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on Game Theory |
| By: | Yeon-Koo Che; Jinwoo Kim; Fuhito Kojima |
| Abstract: | We develop a theory of monotone comparative statics based on weak set order, or in short weak monotone comparative statics, and identify the enabling conditions in the context of individual choices, Pareto optimal choices for a coalition of agents, and Nash equilibria of games. Compared with the existing theory based on strong set order, the conditions for weak monotone comparative statics are weaker, sometimes considerably, in terms of the structure of the choice environment and underlying preferences of agents. We apply the theory to establish existence and monotone comparative statics of Nash equilibria in games with strategic complementarities and of stable many-to-one matchings in two-sided matching problems, allowing for general preferences that accommodate indifferences and incomplete preferences. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1911.06442&r=all |
| By: | Ngo Van Long |
| Abstract: | The purpose of this paper is to model the influence of Kantian moral scruples in a dynamic environment. Our objectives are two-fold. Firstly, we investigate how a Nash equilibrium among agents who have moral scruples may ensure that the exploitation of a common property renewable resource is Pareto efficient at every point of time. Secondly, we outline a prototype model that shows, in an overlapping generation framework, how a community’s sense of morality may evolve over time and identifies conditions under which the community may reach a steady state level of morality in which everyone is perfectly Kantian. |
| Keywords: | Tragedy of the Commons,Dynamic Games,Nash Equilibrium,Self-Image,Categorical Imperative, |
| JEL: | C71 D62 D71 |
| Date: | 2019–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2019s-26&r=all |
| By: | Claus-Jochen Haake (Paderborn University); Thorsten Upmann (Bielefeld University); Papatya Duman (Paderborn University) |
| Abstract: | In this paper, we analyze the two-dimensional Nash bargaining solution (NBS) deploying a standard labor market negotiations model (see McDonald and Solow, 1981; Creedy and McDonald, 1991). We show that the two-dimensional bargaining problem can be decomposed into two one-dimensional problems such that the (Cartesian) product of the solutions of these problems replicates the solution of the two-dimensional problem, if the NBS is applied. However, this decomposition fails for any solution concept that does not satisfy the axiom of Independence of Irrelevant Alternatives (IIA axiom). Our decomposition result has significant implications for actual negotiations, as it allows for the decomposition of a multi-issue bargaining problem into a set of simpler problems, in particular a set of single-issue bargaining problems. In this way, the decomposition may help facilitate negotiations in labor markets and also in other environments. |
| Keywords: | Labor market negotiations; Efficient bargains; Nash bargaining solution; Sequential bargaining; Restricted bargaining games |
| JEL: | C78 J52 J41 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:ciepap:128&r=all |
| By: | Josune Albizuri, M.; Dietzenbacher, Bas (Tilburg University, Center For Economic Research); Zarzuelo, J. |
| Abstract: | This paper studies independence of higher claims and independence of irrelevant claims on the domain of bargaining problems with claims. Independence of higher claims requires that the payoff of an agent does not depend on the higher claim of another agent. Independence of irrelevant claims states that the payoffs should not change when the claims decrease but remain higher than the payoffs. Interestingly, in conjunction with standard axioms from bargaining theory, these properties characterize a new constrained Nash solution, a constrained Kalai-Smorodinsky solution, and a constrained Kalai solution. |
| Keywords: | bargaining with claims; independence of higher claims; independence of irrelevant claims; constrained Nash solution; constrained Kalai-Smorodingsky solution |
| JEL: | C78 D74 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:be1cb9ce-9018-46e7-96b6-2ca977cd5068&r=all |
| By: | Kerber, Manfred; Rowat, Colin; Yoshihara, Naoki |
| Abstract: | This paper studies pillage games (Jordan in J Econ Theory 131.1:26-44, 2006, “Pillage and property”), which are well suited to modelling unstructured power contests. To enable empirical test of pillage games’ predictions, it relaxes a symmetry assumption that agents’ intrinsic contributions to a coalition’s power is identical. In the three-agent game studied: (i) only eight configurations are possible for the core, which contains at most six allocations; (ii) for each core configuration, the stable set is either unique or fails to exist; (iii) the linear power function creates a tension between a stable set’s existence and the interiority of its allocations, so that only special cases contain strictly interior allocations. Our analysis suggests that non-linear power functions may offer better empirical tests of pillage game theory. |
| Keywords: | power contests, core, stable sets |
| JEL: | C71 D51 P14 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hituec:701&r=all |
| By: | Arnaud Wolff |
| Abstract: | We review the way beliefs have traditionally been formalized in game-theoretic settings, and argue that this formalization has its limits, especially in the realm of strategic social interactions. Normative game theory, with its emphasis on equilibrium concepts and its concern about how rational and intelligent players should play, has left little room for a formal characterization of the role of players’ beliefs. Given that beliefs determine play, we argue that a case can be made for a deeper understanding of their nature. We draw on the literature in evolutionary psychology and biology to decipher underlying, not readily apparent, incentives that might influence belief adoption. In fact, we take the view that beliefs are themselves subject to incentives, and that agents’ beliefs may therefore take on a predictable form if we are able to decipher the underlying incentives that they face. This predictable form might then be used to justify specific modelling assumptions, and accordingly improve the models’ predictive power. |
| Keywords: | Beliefs, Game Theory, Social Incentives, Evolution, Coordination. |
| JEL: | B40 C70 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2019-41&r=all |
| By: | Anders Poulsen (University of East Anglia); Graciela Zevallos-Porles (University of East Anglia) |
| Abstract: | We study the effects of endogenous ex-post information acquisition on lying behavior and beliefs in a Sender-Receiver game. After choosing an action, the Receiver can decide to find out if the Sender lied or not. We observe that a significant proportion of Receivers decide to become informed, even when this information is costly. There is, however, no impact of the option of information acquisition on Sender behavior, and no evidence of Senders being shame averse. |
| Keywords: | Sender-Receiver Games; Endogenous Ex-Post Information Acquisition; Shame Aversion. |
| JEL: | C91 D63 D82 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:uea:wcbess:19-04&r=all |
| By: | Takehiro Kawasaki; Nathanael Barrot; Seiji Takanashi; Taiki Todo; Makoto Yokoo |
| Abstract: | Auctions via social network, pioneered by Li et al. (2017), have been attracting considerable attention in the literature of mechanism design for auctions. However, no known mechanism has satisfied strategy-proofness, non-deficit, non-wastefulness, and individual rationality for the multi-unit unit-demand auction, except for some naive ones. In this paper, we first propose a mechanism that satisfies all the above properties. We then make a comprehensive comparison with two naive mechanisms, showing that the proposed mechanism dominates them in social surplus, seller's revenue, and incentive of buyers for truth-telling. We also analyze the characteristics of the social surplus and the revenue achieved by the proposed mechanism, including the constant approximability of the worst-case efficiency loss and the complexity of optimizing revenue from the seller's perspective. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1911.08809&r=all |
| By: | Perry, Logan; Gavrilets, Sergey |
| Abstract: | Leadership can be effective in promoting cooperation within a group, but as the saying goes “heavy is the head that wears the crown.” A lot of debate still surrounds exactly what motivates individuals to expend the effort necessary to lead their groupmates. Evolutionary game theoretic models represent individual’s thought processes by strategy update protocols. The most common of these are random mutation, individual learning, selective imitation, and myopic optimization. Recently we introduced a new strategy update protocol - foresight - which takes into account future payoffs, and how groupmates respond to one’s own strategies. Here we apply our approach to a new 2x2 game, where one player, a leader, ensures via inspection and punishment that the other player, a subordinate, produces collective good. We compare the levels of inspection and production predicted by Nash Equilibrium, Quantal Response Equilibrium, level-k cognition, fictitious play, reinforcement learning, selective imitation, and foresight. We show that only foresight and selective imitation are effective at promoting contribution by the subordinate and inspection and punishment by the leader. The role of selective imitation in cultural and social evolution is well appreciated. In line with our prior findings, foresight is a viable alternative route to cooperation. |
| Date: | 2019–08–07 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:84yxz&r=all |
| By: | Groba, Carlos; Sartal, Antonio; Bergantiños, Gustavo |
| Abstract: | The tuna fishing industry's increasing regulatory restrictions on the number of FADs per vessel is forcing companies to rethink their fishing practices to ensure their continued profitability. Despite these expanding constraints, and although many studies have been published on the use of FADs and their implications, to date there has been little research on how to help the tuna fishing industry optimize its procedures. Based on real data and using the game theory approach, we suggest a new collaborative method of employing FADs that involves their use between vessels, and we demonstrate that sharing FADs optimizes the use of fuel and time for entire fleets. Our findings show that, with the correct incentives, all stakeholders, including the company, the skipper, and even the environment, can achieve mutually improved results by sharing information. |
| Keywords: | FAD restrictions, Tuna fishing industry, Economic incentives for sharing, Fuel consumption reduction, Game theory, Sustainability |
| JEL: | C72 |
| Date: | 2019–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:96938&r=all |
| By: | Bierbrauer, Felix; Tsyvinski, Aleh; Werquin, Nicolas |
| Abstract: | We develop a model of political competition with endogenous platform choices of parties and endogenous turnout. A main finding is that a party that is leading in the polls has an incentive to cater primarily to the core voters of the opposing party. A party that is lagging behind, by contrast, has an incentive to cater to its own base. We analyze the implications for redistributive taxation and characterize the political weights that competing parties assign to voters with different incomes. Finally, we relate the comparative statics predictions of our model to the asymmetric demobilization strategy in the German elections in the era of Merkel. |
| Keywords: | Political competition, Income Taxation, Turnout. |
| JEL: | D72 D82 H21 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:123701&r=all |
| By: | Mauersberger, Felix; Nagel, Rosemarie; Bühren, Christoph |
| Abstract: | The goal of this paper is to show how adding behavioral components to micro-foundated models of macroeconomics may contribute to a better understanding of real world phenomena. The authors introduce the reader to variations of the Keynesian Beauty Contest (Keynes, The General Theory of Employment, Interest, and Money, 1936), theoretically and experimentally with a descriptive model of behavior. They bridge the discrepancies of (benchmark) solution concepts and bounded rationality through step-level reasoning, the so-called level-k or cognitive hierarchy models. These models have been recently used as building blocks for new behavioral macro theories to understand puzzles like the lacking rise of inflation after the financial crisis, the effectiveness of quantitative easing, the forward guidance puzzle and the effectiveness of temporary fiscal expansion. |
| Keywords: | beauty contest game,expectation formation,equilibration,level-k reasoning,macroeconomics,game theory,experimental economics |
| JEL: | E12 E13 D80 D9 C91 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201953&r=all |
| By: | Masaaki Fujii (Quantitative Finance Course, Graduate School of Economics, The University of Tokyo) |
| Abstract: | In this work, we systematically investigate mean field games and mean field type control problems with multiple populations using a coupled system of forward-backward stochastic differential equations of McKean-Vlasov type stemming from Pontryagin’s stochastic maximum principle. Although the same cost functions as well as the coefficient functions of the state dynamics are shared among the agents within each population, they can be different population by population. We study the mean field limits of the three different situations; (i) every agent is non-cooperative; (ii) the agents within each population are cooperative; and (iii) only for some populations, the agents are cooperative within each population. We provide several sets of sufficient conditions for the existence of mean field equilibrium for each of these cases. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf467&r=all |
| By: | Ethan Che |
| Abstract: | We study a seller who sets a reserve price in a second price auction with uncertainty over the joint distribution of bidders' valuations. The seller only knows the mean of the marginal distribution of each bidder's valuation and the range, and an adversarial nature chooses the worst-case distribution within this ambiguity set. We use a dual characterization to solve for this distribution. We find that the seller's optimal reserve price tends to be low and converges to zero in probability as the number of bidders increases. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1911.07103&r=all |
| By: | Roberto Galbiati (OSC - Observatoire sociologique du changement - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Emeric Henry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | How does the exposure to past institutions affect current cooperation? While a growing literature focuses on behavioral channels, we show how cooperation-enforcing institutions affect rational learning about the group's value. Strong institutions, by inducing members to cooperate , may hinder learning about intrinsic values in the group. We show, using a lab experiment with independent interactions and random rematching, that participants behave in accordance with a learning model, and in particular react differently to actions of past partners whether they were played in an environment with coercive enforcement or not. |
| Keywords: | Enforcement,social values,cooperation,learning,spillovers,persistence of insti- tutions,repeated games,experiments |
| Date: | 2019–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02145486&r=all |
| By: | Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Antoine Malezieux (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); Jason Shogren (UW - University of Wyoming) |
| Date: | 2019–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02159905&r=all |
| By: | Even Comfort Hvinden |
| Abstract: | The market behavior nationalized oil companies in the Organization of Petroleum Exporting Countries (OPEC) is starkly time-varying. I rationalize OPEC's behavior in an infinitely repeated game of Cournot competition with imperfect monitoring, capacity constraints to output, and demand evolving as a Markov chain. I adapt the methodology of Abreu, Pearce, and Stacchetti (1990) to derive optimal symmetric equilibria. High powered incentives are created by the threat of output wars, the severity of which is endogenously determined by current and future expected market conditions. Implied price elasticities of supply increase in magnitude and may change sign under constrained incentive creation. The key empirical implication is that unanticipated changes to OPEC's strategic environment will persistently alter their behavior and create breaks in the joint stochastic distribution of equilibrium prices and quantities. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:bny:wpaper:0082&r=all |
| By: | Krishna Dasaratha |
| Abstract: | We study a model of innovation with a large number of firms that create new technologies by combining several discrete ideas. These ideas can be acquired by private investment or via social learning. Firms face a choice between secrecy, which protects existing intellectual property, and openness, which facilitates social learning. These decisions determine interaction rates between firms, and these interaction rates enter our model as link probabilities in a resulting learning network. Higher interaction rates impose both positive and negative externalities on other firms, as there is more learning but also more competition. We show that the equilibrium learning network is at a critical threshold between sparse and dense networks. A corollary is that at equilibrium, the positive externality from interaction dominates: the innovation rate and even average firm profits would be dramatically higher if the network were denser. So there are large returns to increasing interaction rates above the critical threshold---but equilibrium remains critical even after natural interventions. One policy solution is to introduce informational intermediaries, such as public innovators who do not have incentives to be secretive. These intermediaries can facilitate a high-innovation equilibrium by transmitting ideas from one private firm to another. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1911.06872&r=all |