nep-gth New Economics Papers
on Game Theory
Issue of 2019‒07‒22
twelve papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Duality for General TU-games Redefined By Fatma Aslan; Papatya Duman; Walter Trockel
  2. Preferences and strategic behavior in public goods games By Gilles, Grandjean; Mathieu, Lefebvre; Marco, Mantovani
  3. Ordinal Imitative Dynamics By George Loginov
  4. An experiment on coordination in a modified stag hunt game By Pietro Guarnieri; Tommaso Luzzati; Stefano Marchetti
  5. A Note on Equilibrium Uniqueness in Cournot Competition with Demand Uncertainty By Stefanos Leonardos; Costis Melolidakis
  6. Systemic Risk and Heterogeneous Interbank Network By Li-Hsien Sun
  7. "I" on You: Identity in the Dictator Game By Anita Kopányi-Peuker; Jin Di Zheng
  8. A Theory on Media Bias and Elections By Junze Sun; Arthur Schram; Randolph Sloof
  9. Endogenous Social Connections in Legislatures By Marco Battaglini; Eleonora Patacchini; Edoardo Rainone
  10. Cheap Talk and Coordination in the Lab and in the Field: Collective Commercialization in Senegal By Fo Kodjo Dzinyefa Aflagah; Tanguy Bernard; Angelino Viceisza
  11. Experimentation in Dynamic R&D Competition By Dosis, Anastasios; Muthoo, Abhinay
  12. Emission Taxes, Feed-in Subsidies and the Investment in a Clean Technology by a Polluting Monopoly By García-Alaminos, Ángela; Rubio, Santiago J.

  1. By: Fatma Aslan (CNAM, Paris, France and Istanbul Bilgi University, Turkey); Papatya Duman (Paderborn University); Walter Trockel
    Abstract: We criticize some conceptual weaknesses in the recent literature on coalitional TUgames and propose, based on our critics, a new definition of dual TU-games that coincides with the one in the literature on the class of super-additive games. We justify our new definition in four alternative ways: 1. Via an adequate definition of ecient payo vectors. 2. Via a modification of the Bondareva-Shapley duality. 3. Via an explicit consideration of \coalition building". 4. Via associating general TU-games to coalition-production economies. Rather than imputations, we base our analysis on a modification of aspirations.
    Keywords: TU-games, duality, core, c-Core, cohesive games, complete game efficiency
    JEL: C71
    Date: 2019–07
  2. By: Gilles, Grandjean; Mathieu, Lefebvre; Marco, Mantovani
    Abstract: We analyze experimentally behavior in a finitely repeated public goods game. One of the main results of the literature is that contributions are initially high, and gradually decrease over time. Two explanations of this pattern have been developed: (i) the population is composed of free-riders, who never contribute, and conditional cooperators, who contribute if others do so as well; (ii) strategic players contribute to sustain mutually beneficial future cooperation, but reduce their contributions as the end of the game approaches. This paper contributes to bridging the gap between these views. We analyze preferences and strategic ability in one design by manipulating group composition to form homogeneous groups on both dimensions. Our results highlight the interaction between the two: groups that sustain high levels of cooperation are composed of members who share a common inclination toward cooperation and have the strategic abilities to recognize and reap the benefits of enduring cooperation.
    Keywords: Voluntary contribution, conditional cooperation, free riding, strategic sophistication.
    JEL: H41 C73 C92
    Date: 2018–12–19
  3. By: George Loginov
    Abstract: This paper introduces an evolutionary dynamics based on imitate the better realization (IBR) rule. Under this rule, agents in a population game imitate the strategy of a randomly chosen opponent whenever the opponent`s realized payoff is higher than their own. Such behavior generates an ordinal mean dynamics which is polynomial in strategy utilization frequencies. We demonstrate that while the dynamics does not possess Nash stationarity or payoff monotonicity, under it pure strategies iteratively strictly dominated by pure strategies are eliminated and strict equilibria are locally stable. We investigate the relationship between the dynamics based on the IBR rule and the replicator dynamics. In trivial cases, the two dynamics are topologically equivalent. In Rock-Paper-Scissors games we conjecture that both dynamics exhibit the same types of behavior, but the partitions of the game set do not coincide. In other cases, the IBR dynamics exhibits behaviors that are impossible under the replicator dynamics.
    Date: 2019–07
  4. By: Pietro Guarnieri; Tommaso Luzzati; Stefano Marchetti
    Abstract: The paper experimentally investigates whether adding a dominated strategy changes subjects’ decisions in a stag hunt decision context. Specifically, we run two two-periods treatments where respectively 1) the decision makers firstly face the standard stag-hunt matrix and then the modified three-options matrix and 2) the decision makers firstly face the modified three-options matrix and then the standard two-options stag-hunt matrix. Given the circumstance that the added strategy is dominated, standard rationality assumption would predict no changes in participants decisions across periods and treatments. On the contrary, our results show that the exposure to one or the other treatment frames the decision-situation in a different way. Decision makers become less propense to take the risk of “hunting stags” in the modified three-options matrix, after they are firstly exposed to the two-options standard stag-hunt matrix. Vice versa, they appear more propense to change their decision towards the payoff dominant quilibrium, when they are firstly exposed to the modified three-options matrix and then to the two-options standard stag-hunt matrix.
    Keywords: stag hunt, coordination, risk-dominance, risk framing
    JEL: C91 C72 D8
    Date: 2019–07–01
  5. By: Stefanos Leonardos; Costis Melolidakis
    Abstract: We revisit the linear Cournot model with uncertain demand that is studied in Lagerl\"of (2006)* and provide sufficient conditions for the uniqueness of an equilibrium that complement the existing results. We show that if the distribution of the demand intercept has the decreasing mean residual demand (DMRD) or the increasing generalized failure rate (IGFR) property, then uniqueness of equilibrium is guaranteed. The DMRD condition implies log-concavity of the expected profits per unit of output without additional assumptions on the existence or the shape of the density of the demand intercept and hence, answers in the affirmative the conjecture of Lagerl\"of (2006) that such conditions may not be necessary. *Johan Lagerl\"of, Equilibrium uniqueness in a Cournot model with demand uncertainty. The B.E. Journal in Theoretical Economics, Vol. 6: Iss 1. (Topics), Article 19:1--6, 2006.
    Date: 2019–06
  6. By: Li-Hsien Sun
    Abstract: We study the system of heterogeneous interbank lending and borrowing based on the relative average of log-capitalization through the linear combination of the average within groups and the ensemble average and describe the evolution of log-capitalization by a system of coupled diffusions. The model incorporates a game feature with homogeneity within groups and heterogeneity between groups where banks search for the optimal lending or borrowing strategies and intend to minimize the heterogeneous linear quadratic costs in order to remain survival in the system. Due to the complicity of the lending and borrowing system, the closed-loop Nash equilibria and the open-loop Nash equilibria are both driven by the coupled Riccati equations. The existence of the equilibria in the case of the sufficiently large number of banks is guaranteed by the solvability for the coupled Riccati equations as the number of banks goes to infinity in each group. The equilibria are consisted of the mean-reverting term identical to the one group game and the group average owing to heterogeneity. In addition, the corresponding heterogeneous mean filed game is also discussed. The existence of the $\epsilon$-Nash equilibrium is also verified. Finally, In the financial implication, we observe the Nash equilibria governed by the mean-reverting term and the linear combination of the ensemble averages of individual groups and study the influence of the relative parameters on the liquidity rate through the numerical analysis.
    Date: 2019–07
  7. By: Anita Kopányi-Peuker (University of Amsterdam); Jin Di Zheng (Nanjing Audit University)
    Abstract: We study a giver’s generosity depending on her relationship with the recipient and the observer. We assign different group identities to the players using a variation of the minimumgroup paradigm, and test the effect of group memberships on altruistic giving in the dictator game with a passive observer. The results show that the dictator gives the least when she is from a different group than the other two. We further show that dictators give more when there is no observer. This is driven by male subjects who react more to the presence of the observer.
    Keywords: dictator game, observer, group identity, laboratory experiment
    JEL: D91 C72 C92
    Date: 2019–07–16
  8. By: Junze Sun (Amsterdam School of Economics); Arthur Schram (Amsterdam School of Economics); Randolph Sloof (Amsterdam School of Economics)
    Abstract: We develop a tractable theory to study the impact of biased media on election outcomes, voter turnout and welfare. News released by media allows voters to infer the relative appeal of the two candidates, and the closeness of elections. In large elections, the former determines the election outcome, whereas the latter drives voter turnout. With a single media outlet, a rise in media bias affects the election outcome in a non-monotonic way, and reduces voter welfare by decreasing the probability of electing the efficient candidate and increasing aggregate turnout costs. Introducing extra media outlets can systematically shift the election outcome and voter turnout in either direction, but it weakly improves voter welfare. The impact of other ways to strengthen media competition – such as increased polarization and prevention of collusion – critically depends on whether media have commitment power; if not, they can worsen information transmission and voter welfare.
    Keywords: media bias, voting, Poisson games, media competition, commitment
    JEL: D72 D82 D83
    Date: 2019–07–16
  9. By: Marco Battaglini; Eleonora Patacchini; Edoardo Rainone
    Abstract: We present a model of the U.S. Congress in which social connections among Congress members are endogenous and matter for their legislative activity. We propose a novel equilibrium concept for the network formation game that allows for a sharp characterization of equilibrium behavior and that yields a unique prediction under testable conditions. While the equilibrium is characterized by a large number of nonlinear equations, we show that the model can be structurally estimated by an appropriately designed Approximate Bayesian Computation method. Estimating the model using data from the 109th to 113th U.S. Congresses, we show that social connections are important for legislators' productivities and we identify some of the key determinants of social centralities in Congress.
    JEL: D71 D72
    Date: 2019–06
  10. By: Fo Kodjo Dzinyefa Aflagah; Tanguy Bernard; Angelino Viceisza
    Abstract: Coordination is central to social interactions. Theory and conventional lab experiments suggest that cheap talk/communication can enhance coordination under certain conditions. Two aspects that remain underexplored are (1) the interaction between the number of players (group size) and communication and (2) how existing findings might play out in the field. We address both of these by studying a typical naturally-occurring setting that requires coordination; that is, one where members of agricultural cooperatives seek to jointly sell their output. Combining artefactual/lab-in-the-field experiments (LFEs), natural field experiments (RCTs), surveys, and cooperative records, we find that (1) revealing farmers' intended sales (i.e., cheap talk/communication) yields enhanced collective commercialization (i.e., coordination), particularly in larger groups; (2) such cheap talk may lead to higher incomes for small-scale farmers; (3) participants transfer learning from the LFEs thus affecting subsequent behavior in the RCTs (i.e., the day-to-day environment). Our results contribute to existing literature by highlighting the potential for cheap-talk institutions to (1) boost coordination, particularly in settings with greater strategic uncertainty (e.g., larger farmer cooperatives), and (2) promote collective entrepreneurship and development.
    JEL: C92 C93 D7 L26 O12 P32 Q13
    Date: 2019–07
  11. By: Dosis, Anastasios (ESSEC Business School and THEMA); Muthoo, Abhinay (University of Warwick,)
    Abstract: We study a two-stage, winner-takes-all, R&D race, in which, at the outset, firms are uncertain regarding the viability of the project. Learning through experimentation introduces a bilateral (dynamic) feedback mechanism. For relatively low-value products,theequilibriumstoppingtimecoincideswiththesociallyefficientstoppingtime althoughfirmsmightexperimentexcessivelyinequilibrium;forrelativelyhigh-value products,firmsmightreduceexperimentationandstopratherprematurelyduetothe fundamental free-riding effect. Perhaps surprisingly, a decrease in the value of the product can spur experimentation.
    Keywords: Experimentation ; learning ; dynamic R&D competition ; inefficiency Jel Classification: C73 ; D83 ; O31 ; O32
    Date: 2019
  12. By: García-Alaminos, Ángela; Rubio, Santiago J.
    Abstract: The paper studies the use of emission taxes and feed-in subsidies for the regulation of a monopoly that can produce the same good with a technology that employs a polluting input and a clean technology. The second-best tax and subsidy are calculated solving a two-stage policy game between the regulator and the monopoly with the regulator acting as the leader of the game. We find that the second-best tax rate is the Pigouvian tax. The tax implements the efficient level of the dirty output but does not affect the total output. On the other hand, the subsidy leads to the monopoly to reduce the dirty output but also to increase the total output. This increase in total output may yield a larger net social welfare when the subsidy is used provided that the marginal cost of clean output is not very high, as a linear-quadratic specification of the model confirms. Finally, it is showed that the combination of an emission tax with a feed-in subsidy induces the firm to choose the efficient outputs, but in this case the first-best tax must be lower than the Pigouvian tax. Thus, the findings of this paper support the idea that feed-in subsidies open the possibility for improving the regulation of a polluting firm with market power.
    Keywords: Research Methods/ Statistical Methods
    Date: 2019–07–18

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