|
on Game Theory |
| By: | George Georgiadis; Youngsoo Kim; H. Dharma Kwon |
| Abstract: | We consider a two-player game of war of attrition under complete information. It is well-known that this class of games admits equilibria in pure, as well as mixed strategies, and much of the literature has focused on the latter. We show that if the players' payoffs whilst in "war" vary stochastically and their exit payoffs are heterogeneous, then the game admits Markov Perfect equilibria in pure strategies only. This is true irrespective of the degree of randomness and heterogeneity, thus highlighting the fragility of mixed-strategy equilibria to a natural perturbation of the canonical model. In contrast, when the players' flow payoffs are deterministic or their exit payoffs are homogeneous, the game admits equilibria in pure and mixed strategies. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.12013&r= |
| By: | Vessela Daskalova; Nicolaas J. Vriend |
| Abstract: | Players may categorize the strategies available to them. In many games there are different ways to categorize one's strategies (different frames) and which ones players use has implications for the outcomes realized. This paper proposes a model of agents who learn which frames to use through reinforcement. As a case study we fit the model to existing experimental data from coordination games. The analysis shows that the model fits the data well as it matches the key stylized facts. It suggests a trade-off of using coarser versus finer representations of the strategy set when it comes to learning. |
| Keywords: | Variable frame theory; Coordination games; Categorization; Reinforcement learning; Focal points; Bounded rationality |
| JEL: | C63 C72 C91 D91 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:202118&r= |
| By: | Markus Kinateder; Luca Paolo Merlino |
| Abstract: | Players allocate their budget to links, a local public good and a private good. A player links to free ride on others' public good provision. We derive sufficient conditions for the existence of a Nash equilibrium. In equilibrium, large contributors link to each other, while others link to them. Poorer players can be larger contributors if linking costs are sufficiently high. In large societies, free riding reduces inequality only in networks in which it is initially low; otherwise, richer players benefit more, as they can afford more links. Finally, we study the policy implications, deriving income redistribution that increases welfare and personalized prices that implement the efficient solution. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.11651&r= |
| By: | Buchen, Clemens |
| JEL: | C61 C72 C73 D78 P16 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242422&r= |
| By: | Kenneth Hendricks; Thomas Wiseman |
| Abstract: | A seller with one unit of a good faces N\geq3 buyers and a single competitor who sells one other identical unit in a second-price auction with a reserve price. Buyers who do not get the seller's good will compete in the competitor's subsequent auction. We characterize the optimal mechanism for the seller in this setting. The first-order approach typically fails, so we develop new techniques. The optimal mechanism features transfers from buyers with the two highest valuations, allocation to the buyer with the second-highest valuation, and a withholding rule that depends on the highest two or three valuations. It can be implemented by a modified third-price auction or a pay-your-bid auction with a rebate. This optimal withholding rule raises significantly more revenue than would a standard reserve price. Our analysis also applies to procurement auctions. Our results have implications for sequential competition in mechanisms. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.13121&r= |
| By: | Guillaume Pommey (Università di Roma "Tor Vergata") |
| Abstract: | When partnerships come to an end, partners must find a way to efficiently reallocate the commonly owned assets to those who value them the most. This requires that the aforementioned members possess enough financial resources to buy out the others’ shares. I investigate ex post efficient partnership dissolution when agents are ex post cash constrained. I derive necessary and sufficient conditions for ex post efficient partnership dissolution with Bayesian (resp. dominant strategy) incentive compatible, interim individually rational, ex post (resp. ex ante) budget balanced and ex post cash-constrained mechanisms. Ex post efficient dissolution is more likely to be feasible when agents with low (resp. large) cash resources own more (resp. less) initial ownership rights. Furthermore, I propose a simple auction to implement the optimal mechanism. Finally, I investigate second-best mechanisms when cash constraints are such that ex post efficient dissolution is not attainable. |
| Keywords: | Mechanism design, Partnership, Ex post cash constraints, Property rights theory. |
| JEL: | D02 D23 D40 D44 D82 C72 |
| Date: | 2021–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:514&r= |
| By: | Westbrock, Bastian; Rosenkranz, Stephanie; Rezaei, Sarah; Weitzel, Utz |
| JEL: | D85 C70 C91 H41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242447&r= |
| By: | Ricard Gil; Jean-François Houde; Shilong Sun; Yuya Takahashi |
| Abstract: | This paper studies the role and incidence of entry preemption strategic motives on the dynamics of new industries, while providing an empirical test for entry preemption, and quantifying its impact on market structure. The empirical context is the evolution of the U.S. drive-in theater market between 1945 and 1957. We exploit a robust prediction of dynamic entry games to test for preemption incentives: the deterrence effect of entering early is only relevant for firms in markets of intermediate size. Potential entrants in small and large markets face little uncertainty about the actual number of firms that will eventually enter. This leads to a non-monotonic relationship between market size and the probability of observing an early entrant. We find robust empirical support for this prediction using a large cross-section of markets. We then estimate the parameters of a dynamic entry game that matches the reduced-form prediction and quantify the strength of the preemption incentive. Our counterfactual analysis shows that strategic motives can increase the number of early entrants by as much as 50 percent in mid-size markets without affecting the number of firms in the long run. By causing firms to enter the market too early, we show that strategic entry preemption leads on average to a 5% increase in entry costs and a 1% decrease in firms' expected value (relative to an environment without strategic investments). |
| JEL: | L1 L12 L82 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29408&r= |
| By: | Ricardo Martínez (Department of Economic Theory and Economic History, University of Granada.); Joaquín Sánchez-Soriano (Centro de Investigación Operativa (CIO), Universidad Miguel Hernández de Elche.) |
| Abstract: | We study the problem of sharing the revenue obtained by selling museum passes from the axiomatic perspective. In this setting, we propose replacing the usual dummy axiom with a milder requirement; social solidarity with dummies. This new axiom formalizes the philosophical idea that even null agents/museums may have the right to receive a minimum allocation in a sharing situation. By replacing dummy with social solidarity with dummies, we characterize several families of rules, which are convex combinations of the uniform and Shapley approaches. Our findings generalize several existing results in the literature. Also, we consider a domain of problems that is richer than the domain proposed by Ginsburgh and Zang (2003) in their seminal paper on the museum pass problem. |
| Keywords: | museum passes, social solidarity, dummy, Shapley rule, uniform rule. |
| JEL: | D63 D71 |
| Date: | 2021–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:21/11&r= |
| By: | Boris Knapp |
| Abstract: | User-generated reviews like those found on Amazon, Yelp, and similar platforms have become an important source of information for most consumers nowadays. It is therefore tempting for firms to manipulate reviews in order to increase demand for their products - but not all consumers are aware of this. We show that in a simple model with fake reviews and naive consumers the unique equilibrium is characterised by partial pooling, where fake reviews blend in with real ones and are persuasive. Policies that reduce the share of naive consumers have opposing effects on the two consumer groups: naives benefit, while sophisticates are harmed. A policy maker concerned with aggregate consumer welfare is thus facing a non-trivial problem. We further show that when real reviews are written strategically, they are not always truthful. Given sufficiently favourable market conditions, the equilibrium where all real reviewers are strategic is outcome equivalent to one where all consumers are sophisticates. In the context of online platforms, where the boundary between consumers and reviewers is fluid, this equivalence result has important practical implications. |
| JEL: | C72 D82 L15 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:vie2102&r= |
| By: | Kamesh Munagala; Yiheng Shen; Kangning Wang; Zhiyi Wang |
| Abstract: | Motivated by civic problems such as participatory budgeting and multiwinner elections, we consider the problem of public good allocation: Given a set of indivisible projects (or candidates) of different sizes, and voters with different monotone utility functions over subsets of these candidates, the goal is to choose a budget-constrained subset of these candidates (or a committee) that provides fair utility to the voters. The notion of fairness we adopt is that of core stability from cooperative game theory: No subset of voters should be able to choose another blocking committee of proportionally smaller size that provides strictly larger utility to all voters that deviate. The core provides a strong notion of fairness, subsuming other notions that have been widely studied in computational social choice. It is well-known that an exact core need not exist even when utility functions of the voters are additive across candidates. We therefore relax the problem to allow approximation: Voters can only deviate to the blocking committee if after they choose any extra candidate (called an additament), their utility still increases by an $\alpha$ factor. If no blocking committee exists under this definition, we call this an $\alpha$-core. Our main result is that an $\alpha$-core, for $\alpha 1.015$ for submodular utilities, and a lower bound of any function in the number of voters and candidates for general monotone utilities. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.12499&r= |
| By: | Natalie Struwe; James M. Walker; Esther Blanco |
| Abstract: | We present experimental evidence for decision settings where public good providers compete for endogenous donations offered by outside donors. Donors receive benefits from public good provision but cannot provide the good themselves. The performance of three competition mechanisms is examined in relation to the level of public good provision and transfers offered by donors. In addition to a contest with rewards proportional to effort to all public good providers, we study two contests with exclusion from transfers, namely a winner-takes-all and a loser-gets-nothing. We compare behavior in these three decision settings to the default setting of no-transfers. Results for this novel decision environment with endogenous prizes show that contributions to the public good are not significantly different in the winner-takes-all and loser-gets-nothing settings, but donor's transfers are significantly lower in winner-takes-all. Initially, the winner-takes-all and loser-gets-nothing settings lead to a significant increase in public good contributions compared to the setting where transfers are proportional to contributions for everyone; but this difference diminishes over decision rounds. All three contest with endogenous prizes generate consistent and significantly higher public good provision compared to the setting with no-transfers. |
| Keywords: | Public Good, Institution, Externality, Contests, Laboratory Experiment |
| JEL: | D70 H41 C92 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2021-29&r= |