nep-gth New Economics Papers
on Game Theory
Issue of 2020‒12‒14
twenty-two papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Binary Outcomes and Linear Interactions By Vincent Boucher; Yann Bramoullé
  2. Non-cohesive TU-games: Efficiency and Duality By Fatma Aslan; Papatya Duman; Walter Trockel
  3. Allocating marketing resources over social networks: A long-term analysis By Vineeth S. Varma; Samson Lasaulce; Julien Mounthanyvong; Irinel-Constantin Morarescu
  4. Great Power Competition: Lessons from the Past, Implications for the Future By Vuving, Alexander
  5. Do Rights to Resistance Discipline the Elites? An Experiment on the Threat of Overthrow By Konstantin Chatziathanasiou; Svenja Hippel; Michael Kurschilgen
  6. Searching for Results: Optimal Platform Design in a Network Setting By Charlson, G.
  7. Collusion in Quality-Segmented Markets By Iwan Bos; Marco A. Marini
  8. Marketing resource allocation in duopolies over social networks By Vineeth S. Varma; Irinel-Constantin Morarescu; Samson Lasaulce; Samuel Martin
  9. Empirical Evidence on Repeated Sequential Games By Ghidoni, Riccardo; Suetens, Sigrid
  10. The emergence of money: a dynamic analysis By Maurizio Iacopetta
  11. Antiduality in Exact Partition Games By Dietzenbacher, Bas; Yanovskaya, E.
  12. Sequencing Situations and Games with Non-Linear Cost Functions By Schouten, Jop; Saavedra-Nieves, Alejandro; Fiestras-Janeiro, G.
  13. Mixing Solutions in Claims Problems By José, Alcalde; Peris, Josep E.
  14. The Determinants of Efficient Behavior in Coordination Games By Pedro Dal B—; Guillaume R. FrŽchette; Jeongbin Kim
  15. Bargaining with Independence of Higher or Irrelevant Claims By Josune Albizuri, M.; Dietzenbacher, Bas; Zarzuelo, J.
  16. Monotonicity and Egalitarianism (revision of CentER DP 2019-007) By Dietzenbacher, Bas
  17. Sixty-Seven Years of the Nash Program: Time for Retirement? By Roberto Serrano
  18. The Volunteer's Dilemma in Finite Populations By Kai A. Konrad; Florian Morath
  19. The Nucleolus and Inheritance of Properties in Communication Situations By Schouten, Jop; Dietzenbacher, Bas; Borm, Peter
  20. Signaling under Double-Crossing Preferences By Chia-Hui Chen; Junichiro Ishida; Wing Suen
  21. Interim Rationalizable Implementation of Functions By Takashi Kunimoto; Rene Saran; Roberto Serrano
  22. Trade Costs and Strategic Investment in Infrastructure in a Dynamic Global Economy with Symmetric Countries By Akihiko Yanase; Ngo Van Long; Ngo Van Long

  1. By: Vincent Boucher (Department of Economics, Université Laval, CRREP and CREATE); Yann Bramoullé (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.)
    Abstract: Heckman and MaCurdy (1985) first showed that binary outcomes are compatible with linear econometric models of interactions. This key insight was unduly discarded by the literature on the econometrics of games. We consider general models of linear interactions in binary outcomes that nest linear models of peer effects in networks and linear models of entry games. We characterize when these models are well defined. Errors must have a specific discrete structure. We then analyze the models' game-theoretic microfoundations. Under complete information and linear utilities, we characterize the preference shocks under which the linear model of interactions forms a Nash equilibrium of the game. Under incomplete information and independence, we show that the linear model of interactions forms a Bayes-Nash equilibrium if and only if preference shocks are iid and uniformly distributed. We also obtain conditions for uniqueness. Finally, we propose two simple consistent estimators. We revisit the empirical analyses of teenage smoking and peer effects of Lee, Li, and Lin (2014) and of entry into airline markets of Ciliberto and Tamer (2009). Our reanalyses showcase the main interests of the linear framework and suggest that the estimations in these two studies suffer from endogeneity problems.
    Keywords: binary outcomes, linear probability model, peer effects, econometrics of games
    JEL: C31 C35 C57
    Date: 2020–11
  2. By: Fatma Aslan (Faculty of Economic and Social Sciences, Budapest University of Technology and Economics, and Quantitative Social and Management Sciences Research Centre, Hungary); Papatya Duman (Paderborn University); Walter Trockel (Bielefeld University)
    Abstract: In this article, we draw attention to some inconsistencies and conceptual chinks in the current literature on coalitional TU-games. We criticize the widespread habit of neglecting the classic problem of coalition-building and defining feasibility, efficiency, and duality for general TU-games with respect to the grand coalition. We redefine these properties using the concept of cohesiveness by versions that are meaningful for all TU-games. Based on conceptual and historical arguments we distinguish between subsets and formed coalitions and between classic TU-games and TU-game extensions. We use the Duality Theorem of Linear Optimization to motivate the use of cohesiveness. In an Appendix, we collect some results illustrating similarities and differences between our duality and the currently widely used *-duality for TU-games.
    Keywords: TU-games, duality, c-Core, cohesive games, super-additivity, Pareto efficiency
    JEL: C71
    Date: 2020–11
  3. By: Vineeth S. Varma; Samson Lasaulce; Julien Mounthanyvong; Irinel-Constantin Morarescu
    Abstract: In this paper, we consider a network of consumers who are under the combined influence of their neighbors and external influencing entities (the marketers). The consumers' opinion follows a hybrid dynamics whose opinion jumps are due to the marketing campaigns. By using the relevant static game model proposed recently in [1], we prove that although the marketers are in competition and therefore create tension in the network, the network reaches a consensus. Exploiting this key result, we propose a coopetition marketing strategy which combines the one-shot Nash equilibrium actions and a policy of no advertising. Under reasonable sufficient conditions, it is proved that the proposed coopetition strategy profile Pareto-dominates the one-shot Nash equilibrium strategy. This is a very encouraging result to tackle the much more challenging problem of designing Pareto-optimal and equilibrium strategies for the considered dynamical marketing game.
    Date: 2020–11
  4. By: Vuving, Alexander
    Abstract: Throughout the 52-century long history of great power competition, human dynamics, technology, and geography are the most consequential and most permanent factors that have shaped the interaction among the great powers. This essay mines the past for lessons about great power competition by examining the structural impact of these factors on the rise and fall of great powers, the balance of power among them, and the character of their relations. In order to aid its analysis, the essay introduces three concepts that have not been discussed in the literature: 1) The system-changers: actors that are not system-makers like the great powers but have the power to change the international system and disrupt the balance of power among the system-makers. 2) The strategic structure of great power competition: a structure that emerges from the interaction of the players’ preferences and determines the best strategies for the players as well as the stable outcomes of their game. The essay argues that the Thucydides Trap does not exist in the US-China rivalry because the strategic structure of this rivalry is that of either a Game of Chicken or a Peace-lover’s Dilemma. Using game theory and geopolitics, the essay is able to make long-term predictions and strategy implications for the US-China rivalry. 3) The peace-lover’s dilemma: an asymmetric game whose stable outcome is the dominance of the more aggressive player (who prefers its own supremacy to sharing power with the other) over the less aggressive player (who prefers sharing power with the other to its own supremacy), hence this is a dilemma for the game’s peace-loving player.
    Date: 2020–09–30
  5. By: Konstantin Chatziathanasiou (University of Münster); Svenja Hippel (University of Würzburg); Michael Kurschilgen (Technical University of Munich and the Max Planck Institute for Research on Collective Goods)
    Abstract: The threat of overthrow stabilizes a constitution because it disciplines the elites. This is the main rationale behind rights to resistance. In this paper, we test this conjecture experimentally. We model a society in which players can produce wealth by solving a coordination problem. Coordination is facilitated through a pre-game status-ranking. Compliance with the status hierarchy yields an efficient yet inequitable payoff distribution, in which a player’s wealth is determined by her pre-game status. Between treatments, we vary (a) whether overthrows – which reset the status-ranking via collective disobedience – are possible or not, and (b) whether voluntary redistributive transfers – which high-status players can use to appease the low-status players – are available or not. In contrast to established thinking we find that, on average, the threat of overthrow does not have a stabilizing effect as high-status players fail to provide sufficient redistribution to prevent overthrows. However, if an overthrow brings generous players into high-status positions, groups stabilize and prosper. This suggests an alternative rationale for rights to resistance.
    Keywords: rights to resistance; civil resistance; constitutional stability; redistribution; coordination; battle of the sexes; experiment
    JEL: C72 C92 D74 H23 P48
    Date: 2020–11
  6. By: Charlson, G.
    Abstract: Large online platforms, like Airbnb or Amazon Marketplace, increasingly direct users to internal search engines that limit the number of sellers consumers observe. We show that such behaviour is consistent with profit maximisation. To do so, we model buyer-seller interactions as a series bipartite graphs, which are each realised with a probability chosen by the platform owner. Prominent players disproportionately increase competition, which decreases prices. To maximise profit, the platform owner ensures that buyers only observe a consistent number of sellers in every state of the world realised with positive probability. When products are vertically differentiated, the platform owner biases observation towards high-quality products, but doing so reduces prices, and, as a result, the optimal number of sellers in the network. The extent to which platforms in different markets highlight high-quality products and the number of sellers their search processes show is a function of both quality dispersion and substitutability.
    Keywords: networks, platforms, industrial organisation, network design, games on networks
    JEL: D20 L20
    Date: 2020–12–02
  7. By: Iwan Bos (Department of Organisation, Strategy and Entrepreneurship, Maastricht University); Marco A. Marini (Department of Social Sciences and Economics, Sapienza University of Rome)
    Abstract: This paper analyzes price collusion in a repeated game with two submarkets; a standard and a premium quality segment. Within this setting, we study four types of price-?xing agreement: (i) a segment-wide cartel in the premium submarket only, (ii) a segment-wide cartel in the standard submarket only, (iii) two segment-wide cartels, and (iv) an industry-wide cartel. We present a complete characterization of the collusive pricing equilibrium and examine the corresponding e¤ect on market shares and welfare. Partial cartels operating in a su¢ ciently large segment lose market share and the industry-wide cartel prefers to maintain market shares at pre-collusive levels. The impact on consumer and social welfare critically depends on the cost of producing quality. Moreover, given that there is a cartel, more collusion can be bene?cial for society as a whole.
    Keywords: Partial Cartels, Price Collusion, Market Segmentation, Vertical Di¤erentiation.
    JEL: D4 L1
    Date: 2020–11
  8. By: Vineeth S. Varma; Irinel-Constantin Morarescu; Samson Lasaulce; Samuel Martin
    Abstract: One of the key features of this paper is that the agents' opinion of a social network is assumed to be not only influenced by the other agents but also by two marketers in competition. One of our contributions is to propose a pragmatic game-theoretical formulation of the problem and to conduct the complete corresponding equilibrium analysis (existence, uniqueness, dynamic characterization, and determination). Our analysis provides practical insights to know how a marketer should exploit its knowledge about the social network to allocate its marketing or advertising budget among the agents (who are the consumers). By providing relevant definitions for the agent influence power (AIP) and the gain of targeting (GoT), the benefit of using a smart budget allocation policy instead of a uniform one is assessed and operating conditions under which it is potentially high are identified.
    Date: 2020–11
  9. By: Ghidoni, Riccardo (Tilburg University, School of Economics and Management); Suetens, Sigrid (Tilburg University, School of Economics and Management)
    Date: 2019
  10. By: Maurizio Iacopetta (Observatoire français des conjonctures économiques)
    Abstract: This paper studies the role of liquidity in triggering the emergence of money in a Kiyotaki-Wright economy. A novel method computes the dynamic Nash equilibria of the economy by setting up an iteration of the agents' profile of (pure) strategies and of the distribution of commodities across agents. The analysis shows that the evolving state of liquidity can spark the acceptance of a high-cost-storage commodity as money or cause the disappearance of a commodity money. It also reveals the existence of multiple dynamic equilibria with pure strategies. Several simulations clarify how history and the coordination of beliefs matter for the selection of a particular equilibrium.
    Keywords: Money; Strategies; Simulations
    Date: 2019–10
  11. By: Dietzenbacher, Bas (Tilburg University, School of Economics and Management); Yanovskaya, E.
    Date: 2020
  12. By: Schouten, Jop (Tilburg University, School of Economics and Management); Saavedra-Nieves, Alejandro; Fiestras-Janeiro, G.
    Date: 2020
  13. By: José, Alcalde (University of Alicante, D. Quantitative Methods and Economic Theory); Peris, Josep E. (University of Alicante, D. Quantitative Methods and Economic Theory)
    Abstract: The literature on solutions to claims problems mainly orbits on three canonical rules: The proportional, the Constrained Equal Awards and the Constrained Equal Losses. Mixtures of these solutions have been proposed to design alternative approaches to solve claims problems. We consider piece-wise and convex mixtures as two relevant tools. Piece-wise mixture guarantees that each agent obtains a minimal reimbursement, when it is available, while the remaining is distributed according an alternative distribution criterion. Convex mixture shares the relevance of each distributive criterion according an exogenously given weight. In this framework we explore which properties are preserved by mixed solutions. Alternatively, we propose to design mixed solutions according the compromising degree, an endogenous parameter capturing the relative relevance of the rationing that agents have to share collectively. By using our mixing parameter we obtain that the Proportional rule appears as a piece-wise mixture of the Constrained Equal Awards and the Constrained Equal Losses solutions. The convex mixture of these solutions is explored from a normative point of view.
    Keywords: Claims Problem; Piece-Wise Mixture; Convex Mixture
    JEL: C79 D63 D74
    Date: 2020–11–30
  14. By: Pedro Dal B—; Guillaume R. FrŽchette; Jeongbin Kim
    Abstract: We study the determinants of efficient behavior in stag hunt games (2x2 symmetric coordination games with Pareto ranked equilibria) using both data from eight previous experiments on stag hunt games and data from a new experiment which allows for a more systematic variation of parameters. In line with the previous experimental literature, we find that subjects do not necessarily play the efficient action (stag). While the rate of stag is greater when stag is risk dominant, we find that the equilibrium selection criterion of risk dominance is neither a necessary nor sufficient condition for a majority of subjects to choose the efficient action. We do find that an increase in the size of the basin of attraction of stag results in an increase in efficient behavior. We show that the results are robust to controlling for risk preferences.
    Date: 2020
  15. By: Josune Albizuri, M.; Dietzenbacher, Bas (Tilburg University, School of Economics and Management); Zarzuelo, J.
    Date: 2019
  16. By: Dietzenbacher, Bas (Tilburg University, School of Economics and Management)
    Date: 2020
  17. By: Roberto Serrano
    Abstract: The Nash program is an important research agenda initiated in Nash (1953) in order to bridge the gap between the noncooperative and cooperative counterparts of game theory. The program is thus turning sixty-seven years old, but I will argue it is not ready for retirement, as it is full of energy and one can still propose important directions to be explored. This paper completes and updates previous surveys, and suggests several directions for future research.
    Date: 2020
  18. By: Kai A. Konrad; Florian Morath
    Abstract: We study the long-run stochastic stability properties of volunteering strategies in finite populations. We allow for mixed strategies, characterized by the probability that a player may not volunteer. A pairwise comparison of evolutionary strategies shows that the strategy with a lower probability of volunteering is advantaged. However, in the long run there are also groups of volunteering types. Homomorphisms with the more volunteering types are more frequent if the groups have fewer members, and if the benefits from volunteering are larger. Such homomorphisms with volunteering cease to exist if the group becomes infinitely large. In contrast, the disadvantage of volunteering disappears if the ratio of individual benefits and costs of volunteering becomes infinitely large.
    Keywords: Volunteering, stochastic stability, finite populations, mixed strategies, collective action
    JEL: C73 D62 H41
    Date: 2020
  19. By: Schouten, Jop (Tilburg University, School of Economics and Management); Dietzenbacher, Bas (Tilburg University, School of Economics and Management); Borm, Peter (Tilburg University, School of Economics and Management)
    Date: 2019
  20. By: Chia-Hui Chen; Junichiro Ishida; Wing Suen
    Abstract: This paper provides a general analysis of signaling under double-crossing preferences with a continuum of types. There are natural economic environments where indifference curves of two types cross twice, so that the celebrated single-crossing property fails to hold. Equilibrium exhibits a particular form of pooling: there is a threshold type below which types choose actions that are fully revealing and above which they choose actions that are clustered in possibly non-monotonic ways, with a gap separating these two sets of types. We also provide an algorithm to establish equilibrium existence by construction under mild conditions.
    Date: 2020–10
  21. By: Takashi Kunimoto; Rene Saran; Roberto Serrano
    Abstract: This paper investigates rationalizable implementation of social choice functions (SCFs) in incomplete information environments. We identify weak interim rationalizable monotonicity (weak IRM) as a novel condition and show that weak IRM is a necessary and almost sufficient condition for rationalizable implementation. We show by means of an example that interim rationalizable monotonicity (IRM), found in the literature, is strictly stronger than weak IRM as its name suggests, and that IRM is not necessary for rationalizable implementation, as had been previously claimed. The same example also demonstrates that Bayesian monotonicity, the key condition for full Bayesian implementation, is not necessary for rationalizable implementation. This implies that rationalizable implementation can be more permissive than Bayesian implementation: one can exploit the fact that there are no mixed Bayesian equilibria in the implementing mechanism.
    Date: 2020
  22. By: Akihiko Yanase; Ngo Van Long; Ngo Van Long
    Abstract: This paper develops a two-country model of intraindustry trade with trade costs, which can be reduced by public investment in an international infrastructure capital, the stock of which accumulates over time. Depending on the trade costs and international distribution of manufac-turing firms, equilibrium patterns of trade are determined, and national welfare in each country is affected by these trade patterns. 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.”
    Keywords: public infrastructure capital, intraindustry trade, differential game, multiple equilibria.
    JEL: C61 C73 F12 H54 H87 O18
    Date: 2020

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