nep-gth New Economics Papers
on Game Theory
Issue of 2020‒01‒27
twenty papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Long Information Design By Frédéric Koessler; Marie Laclau; Jérôme Renault; Tristan Tomala
  2. Monotonicity and Egalitarianism (revision of CentER DP 2019-007) By Dietzenbacher, Bas
  3. Best-Response Dynamics in Directed Network Games By Péter Bayer; György Kozics; Nóra Gabriella Szőke
  4. One-way and two-way cost allocation in hub network problems By Bergantiños, Gustavo; Vidal-Puga, Juan
  5. Existence of Trembling hand perfect and sequential equilibrium in Stochastic Games By Sofia Moroni
  6. The Doors of Perception By Gary Charness; Alessandro Sontuoso
  7. Numerical Appromixation of the Value of a Stochastic Differential Game with Asymmetric Information By Banas, Lubomir; Ferrari, Giorgio; Randrianasolo, Tsiry Avisoa
  8. Matching Platforms By Masaki Aoyagi; Seung Han Yoo
  9. Personal preferences in networks By Orlova, Olena
  10. On Globalization and the Concentration of Talent By Ulrich Schetter; Oriol Tejada
  11. Partial Language Competence By Jeanne Hagenbach; Frédéric Koessler
  12. Evolutionary Equilibrium in Contests with Stochastic Participation: Entry, Effort and Overdissipation By Yiquan Gu; Burkhard Hehenkamp; Wolfgang Leininger
  13. Multi-product bargaining, bundling, and buyer power By Dertwinkel-Kalt, Markus; Wey, Christian
  14. Robust Bidding and Revenue in Descending Price Auctions By Sarah Auster; Christian Kellner
  15. A characterization of Approval Voting without the approval balloting assumption By Federica Ceron; Stéphane Gonzalez
  16. Becoming Friends or Foes? How Competitive Environments Shape Social Preferences By Eugen Dimant; Kyle Hyndman
  17. Making Friends Meet: Network Formation with Introductions By Jan-Peter Siedlarek
  18. Searching for Interpretable Demographic Patterns By Muratova, Anna; Islam, Robiul; Mitrofanova, Ekaterina S.; Ignatov, Dmitry I.
  19. Redistribution and Social Information (ReSoc) By O'Garra, Tanya; Sisco, Matthew R.
  20. Behavioral and Game-Theoretic Security Investments in Interdependent Systems Modeled by Attack Graphs By Mustafa Abdallah; Parinaz Naghizadeh; Ashish R. Hota; Timothy Cason; Saurabh Bagchi; Shreyas Sundaram

  1. By: Frédéric Koessler (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Marie Laclau (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Jérôme Renault (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique); Tristan Tomala (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, HEC Paris - Ecole des Hautes Etudes Commerciales)
    Abstract: We analyze strictly competitive information design games between two designers and an agent. Before the agent takes a decision, designers disclose public information at multiple stages about persistent state parameters. We consider environments with arbitrary constraints on feasible in- formation disclosure policies. Our main results characterize equilibrium payoffs and strategies for various timings of the game: simultaneous or alternating disclosures, with or without deadline. With- out constraints on policies, information is disclosed in a single stage, but there may be no bound on the number stages used to disclose information when policies are constrained. As an application, we study competition in product demonstration and show that more information is revealed when there is a deadline. The format that provides the buyer with the most information is the sequential game with deadline in which the ex-ante strongest seller is the last mover.
    Keywords: Bayesian persuasion,concavification,convexification,information design,Mertens Zamir solution,product demonstration,splitting games,statistical experiments,stochastic games
    Date: 2019–12
  2. By: Dietzenbacher, Bas (Tilburg University, Center For Economic Research)
    Abstract: This paper identifies the maximal domain of transferable utility games on which aggregate monotonicity (no player is worse o when the worth of the grand coalition increases) and egalitarian core selection (no other core allocation can be obtained by a transfer from a richer to a poorer player) are compatible. On this domain, which includes the class of large core games, we show that these two axioms characterize a unique solution which even satisfies coalitional monotonicity (no member is worse off when the worth of one coalition increases) and strong egalitarian core selection (no other core allocation can be obtained by transfers from richer to poorer players).
    Keywords: TU game; aggregate monotonicity; coalitional monotonicity; egalitarian core; strong egalitarian core; egalitarian stability
    JEL: C71
    Date: 2020
  3. By: Péter Bayer; György Kozics; Nóra Gabriella Szőke
    Abstract: We study public goods games played on networks with possibly non-reciprocal relationships between players. Examples for this type of interactions include one-sided relationships, mutual but unequal relationships, and parasitism. It is well known that many simple learning processes converge to a Nash equilibrium if interactions are reciprocal, but this is not true in general for directed networks. However, by a simple tool of rescaling the strategy space, we generalize the convergence result for a class of directed networks and show that it is characterized by transitive weight matrices. Additionally, we show convergence in a second class of networks; those rescalable into networks with weak externalities. We characterize the latter class by the spectral properties of the absolute value of the network's weight matrix and show that it includes all directed acyclic networks.
    Date: 2020–01–13
  4. By: Bergantiños, Gustavo; Vidal-Puga, Juan
    Abstract: We consider a cost allocation problem arising from a hub network problem design. Finding an optimal hub network is NP-hard, so we start with a hub network that could be optimal or not. Our main objective is to divide the cost of such network among the nodes. We consider two cases. In the one-way flow case, we assume that the cost paid by a set of nodes depends only on the flow they send to other nodes (including nodes outside the set), but not on the flow they receive from nodes outside. In the two-way flow case, we assume that the cost paid by a set of nodes depends on the flow they send to other nodes(including nodes outside the set) and also on the flow they receive from nodes outside. In both cases, we study the core and the Shapley value of the corresponding cost game.
    Keywords: game theory; hub network; cost allocation; core; Shapley value
    JEL: C71
    Date: 2018–05–15
  5. By: Sofia Moroni
    Abstract: In this paper we define notions of trembling hand and sequential equilibrium and show that both types of equilibria exist in a large class of stochastic games that may feature incomplete and imperfect information. These equilibria do not necessitate the use of a public correlating device. Under further regularity assumptions each stochastic game has a sequence of approximating finite games whose equilibria approximate equilibria of the limit game.
    Date: 2020–01
  6. By: Gary Charness (Department of Economics, University of California, Santa Barbara); Alessandro Sontuoso (Smith Institute for Political Economy and Philosophy, Chapman University; Philosophy, Politics and Economics, University of Pennsylvania)
    Abstract: We investigate how a player’s strategic behavior is affected by the set of notions she uses in thinking about the game, i.e., the “frame”. To do so, we consider matching games where two players are presented with a set of objects, from which each player must privately choose one (with the goal of matching the counterpart’s choice). We propose a novel theory positing that different player types are aware of different attributes of the strategy options, hence different frames; we then rationalize why differences in players’ frames may lead to differences in choice behavior. Unlike previous theories of framing, our model features an epistemic structure allowing for the case in which an individual learns new frames, given some initial unawareness (of the fact that her perception of attributes may be incomplete). To test our model, we introduce an experimental design in which we bring about different frames by manipulating subjects’ awareness of various attributes. The experimental results provide strong support for our theory.
    Keywords: Frames; Unawareness; Focal Points; Coordination Games
    JEL: C72 C91
    Date: 2019
  7. By: Banas, Lubomir (Center for Mathematical Economics, Bielefeld University); Ferrari, Giorgio (Center for Mathematical Economics, Bielefeld University); Randrianasolo, Tsiry Avisoa (Center for Mathematical Economics, Bielefeld University)
    Abstract: We consider a convexity constrained Hamilton-Jacobi-Bellman-type obstacle problem for the value function of a zero-sum differential game with asymmetric information. We propose a convexity-preserving probabilistic numerical scheme for the approximation of the value function which is discrete w.r.t. the time and convexity variables, and show that the scheme converges to the unique viscosity solution of the considered problem. Furthermore, we generalize the semi-discrete scheme to obtain an implementable fully discrete numerical approximation of the value function and present numerical experiments to demonstrate the properties of the proposed numerical scheme.
    Keywords: zero-sum stochastic differential games, asymmetric information, probabilistic numerical approximation, discrete convex envelope, convexity constrained Hamilton-Jacobi- Bellmann equation, viscosity solution
    Date: 2020–01–13
  8. By: Masaki Aoyagi; Seung Han Yoo
    Abstract: A platform matches agents from two sides of a market to create a trading opportunity between them. The agents subscribe to the platform by paying subscription fees which are contingent on their reported private types, and then engage in strategic interactions with their matched partner(s). A matching mechanism of the platform specifies the subscription fees as well as the matching rule which determines the probability that each type of agent on one side is matched with each type on the other side. We characterize optimal matching mechanisms which induce truthful reporting from the agents and maximize the subscription revenue. We show that the optimal mechanisms for a one-to-one trading platform match do not necessarily entail assortative matching, and may employ an alternative matching rule that maximizes the extraction of informational rents of the higher type. We then study an auction platform that matches each seller to two agents, and show that the optimal mechanism entails the combination of negative and positive assortative matching.
    Date: 2019–12
  9. By: Orlova, Olena (Center for Mathematical Economics, Bielefeld University)
    Abstract: We consider a network of players endowed with individual preferences and involved in interactions of various patterns. We show that their ability to make choices according to their preferences is limited, in a specific way, by their involvement in the network. The earlier literature demonstrated the conflict between individuality and peer pressure. We show that such a conflict is also present in contexts in which players do not necessarily aim at conformity with their peers. We investigate the consequences of preference heterogeneity for different interaction patterns, characterize corresponding equilibria and outline the class of games in which following own preferences is the unique Nash equilibrium. The introduction of personal preferences changes equilibrium outcomes in a non-trivial fashion: some equilibria disappear, while other, qualitatively new, appear. These results are robust to both independent and interdependent relationship between personal and social utility components.
    Date: 2020–01–13
  10. By: Ulrich Schetter (Center for International Development at Harvard University); Oriol Tejada
    Abstract: We analyze how globalization affects the allocation of talent across competing teams in large matching markets. Assuming a reduced form of globalization as a convex transformation of payoffs, we show that for every economy where positive assortative matching is an equilibrium without globalization, it is also an equilibrium with globalization. Moreover, for some economies positive assortative matching is an equilibrium with globalization but not without. The result that globalization promotes the concentration of talent holds under very minimal restrictions on how individual skills translate into team skills and on how team skills translate into competition outcomes. Our analysis covers many interesting special cases, including simple extensions of Rosen (1981) and Melitz (2003) with competing teams.
    Keywords: competing teams, globalization, inequality, matching
    JEL: C78 D3 D4 F61 F66
    Date: 2019–12
  11. By: Jeanne Hagenbach (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Frédéric Koessler (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper proposes an equilibrium concept, Language-Based Expectation Equilibrium , which accounts for partial language understanding in sender-receiver cheap talk games. Each player is endowed with a privately known language competence which represents all the messages that he understands. For the messages he does not understand, he has correct but only coarse expectations about the equilibrium strategies of the other player. In general, a language-based expectation equilibrium outcome differs from Nash and communication equilibrium outcomes, but is always a Bayesian solution. Partial language competence of the sender rationalizes information transmission and lies in pure persuasion problems, and facilitates information transmission from a moderately biased sender.
    Keywords: Analogy-based expectations,Bayesian solution,bounded rationality,cheap talk,language,pure persuasion,strategic information transmission
    Date: 2019–01
  12. By: Yiquan Gu; Burkhard Hehenkamp; Wolfgang Leininger
    Abstract: This paper examines the evolutionary stability of behaviour in contests where players’ participation can be stochastic. We find, for exogenously given participation probabilities, players exert more effort under the concept of a finite-population evolutionarily stable strategy (FPESS) than under Nash equilibrium (NE). We show that there is exante overdissipation under FPESS for sufficiently large participation probabilities, if, and only if, the impact function is convex. With costly endogenous entry, players enter the contest with a higher probability and exert more effort under FPESS than under NE. Importantly, under endogenous entry, overdissipation can occur for all (Tullock) contest success functions, in particular those with concave impact functions.
    Keywords: Contests with Stochastic Participation; Overdissipation; Evolutionarily Stable Strategy; Finite Population; Endogenous Entry
    JEL: C73 D72
    Date: 2018–10
  13. By: Dertwinkel-Kalt, Markus; Wey, Christian
    Abstract: We re-consider the bilateral bargaining problem of a multi-product, manufacturer-retailer trading relationship. O'Brien and Shaffer (Rand JE 35:573-598, 2005) have shown that the unbundling of contracts leads to downward distorted production levels if seller power is strong, while otherwise the joint profit maximizing quantities are contracted (which is also always the case when bundling contracts are feasible). We show that the unbundling of contracts also leads to downward distorted output levels when the buyer firm has sufficient (Nash) bargaining power (i.e., buyer power). Our result is driven by cost substitutability (diseconomies of scope).
    Keywords: Vertical Restraints,Bundling,Buyer Power
    JEL: L13 L41 K21
    Date: 2019
  14. By: Sarah Auster; Christian Kellner
    Abstract: We study the properties of Dutch auctions in an independent private value setting, where bidders face uncertainty over the type distribution of their opponents and evaluate their payoffs by the worst case from a set of probabilistic scenarios. In contrast to static auction formats, participants in the Dutch auction gradually learn about the valuations of other bidders. We show that the transmitted information can lead to changes in the worst-case distribution and thereby shift a bidder’s payoff maximizing exit price over time. We characterise the equilibrium bidding function in this environment and show that the arriving information leads bidders to exit earlier at higher prices. As a result, the Dutch auction systematically generates more revenue than the first-price auction.
    Keywords: Auctions, Ambiguity, Consistent Planning
    Date: 2020–01
  15. By: Federica Ceron (Paris School of Economics, Université Paris 1 Panthéon-Sorbonne, Université Paris-Est Créteil); Stéphane Gonzalez (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint- Etienne)
    Abstract: We provide an axiomatic characterization of Approval Voting without the approval balloting assumption. The dichotomous structure of the informational basis of Approval voting as well as its aggregative rationale are jointly derived from a set of normative conditions on the voting procedure. The first one is the well-known social-theoretic principle of consistency; the second one, ballot richness, requires voters to be able to express a sufficiently rich set of opinions; the last one, dubbed no single-voter overrides, demands that the addition of a voter to an electorate cannot radically change the outcome of the election. Such result is promising insofar it suggests that the informational basis of voting may have a normative relevance that deserves formal treatment.
    Keywords: Informational basis, balloting procedure, Approval voting, Evaluative voting
    JEL: C71
    Date: 2019
  16. By: Eugen Dimant (University of Pennsylvania); Kyle Hyndman (University of Texas Dallas)
    Abstract: We study the interaction between competition and social proximity on altruism, trust, and reciprocity. We decompose the behavioral channels by utilizing variants of both the Trust Game and the Dictator Game in a design that systematically controls the transmission of relevant information. Our results suggest that competitive environments, and in particular the outcomes thereof when competitors are socially proximate, affect social preferences. Within the context of the Trust Game, we find that winning makes individuals more trusting, less reciprocal, and less altruistic. In order to decompose the underlying mechanism of decision-makers, we subsequently use the Dictator Game and find that knowledge about winning the competition decreases giving, especially with increased proximity between competitors. From this we can conclude that the observed increase in trust is guided by self-serving concerns to maximize the total pie rather than altruistic concerns to compensate the competitor who lost the competition. Our results provide helpful insights into the structure of incentives within institutions and companies, which is known to affect performance.
    Keywords: Altruism, Competition, Reciprocity, Social Proximity, Trust
    Date: 2019
  17. By: Jan-Peter Siedlarek
    Abstract: High levels of clustering—the tendency for two nodes in a network to share a neighbor—are ubiquitous in economic and social networks across different applications. In addition, many real-world networks show high payoffs for nodes that connect otherwise separate network regions, representing rewards for filling “structural holes” in the sense of Burt (1992) and keeping distances in networks short. This paper proposes a parsimonious model of network formation with introductions and intermediation rents that can explain both these features. Introductions make it cheaper to create connections that share a common node. They are subject to a tradeoff between gains from shorter connections with lower search cost and losses from lower intermediation rents for the central node. Stable networks are shown to have high levels of clustering at the same time that they permit substantial intermediation rents for nodes bridging structural holes.
    Keywords: networks; network formation; clustering; intermediation; introductions
    JEL: A14 D85
    Date: 2020–01–15
  18. By: Muratova, Anna; Islam, Robiul; Mitrofanova, Ekaterina S.; Ignatov, Dmitry I.
    Abstract: Nowadays there is a large amount of demographic data which should be analyzed and interpreted. From accumulated demographic data, more useful information can be extracted by applying modern methods of data mining. Two kinds of experiments are considered in this work: 1) generation of additional secondary features from events and evaluation of its influence on accuracy; 2) exploration of features influence on classification result using SHAP (SHapley Additive exPlanations). An algorithm for creating secondary features is proposed and applied to the dataset. The classifications were made by two methods, SVM and neural networks, and the results were evaluated. The impact of events and features on the classification results was evaluated using SHAP; it was demonstrated how to tune model for improving accuracy based on the obtained values. Applying convolutional neural network for sequences of events allowed improve classification accuracy and surpass the previous best result on the studied demographic dataset.
    Keywords: data mining; demographics; neural networks; classification; SHAP; interpretation
    JEL: C02 C15 I00 J13
    Date: 2019–09–23
  19. By: O'Garra, Tanya (Middlesex University); Sisco, Matthew R.
    Abstract: We use a ‘multi-player dictator game’ (MDG) to examine how aggregate and individual redistribution behaviour is influenced by the observable actions of peers, and to identify whether the redistributive strategy selected by individuals is subject to an ‘anchoring effect’. We find that in the aggregate, individuals positively condition their redistribution choices on the contributions of first-movers in their group, suggesting conformity to peers. However, examination of second-mover ‘types’ (classified using the full vector of individual contributions stated in response to a range of first-mover donations) indicates that only 17% can be classed as ‘conformists’; the remaining major 'types' include self-interested players (42%), unconditional givers (22%) and ‘compensators’ (8.3%). Most strikingly, the first observable amount presented to second-movers in the strategy game (the anchor) is found to influence the likelihood of choosing a giving strategy versus a self-interested strategy. Specifically, low anchors increase the likelihood of selecting self-interested strategies, whilst high anchors increase the likelihood of conformist and compensating strategies. The distribution of ‘types’ is therefore dependent on the initial conditions of play in the strategy game. Thus, not only is individual redistribution behaviour observed to be path dependent, but initial conditions strongly determine the path.
    Date: 2018–06–22
  20. By: Mustafa Abdallah; Parinaz Naghizadeh; Ashish R. Hota; Timothy Cason; Saurabh Bagchi; Shreyas Sundaram
    Abstract: We consider a system consisting of multiple interdependent assets, and a set of defenders, each responsible for securing a subset of the assets against an attacker. The interdependencies between the assets are captured by an attack graph, where an edge from one asset to another indicates that if the former asset is compromised, an attack can be launched on the latter asset. Each edge has an associated probability of successful attack, which can be reduced via security investments by the defenders. In such scenarios, we investigate the security investments that arise under certain features of human decision-making that have been identified in behavioral economics. In particular, humans have been shown to perceive probabilities in a nonlinear manner, typically overweighting low probabilities and underweighting high probabilities. We show that suboptimal investments can arise under such weighting in certain network topologies. We also show that pure strategy Nash equilibria exist in settings with multiple (behavioral) defenders, and study the inefficiency of the equilibrium investments by behavioral defenders compared to a centralized socially optimal solution.
    Date: 2020–01

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