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on Game Theory |
| By: | Elnaz Bajoori (University of Bath); Dries Vermeulen |
| Abstract: | In second-price auctions with interdependent values, bidders do not necessarily have dominant strategies. Moreover, such auctions may have many equilibria. In order to rule out the less intuitive equilibria, we define the notion of distributional strictly perfect equilibrium (DSPE) for Bayesian games with infinite type and action spaces. This equilibrium is robust against arbitrary small perturbations of strategies. We apply DSPE to a class of symmetric second-price auctions with interdependent values and show that the efficient equilibrium defined by Milgrom \cite{Milgrom81} is a DSPE, while a class of less intuitive, inefficient, equilibria introduced by Birulin \cite{Birulin2003} is not. |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:eid:wpaper:58152&r=gth |
| By: | Eichenseer, Michael; Moser, Johannes |
| Abstract: | We examine how leadership affects a dynamic public goods game. Using a setting where cooperation gains can be reinvested, our findings suggest that leadership has a positive impact on final wealth. Somewhat surprisingly, leadership also has a positive impact on reducing inequality within groups as measured by the Gini index. Based on a sequential prisoner's dilemma, we elicit types for conditional cooperation. Our results indicate that groups work best when led by cooperatively inclined individuals. Furthermore, early contributions by the leader are crucial and yield a high return. |
| Keywords: | Leadership,Public Goods Game,Conditional Cooperation,Inequality,Growth,Lab Experiment |
| JEL: | C72 C92 H41 D63 C72 C92 H41 D63 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc18:181599&r=gth |
| By: | Yongsheng Xu (Georgia State University); Naoki Yoshihara (School of Economics and Management, Kochi University of Technology) |
| Abstract: | This paper studies the Nash solution to non-convex bargaining problems. Given the multiplicity of the Nash solution in this context, we refine the Nash solution by incorporating an equity consideration. The proposed refinement is defined as the composition of the Nash solution and a variant of the Kalai Smorodinsky solution. We then present an axiomatic characterization of the new solution. |
| Keywords: | non-convex bargaining problem, Nash solution, equitable Nash solution, equity principle, binary weak axiom of revealed preference |
| JEL: | C71 C78 D6 D7 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2018-11&r=gth |
| By: | Sheremeta, Roman |
| Abstract: | Costly competitions between economic agents are modeled as contests. Researchers use laboratory experiments to study contests and test comparative static predictions of contest theory. Commonly, researchers find that participants’ efforts are significantly higher than predicted by the standard Nash equilibrium. Despite overbidding, most comparative static predictions, such as the incentive effect, the size effect, the discouragement effect and others are supported in the laboratory. In addition, experimental studies examine various contest structures, including dynamic contests (such as multi-stage races, wars of attrition, tug-of-wars), multi-dimensional contests (such as Colonel Blotto games), and contests between groups. This article provides a short review of such studies. |
| Keywords: | Contest; All-pay auction; Tournament; Dynamic Contest; Multi-battle Contest; Multi-dimensional Contest; Group Contest; Rent-seeking; Experiment; Overbidding; Over-dissipation; Incentive Effect; Size Effect; Discouragement Effect; Strategic Momentum |
| JEL: | C7 C9 D4 D7 D9 H4 J4 K4 L2 M5 |
| Date: | 2018–10–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89327&r=gth |
| By: | Drozd, Lukasz A. (Federal Reserve Bank of Philadelphia); Serrano-Padial, Ricardo (Drexel University) |
| Abstract: | We study the negative feedback loop between the aggregate default rate and the efficacy of enforcement in a model of debt-financed entrepreneurial activity. The novel feature of our model is that enforcement capacity is accumulated ex ante and thus subject to depletion ex post. We characterize the effect of shocks that deplete enforcement resources on the aggregate default rate and credit supply. In the model default decisions by entrepreneurs are strategic complements, leading to multiple equilibria. We propose a global game selection to overcome equilibrium indeterminacy and show how shocks that deplete enforcement capacity can lead to a spike in the aggregate default rate and trigger credit rationing. |
| Keywords: | contract enforcement; default spillovers; credit crunch; credit cycles; global games; heterogeneity |
| JEL: | C72 D82 D84 D86 G21 O16 |
| Date: | 2018–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:18-21&r=gth |
| By: | Weghake, Jens; Erlei, Mathias; Keser, Claudia; Schmidt, Martin |
| Abstract: | We conducted a laboratory experiment to study the price setting behavior in two-sided markets. We seek to answer two specific research questions: Do participants charge the equilibrium prices that can be derived from a theoretical model? How is the price setting affected by the characteristics of the Nash equilibrium? Our study shows that there are hardly any realizations of the Nash equilibrium. Participants seem to use simple heuristics. The increase in complexity caused by asymmetry has two effects: On the one hand, it makes finding the optimal pricing more difficult so that, on average, we find prices that are further away from optimal prices. On the other hand, higher complexity goes along with stronger signals against non-expedient heuristics so that, on an individual level, the equilibrium is reached in more markets. |
| Keywords: | two-sided market theory,experiment,duopoly,platform competition |
| JEL: | C72 C91 D43 L13 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc18:181626&r=gth |
| By: | Michele Lombardi (University of Glasgow); Naoki Yoshihara (School of Economics and Management, Kochi University of Technology) |
| Abstract: | A partially-honest individual is a person who follows the maxim, "Do not lie if you do not have to" to serve your material interest. By assuming that the mechanism designer knows that there is at least one partially-honest individual in a society of n 3 individuals, a social choice rule (SCR) that can be Nash implemented is termed partially-honestly Nash implementable. The paper offers a complete characterization of the n-person SCRs that are partially-honestly Nash implementable. It establishes a condition which is both necessary and sufficient for the partially-honest Nash implementation. If all individuals are partially-honest, then all SCRs that satisfy the property of unanimity are partially-honestly Nash implementable. The partially-honest Nash implementation of SCRs is examined in a variety of environments. |
| Keywords: | Nash implementation, pure strategy Nash equilibrium, partial-honesty, Condition μ |
| JEL: | C72 D71 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2018-13&r=gth |
| By: | Carlos Alós-Ferrer; Johannes Buckenmaier |
| Abstract: | Approval voting allows voters to support as many candidates as they wish. One advantage of the method is that voters have weak or no incentives to vote insincerely. However, the exact meaning of this statement depends on how the voters' preferences over candidates are extended to sets. We show that, under a combination of standard, well-established assumptions on the extended preferences, voters will always have a strictly sincere best response (that is, a best response ballot such that every approved candidate is strictly preferred to every disapproved one) given the ballots of other voters. The result holds for arbitrary preferences over candidates, allowing for indifferences but covering the extreme cases of dichotomous or strict preferences. As a corollary, we show that the classical strategy-proofness result for the case of dichotomous preferences on alternatives (Brams and Fishburn, 1978) holds for a larger class of preferences on sets than originally assumed. |
| Keywords: | Approval voting, manipulation, preferences among sets, strict sincerity |
| JEL: | C72 D71 D72 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:302&r=gth |
| By: | Konstantinos Charistos (Department of Economics, University of Macedonia) |
| Abstract: | The impact of leniency programs on cartelists’ decision to allocate the incriminating evidence is investigated. Firms are allowed to possess either exclusive or common pieces of cartel-related evidence. The cartel organization is able to allocate the incriminating evidence in an attempt to enhance the sustainability of the illicit agreement. Assuming that the Antitrust Authority (AA) provides incentives that induce confession, reporting is either partial or universal. It is shown that in the former case the cartel organization selects to split and equally share the evidence (each firm possesses only exclusive pieces) whereas in the latter case every firm may possess perfect evidence. Unless the conviction of an investigated cartel is unlikely, when the AA optimally anticipates the cartel’s ability to allocate the evidence, only partial information is obtained. |
| Keywords: | Antitrust enforcement, Collusion, Leniency programs. |
| JEL: | K21 L12 L41 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2018_11&r=gth |
| By: | Hélène Le Cadre (EnergyVille); Enrique Puente; Hanspeter Höschle |
| Abstract: | In this paper, we consider consumers and prosumers who interact on a platform. Consumers buy energy to the platform to maximize their usage benefit while minimizing the cost paid to the platform. Prosumers, who have the possibility to generate energy, self-consume part of it to maximize their usage benefit and sell the rest to the platform to maximize their revenue. Product differentiation is introduced and consumers can specify preferences regarding locality, RES-based generation , and matchings with the prosumers. The consumers and prosumers' problems being coupled through a matching probability, we provide analytical characterizations of the resulting Nash equilibrium. Assuming supply-shortages occur, we reformulate the platform problem as a consensus problem that we solve using Alternating Direction Method of Multipliers (ADMM), enabling minimal information exchanges between the nodes. On top of the platform, a trust-based mechanism combining exploitation of nodes with good reputation and exploration of new nodes, is implemented to determine the miner node which validates the transactions. A case study is provided to analyze the impact of preferences and miner selection dynamic process. |
| Date: | 2018–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01874798&r=gth |
| By: | Konstantinos Charistos (Department of Economics, University of Macedonia) |
| Abstract: | This paper underlines the impact of indirect network externalities on the effectiveness of antitrust enforcement to deter collusion between advertising-selling platforms. Since two-sided collusion is less likely to be sustained as consumers (e.g. readers/viewers) become more ad-avoiders while the opposite is true for one-sided collusion, firms may be induced to semi-collude (collude on advertising while competing for consumers) instead of colluding on both sides. When firms semi-collude on advertising and consumers are neutral towards advertisements, the imposition of fines based on the illegal gain of the colluding side (one-sided fines) enhances cartel deterrence compared to fines based on the total illegal profits (two-sided fines). |
| Keywords: | Antitrust enforcement, Collusion, Media markets. |
| JEL: | K21 L12 L41 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2018_10&r=gth |
| By: | Persson, Lars (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN)) |
| Abstract: | The world’s first multinational electricity market was formed with the creation of the Nordic power exchange, Nord Pool. We analyze the incentives to undertake transmission network investment in the context of the liberalized Nordic electricity market. Welfare improving investment in a multinational electricity market requires accounting for the cross-border effects of capacity expansion. We propose methods to increase voluntary cooperation on international infrastructure projects, with an aim to increase aggregate efficiency and achieve equitable distribution of the gains from market integration. |
| Keywords: | Coalition formation; Cross-border transmission investment; Multilateral bargaining; Nordic electricity market; Shapley Value |
| JEL: | C71 F15 L43 L94 |
| Date: | 2018–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1242&r=gth |
| By: | Jörn C. Richstein; Casimir Lorenz; Karsten Neuhoff |
| Abstract: | Short-term electricity markets are key to an efficient production by generation units. We develop a two-period model to assess different bidding formats to determine for each bidding format the optimal bidding strategy of competitive generators facing price-uncertainty. We compare the results for simple bidding, block bidding and multi-part bidding and find that even under optimal simple and block bidding generators face the risk of ex-post suboptimal solutions, whereas in multi-part bidding these do not occur. This points to efficiency gains of multi-part bidding in the presence of uncertainty in electricity markets. |
| Keywords: | market design, electricity markets, bidding formats, auctions |
| JEL: | D44 Q48 L94 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1765&r=gth |
| By: | Angelo Baglioni (Università Cattolica del Sacro Cuore); Luca Colombo (Università Cattolica del Sacro Cuore); Paola Rossi (Bank of Italy) |
| Abstract: | When the debt of distressed firms is dispersed, free riding makes it difficult to reach a restructuring agreement. We develop a multistage game in which banks come across each other frequently, allowing them to threaten punishment in case of free riding. As the number of banks grows, the chance of re-encountering a bank and of being punished for free riding increases, improving the likelihood of cooperation. Looking at Italian firms in distress, we find that the restructuring probability increases with the number of banks up to a threshold - around three banks - beyond which coordination problems prevail. |
| Keywords: | banks, debt restructuring, number of creditors |
| JEL: | G21 G33 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1191_18&r=gth |