nep-gth New Economics Papers
on Game Theory
Issue of 2019‒05‒27
nineteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Decomposition of games: some strategic considerations By Joseph Abdou; Nikolaos Pnevmatikos; Marco Scarsini; Xavier Venel
  2. Axiomatizations of the Shapley Value for Upstream Responsibility Games By Pintér, Miklós; Radványi, Anna
  3. Efficiency and stability in sender-receiver games under the selection-mutation dynamics By Seigo Uchida
  4. Coopetition in group contest By Hubert J. Kiss; Alfonso Rosa-Garcia; Vita Zhukova
  5. Nash Stable Outcomes in Fractional Hedonic Games: Existence, Efficiency and Computation By Vittorio Bilò; Angelo Fanelli; Michele Flammini; Gianpiero Monaco; Luca Moscardelli
  6. An Experimental Study on the Effects of Communication, Credibility, and Clustering in Network Games By Gary Charness; Francesco Feri; Miguel A. Meléndez-Jiménez; Matthias Sutter
  7. Preemption Contests Between Groups By Barbieri, Stefano; Konrad, Kai A.; Malueg, David A.
  8. Capacity choice in an international mixed triopoly By Ohnishi, Kazuhiro
  9. Identifying the Ranking of Focal Points in Coordination Games on the Individual Level By Schmidt, Robert J.
  10. A Perfectly Robust Approach to Multiperiod Matching Problems By Kotowski, Maciej
  11. Spite vs. risk: explaining overbidding By Oliver Kirchkamp; Wladislaw Mill
  12. Extreme Lobbyists and Policy Convergence By Hirata, Daisuke; Kamada, Yuichiro
  13. Information Acquisition with Endogenously Determined Cost in Cournot Markets with Stochastic Demand By Catilina, Eliane
  14. Empirical bias of extreme-price auctions: analysis By Rodrigo A. Velez; Alexander L. Brown
  15. Mixtures of Mean-Preserving Contractions By Joseph Whitmeyer; Mark Whitmeyer
  16. Entry and competition in takeover auctions By Gentry, Matthew; Stroup, Caleb
  17. Ostracism in alliances of teams and individuals: Voting, exclusion, contribution, and earnings By Stephan Huber; Jochen Model; Silvio Städter
  18. Identity and Redistribution: Theory and Evidence By Sanjit Dhami; Emma Manifold; Ali al-Nowaihi
  19. Vague lies and lax standards of proof: On the law and economics of advice By Mikhail Drugov; Marta Troya-Martinez

  1. By: Joseph Abdou (Centre d'Economie de la Sorbonne, Paris School of Economics,Université Paris1 Panthéon-Sorbonne); Nikolaos Pnevmatikos (LEMMA, Université Paris2 Panthéon-Assas); Marco Scarsini (LUISS, Dipartimento di Economia e Finanza); Xavier Venel (Centre d'Economie de la Sorbonne, Paris School of Economics,Université Paris1 Panthéon-Sorbonne)
    Abstract: Candogan et al. (2011) provide an orthogonal direct-sum decomposition of finite games into potential, harmonic and non-strategic components. In this paper we study the issue of decomposing games that are strategically equivalent from a game-theoretical point of view, for instance games obtained via duplications of strategies or suitable linear transformations of payoffs. We consider classes of decompositions and show when two decompositions of equivalent games are coherent
    Keywords: Decomposition of games; Potential games; Harmonic games; Duplicate strategies; Gradient operator; Projection operator
    Date: 2019–02
  2. By: Pintér, Miklós; Radványi, Anna
    Abstract: In this paper the problem of sharing the cost of emission in supply chains are considered. We focus on allocation problems that can be described by rooted trees, called cost-tree problems, and on the induced transferable utility cooperative games, called upstream responsibility games (Gopalakrishnan et al., 2017). The formal notion of upstream responsibility games is introduced, and the characterization of the class of these games is provided. The Shapley value (Shapley, 1953) is probably the most popular value for transferable utility cooperative games. In Radvanyi (2018b) we showed that Shapley's (Shapley, 1953) and Young's (Young, 1985) axiomatizations of the Shapley value are valid on the class of upstream responsibility games. According to Gopalakrishnan et al. (2017) we introduce some pollution related properties and we relate them to the TU games terminologies.
    Keywords: Upstream responsibility games, Cost sharing, Emission, Supply chain, Shapley value, Rooted tree, Axiomatization of the Shapley value
    JEL: C71
    Date: 2019–05–20
  3. By: Seigo Uchida
    Abstract: Our study aims to reveal the relationship between the efficiency of neutrally stable strategies and asymptotic stability of rest points close to those strategies in Lewis-type sender-receiver games under the selection-mutation dynamics. We focus on the game in which the number of states is not equal to that of signals. While no strict Nash strategy exists in our case, we show that there are some neutrally stable strategies that have rest points close to these strategies, and that these rest points can be asymptotically stable under the selection-mutation dynamics. Moreover, those neutrally stable strategies give agents the maximal payoff. We name those neutrally stable strategies the extended signaling system, the unilaterally mixed strategy, and the max hybrid strategy.
    Date: 2019–04
  4. By: Hubert J. Kiss (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Department of Economics, Eötvös Loránd University); Alfonso Rosa-Garcia (Department of Business, Universidad Católica San Antonio de Murcia); Vita Zhukova (Department of Business, Universidad Católica San Antonio de Murcia)
    Abstract: There are situations in which competitors ally to pursue a common objective. This simultaneous presence of cooperation and competition is called coopetition and we study it theoretically and experimentally in a group contest setup. More concretely, we analyze a group contest with a new sharing rule, that we call inverse proportional. This rule embodies the idea that the more a member of a group contributes to win the contest, the less this member is able to capture the potential posterior prize, introducing thus a competitive element into group decision-making. We compare the effects of this rule with a standard, the egalitarian sharing rule. While in the egalitarian case theoretically the optimal individual contribution is positive, with the inverse proportional rule zero contribution represents the individual (and also the social) optimum. We find that participants in our experiment contribute more with the egalitarian than with the inverse proportional rule. We also document over-expenditure with the inverse proportional sharing rule, suggesting that group contest generates inefficient behavior even when individuals are extremely penalized for their contributions. We also explore the drivers of decision in the group contest, and find that contribution in a public goods game is positively associated with contribution in the group contest and that competitiveness explains part of the behavior with the inverse proportional rule but not with the egalitarian sharing. Neither social value orientation, risk attitudes, nor personal traits appear as significant predictors of behavior.
    Keywords: competitiveness, egalitarian sharing rule, group contest, inverse proportional sharing rule, public goods game, risk attitudes, social value orientation
    JEL: C72 C92 D70 D72 H41
    Date: 2019–04
  5. By: Vittorio Bilò (Dipartimento di Matematica Ennio De Giorgi - Università del Salento, Università del Salento [Lecce]); Angelo Fanelli (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Michele Flammini (DISIM - Dipartimento di Ingegneria, Scienza dell'Informazione e Matematica - UNIVAQ.IT - Università degli Studi dell'Aquila [L'Aquila], UNIVAQ - University of L'Aquila [Italy]); Gianpiero Monaco (DI - Dipartimento di Informatica [Italy] - UNIVAQ.IT - Università degli Studi dell'Aquila [L'Aquila]); Luca Moscardelli (Department of Economic Studies - University of Chieti-Pescara, Dipartimento di Scienze - Universita di Chieti-Pescara - Universita' di Chieti-Pescara)
    Abstract: We consider fractional hedonic games, a subclass of coalition formation games that can be succinctly modeled by means of a graph in which nodes represent agents and edge weights the degree of preference of the corresponding endpoints. The happiness or utility of an agent for being in a coalition is the average value she ascribes to its members. We adopt Nash stable outcomes as the target solution concept; that is we focus on states in which no agent can improve her utility by unilaterally changing her own group. We provide existence, efficiency and complexity results for games played on both general and specific graph topologies. As to the efficiency results, we mainly study the quality of the best Nash stable outcome and refer to the ratio between the social welfare of an optimal coalition structure and the one of such an equilibrium as to the price of stability. In this respect, we remark that a best Nash stable outcome has a natural meaning of stability, since it is the optimal solution among the ones which can be accepted by selfish agents. We provide upper and lower bounds on the price of stability for different topologies, both in case of weighted and unweighted edges. Beside the results for general graphs, we give refined bounds for various specific cases, such as triangle-free, bipartite graphs and tree graphs. For these families, we also show how to efficiently compute Nash stable outcomes with provable good social welfare.
    Date: 2018–05–13
  6. By: Gary Charness (University of California at Santa Barbara, IZA Bonn, and CESifo Munich); Francesco Feri (Royal Holloway University of London and University of Trieste); Miguel A. Meléndez-Jiménez (Universidad de Málaga); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: The effectiveness of social interaction depends strongly on an ability to coordinate actions efficiently. In large networks, such coordination may be very difficult to achieve and may depend on the communication technology and the network structure. We examine how pre-play communication and clustering within networks affect coordination in a challenging experimental game on eight-person networks. Free-form chat is enormously effective in achieving the non-equilibrium efficient outcome in our game, but restricted communication (where subjects can only indicate their intended action) is almost entirely ineffective. We can rationalize this result with a novel model about the credibility of cheap-talk messages. This credibility is much larger with free-form message communication than with restricted communication. We are the first to model this credibility and show, both theoretically and experimentally, an interaction effect of network structure and communication technologies. We also provide a model of message diffusion, which indeed predicts that diffusion will be more rapid without clustering and is consistent with our data.
    Keywords: Networks, Clustering, Communication, Credibility, Cheap talk, Experiment
    JEL: C71 C91 D03 D85
    Date: 2019–05
  7. By: Barbieri, Stefano; Konrad, Kai A.; Malueg, David A.
    Abstract: We consider a preemption game between groups where the first agent to take a costly action wins the prize on behalf of his group. We describe the equilibrium solution of this problem when players differ in their own costs of action and these costs are private information. The equilibrium is typically characterized by delay. The nature of the equilibrium depends on key parameters such as the number of groups and their size. More competition between groups reduces delay, whereas in larger groups members of a given cost type are more reluctant to act but may yield an earlier resolution of the conflict. We analyze asymmetries across groups, focusing on group size and strength of the externalities within groups.
    Keywords: dynamic conflict; free riding; incomplete information; inter-group conflict; preemption; waiting
    JEL: D74 H41 L13
    Date: 2019–05
  8. By: Ohnishi, Kazuhiro
    Abstract: This paper considers a mixed triopoly model where a state-owned firm, a domestic labor-managed firm and a foreign capitalist firm are allowed to pre-install capacity as a strategic commitment device. First, each firm simultaneously and independently chooses its capacity level. None of the firms can reduce or dispose of capacity. Second, each firm simultaneously and independently chooses its output level. The paper shows that there is an equilibrium solution where only the domestic labor-managed firm pre-installs excess capacity as a strategic commitment device.
    Keywords: Excess capacity; State-owned firm; Domestic labor-managed firm; Foreign capitalist firm
    JEL: C72 D21 F23 L30
    Date: 2019–05–21
  9. By: Schmidt, Robert J.
    Abstract: We propose a method to identify the ranking of focal points (Schelling, 1960) on the individual level. By contrast to conventional coordination, where subjects bet on only one alternative, subjects coordinate by the distribution of points. This allows them to invest in multiple alternatives and to weigh their choices. As a result, subjects not only reveal which alternative appears most focal to them, but the ranking of the available alternatives with regard to the degree of focality. In an experiment on the elicitation of social norms (Krupka and Weber, 2013), we compare the proposed mechanism with conventional coordination. The data confirms the theoretical predictions regarding coordination behavior and demonstrates that the proposed technique is suited to identify the heterogeneity of focal points on the individual level. Moreover, using Monte Carlo simulations, we find that the proposed mechanism identifies focal points on the group level significantly more efficiently than ordinary coordination. Finally, we point to the possibility to use the mechanism as a simple and direct tool to measure the degree of strategic uncertainty on the individual level.
    Keywords: coordination; focal points; game theory; methodology; social norms
    Date: 2019–03–27
  10. By: Kotowski, Maciej (Harvard Kennedy School)
    Abstract: Many two-sided matching situations involve multiperiod interaction. Traditional cooperative solutions, such as stability and the core, often identify unintuitive outcomes (or are empty) when applied to such markets. As an alternative, this study proposes the criterion of perfect alpha-stability. An outcome is perfect alpha-stable if no coalition prefers an alternative assignment in any period that is superior for all plausible market continuations. Behaviorally, the solution combines foresight about the future and a robust evaluation of contemporaneous outcomes. A perfect alpha-stable matching exists, even when preferences exhibit inter-temporal complementarities. A stronger solution, the perfect alpha-core, is also investigated. Extensions to markets with arrivals and departures, transferable utility, and many-to-one assignments are proposed.
    JEL: C71 C78
    Date: 2019–05
  11. By: Oliver Kirchkamp; Wladislaw Mill
    Abstract: In this paper we use an experiment to compare a theory of risk aversion and a theory of spite as an explanation for overbidding in auctions. As a workhorse we use the second-price all-pay and the first-price winner-pay auction. Both risk and spite can be used to rationalize deviations from risk neutral equilibrium bids in auctions. We exploit that equilibrium predictions in the second-price all-pay auctions for spiteful preferences are different than those for risk averse preferences. Indeed, we find that spite is a more convincing explanation for bidding behavior for the second-price all-pay auction. Not only can spite rationalize observed bids, also our measure for spite is consistent with observed bids.
    Keywords: auction, overbidding, spite, risk, experiment
    JEL: C91 C72 D44 D91
    Date: 2019
  12. By: Hirata, Daisuke; Kamada, Yuichiro
    Abstract: We consider a two-candidate election model with campaign contributions. In the first stage of the game, each of two candidates chooses a policy position. In the second stage, each of n lobbyists chooses the amount of contribution to each candidate. The winning probability of each candidate depends on the total amount of contributions that she raised from the lobbyists. In any equilibrium of our model, only extreme lobbyists contribute at any subgame, and the policies converge on the unique equilibrium path. Our results suggest that extreme lobbyists and their contributions do not necessarily cause policies to diverge.
    Keywords: Interest groups, campaign contributions, Hotelling model
    JEL: C72 D72 D78
    Date: 2019–05
  13. By: Catilina, Eliane
    Abstract: This paper presents a model of information acquisition in Cournot Market with stochastic demand where the acquisition cost is endogenously determined. The novelty is to consider the possibility of cost reducing alliances to be formed in the first-stage of a two-stage acquisition game. This paper encompasses the main assumptions found in the current literature on information acquisition regarding the role of information and how it affects firms’ profits in a two stage the game. However, we argue that by adding natural assumptions regarding the choices and trade-offs between cost reduction and loss of strategic value we provide a better prediction for the outcome of information acquisition games and welfare implications.
    Keywords: Information acquisition; Cost Sharing Alliances; Information Asymmetry; Strong Nash Equilibrium.
    JEL: D43 D81 L13
    Date: 2019–03–25
  14. By: Rodrigo A. Velez; Alexander L. Brown
    Abstract: We advance empirical equilibrium analysis (Velez and Brown, 2019) of the winner-bid and loser-bid auctions for the dissolution of a partnership. We show, in a complete information environment, that even though these auctions are essentially equivalent for the Nash equilibrium prediction, they can be expected to differ in fundamental ways when they are operated. Besides the direct policy implications, two general consequences follow. First, a mechanism designer who accounts for the empirical plausibility of equilibria may not be constrained by Maskin invariance. Second, a mechanism designer who does not account for the empirical plausibility of equilibria may inadvertently design biased mechanisms.
    Date: 2019–05
  15. By: Joseph Whitmeyer; Mark Whitmeyer
    Abstract: Given a purely atomic probability measure with support on n points, P, any mean-preserving contraction of P, Q, with support on m > n points is a mixture of mean-preserving contractions of P, each with support on most n points. We illustrate an application of this result towards competitive Bayesian persuasion
    Date: 2019–05
  16. By: Gentry, Matthew; Stroup, Caleb
    Abstract: We estimate the degree of uncertainty faced by potential bidders in takeover auctions and quantify how it affects prices in auctions and negotiations. The high degree of uncertainty revealed by our structural estimation encourages entry in auctions but reduces a target’s bargaining power in negotiations. In the aggregate, auctions and negotiations produce similar prices, even though auctions are preferred in takeover markets with high uncertainty, while the reverse is true for negotiations. Firm characteristics predict pre-entry uncertainty and thus are informative about the relative performance of auctions and negotiations for individual targets.
    JEL: G0
    Date: 2018–11–13
  17. By: Stephan Huber (University of Regensburg and UAS Augsburg); Jochen Model (UAS Augsburg); Silvio Städter (UAS Augsburg)
    Abstract: Alliances often provide a collective good among their allies. This article offers laboratory experimental evidence that the possibility to vote for the exclusion of non-cooperating allies, i.e. ostracism, can be a powerful negative referendum to increase allies’ contributions to the collective good. However, it is found that ostracism does not necessarily increase earnings in a public goods game. In particular, it is shown that the ostracism mechanism is used differently by individuals. While ostracism increases contributions irrespective of the game is played with a alliances of individuals or teams as the decision makers, the earnings do not statistically significant increase in alliances of individuals. This result can be explained with different voting patterns. Compared to individuals, teams vote and in turn exclude significantly less in early periods but more in later periods of the game. Thus, negative earnings effects of ostracism, i.e., excluded players can neither contribute to the collective good nor receive from the collective good, are found to be less severe in alliances of teams.
    Keywords: alliances, team decision, public good, collective good, ostracism, exclusion, experiment
    JEL: C91 C92 H41
    Date: 2019–01
  18. By: Sanjit Dhami; Emma Manifold; Ali al-Nowaihi
    Abstract: We contribute to a growing literature on redistribution and identity. We propose a theoretical model that embeds social identity concerns, as in Akerlof and Kranton (2000), with inequity averse preferences, as in Fehr and Schmidt (1999). We conduct an artefactual ultimatum game experiment with registered members of British political parties for whom both identity and redistribution are salient. The empirical results are as follows. (1) Proposers and responders demonstrate ingroup-favoritism. (2) Proposers exhibit quantitatively stronger social identity effects relative to responders. (3) As redistributive taxes increase, offers by proposers and the minimum acceptable offers of responders (both as a proportion of income) decline by almost the same amount, suggesting a shared understanding that is characteristic of social norms. (4) Subjects experience more disadvantageous inequity from outgroup members relative to ingroup members.
    Keywords: Social identity, prosocial behaviour, ultimatum game, fiscal redistribution, entitlements
    JEL: D01 D03
    Date: 2019–04
  19. By: Mikhail Drugov (New Economic School and CEPR); Marta Troya-Martinez (New Economic School and CEPR)
    Abstract: This paper analyses a persuasion game where a seller provides (un)biased and (im)precise advice and may be fined by an authority for misleading the buyers. In the equilibrium, biasing the advice and making it noisier are complements. The advice becomes both more biased and less precise with a stricter standard of proof employed by the authority, a larger share of credulous consumers, and a higher buyers' heterogeneity. The optimal policy of the authority is characterized in terms of a standard of proof and resources devoted to the investigation.
    Keywords: Advice, Persuasion, Legal Procedure, Consumer Protection
    JEL: D18 D8 K4 L1
    Date: 2018–06

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