nep-gth New Economics Papers
on Game Theory
Issue of 2020‒02‒24
twenty papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Nash Smoothing on the Test Bench: Ha-Essential Equilibria By Papatya Duman; Walter Trockel
  2. Recurrent Preemption Games By Hitoshi Matsushima
  3. Efficient Incentives in Social Networks: Gamification and the Coase Theorem By Daske, Thomas
  4. Asymptotic value in frequency-dependent games with separable payoffs: a differential approach By Joseph Abdou; Nikolaos Pnevmatikos
  5. We, You, I, and the Other By Shyam Gouri Suresh; Paul Studtmann
  6. Least Square Approximations and Linear Values of Cooperative Game By Ulrich Faigle; Michel Grabisch
  7. Endogenous Game Theoretic Deontology By Shyam Gouri Suresh; Paul Studtmann
  8. Necessary versus equal players in axiomatic studies By Sylvain Béal; Florian Navarro
  9. Dynamic effects of enforcement on cooperation By Roberto Galbiati; Emeric Henry; Nicolas Jacquemet
  10. Pricing and Fees in Auction Platforms with Two-Sided Entry By Marleen Marra
  11. Fairness through the Lens of Cooperative Game Theory: An Experimental Approach By Geoffroy de Clippel; Kareen Rozen
  12. Intertemporal Price Discrimination in Sequential Quantity-Price Games By James D. Dana Jr.; Kevin R. Williams
  13. Bargaining over Contingent Contracts Under Incomplete Information By Geoffroy de Clippel; Jack Fanning; Kareen Rozen
  14. Cooperation in a Fragmented Society: Experimental Evidence on Syrian Refugees and Natives in Lebanon By Drouvelis, Michalis; Malaeb, Bilal; Vlassopoulos, Michael; Wahba, Jackline
  15. Cooperation in a dynamic setting with asymmetric environmental valuation and responsibility By Francisco Cabo; Mabel Tidball
  16. Lying and Deception in Games By Sobel, Joel
  17. Learning to deal with repeated shocks under strategic complementarity: An experiment By Muhammed Bulutay; Camille Cornand; Adam Zylbersztejn
  18. “One Man, One Vote” Part 1: Electoral Justice in the U.S. Electoral College: Banzhaf and Shapley/Shubik versus May By de Mouzon, Olivier; Laurent, Thibault; Le Breton, Michel; Moyouwou, Issofa
  19. Bounded Rationality and Limited Datasets By Geoffroy de Clippel; Kareen Rozen
  20. Stable and Efficient Structures in Multigroup Network Formation By Shadi Mohagheghi; Jingying Ma; Francesco Bullo

  1. By: Papatya Duman (Paderborn University); Walter Trockel (Bielefeld University)
    Abstract: We extend the analysis of van Damme (1987, Section 7.5) of the famous smoothing demand in Nash (1953) as an argument for the singular stability of the symmetric Nash bargaining solution among all Pareto ecient equilibria of the Nash demand game. Van Damme's analysis provides a clean mathematical framework where he substantiates Nash's conjecture by two fundamental theorems in which he proves that the Nash solution is among all Nash equilibria of the Nash demand game the only one that is H{essential. We show by generalizing this analysis that for any asymmetric Nash bargaining solution a similar stability property can be established that we call H {essentiality. A special case of our result for a = 1=2 is H1/2-essentiality that coincides with van Damme's H{essentiality. Our analysis deprives the symmetric Nash solution equilibrium of Nash's demand game of its exposed position and fortifies our conviction that, in contrast to the predominant view in the related literature, the only structural di erence between the asymmetric Nash solutions and the symmetric one is that the latter one is symmetric.
    Keywords: 2-person bargaining games, {symmetric Nash solution, Nash demand game, Nash smoothing of games, H {essential Nash equilibrium
    JEL: B16 C71 C72 C78 D5
    Date: 2020–02
  2. By: Hitoshi Matsushima (Faculty of Economics, University of Tokyo)
    Abstract: I consider a new model of an infinitely repeated preemption game with random matching, termed the recurrent preemption game, wherein each player’s discount factor depends on whether she wins the current game. This model describes sequential strategic technology adoptions in which a company becomes outdated by failing to maintain a position at the forefront of innovation. Assuming incomplete information about the presence of a rival, I clarify how the prominence of the innovator’s dilemma influences the degree of excessive competition in preemption. I also reveal interesting properties demonstrated by the unique symmetric Nash equilibrium of the recurrent preemption game.
    Keywords: Recurrent Preemption Game, Strategic Technology Adoption, Innovator’s Dilemma, Unique Equilibrium, Random Technology
    JEL: C72 C73 L13 O30 O31
    Date: 2020–02
  3. By: Daske, Thomas
    Abstract: This study explores mechanism design for networks of interpersonal relationships. Agents' social (more or less altruistic or spiteful) preferences and private payoffs are all subject to asymmetric information; utility is quasi-linear. Remarkably, the asymmetry of information about agents' social preferences can be operationalized to satisfy agents' participation constraints. The main result is a constructive proof of the Coase theorem, in its typical mechanism-design interpretation, for networks of at least three agents: If endowments are sufficiently large, any such network can resolve any given allocation problem with a budget-balanced mechanism that is Bayesian incentive-compatible, interim individually rational, and ex-post Pareto-efficient. The endogenously derived solution concept is interpreted as gamification: Resolve the agents' allocation problem with an efficient social-preference robust mechanism; attract agents' participation by complementing this mechanism with a budget-balanced game that operates on their social preferences and provides them with a platform to live out their propensities to cooperate or compete.
    Keywords: mechanism design,social preferences,gamification,Coase theorem
    JEL: C72 C78 D62 D82
    Date: 2020
  4. 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); Nikolaos Pnevmatikos (UP2 - Université Panthéon-Assas)
    Abstract: We study the asymptotic value of a frequency-dependent zero-sum game with separable payoff following a differential approach. The stage payoffs in such games depend on the current actions and on a linear function of the frequency of actions played so far. We associate to the repeated game, in a natural way, a differential game and although the latter presents an irregularity at the origin, we prove that it has a value. We conclude, using appropriate approximations, that the asymptotic value of the original game exists in both the n-stage and the λ-discounted games ant that it coincides with the value of the continuous time game.
    Keywords: stochastic game,frequency dependent payoffs,Hamilton-Jacobi-Bellman-Isaacs equations,continuous-time game
    Date: 2018–07
  5. By: Shyam Gouri Suresh; Paul Studtmann
    Abstract: To capture humans’ moral sense game theorists have introduced the Kantian counterfactual. The Nash counterfactual considers the question: what would happen were I to change my behavior on the assumption that no one else does. By contrast, the Kantian counterfactual considers the question: what would happen were everyone to deviate from some behavior? In this paper, we present a model that endogenizes the decision to engage in this type of Kantian reasoning. Our model thus differs from recent approaches to Kantian reasoning in the literature that appeal to exogenous features to explain the level of moral behavior. We show that our model allows one to identify playing a Kantian strategy with playing what we call a ‘we-strategy’, an identification that is made plausible by the inclusion of psychic payoffs. We go on to prove that agents playing our model optimally achieve weakly Pareto socially optimal outcomes. We end by discussing a theorem that places a constraint on agents who achieve positive expected material payoffs and in so doing explains patterns of giving that can be found in nature.
    Keywords: Kantian Morality, Game Theory, Deontology
    JEL: D91 D63 A12 C79
    Date: 2019–10
  6. By: Ulrich Faigle (Zentrum für Angewandte Informatik [Köln] - Universität zu Köln); Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Many important values for cooperative games are known to arise from least square optimization problems. The present investigation develops an optimization framework to explain and clarify this phenomenon in a general setting. The main result shows that every linear value results from some least square approximation problem and that, conversely, every least square approximation problem with linear constraints yields a linear value. This approach includes and extends previous results on so-called least square values and semivalues in the literature. In particular , it is demonstrated how known explicit formulas for solutions under additional assumptions easily follow from the general results presented here.
    Date: 2019
  7. By: Shyam Gouri Suresh; Paul Studtmann
    Abstract: We examine current approaches to modeling deontology with game theory in the context of whether the agents in those approaches are autonomous. An autonomous agent’s actions must result from her reason, not from contingent causal factors such as genetic similarity, the influence of culture, or outside causal forces. The second component of autonomy is that an autonomous agent must allow her counterparty to be autonomous as well. We propose an approach to modeling deontological reasoning where agents are autonomous in terms of both components.
    Keywords: Kantian Morality, Game Theory, Deontology
    JEL: D91 D63 A12 C79
    Date: 2019–10
  8. By: Sylvain Béal (CRESE, Université de Franche-comté); Florian Navarro (GRANEM, Université d'Angers)
    Abstract: This note introduces three variant of existing axioms in which equal players are replaced by necessary players, i.e. players such that each coalition not containing such a player enjoys a zero worth. As an example, we weaken the axiom of equal treatment of equals by requiring that two necessary players obtain the same payoff. We highlight that necessary players can replace equal players in many well-known axiomatic characterizations, but not in all. In addition, we provide new characterizations of the Shapley value, the class of positively weighted Shapley values, the Solidarity value and the Equal Division value. This sheds a new light on the real role of equal treatment of equals in the axiomatic literature.
    Keywords: Necessary players, equal players, mutually dependent players, equal treatment of necessary players, (weighted-)Shapley value, Equal Division value, Solidarity value
    Date: 2020–01
  9. By: Roberto Galbiati (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Emeric Henry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: In situations where social payoffs are not aligned with private incentives, enforcement with fines can be a way to sustain cooperation. In this paper we show, by the means of a lab experiment , that past fines can have an effect on current behavior even when no longer in force. We document two mechanisms: a) past fines affect directly individuals' future propensity to cooperate; b) when fines for non cooperation are in place in the past, individuals experience higher levels of cooperation from partners and, consistent with indirect reciprocity motives, are in turn nicer towards others once these fines have been removed. This second mechanism is empirically prevalent and, in contrast with the first, induces a snowball effect of past enforcement. Our results can inform the design of costly enforcement policies.
    Keywords: experiments,Laws,social values,cooperation,learning,spillovers,persistence of institutions,repeated games
    Date: 2018–12
  10. By: Marleen Marra (Département d'économie)
    Abstract: This paper presents, solves, and estimates the first structural auction model with seller selection. This allows me to quantify network effects arising from endogenous bidder and seller entry into auction platforms, facilitating the estimation of theoretically ambiguous fee impacts by tracing them through the game. Relevant model primitives are identified from variation in second-highest bids and reserve prices. My estimator builds off the discrete choice literature to address the double nested fixed point characterization of the entry equilibrium. Using new wine auction data, I estimate that this platform’s revenues increase up to 60% when introducing a bidder discount and simultaneously increasing seller fees. More bidders enter when the platform is populated with lower-reserve setting sellers, driving up prices. Moreover, I show that meaningful antitrust damages can be estimated in a platform setting despite this two-sidedness.
    Keywords: Auctions with entry; Two-sided markets; Nonparametric identification; Estimation; Nested fixed point
    JEL: D44 C52 C57 L81
    Date: 2019–12
  11. By: Geoffroy de Clippel; Kareen Rozen
    Abstract: We experimentally investigate how impartial observers allocate money to agents whose complementarity and substitutability determine the surplus each group can achieve. Analyzing the data through the lens of axioms and solutions from cooperative-game theory, a oneparameter model (mixing equal split and Shapley value) arises as a parsimonious description of the data. Three treatments establish the robustness of this qualitative conclusion, while also illustrating how context may impact the parameter estimate.
    Date: 2020
  12. By: James D. Dana Jr. (Northwestern University); Kevin R. Williams (Cowles Foundation, Yale University)
    Abstract: This paper develops an oligopoly model in which firms first choose capacity and then compete in prices in a series of advance-purchase markets. We show that when the elasticity of demand falls across periods, strong competitive forces prevent firms from utilizing intertemporal price discrimination. We then enrich the model by allowing firms to use inventory controls, or sales limits assigned to individual prices. We show that competing firms can profitably use inventory controls. Thus, although typically viewed as a tool to manage demand uncertainty, we show that inventory controls can also facilitate price discrimination in oligopoly.
    Keywords: Capacity-pricing games, Intertemporal price discrimination, Oligopoly models, Inventory controls
    JEL: D21 D43 L13
    Date: 2018–06
  13. By: Geoffroy de Clippel; Jack Fanning; Kareen Rozen
    Abstract: We study bargaining over contingent contracts in problems where private information becomes public or verifiable when the time comes to implement the agreement. We suggest a simple, two-stage game that incorporates important aspects of bargaining. We characterize equilibria in which parties always reach agreement, and study their limits as bargaining frictions vanish. We show that under mild regularity conditions, all interim-efficient limits belong to Myerson (1984)’s axiomatic solution. Furthermore, all limits must be interim-efficient if equilibria are required to be sequential. Results extend to other bargaining protocols.
    Date: 2020
  14. By: Drouvelis, Michalis (University of Birmingham); Malaeb, Bilal (London School of Economics); Vlassopoulos, Michael (University of Southampton); Wahba, Jackline (University of Southampton)
    Abstract: Lebanon is the country with the highest density of refugees in the world, raising the question of whether the host and refugee populations can cooperate harmoniously. We conduct a lab-in-the-field experiment in Lebanon studying intra- and inter-group behavior of Syrian refugees and Lebanese nationals in a repeated public good game without and with punishment. We find that homogeneous groups, on average, contribute and punish significantly more than mixed groups. These patterns are driven by the Lebanese participants. Our findings suggest that it is equally important to provide adequate help to the host communities to alleviate any economic and social pressures.
    Keywords: refugees, public good game, cooperation, punishment
    JEL: D91 J5 F22
    Date: 2019–12
  15. By: Francisco Cabo (Universitad de Valladolid); Mabel Tidball (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)
    Abstract: We analyze a dynamic environmental agreement between two regions. We assume that the agreement is jointly protable, because the eort associated with emission reductions is overcompensated by a cleaner environment in the future The two regions are asymmetric in two respects: their value of a cleaner environment is dierent, and they are responsible for the initial environmental problem in dierent ways. Because the benets of a cleaner environment cannot be transferred, we propose a mechanism on how to share the eorts of lowering current emissions, satisfying two main properties. The rst property is a benets pay principle: the greater one region's relative benet from cooperation, the greater must be its relative contribution. The second property is, a polluter pay principle: a region's relative contribution increases with its responsibility. Moreover, the sharing scheme must be time consistent. At any intermediate time, no country can do better by deviating from cooperation. *
    Keywords: Cooperative dierential game,Distribution procedure,Time consistency,Polluter pay principle,Benets pay principle
    Date: 2020
  16. By: Sobel, Joel
    Keywords: Economics, Commerce, Management, Tourism and Services, Commerce, Management, Tourism and Services
    Date: 2020–02–06
  17. By: Muhammed Bulutay (TUB - Technische Universität Berlin); Camille Cornand (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); 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)
    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
    Date: 2020
  18. By: de Mouzon, Olivier; Laurent, Thibault; Le Breton, Michel; Moyouwou, Issofa
    Abstract: This paper is dedicated to the measurement of (or lack of) electoral justice in the 2010 Electoral College using a methodology based on the expected influence of the vote of each citizen for three probability models. Our first contribution is to revisit and reproduce the results obtained by Owen (1975) for the 1960 and 1970 Electoral College. His work displays an intriguing coincidence between the conclusions drawn respectively from the Banzhaf and Shapley-Shubik’s probability models. Both probability models conclude to a violation of electoral justice at the expense of small states. Our second contribution is to demonstrate that this conclusion is completely flipped upside-down when we use May’s probability model: this model leads instead to a violation of electoral justice at the expense of large states. Besides unifying disparate approaches through a common measurement methodology, one main lesson of the paper is that the conclusions are sensitive to the probability models which are used and in particular to the type and magnitude of correlation between voters that they carry.
    JEL: D71 D72
    Date: 2020–02
  19. By: Geoffroy de Clippel; Kareen Rozen
    Abstract: Bounded rationality theories are typically characterized over exhaustive data sets. We develop a methodology to understand the empirical content of such theories with limited data, adapting the classic, revealed-preference approach to new forms of revealed information. We apply our approach to an array of theories, illustrating its versatility. We identify theories and datasets testable in the same elegant way as Rationality, and theories and datasets where testing is more challenging. We show that previous attempts to test consistency of limited data with bounded rationality theories are subject to a conceptual pitfall that can yield false positives and empty out-of-sample predictions.
    Date: 2020
  20. By: Shadi Mohagheghi; Jingying Ma; Francesco Bullo
    Abstract: In this work we present a strategic network formation model predicting the emergence of multigroup structures. Individuals decide to form or remove links based on the benefits and costs those connections carry; we focus on bilateral consent for link formation. An exogenous system specifies the frequency of coordination issues arising among the groups. We are interested in structures that arise to resolve coordination issues and, specifically, structures in which groups are linked through bridging, redundant, and co-membership interconnections. We characterize the conditions under which certain structures are stable and study their efficiency as well as the convergence of formation dynamics.
    Date: 2020–01

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