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on Game Theory |
| By: | Giovanni Paolo Crespi (Department of Economics, University of Insubria, Italy); Matteo Rocca (Department of Economics, University of Insubria, Italy); Davide Radi (Department of Economics and Management, University of Pisa, Pisa, Italy) |
| Abstract: | Restricting the attention to static games, we consider the problem of ambiguity generated by uncertain values of players’ payoff functions. Uncertainty is represented by a bounded set of possible realizations, and the level of uncertainty is parametrized in such a way that zero means no uncertainty, the so-called nominal counterpart game, and one the maximum uncertainty. Assuming that agents are ambiguity averse and they adopt the worst-case optimization approach to uncertainty, we employ the robust-optimization techniques to obtain a so-called robust game, see Aghassi and Bertsimas (2006). A robust game is a distribution-free model to handle ambiguity in a conservative way. The equilibria of this game are called robustoptimization equilibria and the existence is guaranteed by standard regularity conditions. The paper investigates the sensitivity to the level of uncertainty of the equilibrium outputs of a robust game. Defining the opportunity cost of uncertainty as the extra profit that a player would obtain by reducing his level of uncertainty, keeping fixed the actions of the opponents, we prove that a robust-optimization equilibrium is an e-Nash equilibrium of the nominal counterpart game where the -approximation measures the opportunity cost of uncertainty. Moreover, considering an e-Nash equilibrium of a nominal game, we prove that it is always possible to introduce uncertainty such that the e-Nash equilibrium is a robust-optimization equilibrium. Under some regularity conditions on the payoff functions, we also show that a robust-optimization equilibrium converges smoothly towards a Nash equilibrium of the nominal counterpart game, when the level of uncertainty vanishes. Despite these analogies, the equilibrium outputs of a robust game may be qualitatively different from the ones of the nominal counterpart. An example shows that a robust Cournot duopoly model can admit multiple and asymmetric robust-optimization equilibria despite the nominal counterpart is a simple symmetric game with linear-quadratic payoff functions for which only a symmetric Nash equilibrium exists |
| Keywords: | Ambiguity aversion; worst-case optimization; robust games |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:ins:quaeco:qf1901&r=all |
| By: | Hernández, Penélope (Departamento de Análisis Económico and ERI-CES); Josep E., Peris (University of Alicante, D. Quantitative Methods and Economic Theory); Vidal-Puga, Juan (Department of Statistics and Operations Research) |
| Abstract: | This paper deals with the problem of finding a way to distribute the cost of a minimum cost spanning tree problem between the users. A rule that assigns a payoff to each agent provides this distribution. An optimistic point of view is considered to devise a cooperative game. Following this optimistic approach, a sequential game exerts this construction to define the action sets of the agents. The main result states the existence of a unique cost allocation in subgame perfect equilibria. This cost allocation matches the one suggested by the folk rule. |
| Keywords: | Minimum cost spanning tree; cost allocation; subgame perfect equilibrium |
| JEL: | C71 D63 D71 |
| Date: | 2019–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:ris:qmetal:2019_005&r=all |
| By: | DRAGAN Irinel, (University of Texas); DEHEZ Pierre, (CORE, UCLouvain) |
| Abstract: | The concept of semivalue of a transferable utility game has been introduced by Dubey, Neyman and Weber as weighted sum of marginal contributions. Later, Puente has introduced a particular class of semivalues, called binomial semivalues, where weights are obtained through a recursive procedure. In the present paper, we extend Puente's procedure to obtain an equivalent representation of semivalues that turns out to be useful to solve the inverse problem and the question of coalitional rationality. |
| Keywords: | transferable utility games, semivalues, inverse problem, power game |
| JEL: | C71 |
| Date: | 2019–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2019010&r=all |
| By: | Idione Meneghel (Australian National University College of Business and Economics); Rabee Tourky (Australian National University College of Business and Economics) |
| Abstract: | This paper presents new results on the existence of pure-strategy Bayesian equilibria in specified functional forms. These results broaden the scope of methods developed by Reny (2011) well beyond monotone pure strategies. Applications include natural models of first-price and all-pay auctions not covered by previous existence results. To illustrate the scope of our results, we provide an analysis of three auctions: (i) a first-price auction of objects that are heterogeneous and imperfect substitutes; (ii) a first-price auction in which bidders’ payoffs have a very general interdependence structure; and (iii) an all-pay auction with non-monotone equilibrium. |
| Keywords: | Bayesian games, Monotone strategies, Pure-strategy equilibrium, Auctions |
| JEL: | C72 D44 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2190r&r=all |
| By: | ATAY Ata, (Hungarian Academy of Sciences); MAULEON Ana, (Université Saint-Louis, Bruxelles); VANNETELBOSCH Vincent, (Université catholique de Louvain, CORE, Belgium) |
| Abstract: | Since stable matchings may not exist, we adopt a weaker notion of stability for solving the roommate problem: The bargaining set. Klijn and Masso (2003) show that the bargaining set coincides with the set of weakly stable and weakly efficient matchings in the marriage problem. First, we show that a weakly stable matching always exists in the roommate problem. However, weak stability is not sufficient for a matching to be in the bargaining set. Second, we prove that the bargaining set is always non-empty. Finally, as Klijn and Masso (2003) get for the marriage problem, we show that the bargaining set coincides with the set of weakly stable and weakly efficient matchings in the roommate problem. |
| Keywords: | roommate problem, matching, (weak) stability, bargaining set |
| JEL: | C71 C78 |
| Date: | 2019–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2019012&r=all |
| By: | Aleksei Smirnov; Egor Starkov |
| Abstract: | The paper studies a dynamic communication game in the presence of adverse selection and career concerns. A forecaster of privately known competence, who cares about his reputation, chooses the timing of the forecast regarding the outcome of some future event. We find that in all equilibria in a sufficiently general class earlier reports are more credible. Further, any report hurts the forecaster’s reputation in the short run, with later reports incurring larger penalties. The reputation of a silent forecaster, on the other hand, gradually improves over time. |
| Keywords: | Career concerns, reputation, dynamic games, games of timing, strategic information transmission |
| JEL: | C73 D82 D83 D84 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:334&r=all |
| By: | Ezra Einy (BGU); Ori Haimanko (BGU) |
| Keywords: | Bayesian games, Bayesian potential, equilibrium existence, con- cave payo¤s, absolute continuity, information structures |
| JEL: | C62 C72 D82 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:bgu:wpaper:1911&r=all |
| By: | Gabriele Camera (Economic Science Institute, Chapman University; University of Bologna); Alessandro Gioffré (University of Florence) |
| Abstract: | Experiments that investigate the spontaneous emergence of money in laboratory so cieties rely on inde?nitely repeated helping games with random matching (Camera et al., 2013; Camera and Casari, 2014). An important open issue is the lack of a general proof of existence of an equilibrium capable of supporting the e?cient allocation under private monitoring, without money. Here, we ?ll this gap by o?ering a general proof, as well as by characterizing the e?cient non-monetary equilibrium. This technique can be extended to study games with simultaneous actions. |
| Keywords: | Tacit coordination; Random matching; Social norms |
| JEL: | E4 E5 C7 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:19-28&r=all |
| By: | Mariann Ollar; Antonio Penta |
| Abstract: | We consider mechanism design environments in which agents commonly know that types are identically distributed across agents, but without assuming that the actual distribution is common knowledge, nor that it is known to the designer (common knowledge of identicality). Under these assumptions, we explore problems of partial and full implementation, as well as robustness. First, we characterize the transfers which are incentive compatible under the assumption of common knowledge of identicality, and provide necessary and sufficient conditions for partial implementation. Second, we characterize the conditions under which full implementation is possible via direct mechanisms, as well as the transfer schemes which achieve full implementation whenever it is possible. Finally, we study the robustness properties of the implementing transfers with respect to misspecifications of agents’ preferences and with respect to lower orders beliefs in rationality. |
| Keywords: | moment conditions, robust full implementation, Rationalizability, interdependent values, identical but unknown distributions, uniqueness, strategic externalities, canonical transfers, loading transfers, equal-externality transfers |
| JEL: | D62 D82 D83 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1126&r=all |
| By: | Armenak Antinyan (Wenlan School of Business, Zhongnan University of Economics and Law); Luca Corazzini (Department of Economics, University Of Venice Cà Foscari; Center for Experimental Research in Management and Economics (CERME)); Elena D’Agostino (Elena D’Agostino Department of Economics, University of Messina); Filippo Pavesi (School of Economics and Management, LIUC Carlo Cattaneo University; Stevens Institute of Technology, School of Business, Hoboken) |
| Abstract: | Communication has been shown to play a positive role in promoting trust, yet there is no evidence on how sensitive this result is to the size of the gains from cooperation. To investigate this issue, we adopt an experimental design in which a trustee can send a free form message to a trustor, before the latter makes a delegation choice, by selecting whether or not to allow the trustee to decide how to share a given sum between the two of them. We allow the opportunity cost of delegation to vary and find that the trustee makes use of non-precise promises prevalently when the opportunity cost of delegation is low. Moreover, communication increases the trustor’s beliefs on the amount that the trustee will choose to transfer, only when this cost is high to start with. This attenuates the effect of the size of the opportunity cost of delegation on the trustor’s choice. We also find evidence of deception, but in some circumstances the trustee is overoptimistic about her ability to deceive. Indeed, in the presence of lower opportunity costs of delegation, we document an illusion effect: a trustee using non-precise promises incorrectly expects these to exert a positive effect on the trustor’s beliefs and propensity to delegate. |
| Keywords: | Communication, Trust, Language Precision, Delegation, Deception |
| JEL: | C7 C9 D9 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2019:31&r=all |
| By: | Syngjoo Choi; Booyuel Kim; Jungmin Lee; Sokbae Lee |
| Abstract: | We compare two groups of non-student Korean population?native-born South Koreans (SK) and North Korean refugees (NK)?with contrasting institutional and cultural backgrounds. In our experiment, subjects play dictator games under three di?erent treatments where the source of the income is varied: ?rstly, the income is exogenously given to the subject; secondly, earned by the subject¡¯s own e?ort; thirdly, individually earned by the subject and an anonymous partner and then pooled together. We ?nd that preferences for giving depend on the income source in di?erent ways for the SK and NK subjects. The SK subjects become more sel?sh when an income is individually earned than when it is given exogenously. However, the NK subjects are not responsive to the earned income treatment but behave more pro-socially when individually earned incomes are pooled. The pro-sociality of NK subjects is related to life experiences in North Korea. Our results corroborate the notion that institutions and cultures matter in shaping social norms about distributive fairness. |
| Keywords: | Sel?sh Behavior; Institutions; Division of Korea; Dictator Game; Earnings |
| JEL: | C92 C93 D03 P20 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:snu:ioerwp:no123&r=all |
| By: | H Peyton Young; Itai Arieli; Yakov Babichenko; Ron Peretz |
| Abstract: | New ways of doing things often get started through the actions of a few innovators, then diffuse rapidly as more and more people come into contact with prior adopters in their social network. Much of the literature focuses on the speed of diffusion as a function of the network topology. In practice the topology may not be known with any precision, and it is constantly in flux as links are formed and severed. Here we establish an upper bound on the expected waiting time until a given proportion of the population has adopted that holds independently of the network structure. Kreindler and Young [38, 2014] demonstrated such a bound for regular networks when agents choose between two options: the innovation and the status quo. Our bound holds for directed and undirected networks of arbitrary size and degree distribution, and for multiple competing innovations with different payoffs. |
| Date: | 2019–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:884&r=all |
| By: | Mustafa Caglayan (Heriot Watt University, School of Social Sciences, Edinburgh, EH144AS, UK); Alessandro Flamini (University of Pavia); Babak Jahanshahi (University of Edinburgh) |
| Abstract: | We show that mafias harm technological development. We provide evidence that forced resettlement of bosses promoted mafias rooting in northern Italy. With forced resettlement as exogenous source of variation, we unveil that mafias cause a reduction in technology levels. Moving to a technology generating flow -innovation- we demonstrate that mafias stifle innovation. We argue that without mafia, Nature selects agents for their innovation capacity. Instead, with mafia, agents face an alternative strategy: relate with mafia; this strategy, infringing property rights and competition, hinders innovation. Using evolutionary dynamics, we show that while mafias decrease innovation, proper sanctions/indemnities can address the problem. |
| Keywords: | Organised crime, evolutionary game theory, innovation, technology |
| JEL: | O17 O30 C73 R11 K14 K42 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:sru:ssewps:2019-22&r=all |
| By: | Blanco, M.; Dalton, Patricio (Tilburg University, Center For Economic Research) |
| Abstract: | This paper combines laboratory experiments with a unique feature of the city of Bogota to uncover the relationship between generosity and wealth. Bogota is divided by law into six socio-economic strata which are close proxies of household wealth and income. We recruit subjects from different strata and run a series of double-blind dictator games where the recipient is the NGO Techo-Colombia, which builds transitional housing for homeless families. We identify the stratum of each subject anonymously and blindly, and match their donations with their stratum. In a first experiment we provide a fixed endowment to all participants and nd that donations are significantly increasing with wealth. However, in a second experiment, we show that this is not because the rich are intrinsically more generous, but because the experimental endowment has lower real value for them. With endowments that are equivalent to their daily expenditures, the rich, the middle-class and the poor give a similar proportion of their stratum-equivalent endowment. Moreover, we find that the motivation to donate is similar across strata, where the generosity act is explained mainly by warm-glow rather than pure altruism. |
| Keywords: | charitable giving; social stratification; inequality; social preferences; dictator game |
| JEL: | C91 D31 D64 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:732a238e-a6d3-428b-a062-1e53f12559a5&r=all |
| By: | Nikoloz Kudashvili; Philipp Lergetporer |
| Abstract: | Discrimination against minorities is pervasive in many societies, but little is known about strategies minorities may apply to minimize discrimination. In our trust game with 758 highschool students in the country of Georgia, ethnic Georgian trustors discriminate against the ethnic Armenian minority group. We introduce an initial signaling stage to investigate Armenians’ willingness to hide their ethnicity to avoid expected discrimination. 43 percent of Armenian trustees untruthfully signal that they have a Georgian name. Signaling behavior is driven by expected transfers and non-pecuniary motives. This strategic misrepresentation of ethnicity increases Georgian trustors’ expected back transfers and eliminates their discriminatory behavior. |
| Keywords: | discrimination; trust game; experiment; signaling; adolescents; |
| JEL: | C91 C93 D83 J15 D90 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp644&r=all |