nep-gth New Economics Papers
on Game Theory
Issue of 2020‒11‒02
fourteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Belief Inducibility and Informativeness By Herings, P. Jean-Jacques; Karos, Dominik; Kerman, Toygar
  2. Unique Information Elicitation By Hitoshi Matsushima; Shunya Noda
  3. Beliefs, learning, and personality in the indefinitely repeated prisoner’s dilemma By Gill, David; Rosokha, Yaroslav
  4. “Friends Are Thieves of Time": Heuristic Attention Sharing in Stable Friendship Networks By Tenev, Anastas P.
  5. The Perverse Costly Signaling Effect on Cooperation under the Shadow of the Future By Kamei, Kenju
  6. Inheritance of Convexity for the P˜min-Restricted Game By Alexandre Skoda
  7. Social Framing Effects in Leadership: Preferences or Beliefs? By Edward Cartwright; Michalis Drouvelis
  8. Equilibrium Arrivals to a Last-come First-served Preemptive-resume Queue By Breinbjerg, Jesper; Platz, Trine Tornøe; Østerdal, Lars Peter
  9. Network Comparative Statics By Harkins, Andrew
  10. Economic Games as Estimators By Zargham, Michael; Paruch, Krzysztof; Shorish, Jamsheed
  11. Persuasion, Spillovers, and Government Interventions By Li, Cheng; Xiao, Yancheng
  12. Passive backward acquisitions and downstream collusion By Shekhar, Shiva; Thomes, Tim Paul
  13. Why are open ascending auctions popular? The role of information aggregation and behavioral biases By Theo Offerman; Giorgia Romagnoli; Andreas Ziegler
  14. To segregate, or to discriminate – that is the question: experiment on identity and social preferences By Blanco, M; Guerra, J. A.

  1. By: Herings, P. Jean-Jacques (RS: GSBE Theme Data-Driven Decision-Making, RS: GSBE Theme Conflict & Cooperation, Microeconomics & Public Economics); Karos, Dominik; Kerman, Toygar (General Economics 0 (Onderwijs), RS: GSBE other - not theme-related research)
    Abstract: We consider a group of receivers who share a common prior on a finite state space and who observe private correlated signals that are contingent on the true state of the world. We show that, while necessary, Bayes plausibility is not sufficient for a distribution over posterior belief vectors to be inducible, and we provide a characterization of inducible distributions. We classify communication strategies as minimal, direct, and language independent, and show that any inducible distribution can be induced by a language independent communication strategy (LICS). We investigate 12 the role of the different classes of communication strategies for the amount of higher order information that is revealed to receivers. We show that the least informative communication strategy which induces a fixed distribution over posterior belief vec tors lies in the relative interior of the set of all language independent communication strategies which induce that distribution.
    Date: 2020–10–13
  2. By: Hitoshi Matsushima (University of Tokyo); Shunya Noda (University of British Columbia)
    Abstract: This study investigates the unique information elicitation problem. A central planner attempts to elicit correct information from multiple informed agents through mutual monitoring. There is a severe restriction on incentive devices: we assume neither public monitoring technology nor allocation rule is available; thus, the central planner only uses monetary payment rules. It is well-known that if all agents are selfish, it is impossible to elicit information as a unique equilibrium. We consider an epistemological possibility that some agents could be motivated by an intrinsic preference for honesty, while we allow that honest agents are mostly motivated by monetary interest. We prove that, once we introduce an epistemic type space that allows agents to be (weakly) honest, then the impossibility theorem reduces to a knife-edge case: The central planner can elicit correct information from agents as a unique Bayes Nash equilibrium behavior if and only if it is never common knowledge that all agents are selfish.
    Date: 2020–10
  3. By: Gill, David (Purdue University); Rosokha, Yaroslav (Purdue University)
    Abstract: The indefinitely repeated prisoner’s dilemma (IRPD) captures the trade-off between the short-term payoff from exploiting economic partners and the long-term gain from building successful relationships. We aim to understand more about how people form and use beliefs about others in the IRPD. To do so, we elicit beliefs about the supergame strategies chosen by others. We find that initial beliefs match behavior quite well and that most subjects choose strategies that perform well given their beliefs. Motivated by belief clustering, we use beliefs to estimate a level-k model of boundedly rational thinking. We analyze how beliefs and behavior evolve with experience: beliefs become more accurate over time, and we use beliefs to provide new evidence about the mechanism that underlies learning from experience. Finally, we find that a survey measure of trust predicts cooperative behavior and optimism about others’ cooperation, which helps to explain how trust underpins successful economic exchanges.
    Keywords: Indefinitely repeated prisoner’s dilemma; infinitely repeated prisoner’s dilemma; cooperation; optimism; beliefs; belief elicitation; supergame strategies; level-k; bounded rationality; clustering; learning; best response; experimentation; strategy revision; personality; agreeableness; anxiety; cautiousness; kindness; manipulativeness; trust; factor analysis; Raven test; Quadratic Scoring Rule; game theory; experiment. JEL Classification: C72; C73; C91; D91
    Date: 2020
  4. By: Tenev, Anastas P. (General Economics 0 (Onderwijs), RS: GSBE Theme Conflict & Cooperation)
    Abstract: This paper studies a model of network formation in which agents create links following a simple heuristic -- they invest their limited resources proportionally more in neighbours who have fewer links. This decision rule captures the notion that when considering social value more connected agents are on average less beneficial as neighbours and node degree is a useful proxy when payoffs are difficult to compute. The decision rule illustrates an externalities effect whereby an agent's actions also influence his neighbours' neighbours. Besides complete networks and fragmented networks with complete components, the pairwise stable networks produced by this model include many non-standard ones with characteristics observed in real life networks like clustering and irregular components. Multiple stable states can develop from the same initial structure -- the stable networks could have cliques linked by intermediary agents while sometimes they have a core-periphery structure. The observed pairwise stable networks have close to optimal welfare. This limited loss of welfare is due to the fact that when a link is established, this is beneficial to the linking agents, but makes them less attractive as neighbours for others, thereby partially internalising the externalities the new connection has generated.
    JEL: A13 C72 D85
    Date: 2020–10–12
  5. By: Kamei, Kenju
    Abstract: A literature in the social sciences proposes that humans can promote cooperation with strangers by signaling their generosity through investment in unrelated pro-social activities. This paper studied this hypothesis by conducting a laboratory experiment with an infinitely repeated prisoner’s dilemma game under random matching. A novel feature of the experiment is that each player first decided how much to donate to a charitable organization, the British Red Cross, and then this donation information was conveyed to the player’s matched partner. Surprisingly, the donation activities significantly undermined cooperation. This negative effect of charitable-giving was consistently observed regardless of whether players had a post-interaction opportunity to punish the partners. A detailed analysis suggests that the negative effect (a) resulted from the transmission of the charitable-giving information, not from the fact that subjects engaged in the charitable-giving, and (b) was caused by mis-coordination between the two parties who can both costly signal their generosity. This suggests that letting players have an implicit costly signaling opportunity has damaging unintended consequences for their interactions among strangers. Possible ways to encourage players to use costly signaling for mutual cooperation, such as partner choice, are also discussed in the paper.
    Keywords: experiment; cooperation; prisoner’s dilemma; charitable-giving; costly signaling
    JEL: C73 C9 D91
    Date: 2020–09–26
  6. By: Alexandre Skoda (Centre d'Economie de la Sorbonne)
    Abstract: We consider a restricted game on weighted graphs associated with minimum partitions. We replace in the classical definition of Myerson restricted game the connected components of any subgraph by the sub-components obtained with a specific partition P˜min. This partition relies on the same principle as the partition P˜min introduced by Grabisch and Skoda (2012) but restricted to connected coalitions. More precisely, this new partition P˜min is induced by the deletion of the minimum weight edges in each connected component associated with a coalition. We provide a characterization of the graphs satisfying inheritance of convexity from the underlying game to the restricted game associated with P˜min
    Keywords: Cooperative game; convexity; graph-restricted game; graph partitions
    Date: 2020–09
  7. By: Edward Cartwright; Michalis Drouvelis
    Abstract: We experimentally study the impact of framing effects in a repeated sequential social dilemma game. Our between-subjects design consists of two group level (“Wall Street” vs. “Community”) and two individual level (“First (Second) Movers” vs. “Leaders (Followers)”) frames. We find that average contributions are significantly higher when the game is called the Wall Street game than when it is called the Community game. However, the social framing effect disappears when we control for players’ first-order and second-order beliefs. Overall, our evidence indicates that social frames enter people’s beliefs rather than their preferences.
    Keywords: framing, public good, experiment, beliefs
    JEL: H41 C72 C92
    Date: 2020
  8. By: Breinbjerg, Jesper (Department of Business and Economics, University of Southern Denmark); Platz, Trine Tornøe (Department of Economics, Copenhagen Business School); Østerdal, Lars Peter (Department of Economics, Copenhagen Business School)
    Abstract: We consider a queueing system where a single server opens and serves users according to the last-come first-served discipline with preemptive-resume (LCFS-PR). A finite number of strategic users must choose individually when to arrive at the server. We allow for general classes of user preferences and service time distributions and show existence and uniqueness of a symmetric Nash equilibrium. Furthermore, we show that no asymmetric equilibrium exists, if the population consists of only two users, or if arrival strategies satisfy a mild regularity condition. Based on the constructive existence proof for the symmetric equilibrium, we provide a numerical example in which we compute the symmetric equilibrium strategy and compare the resulting social efficiency to that obtained if users are instead served on a first-come first-served (FCFS) basis.
    Keywords: Queueing; Strategic arrivals; Nash equilibrium; LCFS-PR; FCFS
    JEL: C72 D62 R41
    Date: 2020–10–02
  9. By: Harkins, Andrew (University of Warwick)
    Abstract: This paper develops a framework for analyzing the effect of arbitrary changes to network structure in linear-quadratic games on networks. Changes to network structure which increase total activity and total utility are studied for the case of strategic complements and strategic substitutes. Changes which are welfare increasing are found to depend on a new measure of centrality which counts the total length of walks from a node. Two optimal network design problems are then considered. Total activity is found to be a convex function of the edge weights of the network, which allows for convex optimization techniques to be applied to minimize total activity as in the traditional ‘key player’ problem. Welfare maximizing network structures are also studied and previous results which associate optimal networks with nested split graphs are generalized.
    Date: 2020
  10. By: Zargham, Michael; Paruch, Krzysztof; Shorish, Jamsheed
    Abstract: Discrete event games are discrete time dynamical systems whose state transitions are discrete events caused by actions taken by agents within the game. The agents’ objectives and associated decision rules need not be known to the game designer in order to impose struc- ture on a game’s reachable states. Mechanism design for discrete event games is accomplished by declaring desirable invariant properties and restricting the state transition functions to conserve these properties at every point in time for all admissible actions and for all agents, using techniques familiar from state-feedback control theory. Building upon these connections to control theory, a framework is developed to equip these games with estimation properties of signals which are private to the agents playing the game. Token bonding curves are presented as discrete event games and numerical experiments are used to investigate their signal processing properties with a focus on input-output response dynamics.
    Keywords: Estimation, Dynamic Games, Cryptoeconomic Systems
    Date: 2020–01–19
  11. By: Li, Cheng; Xiao, Yancheng
    Abstract: We develop a model of Bayesian persuasion with spillovers to investigate the impact of information production on optimal policy design. A sender produces information to persuade a receiver to take an action with external effects, and the government implements corrective subsidies and taxes to maximize social welfare. Subsidies to the sender’s preferred action incentivize her to produce less information, while taxes motivating her to produce more. Such an informational effect impacts the receiver’s decision and social welfare. We show that the optimal corrective subsidies and taxes may be different from the Pigouvian level. Most notably, the optimal policy is no government intervention when the spillover is positive and small.
    Keywords: persuasion; spillover effects; externalities; Pigouvian taxes; subsidies; social welfare
    JEL: C72 D8 H21 H23
    Date: 2020
  12. By: Shekhar, Shiva; Thomes, Tim Paul
    Abstract: We investigate the effects of passive backward acquisitions in their efficient upstream supplier on downstream firms' ability to collude in a dynamic game of price competition with homogeneous goods. We find that passive backward acquisitions impede downstream collusion. The main driver of our finding is that a passive backward acquisition secures an acquirer from zero continuation profits after a breakdown of collusion. This anti-collusive effect cannot be outweighed by a lower collusive price that is set by the cartel to increase the acquirer's profit from its claim on the upstream margin.
    Keywords: Tacit collusion,passive backward acquisitions,Bertrand competition
    JEL: D43 L13 L40 L81
    Date: 2020
  13. By: Theo Offerman (University of Amsterdam); Giorgia Romagnoli (University of Amsterdam); Andreas Ziegler (University of Amsterdam)
    Abstract: The popularity of open ascending auctions is often attributed to the fact that openly observable bidding allows to aggregate dispersed information. Another reason behind the frequent utilization of open auction formats may be that they activate revenue enhancing biases. In an experiment, we compare three auctions that differ in how much information is revealed and in the potential activation of behavioral biases: (i) the ascending Vickrey auction, a closed format; and two open formats, (ii) the Japanese-English auction and (iii) the Oral Outcry auction. Even though bidders react to information conveyed in others’ bids, information aggregation fails in both open formats. In contrast, the Oral Outcry raises higher revenue than the other two formats, by stimulating bidders to submit unprofitable jump bids and triggering a quasi-endowment effect.
    Keywords: ascending auctions, information aggregation, jump bidding, auction fever
    JEL: C90 D44 D82
    Date: 2020–10–13
  14. By: Blanco, M; Guerra, J. A.
    Abstract: How do various sources of social identity affect segregation and discrimination decisions? In our laboratory experiment, social identity originates either from similar preferences, income, ability, randomly or from shared socioeconomic status. For the latter, we exploit Colombia’s unique (public information) stratification system which assigns households to socioeconomic strata based on its residential block amenities. Subjects decide with whom to interact in a Dictator and Trust Game. We find high socioeconomic status senders segregate against out-group receivers in the Dictator Game, while low socioeconomic ones do so in the Trust Game. This segregation pattern is partly explained by payoff-maximizing behavior. In the Trust Game, we gather evidence for statistical discrimination. In the Dictator Game, evidence points to a taste for redistribution when identity originates from socioeconomic status or income level. No matter the source of identity, our subjects expect being segregated but not discriminated against.
    Keywords: Socioeconomic status, stratification, segregation, discrimination, laboratory experiment
    JEL: C91 D91 J15 Z13
    Date: 2020–09–10

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