nep-gth New Economics Papers
on Game Theory
Issue of 2021‒03‒08
fourteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Equilibria Existence in Bayesian Games: Climbing the Countable Borel Equivalence Relation Hierarchy. By Ziv Hellman; Yehuda John Levy
  2. An endogenous-timing conflict game By Youngseok Park; Jean Paul Rabanal; Olga A. Rud; Philip J. Grossman
  3. Networks, Communication and Hierarchy: Applications to Cooperative Games By Encarnacion Algaba; Rene van den Brink
  4. Selective Memory of a Psychological Agent By Jeanne Hagenbach; Frédéric Koessler
  5. Information Design in Multi-stage Games By Makris Miltiadis; Renou Ludovic
  6. Discord and Harmony in Networks By Andrea Galeotti; Benjamin Golub; Sanjeev Goyal; Rithvik Rao
  7. Governing climate geoengineering: Side-payments are not enough By Riccardo Ghidoni; Anna Lou Abatayo; Valentina Bosetti; Marco Casari; Massimo Tavoni
  8. Cross-verification and Persuasive Cheap Talk By Atakan Alp; Ekmekci Mehmet; Renou Ludovic
  9. Efficiency of sharing liability rules: An experimental case. By Serge Garcia; Julien Jacob; Eve-Angéline Lambert
  10. Does How We Measure Altruism Matter? Playing Both Roles in Dictator Games By Wei Zhan; Catherine C. Eckel; Philip J. Grossman
  11. The Role of Discounting in Bargaining with One-Sided Offers By Francesc Dilmé
  12. Entry under placement uncertainty By Roy, Sunanda; Singh, Rajesh; Weninger, Quinn
  13. Learning in crowded markets By Kondor, Peter; Zawadowski, Adam
  14. A Novel Hydro - Economic - Econometric Approach for Integrated Transboundary Water Management under Uncertainty By Nikolaos Englezos; Xanthi Kartala; Phoebe Koundouri; Mike Tsionas; Angelos Alamanos

  1. By: Ziv Hellman (Bar-Ilan University); Yehuda John Levy
    Abstract: The solution concept of a Bayesian equilibrium of a Bayesian game is inherently an interim concept. The corresponding ex ante solution concept has been termed Harsányi equilibrium; examples have appeared in the literature showing that there are Bayesian games with uncountable state spaces that have no Bayesian approximate equilibria but do admit Harsányi approximate equilibrium, thus exhibiting divergent behaviour in the ex ante and interim stages. Smoothness, a concept from descriptive set theory, has been shown in previous works to guarantee the existence of Bayesian equilibria. We show here that higher rungs in the countable Borel equivalence relation hierarchy can also shed light on equilibrium existence. In particular, hyperfiniteness, the next step above smoothness, is a sufficient condition for the existence of Harsányi approximate equilibria in purely atomic Bayesian games.
    Keywords: Bayesian games; Equilibrium existence; Borel equivalence relations
    Date: 2020–07
  2. By: Youngseok Park; Jean Paul Rabanal; Olga A. Rud; Philip J. Grossman
    Abstract: We present an endogenous-timing conflict game of incomplete information under strategic complementarity. The model predicts multiple equilibria, in which the outcome follows either a simultaneous move game (Baliga and Sjo¨str¨om, 2004) or a sequential game, which improves social welfare. We study the three families of games in the laboratory using gender-balanced sessions. Our results suggest that: (i) social welfare is higher in the endogenous-timing and sequential games compared to the simultaneous game; (ii) men and women make similar decisions in the simultaneous and sequential-move games; and (iii) in the endogenous- timing game women are less willing to commit to the risky action.
    Keywords: Conflict game; Endogenous timing; Gender; Laboratory experiment; Type uncertainty
    JEL: C72 C92 D74 D82 D91
    Date: 2020–12
  3. By: Encarnacion Algaba (Escuela Superior de Ingenieros); Rene van den Brink (Vrije Universiteit Amsterdam)
    Abstract: Agents participating in different kind of organizations, usually take different positions in some network structure. Two well-known network structures are hierarchies and communication networks. We give an overview of the most common models of communication and hierarchy restrictions in cooperative games, compare different network structures with each other and discuss network structures that combine communication as well as hierarchical features. Throughout the survey, we illustrate these network structures by applying them to cooperative games with restricted cooperation.
    Keywords: Networks, games, communication, hierarchy, cooperative TU-game, Shapley value
    JEL: C71
    Date: 2021–02–24
  4. By: Jeanne Hagenbach (Institut d'Urbanisme de Paris (IUP)); Frédéric Koessler (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 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)
    Abstract: We consider a single psychological agent whose utility depends on his action, the state of the world, and the belief that he holds about that state. The agent is initially informed about the state and decides whether to memorize it, otherwise he has no recall. We model the memorization process by a multi-self game in which the privately informed first self voluntarily discloses information to the second self, who has identical preferences and acts upon the disclosed information. We identify broad categories of psychological utility functions for which there exists an equilibrium in which every state is voluntarily memorized. In contrast, if there are exogenous failures in the memorization process, then the agent memorizes states selectively. In this case, we characterize the partially informative equilibria for common classes of psychological utilities. If the material cost of forgetting is low, then the agent only memorizes good enough news. Otherwise, only extreme news are voluntarily memorized.
    Keywords: Multi-self game,disclosure games,imperfect recall,selective memory,motivated beliefs,psychological games,anticipatory utility
    Date: 2021–02
  5. By: Makris Miltiadis; Renou Ludovic
    Abstract: This paper generalizes the concept of Bayes correlated equilibrium (Bergemann and Morris, 2016) to multi-stage games. We demonstrate the power of our characterization results by applying them to a number of illustrative examples and applications.
    Date: 2021–02
  6. By: Andrea Galeotti; Benjamin Golub; Sanjeev Goyal; Rithvik Rao
    Abstract: Consider a coordination game played on a network, where agents prefer taking actions closer to those of their neighbors and to their own ideal points in action space. We explore how the welfare outcomes of a coordination game depend on network structure and the distribution of ideal points throughout the network. To this end, we imagine a benevolent or adversarial planner who intervenes, at a cost, to change ideal points in order to maximize or minimize utilitarian welfare subject to a constraint. A complete characterization of optimal interventions is obtained by decomposing interventions into principal components of the network's adjacency matrix. Welfare is most sensitive to interventions proportional to the last principal component, which focus on local disagreement. A welfare-maximizing planner optimally works to reduce local disagreement, bringing the ideal points of neighbors closer together, whereas a malevolent adversary optimally drives neighbors' ideal points apart to decrease welfare. Such welfare-maximizing/minimizing interventions are very different from ones that would be done to change some traditional measures of discord, such as the cross-sectional variation of equilibrium actions. In fact, an adversary sowing disagreement to maximize her impact on welfare will minimize her impact on global variation in equilibrium actions, underscoring a tension between improving welfare and increasing global cohesion of equilibrium behavior.
    Date: 2021–02
  7. By: Riccardo Ghidoni; Anna Lou Abatayo; Valentina Bosetti; Marco Casari; Massimo Tavoni
    Abstract: Climate geoengineering strategies can help reduce the economic and ecological impacts of global warming. However, governing geoengineering is challenging: since climate preferences vary across countries, excessive deployment relative to the socially optimal level is likely. Through a laboratory experiment on a public good-or-bad game, we study whether side-payments can address this governance problem. While theoretically effective, our experimental results show only a modest impact of side-payments on outcomes, especially in a multilateral setup. Replacing unstructured bilateral exchanges with a treaty framework simplifies the action space and performs moderately better.
    Keywords: climate governance, public good-or-bad, free-driving, transfers, promises, experiment, Coase theorem
    JEL: C70 C90 H40 Q50
    Date: 2021–02
  8. By: Atakan Alp; Ekmekci Mehmet; Renou Ludovic
    Abstract: We study a cheap-talk game where two experts first choose what information to acquire and then offer advice to a decision-maker whose actions affect the welfare of all. The experts cannot commit to reporting strategies. Yet, we show that the decision-maker's ability to cross-verify the experts' advice acts as a commitment device for the experts. We prove the existence of an equilibrium, where an expert's equilibrium payoff is equal to what he would obtain if he could commit to truthfully revealing his information.
    Date: 2021–02
  9. By: Serge Garcia; Julien Jacob; Eve-Angéline Lambert
    Abstract: We experimentally investigate the relative performance of two liability sharing rules for managing environmental harms that are jointly caused by two firms which can make ex ante safety investments in order to reduce the magnitude of the harm. The investment levels are chosen non-cooperatively and assumed to be non-observable by the regulator. If one firm is unable to cover its part of the damages, third parties might not receive full compensation for their harm. Through an experiment, we analyze the investment choices under two widely used liability sharing rules and compare the decisions to theoretical predictions. In line with theory, we show that insolvency leads to under-investment. Moreover, we show that the relative performance of each rule depends on the firms’ relative degree of solvency. Our results indicate that the legislator should make the default liability sharing rule dependent upon the degree of capitalization of firms.
    Keywords: Environmental Regulation; Liability Sharing Rules; Multiple Tortfeasors; Firms’ Insolvency.
    JEL: K13 K32 Q53
    Date: 2021
  10. By: Wei Zhan; Catherine C. Eckel; Philip J. Grossman
    Abstract: Two protocols have been used in the lab to measure altruism using dictator games that vary both the endowment and the relative price of giving. In single-role games, subjects are designated either dictator or recipient and are paid for one decision in that role. In dual-role games, subjects are paid for two decisions, once in each role. It is unclear what is the effect of this change in procedure.The dual-role protocol may prompt dictators to empathize with their recipients and give more. Alternatively, feeling less responsibility for their partners, dictators may give less. We test whether the protocol affects altruistic preferences. Our results suggest that the dual-role design enhances the preference for efficiency at the expense of equality in allocations. Fur-thermore, only measures derived from the single-role data are correlated with subjects’ past giving behavior. This suggests that the single-role protocol is a more accurate measure of altruistic preferences.
    Keywords: : Dictator Game, Dual Role, Efficiency, Inequality;
    Date: 2020–12
  11. By: Francesc Dilmé (University of Bonn)
    Abstract: This paper analyzes a continuous-time Coase setting with finite horizon, interdependent values, and different discount rates. Our full characterization of equilibrium behavior permits studying how patience shapes the bargaining outcome. We obtain that (i) the seller’s commitment problem persists even when she is fully patient, (ii) making the seller more impatient may increase equilibrium prices, (iii) when adverse selection is not strong, the buyer is ex-post better off when he is more impatient, and (iv) when discounting is time-dependent, episodes where the seller or the buyer have a high discount rate feature a large probability of trade, but only periods with high buyer discounting lead to a fast price decline.
    Keywords: Bargaining, one-sided offers, different discount factors
    JEL: C78 D82
    Date: 2021–02
  12. By: Roy, Sunanda; Singh, Rajesh; Weninger, Quinn
    Abstract: We present a model of firm entry in an industry that is managed with an aggregate production quota or cap-and-trade (CAT) regulation. Firms are heterogeneous in productivity; each knows its own costs of production but is uncertain about where its costs rank among an entrant population. Entry is modeled as a simultaneous move game with incomplete information. Under CAT, firms compete to secure shares of a fixed number of production permits. Entry payoffs are determined by own and rival entrant productivity. We derive the Bayesian Nash entry equilibrium and show conditions under which placement uncertainty leads to excess entry relative to full information. We derive conditions where the reverse, inefficiency due to under entry, occurs. Whereas the behavioral IO literature has attributed over-entry and over-investment to bias, i.e., entrepreneurs are overconfident believing that they are better than average, we show that rational uncertainty regarding post entry competition is sufficient. Our results offer a new explanation for often-observed rational exuberance and for rational pessimism in investment by entrepreneurs.
    Date: 2021–02–24
  13. By: Kondor, Peter; Zawadowski, Adam
    Abstract: We present a novel entry-game with endogenous information acquisition to study the welfare effects of opacity and competition. Potential entrants to an opaque market are uncertain about their competitive advantage relative to other investors, i.e. their type. They construct optimal costly signals to learn about their types, where the marginal cost of learning captures the opacity of the market. In general, the individually optimal entry and learning decisions are socially suboptimal. Players over-invest in learning and more opaque markets are associated with more crowding. Nevertheless, more opaque markets might still lead to higher welfare by implying a better trade-off between the degree of crowding and the total cost of learning. Similarly, decreasing the share of smart investors in the market might also improve welfare. However, fierce competition is always detrimental to welfare as it leads to more wasteful learning without changing the level of crowding.
    Keywords: crowded markets; inattention
    JEL: G10
    Date: 2019–11–01
  14. By: Nikolaos Englezos; Xanthi Kartala; Phoebe Koundouri (Dept. of International and European Economic Studies, Athens University of Economics and Business); Mike Tsionas; Angelos Alamanos
    Abstract: Competitive use of transboundary waters across different countries and among different sectors can be approached as a stochastic multistage dynamic game. In this paper we use this approach to develop and apply a novel framework for optimal management of limited transboundary water resources and evaluation of different international strategies, under hydrological uncertainty. The Omo-Turkana River Basin in Africa is used as a case study application, since it faces the above challenges within the water-food-energy nexus framework. The basic mathematical model consists of the water balance (availability and demand for the different sectors), the costs of water extraction, and the social benefits from water resources. The non-cooperative and cooperative (Stackelberg "leader-follower") cases are solved and compared based on the future water availability. The empirical application of the model calls for sector-specific production function estimations, for which we employ nonparametric treatment of the production functions, while we extend it to allow for technical inefficiency in production and autocorrelated Total Factor Productivity, providing thus a more realistic model. For this purpose, Bayesian analysis is performed using a Sequential Monte Carlo/Particle-Filtering approach. The cooperative solution is the optimal pathway not only for both riparian countries, but for the sustainable water use of the basin too, as in future uncertainty conditions it maintains the maximum welfare option. The detail and sophistication of both the mathematical and econometric models are key elements for this novel approach, supporting robust policy recommendations towards sustainable management of transboundary resources.
    Keywords: Transboundary water management, cooperation games, stochasticity, endogenous adaptation, production functions technical inefficiency, demand curve
    Date: 2021–02–03

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