nep-gth New Economics Papers
on Game Theory
Issue of 2020‒01‒13
fifteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Theories of reasoning and focal point play with a non-student sample By Zhixin Dai; Jiwei Zheng; Daniel John Zizzo
  2. An FBSDE approach to market impact games with stochastic parameters By Samuel Drapeau; Peng Luo; Alexander Schied; Dewen Xiong
  3. Agency Theory Meets Matching Theory By Inés Macho-Stadler; David Pérez-Castrillo
  4. Finite Horizon Dynamic Games with and without a Scrap Value By Reinhard Neck; Dmitri Blueschke; Viktoria Blueschke-Nikolaeva
  5. How to apply penalties to avoid delays in projects By Bergantiños, Gustavo; Lorenzo, Leticia
  6. Equilibrium refinements in games with many players By Enxian Chen; Lei Qiao; Xiang Sun; Yeneng Sun
  7. Monetary Payoff and Utility Function in Adaptive Learning Models By Erhao Xie
  8. On pledging one's trustworthiness through gifts: an experimental inquiry By Giuseppe Danese; Luigi Mittone
  9. General Game Playing B-to-B Price Negotiations By Michael, Friedrich; Ignatov, Dmitry I.
  10. Periodic attractor in the discrete time best-response dynamics of the Rock-Paper-Scissors game By Jos\'e Pedro Gaiv\~ao; Telmo Peixe
  11. Allocating extra revenues from broadcasting sports leagues By Bergantiños, Gustavo; Moreno-Ternero, Juan D.
  12. Improvement of Technical Efficiency of Firm Groups By Walter Briec; Stéphane Mussard
  13. The Folk Rule for Minimum Cost Spanning Tree Problems with Multiple Sources By Bergantiños, Gustavo; Chun, Youngsub; Lee, Eunju; Lorenzo, Leticia
  14. The CMMV Pricing Model in Practice By Bernard De Meyer; Moussa Dabo
  15. Portfolio Optimization under Correlation Constraint By Aditya Maheshwari; Traian Pirvu

  1. By: Zhixin Dai (China Financial Policy Research Center, School of Finance, Renmin University of China); Jiwei Zheng (School of Economics and Centre for Behavioural and Experimental Social Science, University of East Anglia); Daniel John Zizzo (School of Economics, University of Queensland)
    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: 2019–12–12
  2. By: Samuel Drapeau; Peng Luo; Alexander Schied; Dewen Xiong
    Abstract: We analyze a market impact game between $n$ risk averse agents who compete for liquidity in a market impact model with permanent price impact and additional slippage. Most market parameters, including volatility and drift, are allowed to vary stochastically. Our first main result characterizes the Nash equilibrium in terms of a fully coupled system of forward-backward stochastic differential equations (FBSDEs). Our second main result provides conditions under which this system of FBSDEs has indeed a unique solution, which in turn yields the unique Nash equilibrium. We furthermore obtain closed-form solutions in special situations and analyze them numerically
    Date: 2019–12
  3. By: Inés Macho-Stadler; David Pérez-Castrillo
    Abstract: The theory of incentives and matching theory can complement each other. In particular, matching theory can be a tool for analyzing optimal incentive contracts within a general equilibrium framework. We propose several models that study the endogenous payoffs of principals and agents as a function of the characteristics of all the market participants, as well as the joint attributes of the principal-agent pairs that partner in equilibrium. Moreover, considering each principal-agent relationship as part of a market may strongly influence our assessment of how the characteristics of the principal and the agent affect the optimal incentive contract. Finally, we discuss the effect of the existence of moral hazard on the nature of the matching between principals and agents that we may observe at equilibrium, compared to the matching that would happen if incentive concerns were absent.
    Keywords: Incentives, contracts, matching, moral hazard
    JEL: D86 D03 C78
    Date: 2020–01
  4. By: Reinhard Neck (Alpen-Adria-Universität Klagenfurt); Dmitri Blueschke (Alpen-Adria-Universität Klagenfurt); Viktoria Blueschke-Nikolaeva (Alpen-Adria-Universität Klagenfurt)
    Abstract: In this paper, we examine the effects of scrap values on the solutions of dynamic game Problems with a finite time horizon. We show how to include a scrap value in the OPTGAME3 algorithm for the numerical calculation of solutions for dynamic games. We consider two alternative ways of including a scrap value, either only for the state variables or for both the state and control variables. Using a numerical macroeconomic model of a monetary union, we show that the introduction of a scrap value is not appropriate as a substitute for an infinite horizon in dynamic economic policy game problems.
    Keywords: dynamic games, scrap value, finite horizon, Pareto solution, feedback Nash equilibrium solution
    JEL: C73 E60
    Date: 2019–10
  5. By: Bergantiños, Gustavo; Lorenzo, Leticia
    Abstract: A planner wants to carry out a project involving several firms. In many cases the planner, for instance the Spanish Administration, includes in the contract a penalty clause that imposes a payment per day if the firms do not complete their activities or the project on time. We discuss two ways of including such penalty clauses in contracts. In the first the penalty applies only when the whole project is delayed. In the second the penalty applies to each firm that incurs a delay even if the project is completed on time. We compare the two penalty systems and find that the optimal penalty (for the planner) is larger in the second method, the utility of the planner is always at least as large or larger in the second case and the utility of the firms is always at least as large or larger in the first. Surprisingly, the final delay in the project is unrelated to which penalty system is chosen.
    Keywords: game theory; PERT; delays; penalties
    JEL: C72
    Date: 2019–01–25
  6. By: Enxian Chen; Lei Qiao; Xiang Sun; Yeneng Sun
    Abstract: This paper introduces three notions of perfect equilibrium for games with many players, respectively, in behavioral, mixed and pure strategies. The equivalence between behavioral strategy perfect equilibrium and mixed strategy perfect equilibrium is established. More importantly, it is shown that after the resolution of strategic uncertainty, a mixed strategy perfect equilibrium leads to a pure strategy perfect equilibrium almost surely. Various properties related to limit admissibility are also considered.
    Date: 2019–12
  7. By: Erhao Xie
    Abstract: When players repeatedly face an identical or similar game (e.g., coordination game, technology adoption game, or product choice game), they may learn through experience to perform better in the future. This learning behaviour has important economic implications. It determines which economic outcome a game will reach and how fast it will get there. Given the importance of players’ learning behaviours, economists have proposed various adaptive models to study them. These models are usually estimated and tested using experimental data. Moreover, economists usually assume that individuals’ preference—their utility—is equal to the monetary reward they obtain. However, such an assumption can be wrong since players are not necessarily risk neutral. They could be risk averse or risk loving. I study the consequences of this false assumption and propose a method to deal with it. I then apply the method to an existing experimental dataset. The estimation results show that utility does not necessarily equal monetary reward. Imposing such a false assumption leads researchers to draw incorrect conclusions about players’ learning behaviours. For instance, we may incorrectly estimate the speed of learning and wrongly predict the final outcome of a game. In contrast, the method I propose in this paper allows researchers to achieve more accurate estimates.
    Keywords: Econometric and statistical methods; Economic models
    JEL: C57 C72 C92
    Date: 2019–12
  8. By: Giuseppe Danese; Luigi Mittone
    Abstract: The anthropological literature provides many instances of tokens donated in the form of a gift to woo potential trade partners, or to strengthen ties to existing partners. We study the role of gifts, as pledges of one’s trustworthiness, through an experiment modeled on the trust game. We vary whether the trustee can send a token before the trustor decides whether to transfer money; whether one of the tokens is socially positioned; and whether the participants interact repeatedly or are randomly re-matched in each round. Participants in a fixed matching achieve comparable levels of trust and trustworthiness in the studies with and without tokens. In the studies with a token, trustors send significantly more points when the trustee has sent a token. A token is used more sparingly after it is socially positioned. We conclude that for institutional design, the time horizon of the relationship might be at least as important as the ability to make pledges.
    Keywords: Pledges, Gifts, Marcel Mauss, Trust Game, Tokens
    JEL: Z13 B52 C92
    Date: 2020
  9. By: Michael, Friedrich; Ignatov, Dmitry I.
    Abstract: This papers discusses the scientific and practical perspectives of using general game playing in business-to-business price negotiations as a part of Procurement 4.0 revolution. The status quo of digital price negotiations software,which emerged from intuitive solutions to business goals and refereed to as electronic auctions in industry, is summarized in scientific context. Description of such aspects as auctioneers’ interventions, asymmetry among players and time-depended features reveals the nature of nowadays electronic auctions to be rather termed as price games. This paper strongly suggests general game playing as the crucial technology for automation of human rule setting in those games. Game theory, genetic programming, experimental economics and AI human player simulation are also discussed as satellite topics. SIDL-type game descriptions languages and their formal game theoretic foundations are presented.
    Keywords: Procurement 4.0; Artificial Intelligence; General Game Playing; Game Theory; Mechanism Design; Experimental Economics; Behavioral Eco-nomics; z-Tree; Cognitive Modeling; e-Auctions; barter double auction; B-to-B Price Negotiations; English Auction; Dutch auction; Sealed-Bid Auction; Industry 4.0
    JEL: C63 C72 C90 D04 D44
    Date: 2019–09–23
  10. By: Jos\'e Pedro Gaiv\~ao; Telmo Peixe
    Abstract: The Rock-Paper-Scissors (RPS) game is a classic non-cooperative game widely studied in terms of its theoretical analysis as well as in its applications, ranging from sociology and biology to economics. Many experimental results of the RPS game indicate that this game is better modelled by the discretized best-response dynamics rather than continuous time dynamics. In this work we show that the attractor of the discrete time best-response dynamics of the RPS game is finite and periodic. Moreover we also describe the bifurcations of the attractor and determine the exact number, period and location of the periodic strategies.
    Date: 2019–12
  11. By: Bergantiños, Gustavo; Moreno-Ternero, Juan D.
    Abstract: We consider the problem of sharing the revenues from broadcasting sports leagues among participating teams. We introduce axioms formalizing alternative ways of allocating the extra revenue obtained from additional viewers. We show that, combined with some other standard axioms, they provide axiomatic characterizations of three focal rules for this problem: the uniform rule, the equal-split rule and concede-and-divide.
    Keywords: resource allocation, broadcasting, sports leagues, axioms, extra revenues
    JEL: C71
    Date: 2019–12–05
  12. By: Walter Briec (IAE Perpignan - Institut d'Administration des Entreprises - Perpignan - UPVD - Université de Perpignan Via Domitia); Stéphane Mussard (CHROME - Détection, évaluation, gestion des risques CHROniques et éMErgents (CHROME) / Université de Nîmes - UNIMES - Université de Nîmes)
    Abstract: Cooperation between firms can never improve the technical efficiency of any firm coalition. The directional distance function, by virtue of its additive nature, is a useful tool that outlines this impossibility. In this paper, the additive aggregation scheme of input/output vectors is generalized according to an aggregator. Accordingly, cooperation between firms may increase the technical efficiency of the firm group. This improvement is shown to be compatible with nonjoint semilattice technologies that bring out either output or input (weak) complementarity. Firm games are investigated to show that firms may merge on the basis of their inputs due to constraints imposed on outputs. Conversely, they may merge with respect to the outputs they can produce because of limitations imposed on inputs.
    Keywords: Productivity and competitiveness,Aggregation,Cooperative games,Distance functions,Technical efficiency JEL Codes: D21,D24
    Date: 2019–11
  13. By: Bergantiños, Gustavo; Chun, Youngsub; Lee, Eunju; Lorenzo, Leticia
    Abstract: We consider a problem where a group of agents is interested in some goods provided by a supplier with multiple sources. To be served, each agent should be connected directly or indirectly to all sources of the supplier for a safety reason. This problem generalizes the classical minimum cost spanning problem with one source by allowing the possibility of multiple sources. In this paper, we extend the definitions of the folk rule to be suitable for minimal cost spanning tree problems with multiple sources and present its axiomatic characterizations.
    Keywords: minimum cost spanning tree problems, multiple sources, folk rule, axiomatic characterizations.
    JEL: C71
    Date: 2019–01–25
  14. By: Bernard De Meyer (Centre d'Economie de la Sorbonne;; Moussa Dabo (Centre d'Economie de la Sorbonne;
    Abstract: Mainstream financial econometrics methods are based on models well tuned to replicate price dynamics, but with little to no economic justification. In particular, the randomness in these models is assumed to result from a combination of exogenous factors. In this paper, we present a model originating from game theory, whose corresponding price dynamics are a direct consequence of the information asymmetry between private and institutional investors. This model, namely the CMMV pricing model, is therefore rooted in market microstructure. The pricing methods derived from it also appear to fit very well historical price data. Indeed, as evidenced in the last section of the paper, the CMMV model does a very good job predicting option prices from readily available data. It also enables to recover the dynamic of the volatility surface
    Keywords: Game Theory; Information asymmetry; CMMV; Option pricing
    JEL: C58 C73 G13
    Date: 2019–11
  15. By: Aditya Maheshwari; Traian Pirvu
    Abstract: We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation constraint is imposed on the portfolio and the non-tradable index at some benchmark time horizon. The goal is to maximize portofolio's expected exponential utility subject to the correlation constraint. Two types of optimal portfolio strategies are considered: the subgame perfect and the precommitment ones. We find analytical expressions for the constrained subgame perfect (CSGP) and the constrained precommitment (CPC) portfolio strategies. Both these portfolio strategies yield significantly lower risk when compared to the unconstrained setting, at the cost of a small utility loss. The performance of the CSGP and CPC portfolio strategies is similar.
    Date: 2019–12

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