nep-gth New Economics Papers
on Game Theory
Issue of 2019‒02‒04
33 papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. An elementary axiomatization of the Nash equilibrium concept By Voorneveld, Mark
  2. Two Stage 2 × 2 Games With Strategic Substitutes and Strategic Heterogeneity By Tarun Sabarwal; Hao VuXuan
  3. Nonzero-Sum Submodular Monotone-Follower Games. Existence and Approximation of Nash Equilibria By Dianetti, Jodi; Ferrari, Giorgio
  4. Monotone Global Games By Eric J. Hoffmann; Tarun Sabarwal
  5. Epistemic Game Theory without Types Structures: An Application to Psychological Games By Pierpaolo Battigalli; Roberto Corrao; Federico Sanna
  6. Repetition and cooperation: A model of finitely repeated games with objective ambiguity By Demeze-Jouatsa, Ghislain-Herman
  7. A complete folk theorem for finitely repeated games By Demeze-Jouatsa, Ghislain-Herman
  8. Strategic cautiousness as an expression of robustness to ambiguity By Gabriel Ziegler; Peio Zuazo-Garin
  9. A Theory of Auctions with Endogenous Valuations By Benny Moldovanu; Alex Gershkov; Philipp Strack
  10. Dynamic Consistency in Incomplete Information Games with Multiple Priors By Pahlke, Marieke
  11. A Noncooperative Model of Contest Network Formation By Kenan Huremovic
  12. Skewed Information Transmission By Francesc Dilmé
  13. A note on †Necessary and sufficient conditions for the perfect finite horizon folk theorem†[Econometrica, 63 (2): 425-430, 1995.] By Demeze-Jouatsa, Ghislain-Herman
  14. Optimization-Based Algorithm for Evolutionarily Stable Strategies against Pure Mutations By Sam Ganzfried
  15. Relevant Decision Problems and Value of Information By Lily Ling Yang
  16. Managing Competition on a Two-Sided Platform By Paul Belleflamme; Martin Peitz
  17. All-Pay Oligopolies: Price Competition with Unobservable Inventory Choices By Joao Montez; Nicolas Schutz
  18. Sweet Lemons: Mitigating Collusion in Organizations By Colin von Negenborn; Martin Pollrich
  19. An Aggregative Games Approach to Merger Analysis in Multiproduct-Firm Oligopoly By Volker Nocke; Nicolas Schutz
  20. Risk prevention of land flood: A cooperative game theory approach. By Álvarez, Xana; Gómez-Rúa, María; Vidal-Puga, Juan
  21. Polarization in Strategic Networks By Steven Kivinen
  22. Timing of R&D Decisions and Output Subsidies in a Mixed Duopoly with Spillovers By Lee, Sang-Ho; Muminov, Timur; Chen, Jiaqi
  23. On the convexity of preferences in decisions and games under (quasi-)convex/concave imprecise probability correspondences By Giuseppe De Marco
  24. Cheap talk, monitoring and collusion By David Spector
  25. Labor Market Search, Informality, and On-The-Job Human Capital Accumulation By Bobba, Matteo; Flabbi, Luca; Levy Algazi, Santiago; Tejada, Mauricio
  26. Relational Communication By Anton Kolotilin; Hongyi Li
  27. Do Coalitions Matter in Designing Institutions? By Korpela, Ville; Lombardi, Michele; Vartiainen, Hannu
  28. Expectation Formation and Learning in the Labour Market with On-the-Job Search and Nash Bargaining By Damdinsuren, Erdenebulgan; Zaharieva, Anna
  29. Auctions with selective entry By Gentry, Matthew; Li, Tong; Lu, Jingfeng
  30. English versus Vickrey auctions with loss averse bidders By von Wangenheim, Jonas
  31. Platform Competition: Who Benefits from Multihoming? By Paul Belleflamme; Martin Peitz
  32. Lawyer Fee Arrangements and Litigation Outcomes: An Auction-Theoretic Perspective By Yannick Gabuthy; Pierre-Henri Morand
  33. The Folk Rule for Minimum Cost Spanning Tree Problems with Multiple Sources By Bergantiños, Gustavo; Chun, Youngsub; Lee, Eunju; Lorenzo, Leticia

  1. By: Voorneveld, Mark (Dept. of Economics)
    Abstract: For strategic games, the Nash equilibrium concept is axiomatized using three properties: (i) if the difference between two games is `strategically irrelevant', then their solutions are the same; (ii) if a player has a strategy with a constant payoff, this player need not settle for less in any solution of the game; (iii) if all players agree that a certain strategy profile is optimal, then this strategy profile is a solution of the game.
    Keywords: Nash equilibrium; axiomatization; solution concept
    JEL: C72
    Date: 2019–01–14
  2. By: Tarun Sabarwal (Department of Economics, University of Kansas); Hao VuXuan (Department of Economics, The University of Kansas)
    Abstract: Feng and Sabarwal (2018) show that there is additional scope to study strategic complements in extensive form games, by investigating in detail the case of two stage, 2×2 games. We show the same for two stage, 2 × 2 games with strategic substitutes and with strategic heterogeneity. We characterize strategic substitutes and strategic heterogeneity in such games, and show that the set of each class of games has infinite Lebesgue measure. Our conditions are easy to apply and yield uncountably many examples of such games, indicating greater possibilities for the manifestation and study of these types of interactions. In contrast to the case for strategic complements, we show that generically, the set of subgame perfect Nash equilibria in both classes of games is totally unordered (no two equilibria are comparable). Consequently, with multiple equilibria, some nice features of strategic complements that depend on the complete lattice structure of the equilibrium set may not transfer to the case of strategic substitutes or strategic heterogeneity.
    Keywords: Strategic substitutes, strategic complements, strategic heterogeneity, two stage game, extensive form game
    JEL: C60 C70
    Date: 2018–12
  3. By: Dianetti, Jodi (Center for Mathematical Economics, Bielefeld University); Ferrari, Giorgio (Center for Mathematical Economics, Bielefeld University)
    Abstract: We consider a class of N-player stochastic games of multi-dimensional singular control, in which each player faces a minimization problem of monotone-follower type with submodular costs. We call these games monotone-follower games. In a not necessarily Markovian setting, we establish the existence of Nash equilibria. Moreover, we introduce a sequence of approximating games by restricting, for each n ∈ ℕ, the players' admissible strategies to the set of Lipschitz processes with Lipschitz constant bounded by n. We prove that, for each n ∈ ℕ, there exists a Nash equilibrium of the approximating game and that the sequence of Nash equilibria converges, in the Meyer-Zheng sense, to a weak (distributional) Nash equilibrium of the original game of singular control. As a byproduct, such a convergence also provides approximation results of the equilibrium values across the two classes of games. We finally show how our results can be employed to prove existence of open-loop Nash equilibria in an N-player stochastic differential game with singular controls, and we propose an algorithm to determine a Nash equilibrium for the monotone-follower game.
    Keywords: nonzero-sum games, singular control, submodular games, Meyer-Zheng topology, maximum principle, Nash equilibrium, stochastic differential games, monotone-follower problem.
    Date: 2019–01–09
  4. By: Eric J. Hoffmann (Department of Accounting, Economics and Finance, West Texas A&M University); Tarun Sabarwal (Department of Economics, The University of Kansas)
    Abstract: We extend the global games method to finite player, finite action, monotone games. These games include games with strategic complements, games with strategic substitutes, and arbitrary combinations of the two. Our result is based on common order properties present in both strategic complements and substitutes, the notion of p-dominance, and the use of dominance solvability as the solution concept. In addition to being closer to the original arguments in Carlsson and van Damme (1993), our approach requires fewer additional assumptions. In particular, we require only one dominance region, and no assumptions on state monotonicity, or aggregative structure, or overlapping dominance regions. As expected, the p-dominance condition becomes more restrictive as the number of players increases. In cases where the probabilistic burden in belief formation may be reduced, the p-dominance condition may be relaxed as well. We present some examples that are not covered by existing results.
    Keywords: Global games, strategic complements, strategic substitutes, monotone games, equilibrium selection
    JEL: C70 C72
    Date: 2018–12
  5. By: Pierpaolo Battigalli; Roberto Corrao; Federico Sanna
    Abstract: We consider multi-stage games with incomplete information and observable actions, and we analyze strategic reasoning by means of epistemic events within a total state space made of all the pro les of behaviors (paths of play) and possibly incoherent in nite hierarchies of conditional beliefs. Thus, we do not rely on types structures, or similar epistemic models. Subjective rationality is de ned by the conjunction of coherence of belief hierarchies, rational planning, and consistency between plan and on-path behavior. Since consistent hierarchies uniquely induce beliefs about behavior and belief hierarchies of others, we can de ne rationality and common strong belief in rationality, and analyze their behavioral and low-order beliefs implications, which are characterized by strong rationalizability. Our approach allows to extend known techniques to the epistemic analysis of psychological games where the utilities of outcomes depend on beliefs of order k or lower. This covers almost all applications of psychological game theory. JEL Classification Numbers: C72, C73, D82. Keywords: Epistemic game theory, belief hierarchies, consistency, subjective rationality, strong rationalizability, psychological games.
    Date: 2019
  6. By: Demeze-Jouatsa, Ghislain-Herman (Center for Mathematical Economics, Bielefeld University)
    Abstract: In this paper, we present a model of finitely repeated games in which players can strategically make use of objective ambiguity. In each round of a finite rep- etition of a finite stage-game, in addition to the classic pure and mixed actions, players can employ objectively ambiguous actions by using imprecise probabilistic devices such as Ellsberg urns to conceal their intentions. We find that adding an infinitesimal level of ambiguity can be enough to approximate collusive payoffs via subgame perfect equi- librium strategies of the finitely repeated game. Our main theorem states that if each player has many continuation equilibrium payoffs in ambiguous actions, any feasible pay- off vector of the original stage-game that dominates the mixed strategy maxmin payoff vector is (ex-ante and ex-post) approachable by means of subgame perfect equilibrium strategies of the finitely repeated game with discounting. Our condition is also necessary.
    Keywords: Objective Ambiguity, Ambiguity Aversion, Finitely Repeated Games, Subgame Perfect Equilibrium, Ellsberg Urns, Ellsberg Strategies
    Date: 2018–08–13
  7. By: Demeze-Jouatsa, Ghislain-Herman (Center for Mathematical Economics, Bielefeld University)
    Abstract: I analyze the set of pure strategy subgame perfect Nash equilibria of any finitely repeated game with complete information and perfect monitoring. The main result is a complete characterization of the limit set, as the time horizon increases, of the set of pure strategy subgame perfect Nash equilibrium payoff vectors of the finitely repeated game. The same method can be used to fully characterize the limit set of the set of pure strategy Nash equilibrium payoff vectors of any the finitely repeated game.
    Keywords: Finitely Repeated Games, Pure Strategy, Subgame Perfect Nash Equilibrium, Limit Perfect Folk Theorem, Discount Factor
    Date: 2018–08–13
  8. By: Gabriel Ziegler; Peio Zuazo-Garin
    Abstract: Economic predictions often hinge on two intuitive premises: agents rule out the possibility of others choosing unreasonable strategies (‘strategic reasoning’), and prefer strategies that hedge against unexpected behavior (‘cautiousness’). These two premises conflict and this undermines the compatibility of usual economic predictions with reasoning-based foundations. This paper proposes a new take on this classical tension by interpreting cautiousness as robustness to ambiguity. We formalize this via a model of incomplete preferences, where (i) each player’s strategic uncertainty is represented by a possibly non-singleton set of beliefs and (ii) a rational player chooses a strategy that is a best-reply to every belief in this set. We show that the interplay between these two features precludes the conflict between strategic reasoning and cautiousness and therefore solves the inclusion-exclusion problem raised by Samuelson (1992). Notably, our approach provides a simple foundation for the iterated elimination of weakly dominated strategies
    Keywords: Game theory, decision theory, ambiguity, Knightian uncertainty, incomplete preferences, Bayesian rationality, cautiousness, iterated admissibility
    JEL: C72 D82
    Date: 2019–01
  9. By: Benny Moldovanu; Alex Gershkov; Philipp Strack
    Abstract: We study the revenue maximizing allocation of m units among n symmetric agents that have unit demand and convex preferences over the probability of receiving an object. Such preferences are naturally induced by a game where the agents take costly actions that affect their values before participating in the mechanism. Both the uniform m + 1 price auction and the discriminatory pay-your-bid auction with reserve prices constitute symmetric revenue maximizing mechanisms. Contrasting the case with linear preferences, the optimal reserve price reacts to both demand and supply, i.e., it depends both on the number of objects m and on number of agents n. The main tool in our analysis is an integral inequality involving majorization, super-modularity and convexity due to Fan and Lorentz (1954).
    Keywords: revenue maximization, endogenous values , investments, majorization
    JEL: D44
    Date: 2018–07
  10. By: Pahlke, Marieke (Center for Mathematical Economics, Bielefeld University)
    Abstract: This paper generalizes the concept of Sequential Equilibrium to allow for ambiguous incomplete information about types or states. We characterize conditions that ensure existence of Sequential Equilibria under ambiguous incomplete information. Under these conditions players form subjective prior belief sets that satisfy a rectangularity condition which leads to dynamically consistent behavior. Furthermore, we give an example which shows that ambiguity can introduce new Sequential Equilibria.
    Keywords: sequential equilibrium, ambiguity, dynamic consistency, multiple priors, imprecise information
    Date: 2018–08–20
  11. By: Kenan Huremovic
    Abstract: In this paper we study a model of weighted network formation. The bilateral interaction is modeled as a transfer Tullock contest game with the possibility of a draw. We describe stable networks under different concepts of stability. We show that a non-empty Nash stable is the complete network. The complete network is not immune to bilateral deviations. When we allow for limited farsightedness, stable networks immune to bilateral deviations must be complete $M$-partite networks, with partitions of different sizes. The empty network is the efficient network. We provide several novel comparative statics results illustrating the importance of the network structure in mediating the effects of shocks and interventions. In particular we show that an increase in the likelihood of a draw may lead to both higher and lower rent dissipation depending on the network structure. We also describe how small shocks propagate through a contest network. To the best of our knowledge, this paper is the first attempt to model weighted network formation when the bilateral interaction with local negative externalities such that the actions of individuals are neither complements nor substitutes.
    Date: 2019–01
  12. By: Francesc Dilmé
    Abstract: This paper analyzes strategic information transition between skewed agents. More concretely, we study the Crawford and Sobel (1982) setting in the case where agents are not biased, but they differ on the relative importance they put on avoiding "upward" or "downward" mistakes. We show that, even though the agents could fully communicate when the state of the world was perfectly observed by the sender, the information transmission is significantly imprecise in any equilibrium when there is a small noise in the observation. Hence, contrary to what was previous thought, a low objective misalignment is not sufficient for precise equilibrium communication.
    Keywords: Strategic Communication, Skewed Preferences
    JEL: C72 D82 D83
    Date: 2018–07
  13. By: Demeze-Jouatsa, Ghislain-Herman (Center for Mathematical Economics, Bielefeld University)
    Abstract: Smith (1995) presented a necessary and sufficient condition for the finite- horizon perfect folk theorem. In the proof of this result, the author constructed a family of five-phase strategy profiles to approach feasible and individually rational payoff vec- tors of the stage-game. These strategy profiles are not subgame perfect Nash equilibria of the finitely repeated game. I illustrate this fact with a counter-example. However, the characterization of attainable payoff vectors by Smith remains true. I provide an alternative proof.
    Keywords: Finitely Repeated Games, Subgame Perfect Nash Equilibrium, Folk Theorem, Discount Factor
    Date: 2018–08–13
  14. By: Sam Ganzfried
    Abstract: Evolutionarily stable strategy (ESS) is an important solution concept in game theory which has been applied frequently to biological models. Informally an ESS is a strategy that if followed by the population cannot be taken over by a mutation strategy that is initially rare. Finding such a strategy has been shown to be difficult from a theoretical complexity perspective. We present an algorithm for the case where mutations are restricted to pure strategies, and present experiments on several game classes including random and a recently-proposed cancer model. Our algorithm is based on a mixed-integer non-convex feasibility program formulation, which constitutes the first general optimization formulation for this problem. It turns out that the vast majority of the games included in the experiments contain ESS with small support, and our algorithm is outperformed by a support-enumeration based approach. However we suspect our algorithm may be useful in the future as games are studied that have ESS with potentially larger and unknown support size.
    Date: 2018–03
  15. By: Lily Ling Yang
    Abstract: In this paper, we employ a novel approach to study the value of information in games. A decision problem is relevant to another if the optimal decision rule of the former, when applied to the latter, is better than making a decision without any information in the latter. In a game, if the problem originally faced by a player is relevant to the problem induced by a change of the situation, the player benefits more from her own information after the change. Using the notion of relevance, we study the value of information in various games, even when a closed form solution is not available.
    Keywords: Value of information, Quadratic game, Global game, Persuasion game
    JEL: D81 D83
    Date: 2018–06
  16. By: Paul Belleflamme; Martin Peitz
    Abstract: On many two-sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition affects platform pricing, product variety, and the number of platforms that carry trade.
    Keywords: Network effects, two-sided markets, platform competition, intermediation, pricing, imperfect competition
    JEL: D43 L13 L86
    Date: 2018–07
  17. By: Joao Montez; Nicolas Schutz
    Abstract: We study a class of games where stores source unobservable inventories in advance, and then simultaneously set prices. Our framework allows for firm asymmetries, heterogeneous consumer tastes, endogenous consumer information through advertising, and salvage values for unsold units. The payoff structure relates to a complete-information all-pay contest with outside options, non-monotonic winning and losing functions, and conditional investments. In the generically unique equilibrium, stores randomize their price choice and, conditional on that choice, serve all their targeted demand—thus, some inventories may remain unsold. As inventory costs become fully recoverable, the equilibrium price distribution converges to an equilibrium of the associated Bertrand game (where firms first choose prices and then produce to order). This suggests that with production in advance, the choice between a Cournot analysis and a Bertrand-type analysis, as properly generalized in this paper, should depend on whether or not stores observe rivals’ inventories before setting prices.
    Keywords: Oligopoly, inventories, production in advance, all-pay contests, Bertrand convergence
    JEL: L13 D43
    Date: 2018–05
  18. By: Colin von Negenborn; Martin Pollrich
    Abstract: This paper shows that the possibility of collusion between an agent and a supervisor imposes no restrictions on the set of implementable social choice functions (SCF) and associated payoff vectors. Any SCF and any payoff profile that are implementable if the supervisor’s information was public is also implementable when this information is private and collusion is possible. To implement a given SCF we propose a one-sided mechanism that endogenously creates private information for the supervisor vis-Ã -vis the agent, and conditions both players’ payoffs on this endogenous information. We show that in such a mechanism all collusive side-bargaining fails, similar to the trade failure in Akerlof’s (1970) car market and in models of bilateral trade.
    Keywords: Mechanism Design, Collusion, Asymmetric Information, Correlation
    JEL: D82 D83 L51
    Date: 2018–05
  19. By: Volker Nocke; Nicolas Schutz
    Abstract: Using an aggregative games approach, we analyze horizontal mergers in a model of multiproduct-firm price competition with nested CES or nested logit demands. We show that the Herfindahl index provides an adequate measure of the welfare distortions introduced by market power, and that the induced change in the naively-computed Herfindahl index is a good approximation for the market power effect of a merger. We also provide conditions under which a merger raises consumer surplus, and conditions under which a myopic, consumer-surplus-based merger approval policy is dynamically optimal. Finally, we study the aggregate surplus and external effects of a merger.
    Date: 2018–06
  20. By: Álvarez, Xana; Gómez-Rúa, María; Vidal-Puga, Juan
    Abstract: Protection against flood risks becomes increasingly difficult for economic and hydrological reasons. Therefore, it is necessary to improve water retention throughout catchment with a more comprehensive approach. Strategies in the land use and measures that are designed to prevent flood risks involve land owners. So, justice issues appear. This paper studies the application of game theory through a cooperative game in order to contribute the resolution of possible agreements among owners and to establish cost / benefit criteria. It is a methodological contribution where land use management for flood retention is analyzed. Specifically, we concentrate on enhancing upstream water retention focusing on the role that forests have as natural water retention measures. This study shows a framework for allocating the compensations among participants based on cooperative game theory and taking into account a principle of stability. We show that it is possible to establish distribution rules that encourage stable payments among land owners. This contribution shows the suitability of this method as a flood risk management tool and as a guide to help decision-making. Compensations and benefits could be established to raise awareness and encourage land owners to cooperate.
    Keywords: game theory, land management, flood mitigation, land use, compensations, decision-making.
    JEL: C7
    Date: 2019
  21. By: Steven Kivinen (Department of Economics, Dalhousie University)
    Abstract: A model of social learning and strategic network formation is developed with distance-based utility and cognitive dissonance. For intermediate costs, stable networks exhibit realistic properties and belief polarization increases with small increases in available information.
    Keywords: Social Learning; Network Formation; Cooperative Games
    Date: 2017–02–10
  22. By: Lee, Sang-Ho; Muminov, Timur; Chen, Jiaqi
    Abstract: This study considers a mixed duopoly with research spillovers and examines the interplay between firms’ R&D decisions and government’s output subsidies. We investigate and compare the timing of the game between ex-ante R&D and ex-post R&D decisions where the R&D decisions are chosen before the output subsidy is determined in the former case while the order is reversed in the latter case. We show that the equilibrium outcomes can be opposite between the two cases because both public and private firms have different objectives in choosing R&D investments, but the spillovers rate is a key factor that determines their incentives. In particular, we show that the output subsidy is smaller (larger) and the welfare is larger (smaller) under the ex-ante R&D decisions for a higher (lower) degree of spillovers rate. Finally, privatization increases the welfare in both cases only when spillovers rate is weak.
    Keywords: Mixed duopoly; Research spillovers, Ex-ante R&D; Ex-post R&D, Output subsidy
    JEL: H21 L13 L32
    Date: 2019–01–14
  23. By: Giuseppe De Marco (Università di Napoli Parthenope and CSEF)
    Abstract: The Shafer and Sonnenshein convexity of preferences is a key property in game theory. Previous research has shown that, in case of decisions under uncertainty, the compliance with this property (jointly) depends on the concavity/convexity of the imprecise probabi- listic model with respect to the decision variable and on the attitudes towards imprecision of the decision maker. The present paper deepens the analysis by looking at set-valued imprecise probabilistic models that encompass sets of probability distributions and sets of almost desirable gambles. Moreover, it is shown that the required Shafer and Sonnenshein convexity property is obtained also in case the imprecise probability correspondences satisfy quasi-concavity/convexity with respect to the decision variable so that the set of admissible probabilistic models is significantly broadened. It is well known that sets of probability distributions and sets of almost desirable gambles are general models of representation of uncertainty that are connected to each other; moreover, they are both related to another model known as lower expectation. Therefore, the second part of this work explores the links between the (quasi-)concavity/convexity properties accross the three different models so as to understand to what extent the Shafer and Sonnenshein convexity results hold.
    Keywords: Convex preferences, Imprecise probabilities, quasi-concavity/convexity, set-valued maps
    Date: 2019–01–15
  24. By: David Spector (PSE - Paris School of Economics, CNRS - Centre National de la Recherche Scientifique)
    Abstract: Many collusive agreements involve the exchange of self-reported sales data between competitors, which use them to monitor compliance with a target market share allocation. Such communication may facilitate collusion even if it is unverifiable cheap talk and the underlying information becomes publicly available with a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocation mechanisms after unexpected swings, limiting the recourse to price wars. Such communication may allow firms to earn profits that could not be earned in any collusive, symmetric pure-strategy equilibrium without communication.
    Date: 2017–12
  25. By: Bobba, Matteo (Toulouse School of Economics); Flabbi, Luca (University of North Carolina, Chapel Hill); Levy Algazi, Santiago (Inter-American Development Bank); Tejada, Mauricio (Universidad Alberto Hurtado)
    Abstract: We develop a search and matching model where firms and workers produce output that depends both on match-specific productivity and on worker-specific human capital. The human capital is accumulated while working but depreciates while searching for a job. Jobs can be formal or informal and firms post the formality status. The equilibrium is characterized by an endogenous steady state distribution of human capital and by an endogenous formality rate. The model is estimated on longitudinal labor market data for Mexico. Human capital accumulation on-the-job is responsible for more than half of the overall value of production and upgrades more quickly while working formally than informally. Policy experiments reveal that the dynamics of human capital accumulation magnifies the negative impact on productivity of the labor market institutions that give raise to informality.
    Keywords: labor market frictions, search and matching, Nash bargaining, informality, on-the-job human capital accumulation
    JEL: J24 J3 J64 O17
    Date: 2019–01
  26. By: Anton Kolotilin; Hongyi Li
    Abstract: We study a communication game between an informed sender and an uninformed receiver with repeated interactions and voluntary transfers. Transfers motivate the receiver's decision-making and signal the sender's information. Although full separation can always be supported in equilibrium, partial or complete pooling is optimal if the receiver's decision-making is highly responsive to information. In this case, the receiver's decision-making is disciplined by pooling extreme states, where she is most tempted to defect. In characterizing optimal equilibria, we establish new results on monotone persuasion.
    Date: 2019–01
  27. By: Korpela, Ville; Lombardi, Michele; Vartiainen, Hannu
    Abstract: In this paper, we re-examine the classical questions of implementation theory under complete information in a setting where coalitions are the fundamental behavioral units and the outcomes of their interactions are predicted by applying the solution concept of the core. The planner's exercise consists of designing a code of rights, which specifies the collection of coalitions that have the right to block one outcome by moving to another. A code of individual rights is a code of rights in which only unit coalitions may have blocking powers. We provide necessary and sufficient conditions for implementation (under core equilibria) by codes of rights as well as by codes of individual rights. We show that these two modes of implementation are not equivalent. This result is proven robust and extends to alternative notions of core, such as that of an externally stable core. Therefore, coalitions are shown to bring value added to institutional design. The characterization results address the limitations that restrict the relevance of existing implementation theory.
    Keywords: core; implementation; blocking powers
    JEL: C71 D70
    Date: 2019–01–10
  28. By: Damdinsuren, Erdenebulgan (Center for Mathematical Economics, Bielefeld University); Zaharieva, Anna (Center for Mathematical Economics, Bielefeld University)
    Abstract: This paper develops a search and matching model with heterogeneous firms, on-the-job search by workers, Nash bargaining over wages and adaptive learning. We assume that workers are boundedly rational in the sense that they do not have perfect foresight about the outcome of wage bargaining. Instead workers use a recursive OLS learning mechanism and base their forecasts on the linear wage regression with the firm's productivity and worker's current wage as regressors. For a restricted set of parameters we show analytically that the Nash bargaining solution in this setting is unique. We embed this solution into the agentbased simulation and provide a numerical characterization of the Restricted Perceptions Equilibrium. The simulation allows us to collect data on productivities and wages which is used for updating workers' expectations. The estimated regression coefficient on productivity is always higher than the bargaining power of workers, but the difference between the two is decreasing as the bargaining power becomes larger and vanishes when workers are paid their full productivity. In the equilibrium a higher bargaining power is associated with higher wages and larger wage dispersion, in addition, the earnings distribution becomes more skewed. Moreover, our results indicate that a higher bargaining power is associated with a lower overall frequency of job-to-job transitions and a lower fraction of inefficient transitions among them. Our results are robust to the shifts of the productivity distribution
    Keywords: On-the-job search, Nash bargaining, OLS learning, inefficient transitions
    Date: 2018–12–18
  29. By: Gentry, Matthew; Li, Tong; Lu, Jingfeng
    Abstract: We consider auctions with entry based on a general analytical framework we call the Arbitrarily Selective (AS) model. We characterize symmetric equilibrium in a broad class of standard auctions within this framework, in the process extending the classic revenue equivalence results of Myerson (1981), Riley and Samuelson (1981) and Levin and Smith (1994) to environments with endogenous and arbitrarily selective entry. We also explore the relationship between revenue maximization and efficiency, showing that a revenue maximizing seller will typically employ both higher-than-efficient reservation prices and higher-than-efficient entry fees.
    JEL: J1
    Date: 2017–09–01
  30. By: von Wangenheim, Jonas
    Abstract: Evidence suggests that people evaluate outcomes relative to expectations. I analyze this expectation-based loss aversion (Köszegi and Rabin (2006, 2009)) in the context of dynamic and static auctions, where the reference point is given by the (endogenous) equilibrium outcome. If agents update their reference point during the auction, the arrival of information crucially affects equilibrium behavior. Consequently, I show that - even with independent private values - the Vickrey auction yields strictly higher revenue than the English auction, violating the well known revenue equivalence. Thus, dynamic loss aversion offers a novel explanation for empirically observed differences between these auction formats.
    Keywords: Vickrey auction,English auction,expectation-based loss aversion,revenue equivalence,dynamic loss aversion,personal equilibrium
    JEL: D03 D44
    Date: 2019
  31. By: Paul Belleflamme; Martin Peitz
    Abstract: Competition between two-sided platforms is shaped by the possibility of multihoming. If initially both sides of platform singlehome, each platform provides users on one side exclusive access to its users on the other side. If then one side multihomes, platforms compete on the singlehoming side and exert monopoly power on the multihoming side. This paper explores the allocative effects of such a change from single- to multihoming. Our results challenge the conventional wisdom, according to which the possibility of multihoming hurts the side that can multihome, while benefiting the other side. This in not always true, as the opposite may happen or both sides may benefit.
    Keywords: Network effects, two-sided markets, platform competition, competitive bottleneck, multihoming
    JEL: D43 L13 L86
    Date: 2018–01
  32. By: Yannick Gabuthy (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Pierre-Henri Morand (LBNC - Laboratoire Biens, Normes, Contrats - UAPV - Université d'Avignon et des Pays de Vaucluse)
    Date: 2019–01–08
  33. By: Bergantiños, Gustavo; Chun, Youngsub; Lee, Eunju; Lorenzo, Leticia
    Abstract: We consider a problem where a group of agents is interested in some goods provided by a supplier with multiple sources. To be served, each agent should be connected directly or indirectly to all sources of the supplier for a safety reason. This problem generalizes the classical minimum cost spanning problem with one source by allowing the possibility of multiple sources. In this paper, we extend the definitions of the folk rule to be suitable for minimal cost spanning tree problems with multiple sources and present its axiomatic characterizations.
    Keywords: minimum cost spanning tree problems, multiple sources, folk rule, axiomatic characterizations.
    JEL: C7
    Date: 2018–11–20

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