nep-gth New Economics Papers
on Game Theory
Issue of 2019‒09‒30
ten papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Sharing a Polluted River under Waste Flow Control By Dongshuang Hou; Aymeric Lardon; Panfei Sun; Genjiu Xu
  2. Regularization and Approximation Methods in Stackelberg Games and Bilevel Optimization By Francesco Caruso; M. Beatrice Lignola; Jacqueline Morgan
  3. Discerning Solution Concepts By Nail Kashaev; Bruno Salcedo
  4. Accuracy and Retaliation in Repeated Games with Imperfect Private Monitoring: Experiments (Revised version of CARF-F-433) By Yutaka Kayaba; Hitoshi Matsushima; Tomohisa Toyama
  5. Deciding to Delegate: On Distributional Consequences of Endogenous Delegation By Lara Ezquerra; Praveen Kujal
  6. "Trust, Beliefs and Cooperation: Excavating a Foundation of Strong Economics By Jeongbin Kim; Louis Putterman; Xinyi Zhang
  7. Role of the Distribution Structure in Responsible Trade By Florence TOUYA
  8. Evolutionarily stable in-group altruismin intergroup conflict By Guillaume Cheikbossian
  9. No-Arbitrage Commodity Option Pricing with Market Manipulation By Ren\'e A\"id; Giorgia Callegaro; Luciano Campi
  10. The Way People Lie in Markets By Chloe Tergiman; Marie Claire Villeval

  1. By: Dongshuang Hou (Department of Applied Mathematics, Northwestern Polytechnical University); Aymeric Lardon (Université Côte d'Azur, France; GREDEG CNRS); Panfei Sun (Department of Applied Mathematics, University of Twente, The Netherlands); Genjiu Xu (Department of Applied Mathematics, Northwestern Polytechnical University)
    Abstract: When the cleaning up of a polluted transboundary river requires the cooperation of several agents (countries, regions, firms or cities) located along it, a challenging issue is how should the pollutant-cleaning costs be shared among them. An important factor ignored by literature so far concerns the ability for wastewater treatment of the river itself depending on both sediment types and ecological units (hydrophyte filter beds, aerobic digesters) in order to control waste flow from upstream to downstream. First, we introduce and implement a new cost sharing method for polluted river problems under waste ow control, called the Downstream Compensation method, which combines the two well-known conflicting theories in international river disputes, namely the Absolute Territorial Sovereignty and the Unlimitted Territorial Integrity. When the river does not have any wastewater treatment ability, the Downstream Compensation method coincides with the Downstream Equal Sharing method. At the other extreme case of full wastewater treatment within the river, the Downstream Compensation method corresponds to the Local Responsibility Sharing method. Second, we show that the Downstream Compensation method is obtained as the Shapley value of appropriately defined cooperative games with transferable utility. Finally, we prove that these games satisfy the concavity property, meaning that the proposed cost allocation scheme belongs to the core.
    Keywords: Polluted river, Wastewater treatment rate, Cost sharing, Shapley value, Core
    JEL: C71 D61 D62
    Date: 2019–09
  2. By: Francesco Caruso (Università di Napoli Federico II); M. Beatrice Lignola (Università di Napoli Federico II); Jacqueline Morgan (Università di Napoli Federico II and CSEF)
    Abstract: In a two-stage Stackelberg game, depending on the leader's information about the choice of the follower among his optimal responses, one can associate different types of mathematical problems. We present formulations and solution concepts for such problems, together with their possible connections in bilevel optimization, and we illustrate the crucial issues concerning these solution concepts. Then, we discuss which of these issues can be positively or negatively answered and how managing the latter ones by means of two widely used approaches: regularizing the set of optimal responses of the follower, via different types of approximate solutions, or regularizing the follower's payoff function, via the Tikhonov or the proximal regularizations. The first approach allows to obviate the lack of existence and/or stability through approximating problems, whose solutions exist under not restrictive conditions and enable to construct a surrogate solution to the original problem. The second approach permits to overcome the non-uniqueness of the follower's optimal response, by constructing sequences of Stackelberg games with a unique second-stage solution which approximate in some sense the original game, and to select among the solutions by using a constructive method with behavioural motivations.
    Keywords: Two-stage Stackelberg game; bilevel optimization; pessimistic and optimistic problem; intermediate Stackelberg problem; subgame perfect Nash equilibrium; existence and stability of solutions; constructive selection method; follower's optimal reaction set approximation; approximate solution; viscosity solution; follower's payoff function approximation; Tikhonov method; proximal regularization; cost-to-move.
    Date: 2019–09–16
  3. By: Nail Kashaev; Bruno Salcedo
    Abstract: The empirical analysis of discrete complete-information games has relied on behavioral restrictions in the form of solution concepts, such as Nash equilibrium. Choosing the right solution concept is crucial not just for identification of payoff parameters, but also for the validity and informativeness of counterfactual exercises and policy implications. We say that a solution concept is discernible if it is possible to determine whether it generated the observed data on the players' behavior and covariates. We propose a set of conditions that make it possible to discern solution concepts. In particular, our conditions are sufficient to tell whether the players' choices emerged from Nash equilibria. We can also discern between rationalizable behavior, maxmin behavior, and collusive behavior. Finally, we identify the correlation structure of unobserved shocks in our model using a novel approach.
    Date: 2019–09
  4. By: Yutaka Kayaba (University of Tokyo); Hitoshi Matsushima (University of Tokyo); Tomohisa Toyama (International Christian University)
    Abstract: We experimentally examine repeated prisoner’s dilemma with random termination, in which monitoring is imperfect and private. Our estimation indicates that a significant proportion of the subjects follow generous tit-for-tat strategies, which are stochastic extensions of tit-for-tat. However, the observed retaliating policies are inconsistent with the generous tit-for-tat equilibrium behavior. Showing inconsistent behavior, subjects with low accuracy do not tend to retaliate more than those with high accuracy. Furthermore, subjects with low accuracy tend to retaliate considerably with lesser strength than that predicted by the equilibrium theory, while subjects with high accuracy tend to retaliate with more strength than that predicted by the equilibrium theory, or with strength almost equivalent to it.
    Date: 2019–09
  5. By: Lara Ezquerra (Universitat de les Illes Balears); Praveen Kujal (Middlesex University London and Economic Science Institute, Chapman University)
    Abstract: We allow for principals to self-select into delegating (or not) the allocation decision to an agent in a modified dictator game. The standard dictator game is obtained when they choose not to delegate. Nearly half the subjects choose to be a dictator and make the allocation themselves. Dictators thus obtained transfer lower amounts to receivers, relative to when the decision making is passed to an agent (or the standard dictator game). Subjects self-selecting into the role of a dictator give less relative to those that pass the allocation decision to an agent. Finally, the distributional consequences of delegating, or not, vary with less inequality obtained when the delegation decision is delegated.
    Date: 2019
  6. By: Jeongbin Kim; Louis Putterman; Xinyi Zhang
    Abstract: We use a two-phase experimental design to study how systematically manipulated beliefs about trust and trustworthiness can promote or deter cooperation. We use decisions in an initially played trust game to create five environments that differ in the information subjects have about the relative trust/trustworthiness of fellow group members when they make a voluntary contribution decision in our experiment’s second phase. We find that perceived high trusting environments are treated equivalently to ones of perceived high trustworthiness, with both positively affecting subjects’ first-order beliefs about the cooperativeness of group-mates, and in consequence, leading to higher contributions. Our results indicate that people cooperate more and hence produce more together in an environment of high trust/trustworthiness, indicating one channel through which trust helps to grow the economic pie.
    Date: 2019
  7. By: Florence TOUYA
    Abstract: Aware of the high importance of consumers' private information concerning their willingness-to-buy fair trade goods and taking into account the superior price they are willing to pay for this kind of goods with respect to conventional ones, we choose to feed the debate relative to the appropriateness of the different potential retailing channels. We use a common agency game framework to analyze the changes in the price level according various forms or distribution organization : direct competition between upstream producers or manufacturers (or cooperatives of producers / manufacturers), creation of a cooperative at the downstream stage, delivery of the final good to classical retailing networks. It appears that the private information parameter as well as the nature of the relationship between suppliers on the one hand and the retailer on the other hand are the key variables that determine the price paid by consumers. The conventional retailing channel brings excessively high prices with respect to a distribution made by an entity likely to be assimilated to a cooperative because of a double margin effect that is lessened in the cooperative case since the latter objective function involves additional elements such as providing services to upstream actors.
    Keywords: Informational asymmetry, Common Agency, Nonlinear prices, Cooperatives, Cooperation, Pro-social preferences
    JEL: D72 D82 H23 H30 H32 H71 H77
    Date: 2019–08
  8. By: Guillaume Cheikbossian (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)
    Abstract: We provide an evolutionary explanation for the well-established evidence of the existence of in-group favoritism in intergroup conflict. Using a model of group contest, we show that the larger the number of groups competing against one another or the larger the degree of complementarity between individual efforts, the more likely group members are altruistic towards their teammates under preference evolution.
    Keywords: Indirect evolutionary approach,Evolutionary stability,Groups,Altruism,Conflicts
    Date: 2019
  9. By: Ren\'e A\"id; Giorgia Callegaro; Luciano Campi
    Abstract: We design three continuous-time models in finite horizon of a commodity price, whose dynamics can be affected by the actions of a representative risk--neutral producer and a representative risk-neutral trader. Depending on the model, the producer can control the drift and/or the volatility of the price whereas the trader can at most affect the volatility. The producer can affect the volatility in two ways: either by randomizing her production rate or, as the trader, using other means such as spreading false information. Moreover, the producer contracts at time zero a fixed position in a European convex derivative with the trader. The trader can be price-taker, as in the first two models, or she can also affect the volatility of the commodity price, as in the third model. We solve all three models semi-explicitly and give closed-form expressions of the derivative price over a small time horizon, preventing arbitrage opportunities to arise. We find that when the trader is price-taker, the producer can always compensate the loss in expected production profit generated by an increase of volatility by a gain in the derivative position by driving the price at maturity to a suitable level. Finally, in case the trader is active, the model takes the form of a nonzero-sum linear-quadratic stochastic differential game and we find that when the production rate is already at its optimal stationary level, there is an amount of derivative position that makes both players better off when entering the game.
    Date: 2019–09
  10. By: Chloe Tergiman (Penn State - Pennsylvania State University - Penn State System); Marie Claire Villeval (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 finitely repeated game with asymmetric information, we experimentally study how reputation and standard market mechanisms change the nature of fraudulent announcements by experts. While some lies can be detected ex post by investors, other lies remain deniable. Lying behavior suggests that individuals care more about the consequences of being caught, rather than the act of lying per se. Allowing for reputation reduces the frequency of lies that can be detected but has no impact on deniable lies: individuals simply hide their lies better and fraud persists. Competition without reputation increases risky lies and never protects investment.
    Keywords: Dishonesty,Reputation,Competition,Financial Markets
    Date: 2019

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