nep-gth New Economics Papers
on Game Theory
Issue of 2019‒03‒11
twenty-one papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Games and Network Structures on Corruption, Income Inequality, and Tax Control By Elena Gubar; Edgar Javier Sanchez Carrera; Suriya Kumacheva; Ekaterina Zhitkova; Galina Tomilina
  2. Repeated Games Without Public Randomization: A Constructive Approach By Ani Dasgupta; Sambuddha Ghosh
  3. A Full Characterization of Best-Response Functions in the Lottery Colonel Blotto Game* By Dan Kovenock; David Rojo Arjona
  4. Analysis of Approval Voting in Poisson Games By François Durand; Antonin Macé; Matias Nunez
  5. Limiting Sender’s Information in Bayesian Persuasion By Shota Ichihashi
  6. Resource location games By Schlicher, L.P.J.; Musegaas, M.; Westerink-Duijzer, L.E.
  7. The Joint Network Vehicle Routing Game By van Zon, M.; Spliet, R.; van den Heuvel, W.
  8. Behavioral Theory of Repeated Prisoner’s Dilemma: Generous Tit-For-Tat Strategy By Hitoshi Matsushima
  9. On the evolution of individual preferences and family rules By Alessandro Cigno; Alessandro Gioffré; Annalisa Luporini
  10. Multi-battle contests, finite automata, and the tug-of-war By Christian Ewerhart; Julian Teichgräber
  11. Random Matching under Priorities: Stability and No Envy Concepts By Haris Aziz; Bettina Klaus
  12. Promoting socially desirable behaviors: experimental comparison of the procedures of persuasion and commitment By Cécile Bazart; Mathieu Lefebvre; Julie Rosaz
  13. Mean Field Equilibrium: Uniqueness, Existence, and Comparative Statics By Bar Light; Gabriel Weintraub
  14. Readmission treatment price and product quality in the hospital sector: A note By Cellini, Roberto; Lisi, Domenico
  15. Bid Costs and the (In)efficiency of Public Procurement Auctions By Blomgren-Hansen, Niels
  16. Continuity and Robustness of Bayesian Equilibria in Tullock Contests By Sela, A.; Moreno Ruiz, Diego; Einy, Ezra
  17. The importance of reputation in the auditing of companies: A game theory analysis By Dassiou, X.; Glycopantis, D.
  18. Identifying Bid Leakage In Procurement Auctions: Machine Learning Approach By Dmitry I. Ivanov; Alexander S. Nesterov
  19. Location and research activities organization: Could public/private cooperation be harmful? By Marie-Laure Cabon-Dhersin; Emmanuelle Taugourdeau
  20. Persuading part of an audience By Bruno Salcedo
  21. Optimal Managed Competition Subsidies By Keaton S. Miller; Amil Petrin; Robert Town; Michael Chernew

  1. By: Elena Gubar (Faculty of Applied Mathematics and Control Processes, St. Petersburg State University); Edgar Javier Sanchez Carrera (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Suriya Kumacheva (Faculty of Applied Mathematics and Control Processes, St. Petersburg State University); Ekaterina Zhitkova (Faculty of Applied Mathematics and Control Processes, St. Petersburg State University); Galina Tomilina (Faculty of Applied Mathematics and Control Processes, St. Petersburg State University)
    Abstract: IWe study taxpayers’ decisions according to their personal income, individual preferences with respect to the audit and tax control information perceived in their social environment. We consider that citizens are classified by two social groups, the rich and the poor. When public authorities are corrupt, we show that the poor group is the most affected by corruption. However, when taxpayers are corrupt or tax evaders, we implement mechanisms to audit and control this corrupt behaviour. We show that this situation can be represented by several well-known theoretical games. Then, evolutionary dynamics of the game in networks considering that each taxpayer receives information from his neighbours about the probability of audit is analyzed. Our simulation analysis shows that the initial and final preferences of taxpayers depend on important parameters, i.e. taxes and fines, audit information and costs.
    Keywords: Behavioral economics; Corrupt behavior; Income distribution; Income taxation system; Network Games; Population games
    JEL: C72 C73 O11 O12 O55 K42
    Date: 2018
  2. By: Ani Dasgupta (International Maritime Business Department, Massachusetts Maritime Academy and Economics Department, Boston University.); Sambuddha Ghosh (Economics Group, Shanghai University of Finance and Economics)
    Abstract: We study discounted infinitely repeated games with perfect monitoring and without public randomization. Both symmetric and asymmetric discounting cases are considered; a new geometric construct called ‘self-accessibility’ is proposed and used to unify the analyses of these two cases. For symmetric discounting, our approach leads to easy computability of a discount factor bound needed to support a specific payoff vector in equilibrium. When discounting is allowed to be asymmetric, we show that any payoff vector that is in the interior of the smallest rectangular region containing the pureaction payoffs is realizable in the repeated game. Next, an easily-verifiable condition, ‘strict diagonalizability’, is offered as a sufficient and almost necessary condition for a payoff vector to be an equilibrium payoff for some discount factor vector. ‘Turnpike strategies’ that support a target payoff are explicitly constructed. Our results thus encompass and generalize Fudenberg and Maskin (1986, 1991).
    Keywords: ambiguity, Repeated Games, Public Randomization, Asymmetric Discounting
    Date: 2017–09
  3. By: Dan Kovenock (Economic Science Institute, Chapman University); David Rojo Arjona (Chapman University)
    Abstract: We fully characterize best-response functions in Colonel Blotto games with lottery contest success functions.
    Keywords: Multi-Battle contest, Colonel Blotto game, Contest success function, Best-response, Conflict
    JEL: C61 C72
    Date: 2019
  4. By: François Durand (Nokia Bell Labs [Espoo], LINCS - Laboratory of Information, Network and Communication Sciences - Inria - Institut National de Recherche en Informatique et en Automatique - Institut Mines-Télécom [Paris] - Sorbonne Université); Antonin Macé (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - La plante et son environnement - CNRS - Centre National de la Recherche Scientifique - INA P-G - Institut National Agronomique Paris-Grignon - UP11 - Université Paris-Sud - Paris 11 - INRA - Institut National de la Recherche Agronomique); Matias Nunez (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We analyze Approval Voting in Poisson games endowing voters with private values over three candidates. We firsts how that any stable equilibrium is discriminatory: one candidate is commonly regarded as out of contention. We fully characterize stable equilibria and divide them into two classes. In direct equilibria, best responses depend only on ordinal preferences. In indirect equilibria, preference intensities matter. Counter-intuitively, any stable equilibrium violates the ordering conditions, a set of belief restrictions used to derive early results in the literature. We finally use Monte-Carlo simulations to estimate the prevalence of the different sorts of equilibria and their likelihood to elect a Condorcet winner.
    Keywords: Approval voting,Poisson games,Stable equilibria,Monte-Carlo simulations
    Date: 2019–03
  5. By: Shota Ichihashi
    Abstract: This paper studies how the outcome of Bayesian persuasion depends on a sender’s information. I study a game in which, prior to the sender’s information disclosure, the designer can restrict the most informative signal that the sender can generate. In the binary action case, I consider arbitrary preferences of the designer and characterize all equilibrium outcomes. As a corollary, I solve a problem of how to maximize a receiver’s payoffs by restricting the sender’s information: Whenever the designer can increase the receiver’s payoffs by restricting the sender’s information, the receiver-optimal way coincides with an equilibrium of the game in which the receiver persuades the sender.
    Keywords: Economic models
    JEL: D82 D83
    Date: 2019
  6. By: Schlicher, L.P.J.; Musegaas, M.; Westerink-Duijzer, L.E.
    Abstract: In this paper, we introduce and analyze resource location games. We show core nonemptiness by providing a set of intuitive core allocations, called Resource-Profit allocations. In addition, we present a sufficient condition for which the core and the set of Resource- Profit allocations coincide. Finally, we provide an example showing that when the sufficient condition is not satisfied, the coincidence is not guaranteed.
    Keywords: cooperative game, core, resource-profit allocations, reallocation of resources
    Date: 2019–02–06
  7. By: van Zon, M.; Spliet, R.; van den Heuvel, W.
    Abstract: Collaborative transportation can significantly reduce transportation costs as well as greenhouse gas emissions. However, allocating the cost to the collaborating companies remains difficult. We consider the cost-allocation problem which arises when companies, each with multiple delivery locations, collaborate by consolidating demand and combining delivery routes. We model the corresponding cost-allocation problem as a cooperative game: the joint network vehicle routing game (JNVRG). We propose a row generation algorithm to determine a core allocation for the JNVRG. In this approach, we encounter a row generation subproblem which we model as a new variant of a vehicle routing problem with profits. Moreover, we propose two main acceleration strategies for the row generation algorithm. First, we generate rows by relaxing the row generation subproblem, exploiting the tight LP bounds for our formulation of the row generation subproblem. Secondly, we propose to also solve the row generation subproblem heuristically and to only solve it to optimality when the heuristic fails. We demonstrate the effectiveness of the proposed row generation algorithm and the acceleration strategies by means of numerical experiments for both the JNVRG as well as the traditional vehicle routing game, which is a special case of the JNVRG. We create and solve instances based on benchmark instances of the capacitated vehicle routing problem from the literature, ranging from 5 companies with a total of 79 delivery locations to 53 companies with a total of 53 delivery locations.
    Keywords: Collaborative transportation, Cooperative game theory, Vehicle Routing, Row generation, Vehicle, routing with profits, Branch-and-cut-and-price
    Date: 2019–01–01
  8. By: Hitoshi Matsushima (University of Tokyo)
    Abstract: This study investigates infinitely repeated games of a prisoner’s dilemma with additive separability in which the monitoring technology is imperfect and private. Behavioral incentives indicate that, in this setting, a player is not only motivated by pure self-interest but also by reciprocity. Players often become naïve and select an action unconsciously. By focusing on generous tit-for-tat strategies, we characterize a Nash equilibrium with behavioral incentives, termed behavioral equilibrium, in an accuracy-contingent manner. By eliminating the gap between theory and evidence, this study argues that reciprocity plays a substantial role in motivating a player to consciously make decisions.
    Date: 2019–02
  9. By: Alessandro Cigno; Alessandro Gioffré; Annalisa Luporini
    Abstract: We study how the distribution of an inherited trait evolves through marriage if couples are formed at random. If the matching occurs across the entire population, the variance of the trait tends to diminish, and the distribution converges to a common trait. If the matching is restricted to specific subpopulations, each of these converges to a different trait. This has implications for the consequences of immigration. Using a specific model where the trait is a parameter measuring a person's taste for receiving filial attention (a good without perfect market substitutes) in old age, we also show that it may be in a couple's interest to obey a rule requiring them to give specified amounts of the good to their respective parents. The matching is random in this model because preferences are private monitoring. In the long run, if the matching extends to the entire population, either everybody obeys the rule, or nobody does. In the interim, some do, and some do not. If the matching is restricted to specific ethnic or religious groups, the population will tend to break down into a number of sharply characterized subpopulations. That may undermine social cohesion and call for policy intervention.
    Keywords: Marriage, evolution, random matching, family rule, immigration
    JEL: C78 D13 J12
    Date: 2019
  10. By: Christian Ewerhart; Julian Teichgräber
    Abstract: This paper examines multi-battle contests whose extensive form can be represented in terms of a finite state machine. We start by showing that any contest that satisfies our assumptions decomposes into two phases, a principal phase (in which states cannot be revisited) and a concluding tie-breaking phase (in which all non-terminal states can be revisited). Degenerate cases are the finite-horizon contests on the one hand (e.g., the match race), and the tug-of-war on the other. Next, assuming a probabilistic technology in each battle, we show that any contest satisfying our assumptions, with either finite or infinite horizon, admits a unique symmetric and interior Markov perfect equilibrium. This entails, in particular, a complete characterization of the equilibrium in the tug-of-war. Finally, we explore, both analytically and numerically, the intricate problem of a contest designer that maximizes expected total effort. In the absence of a complexity constraint, the revenue-maximizing contest is always a match race, where the optimal length of the race increases as the technology of the component contest becomes more noisy. If, however, the complexity constraint is binding, then the optimal contest is typically (but not always) a tug-of-war.
    Keywords: Dynamic contests, finite automata, match race, tug-of-war, Markov perfect equilibrium, contest design
    JEL: C62 C63 C72 D72
    Date: 2019–02
  11. By: Haris Aziz; Bettina Klaus
    Abstract: We consider stability concepts for random matchings where agents have preferences over objects and objects have priorities for the agents. When matchings are deterministic, the standard stability concept also captures the fairness property of no (justified) envy. When matchings can be random, there are a number of natural stability / fairness concepts that coincide with stability / no envy whenever matchings are deterministic. We formalize known stability concepts for random matchings for a general setting that allows weak preferences and weak priorities, unacceptability, and an unequal number of agents and objects. We then present a clear taxonomy of the stability concepts and identify logical relations between them.Furthermore, we provide no envy / claims interpretations for some of the stability concepts that are based on a consumption process interpretation of random matchings. Finally, we present a transformation from the most general setting to the most restricted setting, and show how almost all our stability concepts are preserved by that transformation.
    Keywords: Matching Theory; Stability Concepts; Fairness; Random Matching
    JEL: C63 C70 C71 C78
    Date: 2017–07
  12. By: Cécile Bazart (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Mathieu Lefebvre (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); Julie Rosaz (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In a series of experiments, we test the relative efficiency of persuasion and commitment schemes to increase and sustain contribution levels in a Voluntary Contribution Game. The design allows to compare a baseline consisting of a repeated public good game to, respectively, four manipulation treatments relying on: an information strategy, a low commitment strategy, a high commitment strategy and a promise strategy. We confirm the advantages of psychologically orientated policies as they increase the overall level of contribution and for some, that is commitment and promises, question the decreasing trend traditionally observed in long term contributions to public goods.
    Keywords: Experiment,Persuasion,Commitment,Voluntary Contribution Mechanism
    Date: 2018
  13. By: Bar Light; Gabriel Weintraub
    Abstract: The standard solution concept for stochastic games is Markov perfect equilibrium (MPE); however, its computation becomes intractable as the number of players increases. Instead, we consider mean field equilibrium (MFE) that has been popularized in the recent literature. MFE takes advantage of averaging effects in models with a large number of agents. We make three main contributions. First, our main result in the paper provides conditions that ensure the uniqueness of an MFE. Second, we generalize previous MFE existence results. Third, we provide general comparative statics results. We apply our results to dynamic oligopoly models and to heterogeneous agent macroeconomic models commonly used in previous work. We believe our uniqueness result is the first of its nature in the class of models we study.
    Date: 2019–03
  14. By: Cellini, Roberto; Lisi, Domenico
    Abstract: In this paper, we study the effect of readmission treatment payment in a dynamic framework characterised by competition among hospitals and sluggish beliefs of patients concerning the service quality. We find that the effect of readmission treatment payment depends on the interplay between the effect of quality in lowering readmissions and its effect on future demand. When the readmission occurrence strongly depends on the service quality, the higher the readmission treatment payment for hospitals, the lower the incentive to provide quality. Instead, when readmission depends barely on quality, the readmission payment acts as the treatment price for first admissions, and thus it reinforces the incentive to provide quality. We also show that the detrimental effect of readmission payments on quality are fed by a high degree of demand sluggishness, that is, by situation where current quality has modest effect on future demand changes. Our findings are robust to different equilibrium concepts of the differential game (i.e., open-loop and state-feedback). The results suggest that a discounted regulated price for readmission can be an effective (and cost-free) policy tool to improve healthcare quality, especially when the market is characterised by sluggish beliefs about quality.
    Keywords: Readmissions; Hospital quality; Demand sluggishness; Differential game.
    JEL: C73 I11 I18
    Date: 2019–03–01
  15. By: Blomgren-Hansen, Niels (Department of Economics, Copenhagen Business School)
    Abstract: The paper analyzes the excess entry hypothesis for sealed-bid first price public procurement auctions.The hypothesis is proved analytically for any feasible combination of bid preparation cost and bid evaluation cost when the bidders face a rectangular cost density function and confirmed in numerical simulations based on a family of flexible cost density functions. The excess entry hypothesis implies that the procurer may reduce both his own cost and the social cost by imposing a positive fee on the bids. Sequential search is a superior strategy to a public procurement auction whether or not the procurer imposes an optimal fee on the bids.
    Keywords: Excess entry; Public procurement auctions; Optimal fee; Sequential search
    JEL: D21 D43 D44 L13 L51
    Date: 2019–02–05
  16. By: Sela, A.; Moreno Ruiz, Diego; Einy, Ezra
    Abstract: We study the continuity and robustness of the Bayesian equilibria of Tullock contests with incomplete information. We show that the Bayesian equilibrium correspondence is upper semicontinuous. We identify conditions under which the Bayesian equilibrium correspondence of Tullock contests with a unique equilibrium is also lower semicontinous. Furthermore, when the Bayesian equilibrium is unique, it is robust to small perturbations of the contest's attributes (the contest success function, and the players' information, value for the prize, and cost of effort).
    Keywords: Robustness of Equilibria; Bayesian Correspondence; Incomplete Information; Tullock Contests
    JEL: D82 D44 C72
    Date: 2019–02
  17. By: Dassiou, X.; Glycopantis, D.
    Abstract: Numerous, mainly empirical, studies of auditing behaviour have recently looked at the “reputation” of the auditor and the size of fees it attracts. Our model of the auditing market advances the study of the fundamental principles involved in determining behaviour in relation to the rewards and penalties using an extensive-form game of the auditing process. We set up a two-player fraud detection game with bribes, bonuses and fines faced by an auditor. Our model yields that the auditor’s reputation, reflected in the size of bonuses, is critical to establishing a non-fraudulent behaviour by the client. Hence the model confirms expected behaviour. We further find the new insight, that while the existence of penalties deters fraud by the client, their size is not critical. This is a new understanding of what determines auditor behaviour. It is the perception of a possible penalty that moves the auditor in the direction of executing a thorough investigation using his acquired expertise.
    Keywords: interdependent decisions; auditor reputation; game theory; perfect Bayesian equilibria
    Date: 2019
  18. By: Dmitry I. Ivanov; Alexander S. Nesterov
    Abstract: We propose a novel machine-learning-based approach to detect bid leakage in first-price sealed-bid auctions. We extract and analyze the data on more than 1.4 million Russian procurement auctions between 2014 and 2018. As bid leakage in each particular auction is tacit, the direct classification is impossible. Instead, we reduce the problem of bid leakage detection to Positive-Unlabeled Classification. The key idea is to regard the losing participants as fair and the winners as possibly corrupted. This allows us to estimate the prior probability of bid leakage in the sample, as well as the posterior probability of bid leakage for each specific auction. We find that at least 16\% of auctions are exposed to bid leakage. Bid leakage is more likely in auctions with a higher reserve price, lower number of bidders and lower price fall, and where the winning bid is received in the last hour before the deadline.
    Date: 2019–03
  19. By: Marie-Laure Cabon-Dhersin (CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université); Emmanuelle Taugourdeau (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper investigates the organization and the distribution of research activities between nearby public and private laboratories. In a three-stage game, the 'size', 'location' and 'research effort' are determined under the assumption that public spillovers depend on the location of the private laboratory. We compare two scenarios in which the research efforts are decided either cooperatively or non-cooperatively. We show that for particular levels of subsidy granted to the public lab, higher funding favors spatial proximity and increases the total research effort in the cooperative case, while it diminishes the total effort in the non-cooperative one. Moreover, compared with the non-cooperative case, research cooperation i) may increase the distance between the two laboratories, ii) makes the public laboratory smaller, iii) increases the total research effort, but iv) is detrimental to the payoff of the whole research sector.
    Keywords: research cooperation,spatial location,public subsidy
    Date: 2018–11
  20. By: Bruno Salcedo
    Abstract: I propose a cheap-talk model in which the sender can use private messages and only cares about persuading a subset of her audience. For example, a candidate only needs to persuade a majority of the electorate in order to win an election. I find that senders can gain credibility by speaking truthfully to some receivers while lying to others. In general settings, the model admits information transmission in equilibrium for some prior beliefs. The sender can approximate her preferred outcome when the fraction of the audience she needs to persuade is sufficiently small. I characterize the sender-optimal equilibrium and the benefit of not having to persuade your whole audience in separable environments. I also analyze different applications and verify that the results are robust to some perturbations of the model, including non-transparent motives as in Crawford and Sobel (1982), and full commitment as in Kamenica and Gentzkow (2011).
    Date: 2019–02
  21. By: Keaton S. Miller; Amil Petrin; Robert Town; Michael Chernew
    Abstract: When markets fail to provide socially optimal outcomes, governments often intervene through ‘managed competition’ where firms compete for per-consumer subsidies. Subsidies are generally set across geographies according to estimates of the cost of government provision, a method which may not be welfare-maximizing. We introduce a framework for determining the optimal subsidy schedule that features heterogeneity in consumer preferences and inertia, and firms with heterogeneous costs that can set prices and product characteristics in response to changes in the subsidy. We apply it to the Medicare Advantage program, which offers Medicare recipients private insurance that replaces Traditional Medicare. We calculate counterfactual equilibria as a function of the subsidies by estimating policy functions for product characteristics from the data and solving for Nash equilibria in prices. The optimal schedule increases consumer surplus by 30% over the current policy and is well-approximated with a linear rule using market-level observables.
    JEL: I11 L13 L51
    Date: 2019–02

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