nep-gth New Economics Papers
on Game Theory
Issue of 2020‒02‒10
twelve papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Strategic information transmission with sender's approval By Françoise Forges; Jérôme Renault
  2. Quid Pro Quo allocations in Production-Inventory games By Luis Guardiola; Ana Meca; Justo Puerto
  3. Learning to deal with repeated shocks under strategic complementarity: An experiment By Muhammed Bulutay; Camille Cornand; Adam Zylbersztejn
  4. Incomplete-Information Games in Large Populations with Anonymity By Martin Hellwig
  5. Incentive-Compatible Diffusion Auctions By Bin Li; Dong Hao; Dengji Zhao
  6. Coalition-Proof Risk Sharing Under Frictions By Harold L. Cole; Dirk Krueger; George J. Mailath; Yena Park
  7. A game of hide and seek in networks By Francis Bloch; Bhaskar Dutta; Marcin Dziubinski
  8. A general model of synchronous updating with binary opinions By Alexis Poindron
  9. Bilateral Tariffs Under International Competition By Tsotne Kutalia; Revaz Tevzadze
  10. Insider Trading with Penalties By Sylvain Carre; Pierre Collin-Dufresne; Franck Gabriel
  11. Targeting in social networks with anonymized information By Francis Bloch; Shaden Shabayek
  12. The Rational Group By Franz Dietrich

  1. By: Françoise Forges (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique, Université Paris-Dauphine, PSL Research University); 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, UT1 - Université Toulouse 1 Capitole)
    Abstract: We consider a sender-receiver game with an outside option for the sender. After the cheap talk phase, the receiver makes a proposal to the sender, which the latter can reject. We study situations in which the sender's approval is crucial to the receiver. We show that a partitional, (perfect Bayesian Nash) equilibrium exists if the sender has only two types or if the receiver's preferences over decisions do not depend on the type of the sender as long as the latter participates. The result does not extend: we construct a counter-example (with three types for the sender and type-dependent affine utility functions) in which there is no mixed equilibrium. In the three type case, we provide a full characterization of (possibly mediated) equilibria.
    Date: 2020–01–15
  2. By: Luis Guardiola; Ana Meca; Justo Puerto
    Abstract: The concept of Owen point, introduced in Guardiola et al. (2009), is an appealing solution concept that for Production-Inventory games (PI-games) always belongs to their core. The Owen point allows all the players in the game to operate at minimum cost but it does not take into account the cost reduction induced by essential players over their followers (fans). Thus, it may be seen as an altruistic allocation for essential players what can be criticized. The aim this paper is two-fold: to study the structure and complexity of the core of PI-games and to introduce new core allocations for PI-games improving the weaknesses of the Owen point. Regarding the first goal, we advance further on the analysis of PI-games and we analyze its core structure and algorithmic complexity. Specifically, we prove that the number of extreme points of the core of PI-games is exponential on the number of players. On the other hand, we propose and characterize a new core-allocation, the Omega point, which compensates the essential players for their role on reducing the costs of their fans. Moreover, we define another solution concept, the Quid Pro Quo set (QPQ-set) of allocations, which is based on the Owen and Omega points. Among all the allocations in this set, we emphasize what we call the Solomonic QPQ allocation and we provide some necessary conditions for the coincidence of that allocation with the Shapley value and the Nucleolus.
    Date: 2020–02
  3. By: Muhammed Bulutay (Technische Universität Berlin, Strasse des 17. Juni 135, 10623 Berlin, Germany); Camille Cornand (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France); Adam Zylbersztejn (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France)
    Abstract: Experimental evidence shows that the rational expectations hypothesis fails to characterize the path to equilibrium after an exogenous shock when actions are strategic complements. Under identical shocks, however, repetition allows adaptive learning, so that inertia in adjustment should fade away with experience. If this finding proves to be robust, inertia in adjustment may be irrelevant among experienced agents. The conjecture in the literature is that inertia would still persist, perhaps indefinitely, in the presence of real-world complications such as nonidentical shocks. Herein, we empirically test the conjecture that the inertia in adjustment is more persistent if the shocks are nonidentical. For both identical and nonidentical shocks, we find persistent inertia and similar patterns of adjustment that can be explained by backward-looking expectation rules. A reformulation of naïve expectations with similarity-based learning approach is found to have a higher predictive power than rational and trend-following rules.
    Keywords: Strategic complementarities, expectations, adjustment speed, similarity-based learning, guessing games, heuristics switching
    JEL: C72 C73 D83 D84 D91
    Date: 2020
  4. By: Martin Hellwig (Max Planck Institute for Research on Collective Goods)
    Abstract: The paper provides mathematical foundations for modeling strategic interdependence with a continuum of agents where uncertainty has an aggregate component and an agent-speci?c component and the latter satis?es a conditional law of large numbers. This decomposition of uncertainty is implied by a condition of anonymity in beliefs, under which the agent in question considers the other agents? types to be essentially pairwise exchangeable. If there is also anonymity in payoff functions, all strategically relevant aspects of beliefs are contained in an agent?s macro beliefs about the cross-section distribution of the other agents?types. The paper also gives conditions under which a function assigning macro beliefs to types is compatible with the existence of a common prior. Key Words: Incomplete-information games, large populations, belief functions, common priors, exchangeability, conditional independence, conditional exact law of large numbers.
    Keywords: Monetary union, central banking, politics of banks, banking union, bank resolution, bail-in.
    JEL: C70 D82 D83
    Date: 2019–11
  5. By: Bin Li; Dong Hao; Dengji Zhao
    Abstract: Diffusion auction is a new model in auction design. It can incentivize the buyers who have already joined in the auction to further diffuse the sale information to others via social relations, whereby both the seller's revenue and the social welfare can be improved. Diffusion auctions are essentially non-typical multidimensional mechanism design problems and agents' social relations are complicatedly involved with their bids. In such auctions, incentive-compatibility (IC) means it is best for every agent to honestly report her valuation and fully diffuse the sale information to all her neighbors. Existing work identified some specific mechanisms for diffusion auctions, while a general theory characterizing all incentive-compatible diffusion auctions is still missing. In this work, we identify a sufficient and necessary condition for all dominant-strategy incentive-compatible (DSIC) diffusion auctions. We formulate the monotonic allocation policies in such multidimensional problems and show that any monotonic allocation policy can be implemented in a DSIC diffusion auction mechanism. Moreover, given any monotonic allocation policy, we obtain the optimal payment policy to maximize the seller's revenue.
    Date: 2020–01
  6. By: Harold L. Cole; Dirk Krueger; George J. Mailath; Yena Park
    Abstract: We analyze efficient risk-sharing arrangements when coalitions may deviate. Coalitions form to insure against idiosyncratic income risk. Self-enforcing contracts for both the original coalition and any deviating coalition rely on a belief in future cooperation, and we treat the contracting conditions of original and deviating coalitions symmetrically. We show that better belief coordination (higher social capital) tightens incentive constraints since it facilitates both the formation of the original as well as a deviating coalition. As a consequence, the payoff of successfully formed coalitions might be declining in the degree of belief coordination and equilibrium allocations might feature resource burning or utility burning.
    JEL: E20
    Date: 2020–01
  7. By: Francis Bloch; Bhaskar Dutta; Marcin Dziubinski
    Abstract: We propose and study a strategic model of hiding in a network, where the network designer chooses the links and his position in the network facing the seeker who inspects and disrupts the network. We characterize optimal networks for the hider, as well as equilibrium hiding and seeking strategies on these networks. We show that optimal networks are either equivalent to cycles or variants of a core-periphery networks where every node in the periphery is connected to a single node in the core.
    Date: 2020–01
  8. By: Alexis Poindron (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Panthéon-Sorbonne)
    Abstract: We consider a society of agents making an iterated yes/no decision on some issue, where updating is done by mutual influence under a Markovian process. Agents update their opinions at the same time, independently of each other, in an entirely mechanical manner. They can have a favourable or an unfavourable perception of their neighbours. We study the qualitative patterns of this model, which captures several notions, including conformism, anti-conformism, communitarianism and leadership. We discuss under which conditions opinions are stable. Finally, we introduce a notion of entropy that we use to extract information on the society and to predict future opinions.
    Keywords: opinion dynamics,convergence,absorbing class,groups,entropy
    Date: 2019–10
  9. By: Tsotne Kutalia; Revaz Tevzadze
    Abstract: This paper explores the gain maximization problem of two nations engaging in non-cooperative bilateral trade. Probabilistic model of an exchange of commodities under different price systems is considered. Volume of commodities exchanged determines the demand each nation has over the counter party's currency. However, each nation can manipulate this quantity by imposing a tariff on imported commodities. As long as the gain from trade is determined by the balance between imported and exported commodities, such a scenario results in a two party game where Nash equilibrium tariffs are determined for various foreign currency demand functions and ultimately, the exchange rate based on optimal tariffs is obtained.
    Date: 2020–01
  10. By: Sylvain Carre (National Research University Higher School of Economics - International College of Economics and Finance); Pierre Collin-Dufresne (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute; National Bureau of Economic Research (NBER)); Franck Gabriel (Ecole Polytechnique Fédérale de Lausanne)
    Abstract: We establish existence and uniqueness of equilibrium in a generalised one-period Kyle (1985) model where insider trades can be subject to a size-dependent penalty. The result is obtained by considering uniform noise and holds for virtually any penalty function. Uniqueness is among all non-decreasing strategies. The insider demand and the price functions are in general non-linear, yet tractable. We apply this result to regulation issues. We show analytically that the penalty functions maximising price informativeness for given noise traders' losses eliminate small rather than large trades. We generalise this result to cases where a budget constraint distorts the set of penalties available to the regulator.
    Keywords: Kyle equilibrium, insider trading
    JEL: C72 G14
    Date: 2019–06
  11. By: Francis Bloch; Shaden Shabayek
    Abstract: This paper studies whether a planner who only has information about the network topology can discriminate among agents according to their network position. The planner proposes a simple menu of contracts, one for each location, in order to maximize total welfare, and agents choose among the menu. This mechanism is immune to deviations by single agents, and to deviations by groups of agents of sizes 2, 3 and 4 if side-payments are ruled out. However, if compensations are allowed, groups of agents may have an incentive to jointly deviate from the optimal contract in order to exploit other agents. We identify network topologies for which the optimal contract is group incentive compatible with transfers: undirected networks and regular oriented trees, and network topologies for which the planner must assign uniform quantities: single root and nested neighborhoods directed networks.
    Date: 2020–01
  12. By: Franz Dietrich (CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Can a group be a standard rational agent? This would require the group to hold aggregate preferences which maximise expected utility and change only by Bayesian updating. Group rationality is possible, but the only preference aggregation rules which support it (and are minimally Paretian and continuous) are the linear-geometric rules, which combine individual tastes linearly and individual beliefs geometrically.
    Date: 2020–01–08

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