nep-gth New Economics Papers
on Game Theory
Issue of 2018‒12‒03
fifteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. A Qualitative Theory of Conflict Resolution and Political Compromise By Joseph Abdou; Hans Keiding
  2. Preferences and strategic behavior in public goods games By Gilles Grandjean; Mathieu Lefebvre; Marco Mantovani
  3. Auctions vs. Negotiations: Optimal Selling Mechanism with Endogenous Bidder Values By Mengxi Zhang
  4. What Drives Conditional Cooperation in Public Goods Games? By Peter Katuscak; Tomas Miklanek
  5. Equivalence of Canonical Matching Models By John Kennes; Daniel le Maire; Sebastian Roelsgaard
  6. Duopolistic Competition and Optimal Switching Time from Export to FDI in Uncertainty By Mankan M. Koné; Lota D.Tamini; Carl Gaigné
  7. The Better Route to Global Tax Coordination: Gradualism or Multilateralism? By Kai A. Konrad; Marcel Thum
  8. Pledge-and-Review Bargaining By Bård Harstad
  9. The Effect of Horizontal Mergers, When Firms compete in Prices and Investments By Massimo Motta; Emanuele Tarantino
  10. Negotiating Cooperation Under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions By Fabian Dvorak; Sebastian Fehrler
  11. If I Don’t Trust Your Preferences, I Won’t Follow Mine: Preference Stability, Beliefs, and Strategic Choice By Irenaeus Wolff
  12. Frames of Governance: Comparing Institutional Arrangements over the Policy Space By Francesco Bogliacino
  13. The Role of Strategic Uncertainty in Area-wide Pest Management Decisions of Florida Citrus Growers By Singerman, A.; Useche, P.
  14. Factors Driving Wealth Inequality in European Countries By Sebastian Leitner
  15. The Relative Impact of Different Forces of Globalisation on Wage Inequality: A Fresh Look at the EU Experience By Stefan Jestl; Sebastian Leitner; Sandra M. Leitner

  1. By: Joseph Abdou (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Hans Keiding (KU - University of Copenhagen)
    Abstract: We view political activity as an interaction between forces seeking to achieve a political agenda. The viability of a situation depends on the compatibility of such agendas. However even in a conflictual situation a compromise may be possible. Mathematically a political structure is modeled as a simplical complex and a viable configuration as a simplex. A represented compromise is a viable configuration obtained by the withdrawal of some agents in favor of some friendly representatives. A delegated compromise is a sophisticated version of a compromise obtained by the iteration of the withdrawal process. Existence of such solutions depends on the discrete topology of the simplicial complex. In particular we prove that the existence of a delegated compromise is equivalent to the strong contractibility of the simplicial complex.
    Keywords: Delegation,compromise,simplicial complex,contiguity,strong homotopy
    Date: 2018–07
  2. By: Gilles Grandjean; Mathieu Lefebvre; Marco Mantovani
    Abstract: We analyze experimentally behavior in a finitely repeated public goodsgame. One of the main results of the literature is that contributions are initially high, and gradually decrease over time. Two explanations of this pattern have been developed: (i) the population is composed of free-riders, who never contribute, and conditional cooperators, who contribute if others do so as well; (ii) strategic players contribute to sustain mutually beneficial future cooperation, but reduce their contributions as the end of the game approaches. This paper contributes to bridging the gap between these views. We analyze preferences and strategic ability in one design by manipulating group composition to form homogeneous groups on both dimensions. Our results highlight the interaction between the two: groups that sustain high levels of cooperation are composed of members who share a common inclination toward cooperation and have the strategic abilities to recognize and reap the benefits of enduring cooperation.
    Keywords: Voluntary contribution, conditional cooperation, free riding, strategic sophistication.
    JEL: H41 C73 C91 C92
    Date: 2018
  3. By: Mengxi Zhang
    Abstract: This paper studies the design of the revenue maximizing selling mechanism in a scenario where bidders can make costly investments upfront to enhance their valuations. Unlike the case where bidders’ values are exogenously fixed, here it may be profitable for the seller to discriminate among ex ante symmetric bidders. I first identify a sufficient and almost necessary condition under which symmetric auctions are optimal. When this condition fails, the optimal selling mechanism may be discriminatory. I further find that the optimal mechanism in general follows a structure which I call a threshold mechanism. Two extreme examples of the threshold mechanism are symmetric auctions and sequential negotiations. In general, any threshold mechanism can be implemented by a dynamic selling scheme which alternately utilizes auctions and negotiations.
    Keywords: Mechanism Design; R&D Investment; Endogenous Bidder Values; Favoritism
    JEL: D44 D82
    Date: 2018–11
  4. By: Peter Katuscak; Tomas Miklanek
    Abstract: Extensive experimental research on public goods games documents that many subjects are “conditional cooperators” in that they positively correlate their contributions with (their belief about) contributions of other subjects in their group. The goal of our study is to shed light on what preference and decision-making patterns drive this observed regularity. We consider four potential explanations, including reciprocity, conformity, inequality aversion, and residual factors such as confusing and anchoring, and aim to disentangle their effects. We find that, of the average conditionally cooperative behavior in the sample, about two thirds is accounted for by residual factors, a quarter by inequality aversion and a tenth by conformity, while reciprocity plays virtually no role. These findings carry important messages about how to interpret conditional cooperation as observed in the lab and ways it can be exploited for fundraising purposes.
    Keywords: : conditional cooperation; public goods game; reciprocity; conformity; inequality aversion; anchoring; fundraising;
    JEL: H41 C91 D64
    Date: 2018–11
  5. By: John Kennes (Department of Economics and Business Economics, Aarhus University, Denmark); Daniel le Maire (University of Copenhagen); Sebastian Roelsgaard (Department of Economics and Business Economics, Aarhus University, Denmark)
    Abstract: This paper offers expected revenue and pricing equivalence results for canonical models of pricing and matching. The equivalence of these models is centered on the assumption that there are large numbers of buyers and sellers and the assignment of buyers within a submarket of sellers is random. Therefore, the distribution of buyers to sellers is approximated by the Poisson distribution. The list of canonical matching models includes the models developed by Burdett and Judd (1983), Shimer (2005), and McAfee (1993). In the Burdett and Judd (1983) model, buyers post prices and the equilibrium features price dispersion because identical buyers play mixed strategies. In the Shimer (2005) model, sellers post a vector of prices corresponding to different buyer types. In equilibrium, all identical buyers pay the same price. In the McAfee (1993) model, equilibrium pricing is determined by simple second price auctions. McAfee’s model also features price dispersion, because the number of bidders at each auction is stocastic.
    Keywords: Directed search, price dispersion, competing auctions, Poisson distribution
    JEL: D83 J64
    Date: 2018–11–19
  6. By: Mankan M. Koné; Lota D.Tamini; Carl Gaigné
    Abstract: This paper aimed to extend previous real option models to features of multinational firmsÕactivities such as market competition and trade barriers. Few researchers have studied multinationalsÕ optimal switching time from export to FDI using real options, and those who have done so have ignored trade policies and strategic interactions between firms. Yet,the presence of local competitors and trade costs influences the option value of waiting. We find that FDI in host countries with uncertain demand, strong competition and few barriers to trade will likely to be delayed with respect to immediate investment. In terms of policy implications, we find that the trade and competition policies of host countries have lower deterrent effects on FDI when uncertainty is reduced.
    Keywords: Foreign Direct Investment; Imperfect Competition; Trade Liberalization; Real Options
    JEL: F23 D21
    Date: 2017
  7. By: Kai A. Konrad; Marcel Thum
    Abstract: In the context of international tax coordination incomplete information is one of the well-known frictions that can lead to bargaining failure and might explain a lack of observed coordination. We consider international negotiations about tax coordination under complete and incomplete information. We identify the conditions for multilateral negotiations to be more likely to be successful than gradual/sequential negotiation approaches and compare different routes of sequential bargaining. Under plausible conditions, full-scale global coordination is least likely to emerge if the negotiations take place sequentially, and if the negotiations with the most unpredictable country take place last.
    Keywords: tax competition, tax cooperation, multilateral negotiations, sequential negotiations, ultimatum bargaining, acceptance uncertainty
    JEL: H25 H77 F52 F55
    Date: 2018
  8. By: Bård Harstad
    Abstract: Real-world negotiations differ fundamentally from existing bargaining theory. Inspired by the Paris Agreement on climate change, this paper develops a novel bargaining game in which each party its own contribution (to a public good, for example), before the set of pledges must be accepted. I first show that, if the tolerance for delay is uncertain, each equilibrium pledge coincides with an asymmetric Nash bargaining solution. The weights placed on others. payouts reflect the underlying uncertainty, but they vary from pledge to pledge, so the set of equilibrium pledges is inefficient. This bargaining outcome is embedded in a dynamic contribution game, with endogenous technology, participation, enforcement, and contract terms, to investigate when pledge-and-review bargaining is desirable. The model’s predictions can rationalize the key differences between the climate agreements signed in Kyoto (1997) and Paris (2015) as well as the development from the former to the latter.
    Keywords: dynamic games, bargaining games, Nash program, climate change, Paris Agreement, Kyoto Protocol
    Date: 2018
  9. By: Massimo Motta; Emanuele Tarantino
    Abstract: We study the effects of mergers when firms offer differentiated products and compete in prices and investments. Since it is in principle ambiguous, we use aggregative game theory to sign the net effect of the merger: We find that only if it entailed sufficient efficiency gains, could the merger raise total investments and consumer surplus. We also prove there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments. Finally, we show that, from the consumer welfare point of view, a R&D cooperative agreement is superior to any consumer-welfare reducing merger.
    Keywords: horizontal mergers, innovation, investments, research joint ventures, competition
    JEL: K22 D43 L13 L41
    Date: 2018–11
  10. By: Fabian Dvorak; Sebastian Fehrler
    Abstract: Case studies of cartels and recent theory suggest that repeated communication is key for stable cooperation in environments where signals about others’ actions are noisy. However, empirically the exact role of communication is not well understood. We study cooperation under different monitoring and communication structures in the laboratory. Under all monitoring structures – perfect, imperfect public, and imperfect private – communication boosts efficiency. However, under imperfect monitoring, where actions can only be observed with noise, cooperation is stable only when subjects can communicate before every round of the game. Beyond improving coordination, communication increases efficiency by making subjects’ play more lenient and forgiving. We further find clear evidence for the exchange of private information – the central role ascribed to communication in recent theoretical contributions.
    Keywords: infinitely repeated games, monitoring, communication, cooperation, strategic uncertainty, prisoner’s dilemma
    Date: 2018
  11. By: Irenaeus Wolff
    Abstract: In contrast to standard theory, experimental participants often do not best-respond to their stated beliefs. Potential reasons are inaccurate belief reports or unstable preferences. Focusing on games in which participants can observe the revealed preferences of their opponents, this paper points out an additional reason for the lack of belief-action consistency. Whether a participant’s best-response—or a Nash-equilibrium—predicts her behaviour depends heavily on the participant believing in others’ preference stability. Believing in others’ preference stability fosters predictability because it is associated with a lower variance in the participant’s belief about her opponents’ actions, and low-variance beliefs entail more best-responding.
    Keywords: Preference stability, best-response, Nash-equilibrium, rational beliefs, public good, social dilemma, conditional cooperation, social preferences.
    Date: 2018
  12. By: Francesco Bogliacino
    Abstract: In this article, we develop a framework to analyze the relationship between evidence and policy. Postulating a normative criterion based on cost-benefit analysis and the value of a piece of information, as well as a topology of the policy space defined by three characteristics (epistemic uncertainty, interests, and the degree of value conflicts), we identify the (Nash) equilibria of an interaction between experts and citizens in providing information to a decision maker. In this setup, we study three institutional arrangements (evidence-based policy, deliberative governance, and negotiated conflict) that differ in terms of reliance on experts and citizens for providing information. We show that different degrees of uncertainty, interests, and values-relevance surrounding issue at stake result in vastly different arrangement performances; hence, to foster efficiency, rules should be contingent. ****** En este ensayo, se desarrolla un marco de análisis para la relación entre evidencia y política pública. A partir de un criterio normativo basado en el análisis costo beneficio y en el valor de una información, y de una topología de las políticas públicas definida por tres características (incertidumbre epistémica, intereses, y el grado del conflicto de valores), identificamos los equilibrios de Nash de una interacción entre expertos y ciudadanos en proveer información a un hacedor de política. En este contexto, estudiamos tres arreglos institucionales (políticas basadas en evidencia, democracia deliberativa, conflicto negociado) que difieren en qué tanto confiamos en los expertos y en los ciudadanos en proveer información. Mostramos que diferentes intensidades de incertidumbre, intereses y conflictos de valores generan resultados muy varios en el desempeño de estos arreglos: en conclusión, para mayor eficiencia, las reglas tienen que ser contingentes.
    Keywords: Evidence-Based Policy; Deliberative Democracy; Negotiated Conflict; Policy Evaluation
    JEL: I38 Z18 D71 D73
    Date: 2018–11–27
  13. By: Singerman, A.; Useche, P.
    Abstract: We conducted a choice experiment based on the theory of global games to analyze the impact of strategic uncertainty on participation decisions of Florida citrus growers in area-wide pest management programs to control the vector of citrus greening. We found that the farmers average certainty equivalent in a strategically uncertain setting under a high coordination requirement for obtaining a Pareto superior payoff, was lower compared to that of a lottery. Moreover, we found some evidence that the perceived risk of farmers in the strategically uncertain alternative increased as the size of the group increased. Thus, our results help explain why, despite the efficiency of area-wide pest management to control the vector of citrus greening across Florida, farmers participation is not as widespread as one would expect. To avoid the strategic uncertainty involved in relying on neighbors, many farmers choose self-reliance in spraying despite the lower payoff. As a recommendation for policy makers, we propose a top-down regulation so as to generate a bottom-up collective action to deal with the issue of strategic uncertainty in area-wide pest management to avoid the sub-optimal outcome. Acknowledgement :
    Keywords: Risk and Uncertainty
    Date: 2018–07
  14. By: Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The Effect of Inheritance and Gifts on Household Net Wealth Distribution Analysed by Applying the Shapley Value Approach to Decomposition This paper analyses how microeconomic factors drive inequality in household wealth across nine European countries when applying the Shapley value approach to decomposition. The research draws on micro data from the Eurosystem Household Finance and Consumption Survey 2014. Disparity in inheritance and gifts obtained by households are found to have a considerable effect on wealth inequality that is on average stronger than that of income differences and other factors. In Austria, Germany, France, Portugal and Spain, the contribution of real and financial assets received as bequests or inter vivos transfers attains more than 30% to explained wealth inequality. The distribution of household characteristics (age, education, size, number of adults and children in the household, marital status) within countries however also shapes the observed wealth dispersion. The results resemble those obtained in a similar study (Leitner, 2016) based on data from the first wave of the Eurosystem Household Finance and Consumption Survey (HFCS 2010).
    Keywords: inequality, wealth distribution, decomposition analysis, inheritance, inter vivos transfers, income distribution, Europe
    JEL: D31 D63 O52 O57
    Date: 2018–11
  15. By: Stefan Jestl (The Vienna Institute for International Economic Studies, wiiw); Sebastian Leitner (The Vienna Institute for International Economic Studies, wiiw); Sandra M. Leitner (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: This paper analyses the contribution of immigration, trade and FDI to wage inequality of native workers in a sample of old and new EU Member States between 2008 and 2013. Methodologically, we use the regression-based Shapley value decomposition approach of Shorrocks (2013) to filter out their relative importance. We find that globalisation has very mixed effects and generally contributes little to wage inequality. Regarding their relative contributions, immigration and FDI are key contributors to wage inequality in old EU Member States, while trade is the key source of wage inequality in new EU Member States. For immigration, the associated increase in wage inequality is strongest and most consistent among Southern EU Member States. We also show that immigration, trade and FDI have different effects across the wage distribution that are however strongest at its centre. For trade and FDI, we also find sporadic inequality-reducing effects that are strongest at the top of the wage distribution.
    Keywords: wage inequality, trade, FDI, immigration, Shapley value decomposition
    JEL: J31 O15 F16
    Date: 2018–11

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.
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