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on Game Theory |
| By: | Lensberg, Terje; Schenk-Hoppé, Klaus R. |
| Abstract: | We study one-shot play in the set of all bimatrix games by a large population of agents. The agents never see the same game twice, but they can learn ‘across games’ by developing solution concepts that tell them how to play new games. Each agent’s individual solution concept is represented by a computer program, and natural selection is applied to derive stochastically stable solution concepts. Our aim is to develop a theory predicting how experienced agents would play in one-shot games. |
| Keywords: | One-shot games, solution concepts, genetic programming, evolutionary stability. |
| JEL: | C63 C73 C90 |
| Date: | 2020–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99095&r=all |
| By: | Hitoshi Matsushima |
| 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 This model describes sequential strategic technology adoptions in which a company becomes outdated by failing to maintain a position at the forefront of innovation.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. |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:toh:dssraa:110&r=all |
| By: | Giuseppe Attanasi (Université Côte d'Azur; CNRS, GREDEG, France); Samuele Centorrino (Stony Brook University); Elena Manzoni (University of Verona) |
| Abstract: | We study two well-known electronic markets: an over-the-counter (OTC) market, in which each agent looks for the best counterpart through bilateral negotiations, and a double auction (DA) market, in which traders post their quotes publicly. We focus on the DA-OTC efficiency gap and show how it varies with different market sizes (10, 20, 40, and 80 traders). We compare experimental results from a sample of 6,400 undergraduate students in Economics with zero-intelligent (ZI) agent-based simulations. Simulations with ZI traders show that the traded quantity (with respect to the efficient one) increases with market size under both DA and OTC. Experimental results with human traders confirm the same tendency under DA, while the share of periods in which the traded quantity is higher (lower) than the efficient one decreases (increases) with market size under OTC, ultimately leading to a DA-OTC efficiency gap increasing with market size. We rationalize these results by putting forward a novel game-theoretical model of OTC market as a repeated bargaining procedure under incomplete information on buyers' valuations and sellers' costs, showing how efficiency decreases slightly with size due to two counteracting effects: acceptance rates in earlier periods decrease with size, and earlier offers increase, but not always enough to compensate the decrease in acceptance rates. |
| Keywords: | Market Design, Classroom Experiment, Agent-based Modelling, Game-theoretic Modelling |
| JEL: | C70 C91 C92 D41 D47 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2020-10&r=all |
| By: | Jean Barthélemy; Guillaume Plantin |
| Abstract: | This paper develops a full-fledged strategic analysis of Wallace's “game of chicken”. A public sector facing legacy nominal liabilities is comprised of fiscal and monetary authorities that respectively set the primary surplus and the price level in a non-cooperative fashion. We find that the post 2008 feature of indefinitely postponed fiscal consolidation and rapid expansion of the Federal Reserve's balance sheet is consistent with a strategic setting in which neither authority can commit to a policy beyond its current mandate, and the fiscal authority moves before the monetary one at each date. |
| Keywords: | : Fiscal Policy, Monetary Policy, Policy Interactions, Game of Chicken. |
| JEL: | E50 E42 E63 C72 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:742&r=all |
| By: | Masaaki Fujii (Faculty of Economics, The University of Tokyo); Akihiko Takahashi (Faculty of Economics, The University of Tokyo) |
| Abstract: | In this work, we study an equilibrium-based continuous asset pricing problem which seeks to form a price process endogenously by requiring it to balance the flow of sales-and-purchase orders in the exchange market, where a large number of agents are interacting through the market price. Adopting a mean field game (MFG) approach, we find a special form of forward-backward stochastic differential equations of McKean-Vlasov type with common noise whose solution provides a good approximate of the market price. We show the convergence of the net order flow to zero in the large N-limit and get the order of convergence in N under some conditions. We also extend the model to a setup with multiple populations where the agents within each population share the same cost and coefficient functions but they can be different population by population. |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2020cf1144&r=all |
| By: | David Evangelista; Yuri Thamsten |
| Abstract: | We investigate finite population games of optimal execution, taking place at a market with friction. The models over which we develop our results are akin to the standard Almgren-Chriss model with linear price impacts. On the one hand, at a temporary level, our perspective is rather similar to that of the aforementioned model. On the other hand, all players in the model will impact the asset's public price, yielding an aggregate permanent price impact. We propose to analyze two different settings. The first one comprises the case where there is no hierarchy among players, and there is a symmetry of information. In this setting, we obtain closed-form formulas to the Nash equilibrium in the most general setting, i.e., when players' preferences are completely heterogeneous. Particularizing to the case of homogeneous parameters, we show that the average optimal inventory of the finite population converges to its mean-field counterpart, uniformly over a fixed trading horizon, as the population size grows to infinity. In the second framework, we consider a major player, also called a leader, with the first move advantage, and a population of minor players, also known as followers, thought of as high-frequency traders, which trade on informational advantage against the leader. This leads to a model of McKean-Vlasov type for the dynamics of the asset's midprice. We prove the existence and uniqueness of the Stackelberg-Nash equilibrium for a reasonable set of model parameters. We also characterize it as the solution of an abstract vector forward-backward stochastic differential equation system. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2004.00790&r=all |
| By: | Iossa, Elisabetta; Loertscher, Simon; Marx, Leslie; Rey, Patrick |
| Abstract: | Collusive schemes by suppliers often take the form of allocating customers or markets among cartel members. We analyze incentives for suppliers to initiate and sustain such a collusive schemes in a repeated procurement setting. We show that, contrary to some prevailing beliefs, staggered (versus synchronized) purchasing does not make collusion more difficult to sustain or initiate. Buyer defensive measures include synchronized rather than staggered purchasing, first-price rather than second-price auctions, more aggressive or secrete reserve prices, longer contract lengths, withholding information, and avoiding observable registration procedures. Inefficiency induced by defensive measures is an often unrecognized social cost of collusive conduct. |
| Keywords: | synchronized vs staggered purchasing; sustainability and initiation of collusion; coordinated effects |
| JEL: | D44 D82 L41 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124177&r=all |
| By: | Miettinen, Topi; Vanberg, Christoph |
| Abstract: | We extend the Baron and Ferejohn (1989) model of multilateral bargaining by allowing the players to attempt commiting to a bargaining position prior to negotiating. If successful,commitment binds a player to reject any proposal which allocates to her a share below a self-imposed threshold. Any such attempted commitment fails and decays with an exogenously given probability. We characterize and compare symmetric stationary subgame perfect equilibria under unanimity rule and majority rules. Under unanimity rule, there are potentially many equilibria which can be ordered from the least to most inefficient, according to how how many commitment attempts must fail in order for an agreement to arise. The most inefficient equilibrium exists independently of the number of players, and the delay in this equilibrium is increasing in the number of players. In addition, more efficient commitment profiles cannot be sustained in equilibrium if the number of players is sufficiently large. The expected inefficiency due to delay at the least and at the most efficient equilibrium increases as the number of players increases. Under any (super)majority rule, however, there is no equilibrium with delay or inefficiency. The reason is that competition to be included in the winning coalition discourages attempts to commit to an aggressive bargaining position. We also show that inefficiencies related to unanimity decision making may be aggravated by longer lags between consecutive bargaining rounds. The predicted patterns are by and large consistent with observed inefficiencies in many international arenas including the European Union, WTO, and UNFCCC. The results suggest that the unanimity rule is particularly damaging if the number of legislators is large and the time lags between consecutive sessions are long. |
| Keywords: | bargaining; commitment; conflict; delay; environmental agreements; international negotiations; legislative; majority; multilateral; unanimity |
| Date: | 2020–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0679&r=all |
| By: | Kamal Saggi; Woan Foong Wong; Halis Murat Yildiz |
| Abstract: | In a three-country model of endogenous trade agreements, we study the implications of the Most Favored Nation Clause (MFN) when countries are free to form discriminatory preferential trade agreements (PTAs). While PTA members discriminate against non-member countries, MFN requires non-members to treat PTA members in a non-discriminatory fashion. We show that MFN reduces the potency of a country’s optimal tariffs and therefore its incentive for unilaterally opting out of trade liberalization. Thus, MFN can be a catalyst for trade liberalization. However, when PTAs take the form of customs unions, the efficiency case for MFN as well as its pro-liberalization effect is weaker since one country finds itself deliberately excluded by member countries as opposed to staying out voluntarily. |
| Keywords: | trade agreements, tariffs, customs unions, World Trade Organization, coalition proof Nash equilibrium, welfare |
| JEL: | F11 F12 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8139&r=all |
| By: | Luca Alfieri; Nino Kokashvili |
| Abstract: | This article aims to measure and compare the voting power of the member states of two financial nets: the ASEAN Plus Three Macroeconomic Research Office (AMRO) - Chiang Mai Initiative Multilateralized (CMIM) and the European Stability Mechanism (ESM). Furthermore, the study observes the changes to the CMIM before and after the increase of its resources in 2012. The literature on the comparison between regional safety nets lacks proper evaluations from a political economy perspective. This work fills the gap in the literature by placing two of the most important and recent regional financial safety nets under scrutiny. The article employs empirical analyses using two typical measurements of voting systems such as the Shapley-Shubik and Banzhaf indices. The article shows that the small ASEAN countries, contrary to assumptions in the literature, have been penalised after changes in 2012. By observing simple voting weights only, these effects are not visible. However, based on the results obtained from Shapley-Shubik and the Banzhaf power measurements, we argue that the voting powers of big countries, such as Japan and China, have increased after the changes in the system in 2012. In contrast to the ASEAN example, results in the case of the ESM show that there are no substantial differences in the voting powers of member states based on the Banzhaf index and Shapley-Shubik Index. Based on the empirical results of the article, the authors suggest that AMRO-CMIM should take into account the ESM experience regarding the voting mechanism. |
| Keywords: | Financial Safety Nets, Chang Mai Initiative, European Stability Mechanism, voting power |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:mtk:febawb:121&r=all |