strategies. Furthermore, voters' private information about how they evaluate candidates' competency generates a complementary mechanism leading to the negative relation between competency and accountability. This mechanism implies that voters' anti-elitism can be rational ex post even if it is groundless in the first place.
    Keywords: Candidates' competency, Political agency, Repeated elections, Private information, Signaling
    JEL: D72 D82
    Date: 2018–09–27
  16. By: Li, Zhi; Zhang, Xin; Xu, Wenchao
    Keywords: Experimental Economics, Natural Resource Economics, Resource and Environmental Policy Analysis
    Date: 2018–06–20
  17. By: Duarte Brito (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia | Center for Advanced Studies in Management and Economics); Einer Elhauge (Harvard Law School); Ricardo Ribeiro (Universidade Católica Portuguesa, Católica Porto Business School); Helder Vasconcelos (Universidade do Porto, Faculdade de Economia and Center for Economics and Finance)
    Abstract: The dominant formulation for modeling the objective function of managers of competing firms with horizontal shareholding has been critiqued for producing the result that, if non-horizontal shareholders are highly dispersed, managers would mimic the interests of horizontal shareholders even if they own a share of the firm that does not induce full control. We show that this issue can be avoided (while maintaining the remaining features of the dominant approach)with an alternative formulation that is derived from a probabilistic voting model that assumes shareholders with higher financial stakes will take greater interest in the managerial actions, which yields the result that managers maximize a control-weighted sum of the shareholders' relative returns.
    Keywords: Horizontal Shareholding, Ownership Dispersion, Manager Objective Function,Proportional Control, Banzhaf Control
    JEL: L13 L41
    Date: 2018–10
  18. By: Leon Yang Chu (Department of Data Science and Operations, Marshall School of Business, University of Southern California, USA); Zhixi Wan (Department of Operations and Business Analytics, Lundquist College of Business, University of Oregon, USA); Dongyuan Zhan (School of Management, University College London, UK)
    Abstract: We consider a ride-hailing platform that provides free information to taxi drivers. Upon receiving a rider's request, the platform broadcasts the rider's origin and destination to idle drivers, who accept or ignore the request depending on the profitability considerations. We show that providing such information may reduce drivers' equilibrium profit. Hence information provision is a double-edged sword: the drivers may choose to take more profitable riders via "strategic idling." When multiple drivers compete for the same request, how the platform breaks the tie affects the incentives of the drivers. We propose a routing policy that can align the incentives and achieve the first-best outcome for large systems.
    Keywords: Ride-hailing Platform; Queuing Game; Information and Incentive; Routing; Taxi Industry
    Date: 2018–09
  19. By: Claudia M. Landeo (University of Alberta); Kathryn E. Spier (Harvard Law School and NBER)
    Abstract: This paper studies the design of enforcement policies to detect and deter harmful short-term activities committed by groups of injurers. With an ordered-leniency policy, the degree of leniency granted to an injurer who self-reports depends on his or her position in the self-reporting queue. By creating a “race to the courthouse,” ordered-leniency policies lead to faster detection and stronger deterrence of illegal activities. The socially-optimal level of deterrence can be obtained at zero cost when the externalities associated with the harmful activities are not too high. Without leniency for self-reporting, the enforcement cost is strictly positive and there is underdeterrence of harmful activities relative to the first-best level. Hence, ordered-leniency policies are welfare improving. Our findings for environments with groups of injurers complement Kaplow and Shavell's (1994) results for single-injurer environments.
    Keywords: Law Enforcement, Ordered Leniency, Self-Reporting, Leniency, Harmful Externalities, Non-Cooperative Games, Prisoners' Dilemma Game, Coordination Game; Risk Dominance; Pareto Dominance; Corporate Misconduct; White-Collar Crime; Securities Fraud; Insider Trading; Market Manipulation; Whistleblowers; Plea Bargaining; Tax Evasion; Environmental Policy Enforcement
    JEL: C72 D86 K10 L23
    Date: 2018–09

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