
on Game Theory 
By:  Jacob K. Goeree; Philippos Louis 
Abstract:  We introduce a setvalued generalization of Nash equilibrium, called M equilibrium, which is based on ordinal monotonicity  players' choice probabilities are ranked the same as the expected payoffs based on their beliefs  and ordinal consistency  players' beliefs yield the same ranking of expected payoffs as their choices. Using results from semialgebraic geometry, we prove there exist a finite number of M equilibria, each consisting of a finite number of connected components. Generically, Mequilibria can be "color coded" by their ranks in the sense that choices and beliefs belonging to the same M equilibrium have the same color. We show that colorable M equilibria are behaviorally stable, a concept that strengthens strategic stability. Furthermore, setvalued and parameterfree M equilibrium envelopes various parametric models based on fixedpoints, including QRE as well as a new and computationally simpler class of models called {\mu} Equilibrium. We report the results of several experiments designed to contrast M equilibrium predictions with those of existing behavioral gametheory models. A first experiment considers five variations of an asymmetricmatching pennies game that leave the predictions of Nash, various versions of QRE, and levelk unaltered. However, observed choice frequencies differ substantially and significantly across games as do players' beliefs. Moreover, beliefs and choices are heterogeneous and beliefs do not match choices in any of the games. These findings contradict existing behavioral gametheory models but accord well with the unique M equilibrium. Follow up experiments employ 3 by 3 games with a unique purestrategy Nash equilibrium and multiple M equilibria. The belief and choice data exhibit coordination problems that could not be anticipated through the lens of existing behavioral gametheory models. 
Date:  2018–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1811.05138&r=all 
By:  Antoine Mandel (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS  Centre National de la Recherche Scientifique, PSE  Paris School of Economics); Xavier Venel (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS  Centre National de la Recherche Scientifique, PSE  Paris School of Economics) 
Abstract:  There exists a wide gap between the predictions of strategic models of network formation and empirical observations of the characteristics of socioeconomic networks. Empirical observations underline a complex structure characterized by fattailed degree distribution, short average distance, large clustering coefficient and positive assortativity. Game theoretic models offer a detailed representation of individuals' incentives but they predict the emergence of much simpler structures than these observed empirically. Random network formation processes, such as preferential attachment, provide a much better fit to empirical observations but generally lack microfoundations. in order to bridge this gap, we propose to model network formation as extensive games and investigate under which conditions equilibria of these games are observationally equivalent with random network formation process. In particular, we introduce a class of games in which players compete with their predecessors and their successors for the utility induced by the links they form with another node in the network. Such sequential competition games can represent a number of strategic economic interactions such as oligopolistic competition in supply networks or diffusion of influence in opinion networks. we show that the focal equilibrium that emerge in this setting is one where players use probability distributions with full support and target the whole network with probabilities inversely proportional to the utility of each node. Notably, when the utility of a node is inversely proportional to its degree, equilibrium play induces a preferential attachment process. 
Abstract:  Les modèles stratégiques de formation de réseaux existants peinent à expliquer un certain nombre de propriétés empiriques. Pour combler ce manque, nous proposons de modéliser la formation de réseau comme un jeu extensif et caractérisons les conditions sous lesquelles les équilibres de ces jeux sont consistants avec des dynamiques aléatoires de formation de réseau dont les bonnes propriétés empiriques sont connues. En particulier, nous introduisons une classe de jeux où les joueurs sont en compétition avec leurs successeurs et à leurs prédécesseurs pour les bénéfices induits par des relations avec d'autres noeuds du réseau. Nous montrons que la stratégie d'équilibre focale dans ce jeu est de se lier aux nœuds existants du réseau avec une probabilité inversement proportionnelle à l'utilité qu'ils génèrent. Notamment, lorsque l'utilité générée par un nœud est inversement proportionnelle à son degré, la stratégie d'équilibre coïncide avec le processus "d'attachement préférentiel" de BarabasiAlbert. 
Keywords:  Socioeconomic networks,endogenous networks formation,game theory,Réseaux socioéconomiques,formation endogène des réseaux,théorie des jeux,attachement préférentiel 
Date:  2018–10 
URL:  http://d.repec.org/n?u=RePEc:hal:cesptp:halshs01960682&r=all 
By:  Herings, P. JeanJacques (General Economics 1 (Micro)); Saulle, Riccardo (General Economics 1 (Micro)); Seel, Christian (General Economics 1 (Micro)) 
Abstract:  This paper studies coalition formation among individuals who differ in productivity. The output of a coalition is determined by the sum of productivities if the coalition exceeds a minimal threshold of members. We consider competitive societies in which the surplus of a coalition is split according to productivity and egalitarian societies in which coalitions split their surplus equally. Preferences of coalition members depend on their material payoffs, but are also influenced by positional concerns, which relate their material payoffs to the average material payoff in the coalition. Our analysis uses two stability notions, the Core and the Myopic Stable Set. Both competitive and egalitarian societies lead to segregated partition structures. For competitive societies, all stable allocations are based on bottomup segregation, i.e., individuals with adjacent productivities form coalitions and if some individuals are not part of a productive coalition, then these are the most productive ones. For egalitarian societies, we obtain topdown segregation in all stable allocations. Again it holds that individuals with adjacent productivities form coalitions, but now the least productive individuals may not be part of any productive coalition. If all individuals have different productivity levels, then the material efficiency of competitive societies is below that of egalitarian societies. 
Keywords:  group formation, segregation, relative payoff, Egalitarianism, Meritocracy, social environment 
JEL:  C70 C71 D62 
Date:  2018–12–17 
URL:  http://d.repec.org/n?u=RePEc:unm:umagsb:2018027&r=all 
By:  Seiji Takanashi (Graduate School of Information Science and Electrical Engineering, Kyushu University) 
Abstract:  In this paper, we study cooperative games with the players whose pref erences depend on all players’ allocations, which we refer to as the social preferences. The social preferences we study in this paper are represented by the utility functions proposed by Fehr and Schmidt (1999) or the util ity functions proposed by Charness and Rabin (2002). First, we define and characterize the cores, which are the same as the standard core except that the utility functions are the FehrSchmidt or the CharnessRabin type. We show that the FehrSchmidt type core becomes smaller if the players become more envious and that it may become larger or smaller if the players become more compassionate. We also show that the CharnessRabin type core be comes smaller if the players pay more attention to care about the minimal allocation and that it may become larger or smaller if the players pay more attention to care about the social welfare. Moreover, we analyze the alpha core and the betacore of the cooperative games consisting of players with these types of social preferences, as well as a new core concept that takes ac count of networks among the players. We show that the FehrSchmidt type core is the smallest among these cores and that the alphacore coincides with the betacore under the FehrSchmidt utility functions. 
Keywords:  Social preference, Inequalityaversion, Cooperative game, Core, Network 
JEL:  C71 D63 D91 
Date:  2018–11 
URL:  http://d.repec.org/n?u=RePEc:kyo:wpaper:1006&r=all 
By:  Erhao Xie 
Abstract:  This paper relaxes the Bayesian Nash equilibrium (BNE) assumption commonly imposed in empirical discrete choice games with incomplete information. Instead of assuming that players have unbiased/correct expectations, my model treats a player’s belief about the behavior of other players as an unrestricted unknown function. I study the joint identification of belief and payoff functions. I show that in games where one player has more actions than the other player, the payoff function is partially identified with neither equilibrium restrictions nor the usual exclusion restrictions. Furthermore, if the cardinality of players’ action sets varies across games, then the payoff and belief functions are point identified up to scale normalizations and the restriction of equilibrium beliefs is testable. For games where action sets are constant across players and observations, I obtain very similar identification results without imposing restrictions on beliefs, as long as the payoff function satisfies a condition of multiplicative separability. I apply this model and its identification results to study the store hours competition between McDonald’s and Kentucky Fried Chicken (KFC) in China. The null hypothesis that KFC has unbiased beliefs is rejected. Failing to account for KFC’s biased beliefs generates an attenuation bias on estimated strategic effects. Finally, the estimation results of the payoff functions indicate that the decision about store hours is a type of vertical differentiation. By operating through the night, a firm not only attracts nighttime consumers but also can steal competitors’ daytime customers. This result has implications on the optimal regulation of stores’ opening hours. 
Keywords:  Econometric and statistical methods, Market structure and pricing 
JEL:  L13 L85 
Date:  2018 
URL:  http://d.repec.org/n?u=RePEc:bca:bocawp:1860&r=all 
By:  Heinemann, Frank (TU Berlin); Moradi, Homayoon (WZB Berlin) 
Abstract:  We solve and test experimentally a globalgames model of speculative attacks where agents can choose whether to read, at a cost, a payoff irrelevant (sunspot) announcement. Assuming that subjects exogenously believe some others to follow sunspots, we provide conditions for a unique equilibrium where agents follow a sunspot announcement depending on the realization of an informative private signal. Although most groups converge to classical globalgame strategies that neglect sunspots, we find that about onethird of groups are eventually coordinating on sunspots, which is inconsistent with the standard theory. In line with the assumption of subjects expecting others to follow sunspots, subjects overestimate the number of subjects who follow sunspots by about 100% on average. We conclude that in environments with high strategic uncertainty, payoff irrelevant signals can affect behavior even if they are costly to obtain and not expected to be publicly observed. 
Keywords:  creditor coordination; global games speculative attack; sunspots; 
JEL:  D82 F31 G12 
Date:  2018–12–27 
URL:  http://d.repec.org/n?u=RePEc:rco:dpaper:135&r=all 
By:  Khan, Abhimanyu 
Abstract:  I study recurrent strategic interaction between two responsive behavioural rules in generic bimatrix weakly acyclic games. The two individuals that play the game in a particular period choose their strategy by responding to a sample of strategies used by the coplayers in the recent history of play. The response of a player is determined by his behavioural rule. I show that the game reaches a convention whenever the behavioural rule of each player is `weakly responsive' to the manner in which strategies were chosen in the past by the coplayers, and stays locked into the convention if the behavioural rules are `mildly responsive'. Furthermore, amongst `mildly responsive' behavioural rules, individuals described by the behavioural rule of `extreme optimism' perform the best in the sense that their most preferred convention is always in the stochastically stable set; under an additional mild restriction that differentiates the behavioural rule of the other player from extreme optimism, the convention referred to above is the unique stochastically stable state. 
Keywords:  evolution of conventions; behavioural rules; weakly responsive; mildly responsive; optimism 
JEL:  C73 
Date:  2018–12–08 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:90429&r=all 
By:  Sophie Bade; Erel SegalHalevi 
Abstract:  Fair division theory mostly involves individual consumption. But resources are often allocated to groups, such as families or countries, whose members consume the same bundle but have different preferences. Do fair and efficient allocations exist in such an "economy of families"? We adapt three common notions of fairness: fairshare, noenvy and egalitarianequivalence, to an economy of families. The stronger adaptation  individual fairness  requires that each individual in each family perceives the division as fair; the weaker one  family fairness  requires that the family as a whole, treated as a single agent with (typically) incomplete preferences, perceives the division as fair. Individualfairshare, familynoenvy and familyegalitarianequivalence are compatible with efficiency under broad conditions. The same holds for individualnoenvy when there are only two families. In contrast, individualnoenvy with three or more families and individualegalitarianequivalence with two or more families are typically incompatible with efficiency, unlike the situation in an economy of individuals. The common market equilibrium approach to fairness is of limited use in economies with families. In contrast, the leximin approach is broadly applicable: it yields an efficient, individualfairshare, and familyegalitarianequivalent allocation. 
Date:  2018–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1811.06684&r=all 
By:  JørgenVitting Andersen (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS  Centre National de la Recherche Scientifique); Philippe De Peretti (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS  Centre National de la Recherche Scientifique) 
Abstract:  We introduce a new methodology that enables the detection of onset of convergence towards Nash equilibria, in simple repeatedgames with infinite large strategy spaces. The method works by constraining on a special and finite subset of strategies. We illustrate how the method can predict (in special time periods) with a high success rate the action of participants in a series of experiments. 
Keywords:  multiperiod games,infinite strategy space,decoupling,bounded rationality,agentbased modeling 
Date:  2018–07 
URL:  http://d.repec.org/n?u=RePEc:hal:cesptp:halshs01960900&r=all 
By:  Hino, Yoshifumi 
Abstract:  We consider an infinitely repeated prisoner's dilemma under costly observation. If a player observes his opponent, then he pays an observation cost and knows the action chosen by his opponent. If a player does not observe his opponent, he cannot obtain any information about his opponent's action. Furthermore, no player can statistically identify the observational decision of his opponent. We prove an efficiency without any signals. Next, we consider a kind of delayed observations. Players decide their actions and observation decisions in the same period, but they choose observation decisions after they choose their actions. We introduce an interim public randomization instead of public randomization just before observation decision. We present a folk theorem with an interim public randomization device for a sufficiently small observation cost when players are sufficiently patient. 
Keywords:  B to B business; Costly observation; Efficiency; Folk theorem; Prisoner's dilemma 
JEL:  C72 C73 D82 
Date:  2018–12–10 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:90381&r=all 
By:  Renaud Bourlès (AixMarseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Yann Bramoullé (AixMarseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Eduardo PerezRichet (Sciences Po Paris & CEPR) 
Abstract:  We provide the first analysis of the risksharing implications of altruism networks. Agents are embedded in a fixed network and care about each other. We study whether altruistic transfers help smooth consumption and how this depends on the shape of the network. We identify two benchmarks where altruism networks generate efficient insurance: for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected. We show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risksharing communities. We uncover complex structural effects. Under iid incomes, central agents tend to be better insured, the consumption correlation between two agents is positive and tends to decrease with network distance, and a new link can decrease or increase the consumption variance of indirect neighbors. Overall, we show that altruism in networks has a firstorder impact on risk and generates specific patterns of consumption smoothing. 
Keywords:  altruism, networks, risk sharing, Informal Insurance 
Date:  2018–11 
URL:  http://d.repec.org/n?u=RePEc:aim:wpaimx:1838&r=all 
By:  Akira Okada (Kyoto University) 
Abstract:  We consider the cultural transmission of trust and trustworthiness in a trust game with spatial matching a la Tabellini. Players are assumed to enjoy psychological benefits from good conducts. The equilibrium probability that an investor trusts a receiver is a monotonically decreasing function of social distance, and the one that the receiver behaves in a trustworthy manner is nonmonotonic. Parents with imperfect empathy transmit their own values to their children through education, and the ratio of individuals with good values globally converges to a stationary point with heterogeneity if educational costs are sufficiently small. Trust and trustworthiness are infl uenced by institutions in different ways. A better "intermediate" enforcement crowds out trust and crowds in trustworthiness. 
Keywords:  crowding effect, cultural transmission, random matching game, social distance, trust, trustworthiness 
JEL:  C72 D02 D64 D91 
Date:  2018–09 
URL:  http://d.repec.org/n?u=RePEc:kyo:wpaper:1001&r=all 
By:  Jackson, Matthew O.; Yariv, Leeat 
Abstract:  We characterize environments in which there exists a representative agent: an agent who inherits the structure of preferences of the population that she represents. The existence of such a representative agent imposes strong restrictions on individual utility functions, requiring them to be linear in the allocation and additively separable in any parameter that characterizes agents' preferences (e.g., a risk aversion parameter, a discount factor, etc.). Commonly used classes of utility functions (exponentially discounted utility functions, CRRA or CARA utility functions, logarithmic functions, etc.) do not admit a representative agent. 
Keywords:  Collective Decisions; Preference Aggregation; Representative Agents; Revealed Preference 
JEL:  D03 D11 D71 D72 E24 
Date:  2018–12 
URL:  http://d.repec.org/n?u=RePEc:cpr:ceprdp:13397&r=all 
By:  Hamamura, Jumpei 
Abstract:  This study analytically investigates the choice of a cost accounting system based on the costbased transfer price by a divisionalized firm that has a direct channel through electronic commerce (EC). The findings show that the optimal choice between direct and absorption costing affects the increase of overhead allocation for the retail division through the costbased transfer price. While traditional strategic transfer pricing literature shows that absorption costing is optimal in specific economic environments, this study demonstrates that direct costing is also optimal in a specific economic environment by considering dual channel competition. This research thus contributes to the extant strategic transfer pricing literature, which considers the choice of a cost accounting system in management accounting. 
Keywords:  Economics; Game theory; Costbased transfer pricing; Cost accounting; Direct channel 
JEL:  D43 M41 
Date:  2018–12–25 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:90836&r=all 
By:  Isa Hafalir (University of Technology Sydney); Fohita Kojima (Stanford University); M. Bumin Yenmez (Boston College) 
Abstract:  Interdistrict school choice programs—where a student can be assigned to a school outside of her district—are widespread in the US, yet the marketdesign literature has not considered such programs. We introduce a model of interdistrict school choice and present two mechanisms that produce stable or efficient assignments. We consider three cate gories of policy goals on assignments and identify when the mechanisms can achieve them. By introducing a novel framework of interdistrict school choice, we provide a new avenue of research in market design. 
Keywords:  Interdistrict school choice, student assignment, stability, efficiency. 
Date:  2018–12–28 
URL:  http://d.repec.org/n?u=RePEc:boc:bocoec:970&r=all 
By:  Smirnov, Vladimir; Wait, Andrew; Xu, Rong 
Abstract:  We examine entry in a marketentry timing model. Early entry allows a firm to enjoy a higher instantaneous postentry pro t, while later entry has the benefi t of lower entry costs. In our model, firms can be asymmetric in terms of costs. Specifically, a more efficient rm enters with lower present value of costs. First, we show that entry order is always efficient in the duopoly game while in the triopoly model an efficient entry order could be violated. Moreover, one of the most notable results is that in the triopoly model we generate the necessary condition for an efficient order of entry. In addition, we explore how the rents earned by duopolists relative to a monopolist (the structure of pro ts in the market) impact the order of entry. These results would be useful for future empirical studies of market entry. Furthermore, our paper investigates the welfare implications of the entry in equilibrium by exploring the dynamics of the initial entry time in duopoly and triopoly markets. Previous studies found that the leader's time of entry is typically inefficiently too late. Our results show that unlike in the symmetric case, in the presence of asymmetric fi rms, fi rst entry is not necessarily inefficiently delayed, especially in markets with higher duopoly effects (which capture duopoly rents relative to those for a monopolist) and with fi rms that are more differentiated. This result implies that encouraging an extra fi rm to enter in an oligopolistic market could shorten the period consumers have to wait for new products, and potentially increase social welfare. 
Keywords:  timing games; entry, leader; follower; process innovation; product innovation. 
Date:  2018–12 
URL:  http://d.repec.org/n?u=RePEc:syd:wpaper:201811&r=all 
By:  Didier Laussel (AMSE  AixMarseille Sciences Economiques  EHESS  École des hautes études en sciences sociales  AMU  Aix Marseille Université  ECM  Ecole Centrale de Marseille  CNRS  Centre National de la Recherche Scientifique); Joana Resende (Economics Department, University of Porto) 
Abstract:  We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of upstream monopolists, who independently produce complementary inputs. We study an intrinsic private common agency game in which each supplier i independently proposes a pricing schedule contract to the assembler, specifying the supplier's payment as a function of the assembler's purchase of input i. We provide a necessary and sufficient equilibrium condition. A lot of equilibria satisfy this condition but there is a unique Paretoundominated Nash equilibrium from the suppliers' point of view. In this equilibrium there are unavoidable efficiency losses due to excessively low sales of the good. However, suppliers may be able to limit these distortions by implicitly coordinating on an equilibrium with a rigid (positive) output in bad demand circumstances. 
Keywords:  complementary inputs,asymmetric information,private common agency games 
Date:  2018–12 
URL:  http://d.repec.org/n?u=RePEc:hal:wpaper:halshs01944314&r=all 
By:  Güth, Werner; Stadler, Manfred; Zaby, Alexandra 
Abstract:  In a capacitythenpricesetting game we experimentally identify capacity precommitment, the possibility to communicate before price choices, and prior competition experience as crucial factors for collusive pricing. The theoretical analysis determines the capacity thresholds above which firms have an incentive to coordinate on higher prices. The experimental data reveals that such intraplay communication after capacity but before price choices has a collusive effect only for capacity levels exceeding these thresholds. Subjects with high capacities generally choose higher prices when they have the possibility to communicate. Asymmetry in capacity choices decreases the truthfulness of price messages as well as the probability to coordinate on the same price. 
Keywords:  capacitythenprice competition,excessive capacities,cheap talk,intraplay communication,collusion,experimental economics 
JEL:  C72 C91 L1 
Date:  2018 
URL:  http://d.repec.org/n?u=RePEc:zbw:tuewef:114&r=all 
By:  Raghul Venkatesh (AMSE  AixMarseille Sciences Economiques  EHESS  École des hautes études en sciences sociales  AMU  Aix Marseille Université  ECM  Ecole Centrale de Marseille  CNRS  Centre National de la Recherche Scientifique) 
Abstract:  Information sharing to achieve a foreign policy objective is an important feature of modern day alliances between countries. We develop a model of strategic communication to study information aggregation within an alliance. In an alliance, i) there is public communication (cheap talk) of private information by members; ii) the actions of players are strategic substitutes; iii) there are resource constraints on actions; and, iv) members have heterogeneous preferences over final outcomes. Our analysis uncovers a novel incentive for information aggregation – the extent of resource constraints on alliance members. Specifically, truthful information sharing depends on the size of bounds on each players' action space. We show that public communication protocol can support information aggregation as long as preferences of alliance members are sufficiently cohesive with respect to the bounds on actions. We derive a precise characterization of cohesiveness within an alliance as a function of the biases and the resource constraints of alliance members. Further, our theory provides an informational rationale for alliance formation between countries. 
Date:  2018–12 
URL:  http://d.repec.org/n?u=RePEc:hal:wpaper:halshs01962197&r=all 
By:  Alex Garivaltis 
Abstract:  This paper studies a twoperson trading game in continuous time that generalizes Garivaltis (2018) to allow for stock prices that both jump and diffuse. Analogous to Bell and Cover (1988) in discrete time, the players start by choosing fair randomizations of the initial dollar, by exchanging it for a random wealth whose mean is at most 1. Each player then deposits the resulting capital into some continuouslyrebalanced portfolio that must be adhered to over $[0,t]$. We solve the corresponding `investment $\phi$game,' namely the zerosum game with payoff kernel $\mathbb{E}[\phi\{\textbf{W}_1V_t(b)/(\textbf{W}_2V_t(c))\}]$, where $\textbf{W}_i$ is player $i$'s fair randomization, $V_t(b)$ is the final wealth that accrues to a one dollar deposit into the rebalancing rule $b$, and $\phi(\bullet)$ is any increasing function meant to measure relative performance. We show that the unique saddle point is for both players to use the (leveraged) Kelly rule for jump diffusions, which is ordinarily defined by maximizing the asymptotic almostsure continuouslycompounded capital growth rate. Thus, the Kelly rule for jump diffusions is the correct behavior for practically anybody who wants to outperform other traders (on any time frame) with respect to practically any measure of relative performance. 
Date:  2018–12 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1812.04603&r=all 
By:  Viehmann, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Lorenczik, Stefan (IEA); Malischek, Raimund (IEA) 
Abstract:  There is an ongoing debate on the appropriate auction design for competitive electricity balancing markets. Uniform (UPA)and discriminatory price auctions (DPA), the prevalent designs in use today, are assumed to have different properties with regard to prices and effciencies. These properties cannot be thoroughly described using analytical methods due to the complex strategy space in repeated multiunit multiple bid auctions. Therefore, using an agentbased Qlearning model, we simulate the strategic bidding behaviour in these auctions under a variety of market conditions. We find that UPAs lead to higher prices in all analysed market settings. This is mainly due to the fact that players engage in bid shading more aggressively. Moreover, small players in UPAs learn to free ride on the price setting of large players and learn higher profits per unit of capacity owned, while they are disadvantaged in DPAs. UPAs also generally feature higher effciencies, but there are exceptions to this observation. If demand is varying and players are provided with additional information about scarcity in the market, market prices increase only in case asymmetric players are present. 
Keywords:  Agentbased computational economics; Auction design; Electricity markets 
JEL:  C63 D43 D44 L94 
Date:  2018–12–18 
URL:  http://d.repec.org/n?u=RePEc:ris:ewikln:2018_003&r=all 
By:  Dongshuang Hou (Department of Applied Mathematics [Twente]  University of Twente [Netherlands]); Aymeric Lardon (GREDEG  Groupe de Recherche en Droit, Economie et Gestion  UNS  Université Nice Sophia Antipolis  UCA  Université Côte d'Azur  CNRS  Centre National de la Recherche Scientifique); Panfei Sun; Theo Driessen (Department of Applied Mathematics [Twente]  University of Twente [Netherlands]) 
Date:  2018–11–22 
URL:  http://d.repec.org/n?u=RePEc:hal:wpaper:halshs01931224&r=all 
By:  Claude Meidinger (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS  Centre National de la Recherche Scientifique) 
Abstract:  Whether there is a preexisting common "language" that ties down the literal meanings of cheap talk messages or not is a distinction plainly important in practice. But it is assumed irrelevant in traditional game theory because it affects neither the payoff structure nor the theoretical possibilities for signaling. And when in experiments the "commonlanguage" assumption is simplicitly implemented, such situations ignore the metacoordination problem created by communication. Players must coordinate their beliefs on what various messages mean before they can use messages to coordinate on what to do. Using simulations with populations of artificial agents, the paper investigates the way according to which a common meaning can be constituted through a collective process of learning and compares the results thus obtained with those available in some experiments. 
Abstract:  Le fait de savoir s'il existe ou non un « langage » commun préexistant qui détermine les significations littérales des messages cheap talk est manifestement important en pratique. Cependant ce fait est considéré comme non pertinent dans la théorie traditionnelle des jeux car il n'affecte ni la structure des gains ni les possibilités théoriques de signaler. Et quand dans les expériences l'hypothèse d'un « langage commun » est implicitement implémentée, de telles situations ignorent le problème de métacoordination créé par la communication. Les joueurs doivent coordonner leurs croyances sur ce que signifient les différents messages avant d'utiliser les messages pour coordonner leurs actions. A l'aide de simulations au sein de populations d'agents artificiels, ce papier étudie la manière selon laquelle une signification commune de messages peut se constituer dans le cadre d'un processus collectif de learning et compare les résultats obtenus avec ceux résultant d'expériences. 
Keywords:  Experimental Economics,Computational Economics,Signaling games,Economie expérimentale,Economie computationnelle,Jeux avec communication 
Date:  2018–12 
URL:  http://d.repec.org/n?u=RePEc:hal:cesptp:halshs01960762&r=all 
By:  Hollenbeck, Brett 
Abstract:  The relationship between mergers and the long run rate of innovation is an open question in antitrust economics. I develop a framework to examine this in a dynamic oligopoly model with endogenous investment, entry, exit and horizontal mergers. Firms produce vertically differentiated goods and may merge with rival firms to gain market power and potentially increase the quality of their product. I extend previous work on dynamic mergers by allowing for products differentiated on quality with competition in prices and an endogenous long run rate of innovation. In equilibrium, horizontal mergers are almost entirely harmful to consumers in the short run, but the prospect of a buyout creates a powerful incentive for firms to preemptively enter the industry and invest to make themselves an attractive merger partner. The result is significantly higher rate of innovation with mergers than without and significantly higher longrun consumer welfare as well. Further results explore the circumstances under which this result is likely to hold. In order for the long run increase in innovation to outweigh the short run harm to consumers caused by mergers, entry costs must be low, entrants and incumbents must both have the ability to innovate rapidly, and the degree of horizontal product differentiation must be low. Alternatively, when mergers can generate innovation directly by allowing firms to combine their products they typically benefit consumers in both the short run and long run. 
Keywords:  Mergers, Antitrust, innovation, dynamic oligopoly 
JEL:  L13 L40 O3 
Date:  2018–12–19 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:90764&r=all 
By:  Dongshuang Hou (Department of Applied Mathematics [Twente]  University of Twente [Netherlands]); Aymeric Lardon (GREDEG  Groupe de Recherche en Droit, Economie et Gestion  UNS  Université Nice Sophia Antipolis  UCA  Université Côte d'Azur  CNRS  Centre National de la Recherche Scientifique); Panfei Sun; Hao Sun (National University of Defense Technology [Changsha]) 
Date:  2018–11–22 
URL:  http://d.repec.org/n?u=RePEc:hal:wpaper:halshs01930832&r=all 
By:  Diego d'Andria (European Commission  JRC) 
Abstract:  We extend the theory of tax incidence under CournotNash oligopolistic competition to study the effects of an ad valorem sales tax on Web services (socalled Web Tax) that are provided free of charge to users, and produce advertising space sold to businesses. Ads are more valuable to advertisers the more users are served by a Web service. Users have adsneutral preferences and Web companies compete in a CournotNash fashion on the advertising market but enjoy monopolistic power in the service market they serve. We demonstrate that, contrary to standard theoretical results, the equilibrium market price might be reduced by a Web Tax. The conditions for such a decrease depend upon the elasticity of ads demand. 
Keywords:  Web tax, digital advertising, Cournot competition, tax incidenceâ€¦ 
JEL:  D43 H2 L13 
Date:  2018–12 
URL:  http://d.repec.org/n?u=RePEc:ipt:taxref:201809&r=all 