nep-gth New Economics Papers
on Game Theory
Issue of 2019‒12‒23
fourteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. "Cooperation in Revision Games and Some Applications" By Yuichiro Kamada; Michihiro Kandori
  2. Theories Of Reasoning and Focal Point Play With A Non-Student Sample By Zhixin Dai; Jiwei Zheng; Daniel John Zizzo
  3. A Dynamic Analysis of Climate Change Mitigation with Endogenous Number of Contributors: Loose vs Tight Cooperation By Colombo, Luca; Labrecciosa, Paola; Long, Ngo Van
  4. Public Good Indices for Games with Several Levels of Approval By Sebastien Courtin; Bertrand Tchantcho
  5. Communication and Market Sharing: An Experiment on the Exchange of Soft and Hard Information By Freitag, Andreas; Roux, Catherine; Thöni, Christian
  6. A Bilateral River Bargaining Problem with Negative Externality By Shivshanker Singh Patel; Parthasarathy Ramachandran
  7. A note on the decomposability of inequality measures By Frederic Chantreuil; Sebastien Courtin; Kévin Fourrey; Isabelle Lebon
  8. Penney's Game Odds From No-Arbitrage By Miller, Joshua Benjamin
  9. The Effects of “Observability†on Rejection Behavior in Ultimatum Game Experiments By Chulyoung Kim; Miho Hong; Sang-Hyun Kim; Sangyoon Nam
  10. Forward guidance: communication, commitment, or both? By Marco Bassetto
  11. Endowment Effects in Proposal Right Contest By Chulyoung Kim; Youjin Hahn; Sang-Hyun Kim
  12. Time-consistent resource management with regime shifts By Maria Arvaniti; Chandra K. Krishnamurthy; Anne-Sophie Crépin
  13. Multimarket Contact in Banking Competition in The United States By David Coble
  14. Vertically Differentiated Cournot Oligopoly: Effects of Market Expansion and Trade Liberalization on Relative Markup and Product Quality By Ngo Van Long; Zhuang Miao

  1. By: Yuichiro Kamada (Haas School of Business, University of California, Berkeley); Michihiro Kandori (Faculty of Economics, The University of Tokyo)
    Abstract: The present paper provides some examples that illustrate how cooperation is achieved among rational and selfish agents when (i) they prepare their actions in advance and (ii) they have some opportunities to revise their actions. Specifically, we use the framework of revision games introduced by Kamada and Kandori (2019). To judge the sustainability of cooperation in the examples, we show and utilize a simple and useful lemma.
    Date: 2019–12
  2. By: Zhixin Dai (University of East Anglia); Jiwei Zheng (University of East Anglia); Daniel John Zizzo (University of East Anglia)
    Abstract: We present a coordination game experiment testing the robustness of the predictive power of level-k reasoning and team reasoning in a sample of Chinese tax administrators. We show how the incidence of coordination game play is virtually identical between Chinese tax administrators and university students, which in turn is comparable with that found in research with a Western university student sample. However, relatively to non-students, students are comparatively more attracted by the focal point under team reasoning when this has equal payoffs and the other outcomes do not.
    Keywords: non-student subjects, focal points, team reasoning, level-k, coordination games.
    JEL: C72 C78 C91
    Date: 2019–12
  3. By: Colombo, Luca; Labrecciosa, Paola; Long, Ngo Van
    Abstract: We propose a dynamic model of climate change abatement in which the number of contributors is endogenous and thus may differ between two modes of cooperation, namely, loose vs tight. In the tight mode of cooperation, each member is prescribed a specific target, whereas in the loose one, members choose their own abatement levels as Nash players. Conditions exist such that the incentive to free ride is lower and the number of contributors is higher in the loose cooperation framework, and this can lead to higher welfare, both in the steady state and along the transition path. Our theoretical results suggest that the loose coalition mode, such reflected in the spirit of the Paris International COP21 Conference on Climate Change, by attracting more participants, could turn out to be more effective in reducing emissions than the Kyoto Protocol.
    Keywords: differential games, pollution abatement, climate change, mode of cooperation
    JEL: Q2 Q52 C73
    Date: 2019–12
  4. By: Sebastien Courtin (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); Bertrand Tchantcho (ENSP - Ecole Nationale Supérieure Polytechnique [Yaoundé] - Université de Yaoundé I [Yaoundé])
    Abstract: This work focuses on (j, 2) games in which there are several levels of approval in the input, i. e. games with n players, j ordered qualitative alternatives in the input level and 2 possible ordered quantitative alternatives in the output. When considering (j, 2) games, we extend the Public Good index (PGI), the Null Player Free index (NPFI) and the Shift index (SI) and provide full characterizations of these extensions.
    Keywords: null player free index,games,shift index,public good index
    Date: 2019
  5. By: Freitag, Andreas (University of Basel); Roux, Catherine (University of Basel); Thöni, Christian
    Abstract: We study the role of communication in collusive market sharing. In a series of Cournot oligopoly experiments with multiple markets and repeated interaction, we vary the types of information that firms can exchange. We distinguish between hard information-verifiable information about past conduct-and soft information- unbinding information about future conduct. We find that the effect of communication on the firms' ability to collude depends on the type of information available: market prices increase only slightly when hard information allows perfect monitoring of rivals' past actions, but the price raise due to soft information, however, is substantial. The explicit consent of each cartel member to a common collusive strategy, even if stated only once, drives this strong effect. Our results point to the types and contents of communication that should be of particular concern to antitrust authorities.
    Keywords: Collusion ; market sharing ; cournot oligopoly ; information; Cmmunication, experiments
    JEL: C91 L13 L41
    Date: 2019–11–29
  6. By: Shivshanker Singh Patel; Parthasarathy Ramachandran
    Abstract: This article is addressing the problem of river sharing between two agents along a river in the presence of negative externalities. Where, each agent claims river water based on the hydrological characteristics of the territories. The claims can be characterized by some international framework (principles) of entitlement. These international principles are appears to be inequitable by the other agents in the presence of negative externalities. The negotiated treaties address sharing water along with the issue of negative externalities imposed by the upstream agent on the downstream agents. The market based bargaining mechanism is used for modeling and for characterization of agreement points.
    Date: 2019–12
  7. By: Frederic Chantreuil (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); Sebastien Courtin (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); Kévin Fourrey (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); Isabelle Lebon (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)
    Abstract: We propose a decomposition of inequality measures. By taking the example of the decomposition of income inequality by components, we show that this decomposition fits the definition of two elements: the sum of pure marginal contributions of income components and the sum of the pairwise interactions of all income components. This decomposition relies on the Shapley function and remains valid for a decomposition by subgroups and by components.
    Keywords: Interactions,Inequality decomposition,Shapley JEL Codes: C71,D63
    Date: 2019–08
  8. By: Miller, Joshua Benjamin (The University of Melbourne)
    Abstract: Penney's game is a two player zero-sum game in which each player chooses a three-flip pattern of heads and tails and the winner is the player whose pattern occurs first in repeated tosses of a fair coin. Because the players choose sequentially, the second mover has the advantage. In fact, for any three-flip pattern, there is another three-flip pattern that is strictly more likely to occur first. This paper provides a novel no-arbitrage argument that generates the winning odds corresponding to any pair of distinct patterns. The resulting odds formula is equivalent to that generated by Conway's ``leading number'' algorithm. The accompanying betting odds intuition adds insight into why Conway's algorithm works. The proof is simple and easy to generalize to games involving more than two outcomes, unequal probabilities, and competing patterns of various length. Additional results on the expected duration of Penney's game are presented. Code implementing and cross-validating the algorithms is included.
    Date: 2019–03–28
  9. By: Chulyoung Kim (Yonsei Univ); Miho Hong (Yale Univ); Sang-Hyun Kim (Yonsei Univ); Sangyoon Nam (U of Southern California)
    Abstract: Using a modified ultimatum game experiment, we tested the hypothesis that greater “observability†of responders’ actions leads to a higher rejection rate. Our experimental data on participants’ rejection behavior rejected this hypothesis but confirmed the theory of reference-dependent preferences.
    Keywords: Ultimatum game experiment, audience effect, signaling, loss aversion
    JEL: C91
    Date: 2019–12
  10. By: Marco Bassetto (Institute for Fiscal Studies and Federal Reserve Bank of Minneapolis)
    Abstract: A policy of forward guidance has been suggested either as a form of commitment (“Odyssean”) or as a way of conveying information to the public (“Delphic”). I analyze the strategic interaction between households and the central bank as a game in which the central bank can send messages to the public independently of its actions. In the absence of private information, the set of equilibrium payo?s is independent of the announcements of the central bank: forward guidance as a pure commitment mechanism is a redundant policy instrument. When private information is present, central bank communication can instead have social value. Forward guidance emerges as a natural communication strategy when the private information in the hands of the central bank concerns its own preferences or beliefs: while forward guidance per se is not a substitute for the central bank’s commitment or credibility, it is an instrument that allows policymakers to leverage their credibility to convey valuable information about their future policy plans. It is in this context that “Odyssean forward guidance” can be understood.
    Date: 2019–07–29
  11. By: Chulyoung Kim (Yonsei Univ); Youjin Hahn (Yonsei Univ); Sang-Hyun Kim (Yonsei Univ)
    Abstract: When parties negotiate over surplus, incumbents, or agenda-setters, tend to spend more resources than challengers to keep their power in making a proposal. This is often attributed to the fact that incumbents usually have better access to resources. We experimentally investigate whether incumbents spend more resources even when they have no advantage. Specifically, we consider a twostage game where in the first stage, players compete to be recognized as a proposer, and in the second stage, they play an ultimatum bargaining game. Our treatment concerns whether one of the subjects is endowed with proposal right (without any material advantage) in the beginning of the game. We find that subjects who were framed to be incumbents spent significantly more resources to keep the proposal right than others. This suggests that even without any resource advantage, the parties who have the power would incur higher costs to keep it, and thus, the allocation of power is likely to persist. Our finding is new in the sense that the endowment effect does not concern “property right†as in previous studies but “proposal right.â€
    Keywords: Proposal right, endowment effect, framing effect, contest, ultimatum game, laboratory experiment
    JEL: C91 D74
    Date: 2019–12
  12. By: Maria Arvaniti (Chair of Economics/Resource Economics, ETH, Zurich and Center for Environmental and Resource Economics (CERE), Umea, Sweden.); Chandra K. Krishnamurthy (Beijer Institute for Ecological Economics, The Royal Swedish Academy of Sciences, Stockholm, Department of Forest Economics, Swedish Agricultural University, SLU, Umea and Center for Environmental and Resource Economics (CERE), Umea, Sweden.); Anne-Sophie Crépin (Beijer Institute for Ecological Economics, The Royal Swedish Academy of Sciences, Stockholm and Stockholm Resilience Centre, Stockholm University, Stockholm.)
    Abstract: We investigate how a resource user who is present-biased manages a renewable resource stock with variable growth that could undergo a reversible regime shift (an abrupt, persistent change in structure and function of the ecosystem supplying the resource). In a discrete-time quasihyperbolic discounting framework with no commitment device, and using only generic utility functions and stock transition with regime shifts, we show that there is a unique, time-consistent stationary Markov-Nash equilibrium extraction policy. Further, we find that the optimal extraction policy is increasing in the resource stock and in the degree of present bias. Overall, our results suggest that for characteristics of ecosystems commonly considered in the literature, presentbiased resource users will increase extraction when faced with regime shifts.
    Keywords: Renewable resources, Regime shifts, Hyperbolic Discounting, Present bias, Uncertainty, Markov Equilibrium
    JEL: Q20 C61 C73
    Date: 2019–12
  13. By: David Coble
    Abstract: In this paper, I present a structural discrete-choice model for deposit services. This model produces estimates of different supply functions at the MSA and bank levels. Combining this information with detailed cost data per bank at the national level, I trace the degree of competition in the banking system and perform compensatory analysis. I derive and estimate the model under three different assumptions: Nash-Bertrand competition, perfect collusion, and partially collusive equilibrium. The findings show that multimarket contacts in the US banking system lead to highly competitive behavior. Also, I measure the variation in consumer welfare as if there was a Nash-Bertrand competition vis-à-vis the identified market equilibrium. I show this change to be between 1.5 to 3.8 cents per dollar deposited, which is equivalent to an increase in (stock) welfare of about 0.65 percent points of a one year US GDP.
    Date: 2019–11
  14. By: Ngo Van Long; Zhuang Miao
    Abstract: We model an oligopoly where firms are allowed to freely enter and exit the market and choose the quality level of their products by incurring different set-up costs. Using this framework, we study the mix of firms in the long-run Cournot-Nash equilibrium under different cost structures and the effects of market size on market outcomes. Specifically, we consider two alternative specifications of cost structure. In the first specification, quality upgrading requires a large increment in the set-up cost or R&D investment. Under this cost structure, we show that in the Nash equilibrium, each firm specializes in a single quality level, and an increase in the market size leads to (i) an increase in the fraction of firms that specialize in the high quality product, (ii) an increase in the market share of the high quality product, and (iii) a reduction in firms' markups and in markup dispersion. Under the second type of cost structure where quality upgrading only requires higher marginal cost, we find that all firms will produce both types of product, and the value share of the high-quality product increases as the market expands, but in quantity terms, the market share of the high quality product does not change. Finally, we find that trade liberalization has broadly similar effects to that of a market expansion, but the supply of the high-quality product from the smaller economy may decrease.
    JEL: L1 L2 F15
    Date: 2019–12–13

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