nep-gth New Economics Papers
on Game Theory
Issue of 2021‒10‒18
twenty papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Equilibrium Existence in Two-player Contests Without Absolute Continuity of Information By Ori Haimanko
  2. Farsighted Rationality in Hedonic Games By Demeze-Jouatsa, Ghislain-Herman; Karos, Dominik
  3. Nash Convergence of Mean-Based Learning Algorithms in First Price Auctions By Xiaotie Deng; Xinyan Hu; Tao Lin; Weiqiang Zheng
  4. Maskin Meets Abreu and Matsushima By Yi-Chun Chen; Takashi Kunimoto; Yifei Sun; Siyang Xiong
  5. Subsidy and Taxation in All-Pay Auctions under Incomplete By Yizhaq Minchuk; Aner Sela
  6. Price and quality competition in a mixed duopoly : Differential game approach By Okuyama, Suzuka
  7. Adaptive Rationality in Strategic Interaction: Do Emotions Regulate Thinking about Others? By Timo Ehrig; Monica Jaison Manjaly; Aditya Singh; Shyam Sunder
  8. Effort Allocations in Elimination Tournaments By Aner Sela
  9. A Mechanism Design Approach to Allocating Travel Funds By Michael A. Jones
  10. Signaling under Double-Crossing Preferences By Chia-Hui Chen; Junichiro Ishida; Wing Suen
  11. Formal insurance and altruism networks By Tizié Bene; Yann Bramoullé; Frédéric Deroïan
  12. Retailer Performance under Mergers: A Nash Price Equilibrium Model By Ge, Houtian; Gomez, Miguel I.; Richards, Timothy J.
  13. Cost Uncertainty in an Oligopoly with Endogenous Entry By Laszlo Goerke; Marco de Pinto
  14. Myerson value of directed hypergraphs By Taiki Yamada
  15. Group Identity, Social Learning and Opinion Dynamics By Sebastiano Della Lena; Luca Paolo Merlino
  16. DYNAMIC SCREENING By David Lagziel; Ehud Lehrer
  17. Media negativity bias and tax compliance: Experimental evidence By Fisar, Milos; Reggiani, Tommaso; Sabatini, Fabio; Spalek, Jirí
  19. Competition and Mergers with Strategic Data Intermediaries By David Bounie; Antoine Dubus; Patrick Waelbroeck
  20. The net effect of advice on strategy-proof mechanisms: An experiment for the Vickrey auction By Takehito Masuda; Ryo Mikami; Toyotaka Sakai; Shigehiro Serizawa; Takuma Wakayama

  1. By: Ori Haimanko (BGU)
    Keywords: Tullock contests, Bayesian Nash Equilibrium, equilibrium existence, zero-sum games, absolute continuity of information, continuum of types, joint density.
    JEL: C72 D72 D82
    Date: 2021
  2. By: Demeze-Jouatsa, Ghislain-Herman (Center for Mathematical Economics, Bielefeld University); Karos, Dominik (Center for Mathematical Economics, Bielefeld University)
    Abstract: We consider a hedonic coalition formation game in which at each possible partition any new coalition can decide the probability with which to form and leave the current partition. These probabilities are commonly known so that farsighted players can decide whether or not to support a coalition's move: they know which future partition, and hence payoffs, will be reached with what probability. We show that if coalitions make mistakes with positive probability, i.e., if they choose probabilities that are always above some $\varepsilon>0$, then there is a behavior profile in which no coalition has a profitable one-shot deviation.
    Keywords: abstract games, hedonic games, farsighted stability, coalition stable equilibrium
    Date: 2021–10–05
  3. By: Xiaotie Deng; Xinyan Hu; Tao Lin; Weiqiang Zheng
    Abstract: We consider repeated first price auctions where each bidder, having a deterministic type, learns to bid using a mean-based learning algorithm. We completely characterize the Nash convergence property of the bidding dynamics in two senses: (1) time-average: the fraction of rounds where bidders play a Nash equilibrium approaches to 1 in the limit; (2) last-iterate: the mixed strategy profile of bidders approaches to a Nash equilibrium in the limit. Specifically, the results depend on the number of bidders with the highest value: - If the number is at least three, the bidding dynamics almost surely converges to a Nash equilibrium of the auction, both in time-average and in last-iterate. - If the number is two, the bidding dynamics almost surely converges to a Nash equilibrium in time-average but not necessarily in last-iterate. - If the number is one, the bidding dynamics may not converge to a Nash equilibrium in time-average nor in last-iterate. Our discovery opens up new possibilities in the study of convergence dynamics of learning algorithms.
    Date: 2021–10
  4. By: Yi-Chun Chen; Takashi Kunimoto; Yifei Sun; Siyang Xiong
    Abstract: The theory of full implementation has been criticized for using integer/modulo games which admit no equilibrium (Jackson (1992)). To address the critique, we revisit the classical Nash implementation problem due to Maskin (1999) but allow for the use of lotteries and monetary transfers as in Abreu and Matsushima (1992, 1994). We unify the two well-established but somewhat orthogonal approaches in full implementation theory. We show that Maskin monotonicity is a necessary and sufficient condition for (exact) mixed-strategy Nash implementation by a finite mechanism. In contrast to previous papers, our approach possesses the following features: finite mechanisms (with no integer or modulo game) are used; mixed strategies are handled explicitly; neither undesirable outcomes nor transfers occur in equilibrium; the size of transfers can be made arbitrarily small; and our mechanism is robust to information perturbations. Finally, our result can be extended to infinite/continuous settings and ordinal settings.
    Date: 2021–10
  5. By: Yizhaq Minchuk (Department of Industrial Engineering and Management, Shamoon College of Engineering, Beer-Sheva 84100, Israel.); Aner Sela (BGU)
    Keywords: All-pay auctions, subsidy, taxation
    JEL: C72 D44 H25
    Date: 2021
  6. By: Okuyama, Suzuka
    Abstract: This paper investigates price and quality competition in a mixed duopoly market, where a state-owned welfare-maximizing public firm competes against a profit-maximizing private firm. We use a differential game approach with a Hotelling spatial competition framework. We extend Cellini et al.(2018) by incorporating a state-owned public firm and derive open- and closed-loop solutions. The steady-state quality levels are optimal in the open-loop solution. Numerical results show that the steady-state quality level of the public firm in the closed-loop solution does not necessarily lower than that in the open-loop solution. As a private firm's investment is large, the public firm’s incentive for quality improvement increases since there exists intertemporal strategic substitutability between investment and quality. Competition and privatization policies are neutral under the open-loop solution but not under the closed-loop solution. Competition policy improves social welfare with an increase in quality and privatization policy improves it with an decrease in quality in the closed-loop solution.
    Keywords: Mixed oligopoly, Privatization, Differential-game, Quality.
    JEL: H42 L13
    Date: 2021–08–30
  7. By: Timo Ehrig (Max Planck Institute for Mathematics in the Sciences, Leipzig); Monica Jaison Manjaly (Indian Institute of Technology, Gandhinagar); Aditya Singh (Indian Institute of Technology, Gandhinagar); Shyam Sunder (School of Management and Cowles Foundation, Yale University)
    Abstract: Forming beliefs or expectations about others’ behavior is fundamental to strategy, as it co-determines the outcomes of interactions in and across organizations. In the game theoretic conception of rationality, agents reason iteratively about each other to form expectations about behavior. According to prior scholarship, actual strategists fall short of this ideal, and attempts to understand the underlying cognitive processes of forming expectations about others are in their infancy. We propose that emotions help regulate iterative reasoning, that is, their tendency to not only reflect on what others think, but also on what others think about their thinking. Drawing on a controlled experiment, we ï¬ nd that a negative emotion (fear) deepens the tendency to engage in iterative reasoning, compared to a positive emotion (amusement). Moreover, neutral emotions yield even deeper levels of iterative reasoning. We tentatively interpret these early ï¬ ndings and speculate about the broader link of emotions and expectations in the context of strategic management. Extending the view of emotional regulation as a capability, emotions may be building blocks of rational heuristics for strategic interaction and enable interactive decision-making when strategists have little experience with the environment.
    Date: 2020–04
  8. By: Aner Sela (BGU)
    Keywords: Game theory, elimination tournaments, knockout tournaments
    JEL: D72 D82 D44
    Date: 2021
  9. By: Michael A. Jones
    Abstract: I explain how faculty members could exploit a method to allocate travel funds and how to use game theory to design a method that cannot be manipulated.
    Date: 2021–10
  10. 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 the indifference curves of two types cross twice, such that the celebrated single-crossing property fails to hold. Equilibrium exhibits a threshold type below which types choose actions that are fully revealing and above which they pool in a pairwise fashion, with a gap separating the actions chosen by these two sets of types. The resulting signaling action is quasi-concave in type. We also provide an algorithm to establish equilibrium existence by construction.
    Date: 2020–10
  11. By: Tizié Bene (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Yann Bramoullé (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Frédéric Deroïan (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université)
    Abstract: We study how altruism networks affect the adoption of formal insurance. Agents have private CARA utilities and are embedded in a network of altruistic relationships. Incomes are subject to both a common shock and a large idiosyncratic shock. Agents can adopt formal insurance to cover the common shock. We show that ex-post altruistic transfers induce interdependence in ex-ante adoption decisions. We characterize the Nash equilibria of the insurance adoption game. We show that adoption decisions are substitutes and that the number of adopters is unique in equilibrium. The demand for formal insurance is lower with altruism than without at low prices, but higher at high prices. Remarkably, individual incentives are aligned with social welfare. We extend our analysis to CRRA utilities and to a fixed utility cost of adoption.
    Keywords: Formal Insurance,Informal Transfers,Altruism Networks
    Date: 2021–09
  12. By: Ge, Houtian; Gomez, Miguel I.; Richards, Timothy J.
    Keywords: Research Methods/Statistical Methods, Marketing, Research Methods/Statistical Methods
    Date: 2021–08
  13. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Marco de Pinto (University of Applied Labour Studies)
    Abstract: How does cost uncertainty affect the welfare consequences of an oligopoly? To answer this question, we investigate a Cournot oligopoly in which firms produce a homogeneous commodity and market entry is feasible. Marginal costs are unknown ex-ante, i.e. prior to entering the market. They become public knowledge before output choices are made. We show that uncertainty induces additional entry in market equilibrium and also raises the socially optimal number of firms. Since the first change dominates, the excessive entry distortion is aggravated. This prediction is robust to various extensions of the analytical set-up. Furthermore, the welfare loss due to oligopoly tends to increase with uncertainty.
    Keywords: Oligopoly, Excessive Entry, Uncertainty, Welfare
    JEL: D43 L13
    Date: 2021–05
  14. By: Taiki Yamada
    Abstract: In this paper, we consider a directed hypergraph as cooperative network, and define the Myerson value for directed hypergraphs. We prove the axiomatization of the Myerson value, namely strong component efficiency and fairness. Moreover, we modified the concept of safety defined by Li-Shan, and proved the condition about the safety of the hyperedge with respect to the Myerson value for directed hypergraphs.
    Date: 2021–10
  15. By: Sebastiano Della Lena; Luca Paolo Merlino
    Abstract: In this paper, we study opinion dynamics in a balanced social structure consisting of two groups. Agents learn the true state of the world naively learning from their neighbors and from an unbiased source of information. Agents want to agree with others of the same group -- in-group identity, -- but to disagree with those of the opposite group -- out-group conflict. We characterize steady state opinions, and show that agents' influence depends on their Bonacich centrality in the signed network of opinion exchange. Finally, we study the effect of group size, the weight given to unbiased information and homophily when agents in the same group are homogeneous.
    Date: 2021–10
  16. By: David Lagziel (BGU); Ehud Lehrer (Tel Aviv University)
    Keywords: dynamic screening; prefect screening; threshold strategies
    JEL: C70 D49 D81
    Date: 2021
  17. By: Fisar, Milos; Reggiani, Tommaso (Cardiff Business School); Sabatini, Fabio; Spalek, Jirí
    Abstract: We study the impact of the media negativity bias on tax compliance. Through a framed laboratory experiment, we assess how the exposure to biased news about government action affects compliance in a repeated taxation game. Subjects treated with positive news are signicantly more compliant than the control group. Instead, the exposure to negative news does not prompt any significant reaction compared to the neutral condition, suggesting that participants may perceive the media negativity bias in the selection and tonality of news as the norm rather than the exception. Overall, our results suggest that biased news provision is a constant source of psychological priming and plays a vital role in taxpayers' compliance decisions.
    Keywords: tax compliance, media bias, taxation game, laboratory experiment.; tax compliance, media bias, taxation game, laboratory experiment.
    JEL: C91 D70 H26 H31
    Date: 2021–10
  18. By: Aner Sela (BGU)
    Keywords: Best-of-three contests, Best-of two contests, Resource budget
    JEL: D72 D82 D44
    Date: 2021
  19. By: David Bounie; Antoine Dubus; Patrick Waelbroeck
    Abstract: We analyze competition between data intermediaries collecting information on consumers, which they sell to firms for price discrimination purposes. We show that competition between data intermediaries benefits consumers by increasing competition between firms, and by reducing the amount of consumer data collected. We argue that merger policy guidelines should investigate the effect of the data strategies of large intermediaries on competition and consumer surplus in related markets.
    Keywords: data, mergers, competition, consumer surplus
    JEL: L13 L40 L86
    Date: 2021
  20. By: Takehito Masuda; Ryo Mikami; Toyotaka Sakai; Shigehiro Serizawa; Takuma Wakayama
    Abstract: We conduct laboratory experiments for the multi-unit Vickrey auction with and without advice to subjects on strategy-proofness. The rate of truth-telling among the subjects without advice stays at 20%, whereas the rate increases to 47% among those who have received advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that the increase in truth-telling is due significantly to the net advice effect (i.e., the effect beyond the so-called experimenter demand effect). Moreover, we find that providing advice improves efficiency in the Vickrey auction, particularly in the early periods, when the subjects are less experienced. In general, subjects tend to overbid in Vickrey auction experiments. Our results indicate the possibility that providing simple advice decreases such overbidding by promoting a better understanding of the strategy-proofness of the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to recognize the benefit of telling the truth. However, our observations show that introducing advice on the property of strategy-proofness helps them behave “correctly.”
    Date: 2020–12

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