nep-gth New Economics Papers
on Game Theory
Issue of 2021‒05‒03
twenty papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Repeated Games with Endogenous Discounting By Kochov, Asen; Song, Yangwei
  2. Does the approval mechanism induce the effcient extraction in Common Pool Resource games? By Koffi Serge William Yao; Emmanuelle Lavaine; Marc Willinger
  3. Conditional cooperation: Type stability across games By Michael Eichenseer; Johannes Moser
  4. Strategic Leaks in First-Price Auctions and Tacit Collusion: The Case of Spying and Counter-Spying By Cuihong Fan; Byoung Heon Jun; Elmar G. Wolfstetter
  5. The Team Allocator Game: Allocation Power in Public Goods Games By Alexandros Karakostas; Martin G. Kocher; Dominik Matzat; Holger A. Rau; Gerhard Riewe
  6. Taxation and strategic reaction: A comparison of Cournot, Stackelberg and collusion By Todorova, Tamara; Vatoci, Besar
  7. Are Strategies Anchored? By Ivanova-Stenzel, Radosveta; Seres, Gyula
  8. Control and Spread of Contagion in Networks By John Higgins; Tarun Sabarwal
  9. History-Based Price Discrimination with Imperfect Information Accuracy and Asymmetric Market Shares By Stefano Colombo; Clara Graziano; Aldo Pignataro
  10. Bargaining and Time Preferences: An Experimental Study By Kim, Jeongbin; Lim, Wooyoung; Schweighofer-Kodritsch, Sebastian
  11. A survey on dynamic common pool resources : theory and experiment By Murielle Djiguemde
  12. Second-Chance Offers and Buyer Reputation: Theory and Evidence on Auctions with Default By Engelmann, Dirk; Frank, Jeff; Koch, Alexander K.; Valente, Marieta
  13. Computational Performance of Deep Reinforcement Learning to find Nash Equilibria By Christoph Graf; Viktor Zobernig; Johannes Schmidt; Claude Kl\"ockl
  14. Inducing Cooperation with Emotion – Who Is Affected? By Gärtner, Manja; Tinghög, Gustav; Västfjäll, Daniel
  15. Coordination under Loss Contracts By Ahrens, Steffen; Bitter, Lea; Bosch-Rosa, Ciril
  16. Mirror, mirror on the wall: Machine predictions and self-fulfilling prophecies By Bauer, Kevin; Gill, Andrej
  17. Bargaining for Community Fishing Quotas By Asproudis, Elias; Filippiadis, Eleftherios
  18. All-Pay Auctions with Reserve Price and Bid Cap By Oleg Muratov
  19. Signalling in auctions: Experimental evidence By Bos, Olivier; Gomez-Martinez, Francisco; Onderstal, Sander; Truyts, Tom
  20. Leadership in a Public Goods Experiment with Permanent and Temporary Members By Angelova, Vera; Güth, Werner; Kocher, Martin G.

  1. By: Kochov, Asen (University of Rochester); Song, Yangwei (HU Berlin)
    Abstract: In a symmetric repeated game with standard preferences, there are no gains from intertemporal trade. In fact, under a suitable normalization of utility, the payoff set in the repeated game is identical to that in the stage game. We show that this conclusion may no longer be true if preferences are recursive and stationary, but not time separable. If so, the players’ rates of time preference are no longer fixed, but may vary endogenously, depending on what transpires in the course of the game. This creates opportunities for intertemporal trade, giving rise to new and interesting dynamics. For example, the efficient and symmetric outcome of a repeated prisoner’s dilemma may be to take turns defecting, even though the efficient and symmetric outcome of the stage game is to cooperate. A folk theorem shows that such dynamics can be sustained in equilibrium if the players are sufficiently patient.
    Keywords: repeated games; efficiency; folk theorems; endogenous discounting;
    Date: 2020–03–02
  2. By: Koffi Serge William Yao (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Emmanuelle Lavaine (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: Masuda et al. (2014) showed that the minimum approval mechanism (AM) implements the effcient level of public good theoretically and experimentally in a linear public good game. We extent this result to a two-players common pool resource (CPR) game. The AM adds a second stage into the extraction game. In the fi rst stage, each group member proposes his level of extraction. In the second stage, the proposed extractions and associated payoffs are displayed and each player is asked to approve or to disapprove both proposed extractions. If both players approve, the proposals are implemented. Otherwise, a uniform level of extraction, the disapproval benchmark (DB), is imposed onto each player. We consider three different DBs: the minimum proposal (MIN), the maximum proposal (MAX) and the Nash extraction level (NASH). We derive theoretical predictions for each DB following backward elimination of weakly dominated strategies (BEWDS). We fi rst underline the strength of the AM, by showing that the MIN implements the optimum theoretically and experimentally. The sub-games predicted under the NASH are Pareto improving with respect to the Nash equilibrium. The MAX leads, either to Pareto improving outcomes with respect to the free access extractions, or to a Pareto degradation. Our experimental results show that the MAX and the NASH reduce the level of over-extraction of the CPR. The MAX leads above all to larger reductions of (proposed and realized) extractions than the NASH.
    Date: 2021–04–14
  3. By: Michael Eichenseer; Johannes Moser
    Abstract: In this paper, we use an experimental setup to classify cooperation types using a sequential prisoner’s dilemma and a one shot sequential public goods game. In these two games, we examine the within subject stability of cooperation preferences. Our results suggest that subjects classified as conditional cooperators in the prisoner’s dilemma match others’ contributions in the public goods game to a significantly larger degree compared to other types, which indicates a substantial consistency. Regarding discrete behavioral types, we find that the prisoner’s dilemma performs well in identifying conditional cooperators while it is only an imperfect tool for identifying selfish types in the public goods game.
    Keywords: conditional cooperation, public goods game, sequential prisoner’s dilemma, discrete behavioral types
    JEL: C72 C91 H41
    Date: 2019–06
  4. By: Cuihong Fan; Byoung Heon Jun; Elmar G. Wolfstetter
    Abstract: We analyze strategic leaks due to spying out a rival’s bid in a first-price auction. Such leaks induce sequential bidding, complicated by the fact that the spy may be a counterspy who serves the interests of the spied at bidder and reports strategically distorted information. This ambiguity about the type of spy gives rise to a non-standard signaling problem where both sender and receiver of messages have private information and the sender has a chance to make an unobserved move. Whereas spying without counterspy exclusively benefits the spying bidder, the potential presence of a counterspy yields a collusive outcome, even if the likelihood that the spy is a counterspy is arbitrarily small. That collusive impact shows up in all equilibria and is strongest in the unique pooling equilibrium which is also the payoff dominant equilibrium.
    Keywords: auctions, tacit collusion, espionage, second-mover advantage, signaling, incomplete information
    JEL: L12 L13 L41 D43 D44 D82
    Date: 2021
  5. By: Alexandros Karakostas; Martin G. Kocher; Dominik Matzat; Holger A. Rau; Gerhard Riewe
    Abstract: We analyze linear, weakest-link and best-shot public goods games in which a distinguished team member, the team allocator, has property rights over the benefits from the public good and can distribute them among team members. These team allocator games are intended to capture natural asymmetries in hierarchical teams facing social dilemmas, such as those that exist in work teams. Our results show that the introduction of a team allocator leads to pronounced cooperation in both linear and best-shot public-good games, while it has no effect in the weakest-link public good. The team allocator uses her allocation power to distribute benefits from the public good in a way that motivates people to contribute. Re-allocating team payoffs allows the team allocator to reward cooperating team members and to sanction non-cooperating members at no efficiency losses from explicit sanctioning costs. As a result, team profits are higher in the linear team allocator game but not in the best-shot case, where the lack of coordination leads to a welfare decrease for the remaining team members.
    Keywords: public goods provision, experiment, institutions, cooperation, allocation power, teams
    JEL: C72 C91 C92
    Date: 2021
  6. By: Todorova, Tamara; Vatoci, Besar
    Abstract: We study the effect of distortionary taxes on three types of market structure: Cournot duopoly, Stackelberg duopoly, and a monopoly under a collusive agreement between the two rival firms in the industry. We investigate different tax regimes such as a per unit tax, an ad valorem tax and a tax on total revenue. A unit tax rate reduces optimal output and profits for firms while market price rises with the imposition of the tax. Interestingly, the optimal tax rate is the same for all three market structures. The ad valorem tax is imposed on the value of the product and is mostly borne by the Stackelberg follower who ends up producing a greater output than what he would produce in the absence of a tax. The ad valorem tax increases firm output and reduces market price. The total revenue decreases output and increases industry price like the unit tax.
    Keywords: Cournot duopoly, Stackelberg game, optimal tax rate, Lerner index
    JEL: D42 D43 H21 L12 L13
    Date: 2020–06–01
  7. By: Ivanova-Stenzel, Radosveta (TU Berlin); Seres, Gyula (HU Berlin)
    Abstract: Anchoring is one of the most studied and robust behavioral biases, but there is little knowledge about its persistence in strategic settings. This article studies the role of anchoring bias in private-value auctions. We test experimentally two different anchor types. The announcement of a random group identification number but also of an upper bid limit in the first-price sealed-bid auction result in higher bids. We show that such behavior can be explained as a rational response to biased beliefs. In Dutch auctions, the effect of a starting price, is negative. We demonstrate that the long-established ranking that the Dutch auction generates lower revenue than the first-price sealed-bid auction crucially depends on the size of the anchor.
    Keywords: anchoring bias; games; incomplete information; auctions;
    JEL: D44 D91 C72 C91
    Date: 2019–12–11
  8. By: John Higgins (Department of Economics, University of Kansas, Lawrence, KS 66045, USA); Tarun Sabarwal (Department of Economics, University of Kansas, Lawrence, KS 66045, USA)
    Abstract: We study proliferation of an action in a network coordination game that is generalized to include a tractable, model-based measure of virality to make it more realistic. We present new algorithms to compute contagion thresholds and equilibrium depth of contagion and prove their theoretical properties. These algorithms apply to arbitrary connected networks and starting sets, both with and without virality. Our algorithms are easy to implement and help to quantify relationships previously inaccessible due to computational intractability. Using these algorithms, we study the spread of contagion in scale-free networks with 1,000 players using millions of Monte Carlo simulations. Our results highlight channels through which contagion may spread in networks. Small starting sets lead to greater depth of contagion in less connected networks. Virality amplifies the effect of a larger starting set and may make full network contagion inevitable in cases where it would not occur otherwise. It also brings contagion dynamics closer to a type of singularity. Our model and analysis can be used to understand potential consequences of policies designed to control or spread contagion in networks.
    JEL: C62 C72
    Date: 2021–04
  9. By: Stefano Colombo; Clara Graziano; Aldo Pignataro
    Abstract: The paper considers a duopoly model in which firms inherited asymmetric market shares and history-based price discrimination is viable. However, firms can identify only a share of their own consumers depending to the degree of information accuracy. We derive the pricing strategies and we analyze the relationship between information accuracy and asymmetric market shares, showing under which circumstances there exists an equilibrium in pure strategies. We show that history-based price discrimination makes the dominant firm’s profits always lower than those of the rival, with an ambiguous effect of the information accuracy on industry profits. Moreover, we prove that the level of information accuracy has a decreasing effect on social welfare, while it affects consumer surplus non-monotonically, according to the size of asymmetry in the inherited market shares.
    Keywords: history-based price discrimination, information accuracy, asymmetric market shares
    JEL: D80 D43 L10
    Date: 2021
  10. By: Kim, Jeongbin (National University of Singapore); Lim, Wooyoung (The Hong Kong University of Science and Technology); Schweighofer-Kodritsch, Sebastian (HU Berlin)
    Abstract: We generalize the Rubinstein (1982) bargaining model by disentangling payoff delay from bargaining delay. We show that our extension is isomorphic to generalized discounting with dynamic consistency and characterize the unique equilibrium. Using a novel experimental design to control for various confounds, we then test comparative statics predictions with respect to time discounting. All bargaining takes place within a single experimental session, so bargaining delay is negligible and dynamic consistency holds by design, while payoff delay per disagreement round is significant and randomized transparently at the individual level (week/month, with/without front-end delay). In contrast to prior experiments, we obtain strong behavioral support for the basic predictions that hold regardless of the details of discounting. Testing differential predictions of different forms of discounting, we strongly reject exponential discounting in favor of present-biased discounting.
    Keywords: alternating-offers bargaining; time preferences; present bias; laboratory experiments;
    JEL: C78 C91 D03
    Date: 2020–08–14
  11. By: Murielle Djiguemde (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper provides a survey on the literature using dynamic games to analyse the decision-making processes of common pool resources (CPRs) users. The purpose of this paper is to shed some light on the application of dynamic games in laboratory experiments. In this way, we focus on articles presenting both a theoretical model with laboratory experiments, by making a distinction between discrete time and continuous time. Therefore, we put a particular attention to subjects' classication according to their observed behavior, the dierent channels by which cooperation can occur and the econometric tools used to analyse experimental data.
    Keywords: Experimental Economics,Dynamic games,Common Pool Resources,Experimetrics.,Experimetrics
    Date: 2021–04–07
  12. By: Engelmann, Dirk (HU Berlin); Frank, Jeff (Royal Holloway, University of London); Koch, Alexander K. (Aarhus University); Valente, Marieta (University of Minho)
    Abstract: Winners in online auctions frequently fail to complete purchases. Major auction platforms therefore allow “second-chance” offers, where the runner-up bidder pays his own bid price, and they let sellers leave negative feedback on buyers who default. We show theoretically that (i) all else equal, the availability of second-chance offers reduces bids; (ii) sellers have no incentive to exclude bidders, even if they are nearly certain to default; (iii) buyer reputation systems reward bidders with a reputation for defaulting, counter to the idea of deterring such behavior. Our auction experiments support these predictions and provide insights on their practical relevance.
    Keywords: auctions; default; reputation; second-chance offers;
    JEL: D44 C91 L14 D83
    Date: 2020–04–21
  13. By: Christoph Graf; Viktor Zobernig; Johannes Schmidt; Claude Kl\"ockl
    Abstract: We test the performance of deep deterministic policy gradient (DDPG), a deep reinforcement learning algorithm, able to handle continuous state and action spaces, to learn Nash equilibria in a setting where firms compete in prices. These algorithms are typically considered model-free because they do not require transition probability functions (as in e.g., Markov games) or predefined functional forms. Despite being model-free, a large set of parameters are utilized in various steps of the algorithm. These are e.g., learning rates, memory buffers, state-space dimensioning, normalizations, or noise decay rates and the purpose of this work is to systematically test the effect of these parameter configurations on convergence to the analytically derived Bertrand equilibrium. We find parameter choices that can reach convergence rates of up to 99%. The reliable convergence may make the method a useful tool to study strategic behavior of firms even in more complex settings. Keywords: Bertrand Equilibrium, Competition in Uniform Price Auctions, Deep Deterministic Policy Gradient Algorithm, Parameter Sensitivity Analysis
    Date: 2021–04
  14. By: Gärtner, Manja (DIW Berlin); Tinghög, Gustav (Linköping University); Västfjäll, Daniel (Linköping University)
    Abstract: We study the effects of dual processing differences that arise from the state level (through experimental manipulation of the decision mode), the trait level (using individual difference measures of the decision mode), and their interaction on cooperative behavior. In a survey experiment with a representative sample of the Swedish population (N = 1,828), we elicited the individuals’ primary decision mode and experimentally varied whether individuals could rely on their preferred mode or were induced to rely either on emotion or reason. Cooperation was measured across a series of commonly used and incentivized games (prisoner’s dilemma game, public goods game, trust game, dictator game). At the state level, our results show that average cooperation rates increased when emotions were induced rather than reason. At the trait level, our results show that individual decision modes and cooperation rates were not correlated when subjects could rely on their primary mode, but traits interacted with our processing manipulation: Experimentally inducing emotions increased cooperation among individuals who otherwise rely primarily on reason, but not among individuals who already rely primarily on emotion. These findings suggest that individuals integrate their traits with emotion-based states by substituting their trait rather than enhancing it. Thus, who is affected by emotions in their decision to cooperate crucially depends on state-trait interactions at the point of decision.
    Keywords: cooperation; intuition; emotion; reason; experiment;
    JEL: C71 C91 D91
    Date: 2020–04–06
  15. By: Ahrens, Steffen (TU Berlin); Bitter, Lea (TU Berlin); Bosch-Rosa, Ciril (TU Berlin)
    Abstract: In this paper we study the effects that loss contracts—prepayments that can be clawbacked later—have on group coordination when there is strategic uncertainty. We compare the choices made by experimental subjects in a minimum effort game. In control sessions, incentives are formulated as a classic gain contract, while in treatment sessions, incentives are framed as an isomorphic loss contract. Our results show that loss contracts reduce the minimum efforts of groups and worsen coordination between group members, both leading to lower payoffs. However, these results depend strongly on the group’s gender composition; groups with a larger proportion of women are better at coordinating and exert more effort.
    Keywords: strategic uncertainty; loss aversion; coordination; contract design; framing; experiment;
    JEL: C91 D84 G11 G41
    Date: 2020–09–07
  16. By: Bauer, Kevin; Gill, Andrej
    Abstract: We show that disclosing machine predictions to affected parties can trigger self-fulfilling prophecies. In an investment game, we experimentally vary investors' and recipients' access to a machine prediction about recipients' likelihood to pay back an investment. Recipients who privately learn about an incorrect machine prediction alter their behavior in the direction of the prediction. Furthermore, when recipients learn that an investor has disregarded a machine prediction of no-repayment, this further lowers the repayment amount. We interpret these findings as evidence that transparency regarding machine predictions can alter recipients' beliefs about what kind of person they are and what investors expect of them. Our results indicate that providing increased access to machine predictions as an isolated measure to alleviate accountability concerns may have unintended negative consequences for organizations by possibly changing customer behavior.
    Keywords: algorithmic transparency,algorithmic decision support,human-machine interaction
    JEL: C91 D80 D91 O33
    Date: 2021
  17. By: Asproudis, Elias; Filippiadis, Eleftherios
    Abstract: This paper presents a model based on the Nash bargaining for fishing quotas and wages between fishing communities and vessels, focusing on two cases: (a) the fishing communities are not environmentally conscious and ignore the external damages caused by the fishing industry emissions, and (b) the fishing communities are environmentally conscious, and the external damages caused by the fishing industry emissions affect their bargaining position in the fishing quotas market. Between other it is argued that, in developing economies, where normally the Total Allowable Catch (TAC) is relatively strict compared to the community's needs, the community's degree of environmental awareness has no effect on social welfare. In developed countries the social welfare is higher when the fishing community is environmentally conscious provided a slow decrease in consumption's marginal utility relative to the rate at which the marginal environmental damage increases. Finally, the community's utility and the vessel's profits depend on the strictness of the total allowable catch.
    Keywords: bargaining, fishing quotas, environmental protection, fishing community, vessels, social welfare.
    JEL: C7 Q13 Q22 Q5
    Date: 2021–04–25
  18. By: Oleg Muratov
    Abstract: I characterize equilibria in an all-pay auction with a reserve price and a bid cap. I consider the cases of two and three players. I show that equilibrium bidding is characterized by atoms at 0, the reserve price, and the bid cap, as well as continuous bidding above the bid cap. If the valuations are high enough, the range for continuous bidding shrinks completely. I show that for some parameter ranges there exist multiple equilibria. Under three players, I show that there exist equilibria with the following features: the player with the non-top valuation can have a positive rent; the players with completely different valuations can actively compete for the single prize; the player with positive payoff can have different payoff in different equilibria.
    Date: 2021–04
  19. By: Bos, Olivier; Gomez-Martinez, Francisco; Onderstal, Sander; Truyts, Tom
    Abstract: We study the relative performance of the first-price sealed-bid auction, the second-price sealed-bid auction, and the all-pay sealed-bid auction in a laboratory experiment where bidders can signal information through their bidding behaviour to an outside observer. We consider two different information settings: the auctioneer reveals either the identity of the winning bidder only, or she also reveals the bidders' payments to an outside observer. We find that the all-pay sealed-bid auction in which the bidders' payments are revealed outperforms the other mechanisms in terms of revenue, while this mechanism underperforms in terms of efficiency relative to the winner-pay auctions.
    Keywords: Auctions,Signalling,Experiments
    JEL: C92 D44 D82
    Date: 2021
  20. By: Angelova, Vera (TU Berlin); Güth, Werner (MPI for Research on Collective Goods, Bonn); Kocher, Martin G. (University of Vienna)
    Abstract: We experimentally analyze leading by example in a public goods game with two permanent and two temporary group members. Our results show that leadership when permanent and temporary members interact leads to lower contributions than interaction without leadership.
    Keywords: cooperation; leadership; social dilemma; public goods provision; experiment;
    JEL: C91 D03 D64
    Date: 2019–11–27

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