nep-gth New Economics Papers
on Game Theory
Issue of 2020‒12‒07
thirteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. An index of competitiveness and cooperativeness for normal-form games By Thomas Demuynck; Christian Seel; Thu Giang Tran
  2. Portfolio Liquidation Games with Self-Exciting Order Flow By Guanxing Fu; Ulrich Horst; Xiaonyu Xia
  3. The Two-Step Average Tree Value for Graph and Hypergraph Games By Kang, Liying; Khmelnitskaya, Anna; Shan, Erfang; Talman, A.J.J.; Zhang, Guang
  4. Stable cores in information graph games By Marina Núñez; Juan Vidal-Puga
  5. Is there a fair price in St. Petersburg repeated games? An empirical analysis By Ruggero Paladini
  6. Cooperation in a Fragmented Society: Experimental Evidence on Syrian Refugees and Natives in Lebanon By Michalis Drouvelis; Bilal Malaeb; Michael Vlassopoulos; Jackline Wahba
  7. Price formation and optimal trading in intraday electricity markets with a major player By Olivier F\'eron; Peter Tankov; Laura Tinsi
  8. The tension between market shares and profit under platform competition By Belleflamme, Paul; Peitz, Martin; Toulemonde, Eric
  9. Multilevel Public Goods Game: an Online Experiment By Marco Catola; Simone D'Alessandro; Pietro Guarnieri; Veronica Pizziol
  10. The Volunteer’s Dilemma explains the Bystander Effect By Pol Campos-Mercade
  11. Multiproduct Firms and Discrete Choice Models of Demand: Existence and Uniqueness of the Bertrand-Nash Equilibrium By Thomas Favory
  12. The back-scratching game By Murray, Cameron; Frijters, Paul; Vorster, Melissa
  13. Trade Costs and Strategic Investment in Infrastructure in a Dynamic Global Economy with Symmetric Countries By Akihiko Yanase; Ngo Van Long

  1. By: Thomas Demuynck; Christian Seel; Thu Giang Tran
    Date: 2020–12–01
  2. By: Guanxing Fu; Ulrich Horst; Xiaonyu Xia
    Abstract: We analyze novel portfolio liquidation games with self-exciting order flow. Both the N-player game and the mean-field game are considered. We assume that players' trading activities have an impact on the dynamics of future market order arrivals thereby generating an additional transient price impact. Given the strategies of her competitors each player solves a mean-field control problem. We characterize open-loop Nash equilibria in both games in terms of a novel mean-field FBSDE system with unknown terminal condition. Under a weak interaction condition we prove that the FBSDE systems have unique solutions. Using a novel sufficient maximum principle that does not require convexity of the cost function we finally prove that the solution of the FBSDE systems do indeed provide existence and uniqueness of open-loop Nash equilibria.
    Date: 2020–11
  3. By: Kang, Liying; Khmelnitskaya, Anna; Shan, Erfang; Talman, A.J.J. (Tilburg University, School of Economics and Management); Zhang, Guang (Tilburg University, School of Economics and Management)
    Date: 2020
  4. By: Marina Núñez (Universitat de Barcelona); Juan Vidal-Puga (Universidade de Vigo)
    Abstract: In an information graph situation, some agents that are connected by an undirected graph can share with no cost some information or technology that can also be obtained from a source. If an agent is not connected to an informed player, this agent pays a unitary cost to obtain this technology. A coalitional cost game can be defined from this situation, and the core of this game is known to be non- empty. We prove that the core of an information graph game is a von Neumann-Morgenstern stable set if and only if the graph is cycle- complete, or equivalently if the information graph game is concave. When the graph is not cycle-complete, whether there always exists a stable set is an open question. In this regard, we show that if the information graph consists of a ring that contains the source, then a stable set always exists and it is the core of a related information graph situation where one edge has been deleted.
    Keywords: Coalitional game, information graph, core, stable set.
    JEL: C71
    Date: 2020
  5. By: Ruggero Paladini
    Abstract: Can the Foley value (n+2.53) be considered a fair price? It is possible to give a positive answer, even if one has to depart to some extent from the classic St. Petersburg game. The only way to put player and dealer in an equal position is to compare the median of an MC simulation of N games with the Foley value. The difference should be, apart from exceptional cases, of the order of one monetary unit or less. Of course this difference has to be multiplied by N in favour of the winning side, so that higher N implies greater win and risk. The departure from the original game of St. Petersburg therefore takes place in two steps: the first step consists in playing not a single game but several ones; the second in repeating the same number of games with the MC technique and checking the median value with respect to the Foley value. In this way the odds of player and dealer would be balanced; the value of the unit stake would depend on their love for risk.
    Keywords: Business taxation, State aid control, Multinational enterprises
    JEL: H H K
    Date: 2020–11
  6. By: Michalis Drouvelis (University of Birmingham); Bilal Malaeb (Institute of Global Affairs, London School of Economics and Political Science); Michael Vlassopoulos (University of Southampton); Jackline Wahba (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 goods game without and with punishment. We randomly assign participants to Lebanese-only, Syrian-only, or mixed sessions. We find that randomly formed pairs in homogeneous sessions, on average, contribute and punish significantly more than those in mixed sessions, suggesting in-group cooperation is stronger. These patterns are driven by Lebanese participants. Further analysis indicates that behavior in mixed groups is more strongly conditioned on expectations about the partner’s cooperation than in homogeneous groups.
    Keywords: refugees, public goods game, cooperation, punishment
    JEL: D91 J5 F22
    Date: 2020–11
  7. By: Olivier F\'eron; Peter Tankov; Laura Tinsi
    Abstract: We study price formation in intraday electricity markets in the presence of intermittent renewable generation. We consider the setting where a major producer may interact strategically with a large number of small producers. Using stochastic control theory we identify the optimal strategies of agents with market impact and exhibit the Nash equilibrium in closed form in the asymptotic framework of mean field games with a major player. This is a companion paper to [F\'eron, Tankov, and Tinsi, Price formation and optimal trading in intraday electricity markets, arXiv:2009.04786, 2020], where a similar model is developed in the setting of identical agents.
    Date: 2020–11
  8. By: Belleflamme, Paul (Université catholique de Louvain, LIDAM/CORE, Belgium); Peitz, Martin; Toulemonde, Eric
    Abstract: We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This platform enjoys a competitive advantage on one or both sides. Our finding raises further doubts on using market shares as a measure of market power in platform markets.
    Keywords: Two-sided platforms, market share, market power, oligopoly, network effects, antitrust
    JEL: D43 L13 L86
    Date: 2020–08–01
  9. By: Marco Catola; Simone D'Alessandro; Pietro Guarnieri; Veronica Pizziol
    Abstract: In the multilevel public goods games, subjects face a trade-off between contributing to the provision of a local good or a global good benefiting the whole society. Institutions may attempt to counteract ingroup favouritism by increasing the efficiency of the global public good. In an online experiment, we systematically address all the conflicting results concerning efficiency obtained in the literature. By gradually increasing the relative return of the global good, we find evidence of i. a levelling up in the contribution to the global good, ii. a substitution at the expenses of the local good, and iii. no evidence of an increase in the total contribution to the two groups (i.e. marginal crowding in). We also provide a measure of an intrinsic preference for the local group revealing in-group favouritism and a novel measure of an intrinsic preference for the global good revealing a motivation to contribute to the society independently of efficiency reasons.
    Keywords: Multilevel public good game, online experiment, efficiency, social dilemma
    JEL: C9 D71 H4
    Date: 2020–11–01
  10. By: Pol Campos-Mercade (Department of Economics, University of Copenhagen)
    Abstract: The bystander effect is the phenomenon that people are less likely to help others when they are in a group than when they are alone. The theoretical literature typically explains the bystander effect with the volunteer’s dilemma: if providing help is equivalent to creating a public good, then bystanders could be less likely to help in groups because they free ride on the other bystanders. This paper uses a dynamic game to experimentally test such strategic interactions as an explanation for the bystander effect. In line with the predictions of the volunteer’s dilemma, I find that bystanders help immediately when they are alone but help later and are less likely to help if they are part of a larger group. In contrast to the model’s predictions, subjects in need of help are helped earlier and are more likely to be helped in larger groups. This finding can be accounted for in an extended model that includes both altruistic and selfish bystanders. The paper concludes that the volunteer’s dilemma is a sensible way to model situations in which someone is in need of help, but it highlights the need to take heterogeneous social preferences into account.
    Keywords: volunteer’s dilemma, bystander effect, helping behavior, group size, altruism
    JEL: C92 D64 D90
    Date: 2020–11–27
  11. By: Thomas Favory (Economics Discipline, Business School, University of Western Australia)
    Abstract: This paper proves the existence and uniqueness of Bertrand-Nash equilibrium in oligopolies, where each firm may sell multiple substitutes of the same good. Bertrand competition emerges as a limit case when the number of products per firm increases if the consumers’ willingness to pay for products follow a sufficiently slim-tailed distribution. In opposition, the double exponential distribution is not slim enough, and firms conserve monopolistic power even for an arbitrarily large number of products per firm. Moreover, the double exponential distribution provides closed-form solutions that relate to discrete choice theory. First, a duality with representative consumers helps recover multinomial logit (MNL) demand functions and constant elasticity of substitution (CES) utility functions. Second, the game in which firms sequentially set the quality, then the price of their products, has a unique equilibrium.
    Keywords: Multiproduct firms, Price competition, Oligopoly, Discrete choice, Product differentiation
    JEL: D21 D43 L12 L13
    Date: 2020
  12. By: Murray, Cameron (The University of Sydney); Frijters, Paul; Vorster, Melissa
    Abstract: We develop a new experiment to study the emergence of welfare-reducing bilateral alliances within larger groups, and the effectiveness of institutional interventions to curtail ‘back-scratching’. In each of the 25 rounds of our experiments, a player (the ‘allocator’) nominates one of three others in a group as a co-worker (the ‘receiver’), which determines the group production that period to be the productivity of the receiver (which varies by round), but also gives the receiver a bonus and makes them the allocator in the next round. Alliances then form if two individuals keep choosing each other even when their productiv- ities are lower than that of others, causing efficiency losses. We study whether particular interventions reduce the rate of alliance formation. Random allocator rotation policies were found to be ineffective, whether implemented prior to, or following, a baseline treatment. Low bonuses did significantly reduce the advent of alliances. There hence seems to be some hope in preventing back-scratching via reducing the gain that can be made by alliances.
    Date: 2020–11–18
  13. By: Akihiko Yanase; Ngo Van Long
    Abstract: This paper develops a two-country model of intra-industry trade with trade costs, which can be reduced by public investment in an international infrastructure capital, the stock of which accumulates over time. Taking the relationship between trade costs and national welfare into consideration, the governments carry out a dynamic game of public investment. We show that the dynamic equilibrium of the policy game may exhibit history dependency; if the initial stock of international infrastructure is smaller (larger) than a certain level, the infrastructure stock decreases (increases) over time, and the world economy will end up in autarky (two-way free trade) in the long run. We also show that international cooperation is beneficial in the sense that it may enable the world economy to escape from a "low-development trap". Cet article développe un modèle de commerce intra-industriel à deux pays avec des coûts commerciaux, qui peuvent être réduits par un investissement public dans un capital d'infrastructure internationale, dont le stock s'accumule avec le temps. Prenant en compte la relation entre les coûts commerciaux et le bien-être national, les gouvernements mènent un jeu dynamique d'investissement public. Nous montrons que l'équilibre dynamique du jeu entre les deux gouvernements peut présenter une dépendance de l'histoire; si le stock initial d'infrastructures internationales est inférieur (supérieur) à un certain niveau, le stock d'infrastructures diminue (augmente) au fil du temps et l'économie mondiale se retrouvera en autarcie (libre-échange bidirectionnel) à long terme. Nous montrons également que la coopération internationale est bénéfique : elle peut permettre à l'économie mondiale de sortir d’un «piège à faible développement».
    Keywords: Public Infrastructure Capital,Intra-Industry Trade,Differential Games,Multiple Equilibria, Capital d'infrastructure,Commerce intra-industriel,Jeux différentiels,Multiplicité d'équilibres
    JEL: C61 C73 F12 H54 H87 O18
    Date: 2020–11–18

This nep-gth issue is ©2020 by Sylvain Béal. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.