|
on Game Theory |
| By: | Ratul Lahkar (Ashoka University); Saptarshi Mukherjee (IIT, Delhi) |
| Abstract: | Due to externalities, the equilibrium behavior in aggregative games is not efficient in the sense of maximizing aggregate payoff. We characterize conditions such that efficiency can be globally implemented in such games under evolutionary dynamics. If payoffs satisfy certain important concavity conditions, then the aggregate payoff function of these games has a unique maximizer. Once the planner imposes a transfer equal to the externality generated by agents, we obtain a new externality adjusted game. This is a potential game with the aggregate payoff function of the original game being its potential function. Evolutionary dynamics converge globally to the maximizer of this potential function, thereby implementing efficiency in the original game. Our earlier paper on public goods (Lahkar and Mukherjee [16]) emerges as an example of the present general analysis. Two new applications are public bads and the tragedy of the commons. |
| Keywords: | Aggregative Games; Externalities; Potential Games; Implementation |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:ash:wpaper:38&r=all |
| By: | Tom Potoms (Department of Economics, University of Sussex); Tom Truyts (CEREC, Saint-Louis University) |
| Abstract: | How are group symbols (e.g. a flag, Muslim veil, clothing style) helpful in sustaining cooperation and social norms? We study the role of symbols in an infinitely repeated public goods game with random matching, endogenous partnership termination, limited information flows and endogenous symbol choice. We characterize an efficiently segregating equilbrium, in which players only cooperate with others bearing the same symbol. Players bearing a scarcer symbol face a longer expected search time to find a cooperative partner upon partnership termination, and can therefore sustain higher levels of cooperation. We compare this equilibrium to other equilibria in terms of Pareto dominance and robustness to (some form of) bilateral renegotiation. |
| Keywords: | Endogenous segregation, repeated games, random matching, public goods games |
| JEL: | C73 D83 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:1720&r=all |
| By: | Laurent, Thibault; Panova, Elena |
| Abstract: | Various social networks share prominent features: clustering, rightskewed degree distribution, segregation into densely connected com- munities. We build network formation game rationalizing these features with signal-extraction benet by network participants. The players build network to exchange their private signals on the relevant state. We show that a family of Nash equilibrium networks possesses the above-mentioned prominent features of real networks. We show, furthermore, that networks with these features are e¢ cient. |
| Keywords: | network formation, endogenous information benet, clustering, hubs, differentiated priors, Bayesian learning in networks. |
| JEL: | D82 D85 C72 |
| Date: | 2020–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124728&r=all |
| By: | Kevin Techer (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon) |
| Abstract: | We consider a class of social cost problems where one polluter interacts with an arbitrary number of potential victims. Agents are supposed to cooperate and negotiate an optimal pollution level together with monetary transfers. We examine multi-choice cooperative games associated with a social cost problem and an assignment (or mapping) of rights. We introduce a class of mappings of rights that takes into account the pollution intensity and we consider three properties on mappings of rights: core compatibility, Kaldor-Hicks core compatibility and no veto power for a victim. We demonstrate that there exist only two families of mappings of rights that satisfy core compatibility. However, no mapping of rights satisfies Kaldor-Hicks core compatibility and no veto power for a victim. |
| Keywords: | Externality,Liability rules,Multi-choice cooperative game,Core |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02939246&r=all |
| By: | Lukasz Balbusy (Faculty of Mathematics, Computer Sciences and Econometrics, University of Zielona Gora); Pawel Dziewulskiz (Department of Economics, University of Sussex); Kevin Reffett (Department of Economics, Arizona State University); Lukasz Wozny (Department of Quantitative Economics, Warsaw School of Economics) |
| Abstract: | We present a new approach for studying equilibrium dynamics in a class of stochastic games with a continuum of players with private types and strategic complementarities. We introduce a suitable equilibrium concept, called Markov Stationary Distributional Equilibrium (MSDE), prove its existence, and provide constructive methods for characterizing and comparing equilibrium distributional transitional dynamics. To analyze equilibrium transitions for the distributions of private types, we develop an appropriate dynamic (exact) law of large numbers. Finally, we show that our models can be approximated as idealized limits of games with a large (but finite) number of players. We provide numerous applications of the results including: dynamic models of growth with status concerns, social distance, and paternalistic bequest with endogenous preference for consumption. |
| Keywords: | large games, distributional equilibria, supermodular games, comparative dynamics, non-aggregative games, law of large numbers, social interactions |
| JEL: | C62 C72 C73 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:1320&r=all |
| By: | İriş, D.; Lee, J.; Tavoni, A. |
| Abstract: | Many public goods cannot be provided directly by interested parties (e.g. citizens), as they entail decision-making at nested hierarchical scales: at a lower level individuals elect a representative, while at a higher scale elected delegates decide on the provision level, with some degree of scrutiny from their constituency. Furthermore, many such decisions involve uncertainty about the magnitude of the contribution that is needed for the good to be provided (or bad to be avoided). In such circumstances delegates can serve as important vehicles for coordination by aggregating societal preferences for provision. Yet, the role of delegation in threshold public goods games is understudied. We contrast the behavior of delegates to that of self-representing individuals in the avoidance of a public bad in an experimental setting. We randomly assign twelve subjects into four teams and ask each team to elect a delegate via majority voting. The elected delegates play several variants of a one-shot public goods game in which losses can ensue if the sum of their contributions falls short of a threshold. We find that when delegation is coupled with a mild form of public pressure, it has a significantly negative effect on contributions, even though the non-delegates can only signal their preferred levels of public good contributions. The reason is that delegates give more weight to the least cooperative suggestion: they focus on the lower of the two public good contributions recommended by their teammates. |
| Keywords: | delegation; cooperation; threshold public goods game; climate experiment |
| JEL: | C72 C92 D81 H40 Q54 |
| Date: | 2019–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:102313&r=all |
| By: | Ratul Lahkar (Ashoka University); Rezina Sultana (IIM, Udaipur) |
| Abstract: | We consider affirmative action in large population Tullock contests. The standard Tullock contest is an equal treatment contest in which agents who exert equal effort have an equal probability of success. In contrast, under affirmative action, agents with equal cost of effort have equal probability of success. We analyze such contests as generalized aggregative potential games and characterize their Nash equilibria. We show that affirmative action equalizes equilibrium payoffs without causing any loss of aggregate welfare. It enhances the welfare and effort levels of agents facing high effort cost. Thus, affirmative action engenders equality without having any detrimental effects on efficiency, at least when the number of agents involved are large. It does, however, reduce aggregate effort in society. |
| Keywords: | Affirmative Action, Tullock Contests; Aggregative Games; Potential Games |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:ash:wpaper:40&r=all |
| By: | Matthew Embrey (Department of Economics, University of Sussex); Kyle Hyndmanz (Naveen Jindal School of Management, University of Texas at Dalls); Arno Riedl (Department of Economics, Maastricht University) |
| Abstract: | Many negotiations involve risks that are only resolved ex-post, and often these risks are not incurred equally by the parties involved. We experimentally investigate bargaining situations where a residual claimant faces ex-post risk, whereas a fixed-payoff player does not. In line with the predictions of a benchmark model, we find that residual claimants extract a risk premium, which increases in risk exposure, and that this premium can be high enough to make it beneficial to bargain over a risky rather than a risk-less pie. In contrast to the model’s predictions, we find that the comparatively less risk averse residual claimants benefit the most from risk exposure and this is driven by fixed-payoff players’ adoption of weak bargaining strategies when the pie is risky. We find evidence for a behavioral mechanism where asymmetric exposure to risk between the two parties creates a wedge between their fairness ideas, which shifts agreements in favor of residual claimants but also increases bargaining friction. |
| Keywords: | Bargaining, Ex-post Risk, Reference Points |
| JEL: | C71 C92 D81 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:sus:susewp:1520&r=all |
| By: | Ratul Lahkar (Ashoka University); Saptarshi Mukherjee (IIT, Delhi) |
| Abstract: | We consider implementation of the efficient state in a large population public goods game. Agents are divided into a finite set of types. The planner asks agents to report types, which generates a reported type distribution. Based on reported types and distribution, the planner calculates the efficient strategy level and a Pigouvian transfer for each type of agent. We show that this direct mechanism satisfies incentive compatibility in strictly dominant strategies, strong budget balance and ex–post individual rationality. |
| Keywords: | Public Goods,Externalities, Pigouvian Pricing, VCG Mechanism |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:ash:wpaper:36&r=all |
| By: | Alexis Louaas (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - CNRS - Centre National de la Recherche Scientifique - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique, X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique) |
| Abstract: | This paper highlights the role that equality and reciprocity play in preserving peace and cooperation among individuals with conflicting interests. Following the contractarian tradition, I model a mutually beneficial interaction as a prisoner's dilemma and using repeated game theory, I show that a mutually beneficial joint venture may be undertaken only if the final distribution of incomes is sufficiently egalitarian. From a pre-moral context, the model allows to derive endogenous bounds on the income of each individual that reproduce Moehler (2018)'s weak universalisation principle. Contrasting with the well-known equity-efficiency trade-off, the model also produces an equity-efficiency complementarity. |
| Keywords: | contractarianism,morality,equity,efficiency,game theory,norms |
| Date: | 2020–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02948051&r=all |
| By: | Gülen Karakoç |
| Abstract: | A decision maker solicits information from two partially informed experts and then makes a choice under uncertainty. The experts can be either moderately or extremely biased relative to the decision maker, which is their private information. I investigate the incentives of the experts to share their private information with the decision maker and analyze the resulting effects on information transmission. I show that it may be optimal to consult a single expert rather than two experts if the decision maker is sufficiently concerned about taking advice from extremely biased experts. In contrast to what may be expected, this result suggests that getting a second opinion may not always be helpful for decision making. |
| Keywords: | Cheap Talk, Multiple Experts, Asymmetric Information. |
| JEL: | C72 D82 D83 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:451&r=all |
| By: | Subodha Kumar (Fox School of Business, Temple University); Xiaowei Mei (Department of Management and Marketing, Hong Kong Polytechnic University); Liangfei Qiu (Warrington College of Business, University of Florida); Lai Wei (Antai College of Economics & Management, Shanghai Jiao Tong University) |
| Abstract: | Sponsored data with reward task is an emerging monetization mechanism in which consumers are subsidized with free megabytes by content providers (CPs, e.g., Netflix) in exchange for engagement with advertisers by performing various forms of reward task. Consumers are endowed with the option of whether or not to participate in reward tasks, which is different from traditional push advertising that consumers have no control of. Although it is an emerging phenomenon, to the best of our knowledge, this has not yet been analyzed rigorously. In order to fill this gap in literature, we provide an economic analysis of this mechanism. Our results show that, interestingly, CP’s optimal subsidization rate increases in its marginal revenue of traditional advertising, but decreases in that of reward task. We also find that the amount of reward tasks performed by consumers actually sometimes decreases with these revenue rates. Further, while the profit of both the CP and the mobile network operator (e.g., AT&T) increases with the marginal revenue of traditional advertising, the effect of the marginal revenue of reward task on their profit is not straightforward. Specifically, when the marginal revenue of reward tasks is relatively high, it affects the CP and the mobile network operator’s profit positively; otherwise, the effect is reversed. We further find that, interestingly, the introduction of sponsored data might not necessarily increase consumer surplus. Similarly, although vertical integration of the mobile network operator and the CP reduces double marginalization by aligning incentives and reducing strategic information asymmetry, we find that it could sometimes hurt consumer surplus. Our results provide important insights for both the mobile network operator and the CP. In addition, we also provide useful guidance to policymakers. |
| Keywords: | mobile network operator; sponsored data; reward task; vertical integration; game theory |
| JEL: | C72 D47 L96 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:2008&r=all |
| By: | Doruk İriş (Department of Economics, Sogang University, Seoul); Sungwoo Im, (Department of Economics, Sogang University, Seoul); Hyeonggyun Ko (Department of Economics, Sogang University, Seoul) |
| Abstract: | We study the impact of countries’ subjective beliefs, i.e., pessimism and optimism, on international agreements to provide global public goods. Under linear payoffs, we find that while pessimism could decrease signatories’ efforts, it can also increase the coalition size. Optimism yields the opposite effects. Using an objective welfare criterion, signatories are typically worse off but non-signatories could be better off. As a result, despite the bias the social welfare may increase. When some countries have identical subjective beliefs (optimistic or pessimistic) and the rest have objective beliefs, the proportion of subjective signatories strongly affects signatories’ effort level. A stable coalition may consist of countries with one type of beliefs or a mixture of types. If it consists of only type, then this type is the relatively more optimistic type. |
| Keywords: | Coalition formation, International agreements, Global Public Goods, Subjective beliefs, Optimism, Pessimism |
| JEL: | D80 D90 Q54 H87 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:sgo:wpaper:2010&r=all |
| By: | Ron Berman (The Wharton School, University of Pennsylvania, 3730 Walnut Street, Philadelphia, PA 19104, USA); Xudong Zheng (Johns Hopkins University, 3100 Wyman Park Drive, Baltimore, MD 21211, USA) |
| Abstract: | Marketers often utilize social media influencers to reach audiences with more authentic and credible messaging. While some influencers are prudent and carefully test products before promoting them, many others are shallow and merely post the marketer messaging as is. We analyze the impact of shallow and prudent influencers on marketer profits, customer satisfaction, and influencer payoffs. Counter to intuition, we find that shallow influencers increase market transparency, consumer satisfaction and marketer profits, while prudent influencers entice the marketers to reduce information efficiency in the market, and increase the share of unsatisfied consumers. In a market where both shallow and prudent influencers exist, prudent influencers may increase their payoff even further by extracting additional information rent. The results provide insight into the value that shallow influencers bring to the market and guidance for marketers considering the use of influencer marketing. |
| Keywords: | influencer marketing; product reviews; information design; Bayesian persuasion |
| JEL: | D82 D83 M31 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:2006&r=all |
| By: | David Spector (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics) |
| Abstract: | When demand is noisy and firms' costs are uncertain, the availability of market share data increases the accuracy of each firm's information, and it creates incentives for signaling. Taking both effects into account, we find that under quantity competition with a homogeneous good, the availability of market share data has a positive impact on total surplus and an ambiguous one on consumer surplus. Under price competition with differentiated substitutes, it has a negative impact on consumer surplus and an ambiguous one on total surplus. If the cost difference is small, the effect of first-period signaling dominates the effect of second-period full information. Accordingly, in this case, the availability of market share data causes total and consumer surplus to increase in the case of quantity competition and to decrease in the case of price competition. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-02946654&r=all |