nep-gth New Economics Papers
on Game Theory
Issue of 2020‒02‒17
23 papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Insights on the Theory of Robust Games By Giovanni Paolo Crespi; Davide Radi; Matteo Rocca
  2. The Burning Coalition Bargaining Model By Marco Rogna
  3. Decomposition of games: some strategic considerations By Joseph Abdou; Nikolaos Pnevmatikos; Marco Scarsini; Xavier Venel
  4. The Sophistication of Conditional Cooperators: Evidence From Public Goods Games. By Francesco Fallucchi; R. Andrew Luccasen III; Theodore L. Turocy
  5. Voluntary Disclosure of Information and Cooperation in Simultaneous-Move Economic Interactions By Kamei, Kenju
  6. Pools or Schools or Both? Diversification and Specialisation in Public Services By Tomas Cernenko; Oliver Rafaj; Daniel Dujava
  7. Gender, information and the efficiency of households' productive decisions: An experiment in rural Togo By Marie Christine Apedo-Amah; Habiba Djebbari; Roberta Ziparo
  8. In Simple Communication Games, When Does Ex Ante Fact-Finding Benefit the Receiver? By Mark Whitmeyer
  9. Prior Interaction, Identity and Coorperation in the Inter-Group Prisoner's Dilemma By Timothy N. Cason; Sau-Him Paul Lau; Vai-Lam Mui
  10. Fictitious Play Outperforms Counterfactual Regret Minimization By Sam Ganzfried
  11. Collusion via Information Sharing and Optimal Auctions By Olga Gorelkina
  12. On a Stackelberg leader's incentive to invite entry into horizontally differentiated oligopolies with network externalities: A reexamination By Ryoma KITAMURA; Tsuyoshi TOSHIMITSU
  13. Financial Market Incompleteness and International Cooperation on Capital Controls By Shigeto Kitano; Kenya Takaku
  14. The Average Tree value for Hypergraph Games By Kang, Liying; Khmelnitskaya, Anna; Shan, Erfang; Talman, A.J.J.; Zhang, Guang
  15. Corelated beliefs: Predicting outcomes in 2X2 games By Timothy N. Cason; Tridib Sharma; Radovan Vadovic
  16. Permit markets with political and market distortions By Alex Dickson; Ian A. MacKenzie
  17. Group cooperation against an incumbent By Guillaume Cheikbossian
  18. Communication and Commitment with Constraints By Raghul S Venkatesh
  19. Sharing the Global Benefits of Finite Natural Resource Exploitation: A Dynamic Coalitional Stability Perspective By Stéphane Gonzalez; Fatma Rostom
  20. On Information Aggregation in International Alliances By Raghul S Venkatesh
  21. Preferences for observable information in a strategic setting: An experiment By Adam Zylbersztejn; Zakaria Babutsidze; Nobuyuki Hanaki
  22. Spatial competition with unit-demand functions By Ga\"etan Fournier; Karine Van Der Straeten; J\"orgen Weibull
  23. Positional Preferences and Efficiency in a Dynamic Economy By Aronsson, Thomas; Ghosh, Sugata; Wendner, Ronald

  1. By: Giovanni Paolo Crespi; Davide Radi; Matteo Rocca
    Abstract: A robust game is a distribution-free model to handle ambiguity generated by a bounded set of possible realizations of the values of players' payoff functions. The players are worst-case optimizers and a solution, called robust-optimization equilibrium, is guaranteed by standard regularity conditions. The paper investigates the sensitivity to the level of uncertainty of this equilibrium. Specifically, we prove that it is an epsilon-Nash equilibrium of the nominal counterpart game, where the epsilon-approximation measures the extra profit that a player would obtain by reducing his level of uncertainty. Moreover, given an epsilon-Nash equilibrium of a nominal game, we prove that it is always possible to introduce uncertainty such that the epsilon-Nash equilibrium is a robust-optimization equilibrium. An example shows that a robust Cournot duopoly model can admit multiple and asymmetric robust-optimization equilibria despite only a symmetric Nash equilibrium exists for the nominal counterpart game.
    Date: 2020–02
  2. By: Marco Rogna (Free University of Bolzano‐Bozen, Faculty of Economics and Management, Italy)
    Abstract: The paper presents a coalitional bargaining model with a peculiar type of partial breakdown: the Burning Coalition Bargaining Model. Rather than triggering the end of all negotiations or the exclusion of some players from the game, as already proposed in the literature, in this model the rejection of a proposal causes the possibility of the proposed coalition to vanish. Under this type of partial breakdown and adopting a standard rejecter-proposes protocol, 0-normalized, 3-players games are examined for extreme values of the breakdown probability. When such probability is equal to one, efficiency is more difficult to obtain than in models adopting discounting. Furthermore, when an efficient outcome is attained, the final pay-offs distribution reflects the strength of players in the game, with strength being defined by belonging to more valuable coalitions. The same feature is retained when considering a probability of breakdown approaching zero.
    Keywords: Bargaining Theory; Bargaining protocols; Coalition formation; Efficiency; Partial breakdown.
    JEL: C71 C78
    Date: 2020–02
  3. By: Joseph Abdou (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, UP1 - Université Panthéon-Sorbonne); Nikolaos Pnevmatikos (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - Sorbonne Universités); Marco Scarsini (LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma]); Xavier Venel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, UP1 - Université Panthéon-Sorbonne)
    Abstract: Candogan et al. (2011) provide an orthogonal direct-sum decomposition of finite games into potential, harmonic and non-strategic components. In this paper we study the issue of decomposing games that are strategically equivalent from a game-theoretical point of view, for instance games obtained via duplications of strategies or suitable linear transformations of payoffs. We consider classes of decompositions and show when two decompositions of equivalent games are coherent.
    Abstract: Candogan et al. (2011) a introduit une décomposition en somme orthogonale des jeux finis en trois composantes : potentielle, harmonique et non stratégique. Dans cet article, nous étudions la question de la décomposition de jeux qui sont stratégiquement équivalents, par exemple obtenus par duplication des stratégies ou par certaines transformations linéaires des paiements. Nous considérons une famille de décompositions et montrons à quelles conditions deux décompositions de jeux équivalents sont cohérentes.
    Keywords: Decomposition of games,Potential games,Harmonic games,Duplicate strategies,Gradient operator,Projection operator,Décomposition de jeux,Jeux potentiels,Jeux harmoniques,Stratégies dupliquées,Opérateur gradient,Opérateur de projection
    Date: 2019–02
  4. By: Francesco Fallucchi (Luxembourg Institute of Socio-Economic Research (LISER)); R. Andrew Luccasen III (Mississippi University for Women); Theodore L. Turocy (University of East Anglia)
    Abstract: Experiments which elicit preferences for conditional cooperation in public goods games with linear payoffs find that about one-quarter of people approximately match the average contributions of others. To identify from among possible explanations proposed for this strong form of conditional cooperation, we extend the elicitation method of Fischbacher et al. (2001) and study voluntary contributions games with a broader range of economic and strategic incentives. We find that most strong conditional cooperators are sophisticated in responding to these incentives, by matching contributions only when doing so leads to an overall welfare improvement. Our data favour an account of conditional cooperation based on social norm compliance, and are not consistent with accounts in which these people are motivated by inequity aversion or warm-glow giving, or are confused about the economic incentives presented by the elicitation mechanism.
    Keywords: public goods, conditional cooperation, sophistication, experiment.
    JEL: C72 D62 D71 H41
    Date: 2020–02
  5. By: Kamei, Kenju
    Abstract: This paper experimentally studies individuals’ voluntary disclosure of past behaviors and its effects in a finitely repeated two-player public goods game. The experiment data found that voluntary information disclosure strengthens cooperation under certain conditions, although a non-negligible fraction of individuals do not disclose information about the past and proceed to behave opportunistically. On closer inspection, the data revealed that the material incentives of disclosure acts differ according to the matching protocol. Specifically, disclosers receive higher payoffs than non-disclosers if the disclosers are assured to be matched with like-minded disclosers; conversely, disclosers are vulnerable to exploitation by others under random matching. These results suggest that mandatory disclosure helps enhance economic efficiency if individuals’ hiding and uncooperative behaviors are liable to precipitate a collapse in the community norms.
    Keywords: experiment, information disclosure, cooperation, dilemma, repeated games, reputation
    JEL: C72 C92 H41
    Date: 2020–01–03
  6. By: Tomas Cernenko; Oliver Rafaj; Daniel Dujava
    Abstract: We develop a model of two municipalities providing two public services. We show that in case of intermediate level of transferability of public services between two municipalities, Pareto-suboptimal Nash equilibrium exists. In this case, cooperation between municipalities or merging of two municipalities into one unit would improve welfare.
    Keywords: diversification, game theory, public services, specialisation
    JEL: C72 H11
    Date: 2019–09–30
  7. By: Marie Christine Apedo-Amah (Stanford University, SIEPR); Habiba Djebbari (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France.); Roberta Ziparo (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France.)
    Abstract: We explore how the capacity of farm households to reach efficiency and share information on production is related to their consumption decision-making process. West African farm households often cultivate several plots, and there is extensive evidence of allocative inefficiencies (Udry, 1996). We design an experiment with Togolese cotton producers, contextualized as an input allocation game, and build a model based on its findings. We further test the model's predictions using our lab-in-the-field data. The cotton producers are found to allocate too few inputs to their wife's plot, failing to maximize household aggregate profits. They do transfer more inputs to their wife's plot when the returns from that plot are increased. Yet, when we experimentally manipulate information on these returns, informational frictions on average do not impact decisions. We attribute these experimental findings to the role that conflict in consumption plays in creating production inefficiencies. The model predicts that both efficiency loss and responses to asymmetric information are heterogenous. Moreover, we show that spouses are unable to communicate on the returns effectively and cannot avoid extra losses, though the damaging effects of private information vanish if information is verifiable ex post. We present evidence consistent with these predictions.
    Keywords: farm households, household production and intra-household allocation, non-cooperative game theory, asymmetric and private information, lab-in-the-field experiment
    JEL: Q12 C72 D13 D82 C91 C93
    Date: 2020–01
  8. By: Mark Whitmeyer
    Abstract: Always, if the number of states is equal to two; or if the number of receiver actions is equal to two and i. The number of states is three or fewer, or ii. The game is cheap talk, or ii. There are just two available messages for the sender. A counterexample is provided for each failure of these conditions.
    Date: 2020–01
  9. By: Timothy N. Cason; Sau-Him Paul Lau; Vai-Lam Mui
    Abstract: This paper studies theoretically and experimentally how success in prior interaction affects cooperation in the one-shot inter-group prisoner’s dilemma (IPD).
    JEL: C72 C92 D02
    Date: 2019–12
  10. By: Sam Ganzfried
    Abstract: We compare the performance of two popular iterative algorithms, fictitious play and counterfactual regret minimization, in approximating Nash equilibrium in multiplayer games. Despite recent success of counterfactual regret minimization in multiplayer poker and conjectures of its superiority, we show that fictitious play leads to improved Nash equilibrium approximation with statistical significance over a variety of game sizes.
    Date: 2020–01
  11. By: Olga Gorelkina
    Abstract: This paper studies collusion via information sharing in the context of auctions. The model of collusion via information sharing builds on Aumann’s (1976) description of knowledge. Robustness of auction mechanisms to collusion via information sharing is defined as the impossibility of an agreement to collude. A cartel can agree to collude on a contract if it is common knowledge within that cartel that the contract is incentive compatible and individually rational. Robust mechanisms are characterized in a number of settings where some, all, or no bidders are bound by limited liability. Finally, the characterization is used in a simple IPV setting to design a mechanism that is both optimal and robust to collusion.
    Keywords: Bidder collusion, mechanism design, communication design, no-trade theorem
    JEL: D82 D44 C72
    Date: 2018–08
  12. By: Ryoma KITAMURA (Faculty of Economics, Otemon Gakuin University); Tsuyoshi TOSHIMITSU (School of Economics, Kwansei Gakuin University)
    Abstract: We develop a model of horizontally differentiated oligopolies with network externalities and reconsider a Stackelberg leader's incentive to invite entry, a problem previously examined by Economides (1996) and Kim (2002). We demonstrate that a Stackelberg leader has (does not have) an incentive to invite entry if the degree of network externalities is larger (smaller) than that of the product substitutability, such that a follower's profit increases (decreases).
    Keywords: Network externality; Horizontally differentiated oligopoly; Stackelberg competition; Entry; Passive expectation; Responsive expectation
    JEL: D21 D43 D62 L13
  13. By: Shigeto Kitano (Research Institute for Economics and Business Administration, Kobe University, Japan); Kenya Takaku (Faculty of International Studies, Hiroshima City University, Japan)
    Abstract: We examine how the degree of financial market incompleteness affects welfare gains from international cooperation on capital controls. When financial markets are incomplete, international risk sharing is disturbed. However, the optimal global policy significantly reverses the welfare deterioration due to inefficient risk-sharing. We show that when financial markets are more incomplete, the welfare gap between the optimal global policy and the Nash equilibrium increases, and the welfare gains from international cooperation on capital controls then become larger.
    Keywords: Financial markets; Incomplete markets; Policy cooperation; Capital controls; Optimal policy; Welfare; Ramsey policy; Open-loop Nash game
    JEL: D52 E61 F32 F38 F42 G15
    Date: 2020–01
  14. By: Kang, Liying; Khmelnitskaya, Anna; Shan, Erfang; Talman, A.J.J. (Tilburg University, Center For Economic Research); Zhang, Guang (Tilburg University, Center For Economic Research)
    Abstract: We consider transferable utility cooperative games (TU games) with limited cooperation introduced by hypergraph communication structure, the so-called hypergraph games. A hypergraph communication structure is given by a collection of coalitions, the hyperlinks of the hypergraph, for which it is assumed that only coalitions that are hyperlinks or connected unions of hyperlinks are able to cooperate and realize their worth. We introduce the average tree value for hypergraph games, which assigns to each player the average of the player's marginal contributions with respect to a particular collection of rooted spanning trees of the hypergraph. We also provide axiomatization of the average tree value for hypergraph games on the subclasses of cycle-free hypergraph games, hypertree games and cycle hypergraph games.
    Keywords: TU game; hypergraph communication structure; average tree value; component fairness
    JEL: C71
    Date: 2020
  15. By: Timothy N. Cason; Tridib Sharma; Radovan Vadovic
    Abstract: Studies of strategic sophistication in experimental normal formgames commonly assume that subjects’ beliefs are consistent with independent choice.
    Date: 2019–12
  16. By: Alex Dickson (Department of Economics, University of Strathclyde, Glasgow, UK, G4 0QU.); Ian A. MacKenzie (School of Economics, University of Queensland;
    Abstract: This article investigates the cost effectiveness of cap-and-trade markets in the presence of both political and market distortions. We create a model where dominant firms have the ability to rent seek for a share of pollution permits as well as influence the market equilibrium with their choice of permit exchange because of market power. We derive the subgame-perfect equilibrium and show the interaction of these two distortions has consequences for the resulting allocative efficiency of the market. We find that if the dominant rent-seeking firms are all permit buyers (or a composition of buyers and sellers) then allocative efficiency is improved relative to the case without rent seeking; by contrast, if the dominant rent-seeking firms are all permit sellers then allocative efficiency reduces.
    Keywords: Pollution market, Market power, rent seeking.
    JEL: D43 D72 Q58
    Date: 2020–01–21
  17. By: Guillaume Cheikbossian (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - UM - Université de Montpellier - INRA - Institut National de la Recherche Agronomique)
    Abstract: In this paper, I study the ability of group members to cooperate against an incumbent in a repeated rent-seeking game and where group members and the incumbent have di¤erent valuations of the prize. I rst consider that group members use Nash Reversion Strategies (NRS) to support cooperative behavior and show that full cooperation within the group is more easily sustained as a Stationary Subgame Perfect (Nash) Equilibrium (SSPE) as either group size, or the heterogeneity in the valuation of the prize, increases. In turn, I show that full cooperation within the challenger group can also be sustained as a Weakly Renegotiation-Proof Equilibrium (WRPE). Yet, an increase in group size makes it more di¢ cult to sustain within-group cooperation but an increase in the relative valuation of the prize by group members still facilitates group cooperation.
    Keywords: Renegotiation,Collective Action,Group Cooperation,Repeated Game,Trigger Strategies
    Date: 2019
  18. By: Raghul S Venkatesh (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE)
    Abstract: An informed and an uninformed agent both contribute to a joint coordination game such that their actions are substitutable and constrained. When agents are allowed to share information prior to the coordination stage, in the absence of commitment , there is full information revelation as long as constraints are not binding. The presence of binding constraints results in only partial revelation of information in equilibrium. The most informative equilibrium is strictly pareto dominant. Allowing for limited commitment strictly increases (ex ante) welfare of both agents. I completely characterize the optimal commitment mechanism for the uninformed agent. Finally, I apply the theoretical results to the problem of information sharing and binding agreements in international alliances.
    Date: 2018–12
  19. By: Stéphane Gonzalez (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Fatma Rostom (UP1 UFR02 - Université Panthéon-Sorbonne - UFR d'Économie - UP1 - Université Panthéon-Sorbonne, Chaire Energie & Prospérité - ENS Paris - École normale supérieure - Paris - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - Institut Louis Bachelier)
    Abstract: The article explores the implications of natural resource scarcity in terms of global cooperation and trade. We investigate whether there exist stable international long-term agreements that take into account the disparities between countries in terms of geological endowments and productive capacity, while caring about future generations. For that purpose, we build an original cooperative game framework, where countries can form coalitions in order to optimize their discounted consumption stream in the long-run, within the limits of their stock of natural resources. We use the concept of the recursive core that satisfies both coalitional stability and time consistency. We show that this set is nonempty, stating that an international long-term agreement along the optimal path will be self-enforcing. The presented model can be viewed as a tool to refresh the common look at the North-South opposition and sets the conceptual framework for the exploration of a fair sharing of the fruits of global economic growth.
    Keywords: Non-renewable natural resources,Cooperative games,Recursive core
    Date: 2019
  20. By: Raghul S Venkatesh (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE)
    Abstract: I develop a model of strategic communication to study information aggregation in an alliance between multiple players. An alliance exhibits four features: i) imperfect private information among players; ii) substitutability in actions; iii) constraints on the action set; and iv) preference heterogeneity (biases). The main result of the paper derives conditions for full information aggregation within the alliance under a public communication protocol. Full information aggregation ensues as long as players' biases are sufficiently cohesive with respect to the constraints on the action set. When players can (costlessly) choose an action set ex ante, I derive the precise conditions on the minimal action set such that there is full information aggregation. Comparative statics uncovers two sources for the differences in the size of the minimal action set between players: bias over outcomes (preference effect) and degree of interdependency (interdependency effect). The results are discussed in the context of burden sharing incentives during military interventions within NATO.
    Date: 2018–12
  21. By: Adam Zylbersztejn (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Zakaria Babutsidze (SKEMA Business School - SKEMA Business School, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique, OFCE - OFCE - Sciences Po - Sciences Po); Nobuyuki Hanaki (Osaka University [Osaka])
    Abstract: We experimentally investigate how much value people put in observable information about others in strategic interactions. The incentivized experimental task is to predict an unknown target player's trustworthiness in an earlier hidden action game. In Experiment 1, we vary the source of information about the target player (neutral picture, neutral video, video containing strategic content). The observed prediction accuracy rates then serve as an empirical measure of the objective value of information. In Experiment 2, we elicit the subjective value of information using the standard stated preferences method ("willingness to accept"). While the elicited subjective values are ranked in the same manner as the objective ones, subjects attach value to information which does not help predict target behavior, and exaggerate the value of helpful information.
    Keywords: Prediction,observable information,individual characteristics,stated preferences,willingness to accept,experiment
    Date: 2019
  22. By: Ga\"etan Fournier; Karine Van Der Straeten; J\"orgen Weibull
    Abstract: This paper studies a spatial competition game between two firms that sell a homogeneous good at some pre-determined fixed price. A population of consumers is spread out over the real line, and the two firms simultaneously choose location in this same space. When buying from one of the firms, consumers incur the fixed price plus some transportation costs, which are increasing with their distance to the firm. Under the assumption that each consumer is ready to buy one unit of the good whatever the locations of the firms, firms converge to the median location: there is "minimal differentiation". In this article, we relax this assumption and assume that there is an upper limit to the distance a consumer is ready to cover to buy the good. We show that the game always has at least one Nash equilibrium in pure strategy. Under this more general assumption, the "minimal differentiation principle" no longer holds in general. At equilibrium, firms choose "minimal", "intermediate" or "full" differentiation, depending on this critical distance a consumer is ready to cover and on the shape of the distribution of consumers' locations.
    Date: 2020–01
  23. By: Aronsson, Thomas; Ghosh, Sugata; Wendner, Ronald
    Abstract: Based on an endogenous growth model, this paper characterizes the conditions under which positional preferences do not give rise to intertemporal distortions as well as derives an optimal tax policy response in cases where these conditions are not satisfied. In our model, individuals can be positional both in terms of their consumption and wealth, the relative concerns partly reflect comparisons with people in other countries, and we distinguish between a (conventional) welfarist government and a paternalist government that does not respect positional preferences. We also extend the analysis to a multi-country framework and show that Nash-competition among local paternalist governments leads to a global social optimum, whereas Nash-competition among local welfarist governments does not.
    Keywords: Positional preferences, efficiency, intertemporal distortions, welfarist government, paternalist government, endogenous growth
    JEL: D62 E61 H11 O43
    Date: 2020–01–30

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