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on Game Theory |
| By: | Anne-Christine Barthel (Department of Economics, *West Texas A&M University, Canyon, TX 79016, USA); Eric Hoffmann (Department of Economics, *West Texas A&M University, Canyon, TX 79016, USA); Tarun Sabarwal (Department of Economics, University of Kansas, Lawrence, KS 66045, USA) |
| Abstract: | In game theory, p-dominance and its set-valued generalizations serve as important robust solution concepts. We show that in monotone games, (which include the broad classes of super-modular games, sub-modular games, and their combinations,) these concepts can be characterized in terms of pure strategy Nash equilibria in an auxiliary game of complete information. The auxiliary game is constructed in a transparent manner that is easy to follow and retains a natural connection to the original game. Our results show explicitly how to map these concepts to a corresponding Nash equilibrium thereby identifying a new bijection between robust solutions in the original game and equilibrium notions in the auxiliary game. Moreover, our characterizations lead to new results about the structure of entire classes of such solution concepts. In games with strategic complements, these classes are complete lattices. More generally, they are totally unordered. We provide several examples to highlight these results. |
| Keywords: | p-dominance, p-best response set, minimal p-best response set, strategic complements, strategic substitutes |
| JEL: | C62 C72 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:202121&r= |
| By: | Taisuke Otsu; Martin Pesendorfer |
| Abstract: | This paper surveys the recent literature on dynamic games estimation when there is a concern of equilibrium multiplicity. We focus on the questions of testing for equilibrium multiplicity and estimation in the presence of multiplicity. |
| Keywords: | Dynamic Markov game, Multiplicity of equilibria |
| JEL: | C12 C72 D44 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stiecm:618&r= |
| By: | A. Mantovi |
| Abstract: | The Bitcoin selection rule shapes the basic mining (rent-seeking) competition, whose unique Nash equilibrium has been thoroughly investigated in terms of best responses to the overall scale of activity and entry thresholds. It is the aim of the present contribution to deepen such game theoretic aspects of Proof-of-Work and provide a unifying perspective on approaches employing absolute and relative levels of activity, and envision a ‘map’ of strategic space that may frame and cross-fertilize more realistic refinements of mining competition and blockchain phenomenology. The additive aggragation property of the selection rule has pivotal implications for thorough investigations of best response dynamics. Potential lines of progress are briefly sketched. |
| Keywords: | Blockchain; Proof-of-Work; Rent Seeking; Nash Equilibrium; Additive Aggregation;Best Response Dynamics |
| JEL: | C72 D82 E42 O33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2021-ep02&r= |
| By: | Andrea Attar (CEIS & DEF University of Rome "Tor Vergata" and Toulouse School of Economics); Eloisa Campioni (CEIS & DEF University of Rome "Tor Vergata" and Toulouse School of Economics); Thomas Mariotti (Toulouse School of Economics, CNRS); Alessandro Pavan (Northwestern University, Evanston) |
| Abstract: | We study games in which several principals contract with several privately-informed agents. We show that enabling the principals to engage in contractible private disclosures {by sending private signals to the agents about how the mechanisms will respond to the agents' messages { can significantly affect the predictions of such games. Our first result shows that private disclosures may generate equilibrium outcomes that cannot be supported in any game without private disclosures, no matter the richness of the message spaces and the availability of public randomizing devices. The result thus challenges the canonicity of the universal mechanisms of Epstein and Peters (1999). Our second result shows that equilibrium outcomes of games without private disclosures need not be sustainable when private disclosures are allowed. The result thus challenges the robustness of the \folk theorems" of Yamashita (2010) and Peters and Troncoso-Valverde (2013). These findings call for a novel approach to the analysis of competing-mechanism games. |
| Keywords: | Incomplete Information, Competing Mechanisms, Private Disclosures, Signals, Universal Mechanisms, Folk Theorems. |
| JEL: | D82 |
| Date: | 2021–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:519&r= |
| By: | Sylvain Chassang (Princeton University and NBER); Lucia Del Carpio (INSEAD); Samuel Kapon (New York University) |
| Abstract: | Limits on a government’s capacity to enforce laws can result in multiple equilibria. If most agents comply, limited enforcement is sufficient to dissuade isolated agents from misbehaving. If most agents do not comply, overstretched enforcement capacity has a minimal impact on behavior. We study the extent to which divide-and-conquer enforcement strategies can help select a high compliance equilibrium in the presence of realistic compliance frictions. We study the role of information about the compliance of others both in theory and in lab experiments. As the number of agents gets large, theory indicates that providing information or not is irrelevant in equilibrium. In contrast, providing individualized information has a first order impact in experimental play by increasing convergence to equilibrium.This illustrates the value of out-of-equilibrium information design. |
| JEL: | C72 C73 C92 D73 D82 D86 H26 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:278&r= |
| By: | Subhayu Bandyopadhyay; Todd Sandler |
| Abstract: | A two-stage game investigates how counterterrorism measures affect within-country competition between two rival terrorist groups. Although such competition is commonplace (e.g., al-Nusra Front and Free Syria Army; Revolutionary Armed Forces of Colombia and the National Liberation Army; and al-Fatah and Hamas), there is no theoretical treatment of how proactive and defensive measures influence this interaction. Previous studies on rival terrorist groups are solely empirical concerning group survival, outbidding, and terrorism level, while ignoring the role that government countermeasures exert on the rival groups’ terrorism. In a theoretical framework, alternative counterterrorism actions have diverse impacts on the level of terrorism depending on relative group sizes and government-targeting decisions. In the two-stage game, optimal counterterrorism policy rules are displayed in terms of how governments target symmetric and asymmetric terrorist groups. Comparative statics show how parameter changes affect Nash or subgame perfect equilibrium outcomes. |
| Keywords: | competitive terrorist groups; defensive and proactive counterterrorism; two-stage game; comparative statics; outbidding between rival groups |
| Date: | 2021–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:93274&r= |
| By: | Marleen Marra (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper presents, solves, and estimates the first structural auction model with seller selection. This allows me to quantify network effects arising from endogenous bidder and seller entry into auction platforms, facilitating the estimation of theoretically ambiguous fee impacts by tracing them through the game. Relevant model primitives are identified from variation in second-highest bids and reserve prices. My estimator builds off the discrete choice literature to address the double nested fixed point characterization of the entry equilibrium. Using new wine auction data, I estimate that this platform's revenues increase up to 60% when introducing a bidder discount and simultaneously increasing seller fees. More bidders enter when the platform is populated with lower-reserve setting sellers, driving up prices. Moreover, I show that meaningful antitrust damages can be estimated in a platform setting despite this two-sidedness. |
| Keywords: | Auctions with entry,Two-sided markets,Nonparametric identification,Estimation,Nested fixed point |
| Date: | 2019–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03393068&r= |
| By: | Kenju Kamei; Hajime Kobayashi; Tiffany Tsz Kwan Tse |
| Abstract: | The observability of partners’ past play is known to theoretically improve cooperation in an infinitely repeated prisoner’s dilemma game under random matching. This paper presents evidence from an incentivized experiment that reputational information per se may not improve cooperation. A structural estimation suggests that a certain percentage of players act according to the “Always Defect” strategy, whether or not the reputational information is available. The remaining players adopt available cooperative strategies: specifically, the tit-for-tat strategy when reputational information is not available, and a strategy that conditions on the matched partner’s past play when reputational information is available. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1145&r= |
| By: | Céline Bonnet (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Zohra Bouamra-Mechemache (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Hugo Molina (ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We develop a framework of bilateral oligopoly with a sequential two-stage game in which manufacturers engage in bilateral bargains with retailers competing on a downstream market. We show that bargaining outcomes depend on three different bargaining forces and can be interpreted in terms of "equilibrium of fear". We estimate our framework using data on soft drink purchases in France and find that retailers have a higher bargaining power than manufacturers. Using counterfactual simulations, we highlight that retail mergers always increase retailers' fear of disagreement which weakens their bargaining power vis-à-vis manufacturers and leads to higher wholesale and retail prices. |
| Keywords: | Retail mergers,Bargaining,Bilateral oligopoly,Soft drink industry |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03375907&r= |
| By: | Philippe Gagnepain (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); Stéphane Gauthier (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: | This paper exploits the repeal of the Wright amendment as a natural experiment in order to contribute to the ongoing discussion on how the enlargement of the relevant market affects the ability of firms to coordinate on a Nash equilibrium. Using data on the U.S. air transportation industry, we present a Difference-inDifference procedure which sheds light on the significant loss of accuracy in airlines' predictions in markets originating in Dallas after the Love Field airport started operating long distance services in 2014. This suggests that competition authorities should be careful when they refer to the Nash equilibrium following market expansion reforms. |
| Keywords: | Airline industry,Nash equilibrium,Market definition,Transportation |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03359597&r= |
| By: | Willi Semmler; Giovanni Di Bartolomeo; Behnaz Minooei Fard; Joao Paulo Braga |
| Abstract: | Governments attempt to provide the energy sector with incentives to replace old technologies with new ones based on renewable energy as the most effective way to combat climate change. Yet in the energy sector prevail fossil fuel incumbents that inhibit renewable energy entrants. Our paper provides a game-theoretic stylization of competition between those two types of firms. Incumbents set prices and entrants respond with quantity adjustments. In the context of a dynamic limit pricing model, we study the entry dynamics in a market in which the dominant firms (fossil fuel energy suppliers) face the entry of a group of competitive fringe firms (renewable energy suppliers) when the dominant firms have easier access to financial markets, but the fringe firms finance their expansion with internal finance. We also investigate the effect of the public support of renewable energy firms through subsidies. Our model is built on Judd and Peterson (1986, JET), but our solutions are obtained through a non-linear model predictive control algorithm. By this technique, we can predict the outcome of the competition between incumbents and entrants and the impact of financial and fiscal policies considering moving-horizon strategies. |
| Keywords: | Global warming; Renewable energy; Limit pricing; Strategic entry game; Non-linear model predictive control |
| JEL: | D40 D21 D43 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:sap:wpaper:wp200&r= |
| By: | Kraft, Kornelius; Lammers, Alexander |
| JEL: | D04 E25 J51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242342&r= |
| By: | Meg Adachi-Sato (Faculty of Business Administration and Accountancy, Khon Kaen University, THAILAND and Research Institute for Economics and Business Administration, Kobe University, JAPAN) |
| Abstract: | This paper shows how a socially and environmentally aware firm principal can motivate a profit-oriented manager to pursue environmental, social and governance (ESG) outcomes. In the model, the manager produces a verifiable output that is detrimental to ESG, but also engages in an unverifiable output that promotes ESG. I show that an ex-post bargaining contract is preferred to an ex-ante commitment contract if the unverifiable output substantially improves ESG or if there is a large negative externality. The paper also demonstrates how social impact bonds can be more effective than short-term debt to finance social programs. |
| Keywords: | Socially responsible investment; ESG; Multitask; Hold-up; Incomplete contracts; Social impact bonds; Sustainability-linked bonds |
| JEL: | D86 G11 G23 M12 M14 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2021-20&r= |
| By: | Takanori ADACHI; Michal FABINGER |
| Abstract: | This paper proposes a sufficient statistics approach to welfare analysis of third-degree price discrimination in differentiated oligopoly. Specifically, our sufficient conditions for price discrimination to increase or decrease aggregate output, social welfare, and con-sumer surplus simply entail a cross-market comparison of multiplications of two or three of the sufficient statistics—pass-through, conduct, and profit margin—that are functions of first-order and second-order elasticities of the firm’s demand. Notably, these results are derived under a general class of demand, and can be readily be extended to accom-modate heterogeneous firms. These features suggest that our approach has potential for conducting welfare analysis without a full specification of an oligopoly model. |
| Keywords: | Third-Degree Price Discrimination; Oligopoly; Sufficient Statistics. |
| JEL: | D43 L11 L13 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-21-005&r= |