nep-gth New Economics Papers
on Game Theory
Issue of 2022‒01‒10
fifteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Markovian Persuasion By Ehud Lehrer; Dimitry Shaiderman
  2. A Game-theoretic Analysis of Childhood Vaccination Behavior: Nash Versus Kant By Philippe De Donder; Humberto Llavador; Stefan Penczynski; John E. Roemer; Roberto Velez
  3. Two-bound core games and the nucleolus By Gong, Doudou; Dietzenbacher, Bas; Peters, Hans
  4. Social closeness can help, harm and be irrelevant in solving pure coordination problems By Simon Gaechter; Chris Starmer; Christian Thoeni; Fabio Tufano; Till O Weber
  5. Learning Efficiency of Multi-Agent Information Structures By Mira Frick; Ryota Iijima; Yuhta Ishii
  6. Efficiency-Inducing Tax Credits for Charitable Donations when Taxpayers Have Heterogeneous Behavioral Norms By Ngo Van Long
  7. Without liberty and justice, what extremes to expect? Two contemporary perspectives By Miller, Marcus; Ben Zissimos
  8. Lifetime employment and reaction functions of socially concerned firms under quantity competition By Ohnishi, Kazuhiro
  9. Developing Hydrogen Infrastructure and Demand: An Evolutionary Game and the Case of China By Zhao, Tian; Liu, Zhixin; Jamasb, Tooraj
  10. The Way People Lie in Markets: Detectable vs. Deniable Lies By Chloe Tergiman; Marie Claire Villeval
  11. Competition analysis on the over-the-counter credit default swap market By Louis Abraham
  12. The strategy method conflates confusion with conditional cooperation in public goods games: evidence from large scale replications By Maxwell N. Burton-Chellew; Victoire D'Amico; Claire Guerin
  13. Selfish learning is more important than fair-minded conditional cooperation in public goods games By Maxwell N. Burton-Chellew; Claire Guerin
  14. Cassandra's Curse: A Second Tragedy of the Commons By Colo, Philippe
  15. Pareto-Improving Minimum Corporate Taxation By Mr. Shafik Hebous; Mr. Michael Keen

  1. By: Ehud Lehrer; Dimitry Shaiderman
    Abstract: In the classical Bayesian persuasion model an informed player and an uninformed one engage in a static interaction. The informed player, the sender, knows the state of nature, while the uninformed one, the receiver, does not. The informed player partially shares his private information with the receiver and the latter then, based on her belief about the state, takes an action. This action determines, together with the state of nature, the utility of both players. We consider a dynamic Bayesian persuasion situation where the state of nature evolves according to a Markovian law. In this repeated persuasion model an optimal disclosure strategy of the sender should, at any period, balance between getting high stage payoff and future implications on the receivers' beliefs. We discuss optimal strategies under different discount factors and characterize when the asymptotic value achieves the maximal value possible.
    Date: 2021–11
  2. By: Philippe De Donder (Toulouse School of Economics); Humberto Llavador (Universitat Pompeu Fabra); Stefan Penczynski (University of East Anglia); John E. Roemer (Cowles Foundation and Dept. of Political Science, Yale University); Roberto Velez (Centro Estudios Espinosa Yglesias, Mexico City)
    Abstract: Whether or not to vaccinate one’s child is a decision that a parent may approach in several ways. The vaccination game, in which parents must choose whether to vaccinate a child against a disease, is one with positive externalities (herd immunity). In some societies, not vaccinating is an increasingly prevalent behavior, due to deleterious side effects that parents believe may accompany vaccination. The standard game-theoretic approach assumes that parents make decisions according to the Nash behavioral protocol, which is individualistic and non-cooperative. Because of the positive externality that each child’s vaccination generates for others, the Nash equilibrium suffers from a free-rider problem. However, in more solidaristic societies, parents may behave cooperatively –they may optimize according to the Kantian protocol, in which the equilibrium is efficient. We test, on a sample of six countries, whether childhood vaccination behavior conforms better to the individualistic or cooperative protocol. In order to do so, we conduct surveys of parents in these countries, to ascertain the distribution of beliefs concerning the subjective probability and severity of deleterious side effects of vaccination. We show that in all the countries of our sample the Kant model dominates the Nash model. We conjecture that, due to the free-rider problem inherent in the Nash equilibrium, a social norm has evolved, quite generally, inducing parents to vaccinate with higher probability than they would in the non-cooperative solution. Kantian equilibrium offers one precise version of such a social norm.
    Keywords: Kantian equilibrium, Nash equilibrium, Vaccination, Social norm
    JEL: C72 D62 D63 I12
    Date: 2021–12
  3. By: Gong, Doudou (RS: GSBE other - not theme-related research, Quantitative Economics); Dietzenbacher, Bas (RS: GSBE other - not theme-related research, QE Math. Economics & Game Theory); Peters, Hans (QE Math. Economics & Game Theory, RS: GSBE other - not theme-related research)
    Abstract: This paper introduces the new class of two-bound core games, where the core can be described by a lower bound and an upper bound on the payoffs of the players. Many classes of games turn out to be two-bound core games. We show that the core of each two-bound core game can be described equivalently by the pair of exact core bounds, and study to what extent the exact core bounds can be stretched while retaining the core description. We provide explicit expressions of the nucleolus for two-bound core games in terms of all pairs of bounds describing the core, using the Talmud rule for bankruptcy problems, and study to what extent these expressions are robust against game changes.
    JEL: C71
    Date: 2021–12–13
  4. By: Simon Gaechter (University of Nottingham, IZA Bonn); Chris Starmer (University of Nottingham); Christian Thoeni (University of Lausanne); Fabio Tufano (University of Nottingham); Till O Weber (Newcastle University)
    Abstract: Experimental research has shown that ordinary people often perform remarkably well in solving coordination games that involve no conflicts of interest. While most experiments in the past studied such coordination games among socially distant anonymous players, here we study behaviour in a set of two player coordination games and compare the outcomes depending on whether the players are socially close or socially distant. We find that social closeness influences prospects for coordination, but whether it helps, harms or has no impact on coordination probabilities, depends on the structure of the game.
    Keywords: Coordination; Lab-in-the-field experiment; Oneness; Salience; Social closeness; Social distance
    Date: 2021–09
  5. By: Mira Frick (Cowles Foundation, Yale University); Ryota Iijima (Cowles Foundation, Yale University); Yuhta Ishii (Department of Economics at Pennsylvania State University)
    Abstract: We study settings in which, prior to playing an incomplete information game, players observe many draws of private signals about the state from some information structure. Signals are i.i.d. across draws, but may display arbitrary correlation across players. For each information structure, we define a simple learning efficiency index, which only considers the statistical distance between the worst-informed player’s marginal signal distributions in different states. We show, first, that this index characterizes the speed of common learning (Cripps, Ely, Mailath, and Samuelson, 2008): In particular, the speed at which players achieve approximate common knowledge of the state coincides with the slowest player’s speed of individual learning, and does not depend on the correlation across players’ signals. Second, we build on this characterization to provide a ranking over information structures: We show that, with sufficiently many signal draws, information structures with a higher learning efficiency index lead to better equilibrium outcomes, robustly for a rich class of games and objective functions that are "aligned at certainty." We discuss implications of our results for constrained information design in games and for the question when information structures are complements vs. substitutes.
    Keywords: Common learning, Speed of learning, Higher-order beliefs, Comparison of information structures
    JEL: D80 D83 C70
    Date: 2021–08
  6. By: Ngo Van Long
    Abstract: We consider an economy in which some taxpayers behave in a Kantian way in their donation behavior while others are Nash players. A Kantian taxpayer holds the norm that any suggested deviation from a proposed equilibrium profile would be adopted by him only if when all members of their community adopted the same deviation, they would all achieve a higher level of welfare. In contrast, a Nash player follows the individual rationality criterion: He would deviate if, assuming all others do not deviate, he would improve his own payoff. We show that if all taxpayers are Nash players, then there is an efficiency-inducing tax credit scheme for charitable contributions. In contrast, if all taxpayers are Kantian, the optimal tax credit for charity is zero. If both types of taxpayers co-exist, and the government does not know who is of what type, then it is not possible for the government to induce the first-best outcome, but it must rely on a second-best tax-credit scheme.
    Keywords: categorical imperative, Kantian behaviour, Kantian equilibrium, Kant-Nash equilibrium, voluntary contributions to a public good, tax credits
    JEL: H21 H31 H41
    Date: 2021
  7. By: Miller, Marcus (University of Warwick); Ben Zissimos (Exeter University Business School)
    Abstract: From a wide-ranging historical survey, Acemoglu and Robinson conclude that the preservation of liberty depends on being in a ‘narrow corridor’ where there is a balance of power between the state and society. We first examine the support Binmore's game-theoretic treatment of Social Contracts provides for such a ‘narrow corridor’ of liberty and justice – and what extremes to expect without them. We also consider how the biological model of Competing Species helps to describe the dynamics of conflicting powers outside the narrow corridor– where, as in contemporary Russia and China, any Social Contracts that exist are neither free nor fair.
    Keywords: liberty, social contracts, repeated games, Competing Species, anarchy, Despotism, Neofeudalism JEL Classification: C70, C73, P00, Z13
    Date: 2021
  8. By: Ohnishi, Kazuhiro
    Abstract: This paper considers a Cournot oligopoly model with a concave demand function where socially concerned firms can offer lifetime employment as a strategic commitment device. Each socially concerned firm maximizes its own profit plus a share of consumer surplus. The paper presents the reaction functions of socially concerned firms in the Cournot oligopoly model.
    Keywords: Cournot oligopoly model; Lifetime employment; Reaction functions; Socially concerned firms
    JEL: C72 D21 L20
    Date: 2021–11–30
  9. By: Zhao, Tian (School of Economics and Management, Beihang University); Liu, Zhixin (School of Economics and Management, Beihang University); Jamasb, Tooraj (Department of Economics, Copenhagen Business School)
    Abstract: Diffusion of hydrogen refueling stations (HRS) is key to promotion of hydrogen vehicles. In this paper, we explore the nexus between critical stakeholders in the hydrogen industry from a game perspective. We investigate the proposed policy for promotion of hydrogen vehicles in China. We model the three main actors in hydrogen infrastructure development, i.e. public sectors, private investors, and consumers. The tripartite evolutionary game analyzes the interactive policy process of subsidy provision, infrastructure investment, and fuel consumption. We then examine the evolutionary stable strategy (ESS) of the system. We propose a policy mechanism for how to set values of key parameters to promote active cooperation of the three actors in HRS diffusion. A numerical simulation validates the solution of the game and sensitivity analyses of initial probabilities and key parameters. We find that boosting initial willingness of actors to choose cooperative hydrogen strategies is beneficial to lead the game system to the ideal consequence. We offer some recommendations including establishing regulation standards for the construction of HRS, increasing financial incentives to each actor and decreasing the cost of HRS and retail price of hydrogen.
    Keywords: Hydrogen infrastructure; Evolutionary game; Numerical simulation; China
    JEL: C73 Q42 Q48 R42
    Date: 2021–11–21
  10. By: Chloe Tergiman (Smeal College of Business, 334 Business Building, Penn State University); Marie Claire Villeval (Univ Lyon, CNRS, GATE UMR 5824, 93 Chemin des Mouilles, F-69130, Ecully, France. IZA, Bonn, Germany)
    Abstract: In a finitely repeated game with asymmetric information, we experimentally study how individuals adapt the nature of their lies when settings allow for reputation-building. While some lies can be detected ex post by the uninformed party, others remain deniable. We find that traditional market mechanisms such as reputation generate strong changes in the way people lie and lead to strategies in which individuals can maintain plausible deniability: people simply hide their lies better by substituting deniable lies for detectable lies. Our results highlight the limitations of reputation to root out fraud when a Deniable Lie strategy is available.
    Keywords: Lying, Deniability, Reputation, Financial Markets, Experiment
    JEL: C91 D01 G41 M21
    Date: 2021
  11. By: Louis Abraham (ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich])
    Abstract: We study two questions related to competition on the OTC CDS market using data collected as part of the EMIR regulation. First, we study the competition between central counterparties through collateral requirements. We present models that successfully estimate the initial margin requirements. However, our estimations are not precise enough to use them as input to a predictive model for CCP choice by counterparties in the OTC market. Second, we model counterpart choice on the interdealer market using a novel semi-supervised predictive task. We present our methodology as part of the literature on model interpretability before arguing for the use of conditional entropy as the metric of interest to derive knowledge from data through a model-agnostic approach. In particular, we justify the use of deep neural networks to measure conditional entropy on real-world datasets. We create the $\textit{Razor entropy}$ using the framework of algorithmic information theory and derive an explicit formula that is identical to our semi-supervised training objective. Finally, we borrow concepts from game theory to define $\textit{top-k Shapley values}$. This novel method of payoff distribution satisfies most of the properties of Shapley values, and is of particular interest when the value function is monotone submodular. Unlike classical Shapley values, top-k Shapley values can be computed in quadratic time of the number of features instead of exponential. We implement our methodology and report the results on our particular task of counterpart choice. Finally, we present an improvement to the $\textit{node2vec}$ algorithm that could for example be used to further study intermediation. We show that the neighbor sampling used in the generation of biased walks can be performed in logarithmic time with a quasilinear time pre-computation, unlike the current implementations that do not scale well.
    Date: 2021–11–29
  12. By: Maxwell N. Burton-Chellew; Victoire D'Amico; Claire Guerin
    Abstract: The strategy method is often used in public goods games to measure individuals’ willingness to cooperate depending on the level of cooperation by others (conditional cooperation). However, while the strategy method is informative, it risks being suggestive and inducing elevated levels of conditional cooperation that are not motivated by concerns for fairness, especially in uncertain or confused participants. Here we make 845 participants complete the strategy method two times, once with human and once with computerized groupmates. Cooperation with computers cannot rationally be motivated by concerns for fairness. Worryingly, 69% of participants conditionally cooperated with computers, whereas only 7% conditionally cooperated with humans while not cooperating with computers. Overall, 83% of participants cooperated with computers, contributing 89% as much as towards humans. Results from games with computers present a serious problem for measuring social behaviors.
    Keywords: Confusion, fairness, inequity-aversion, strong reciprocity
    JEL: H41 C91 C72
    Date: 2021–12
  13. By: Maxwell N. Burton-Chellew; Claire Guerin
    Abstract: Why does human cooperation often unravel in economic experiments despite a promising start? Previous studies have interpreted the decline as the reaction of disappointed cooperators retaliating in response to lesser cooperators (conditional cooperation). This interpretation has been considered evidence of a uniquely human form of cooperation, motivated by altruistic concerns for fairness and requiring special evolutionary explanations. However, experiments have typically shown individuals information about both their personal payoff and information about the decisions of their groupmates (social information). Showing both confounds explanations based on conditional cooperation with explanations based on individuals learning how to better play the game. Here we experimentally decouple these two forms of information, and thus these two learning processes, in public goods games involving 616 Swiss university participants. We find that payoff information leads to a greater decline, supporting a payoff-based learning hypothesis. In contrast, social information has small or negligible effect, contradicting the conditional cooperation hypothesis. We also find widespread evidence of both confusion and selfish motives, suggesting that human cooperation is maybe not so unique after all.
    Keywords: altruism, behavioral economics, confusion, reciprocity, social preferences
    JEL: D01
    Date: 2021–11
  14. By: Colo, Philippe
    Abstract: This paper studies why scientific forecasts regarding exceptional or rare events generally fail to trigger adequate public response. A major example is climate change: despite years of scientific reporting, public acceptance of economic regulations is still limited. Building on the main causes identified by surveys for these reluctances, this paper offers an explanatory mechanism for this paradox. I consider a game of contribution to a public bad: greenhouse gases emissions. Prior to that, contributors receive expert advice regarding climate damages. Because of climate science's complexity, experts' forecasts are non-verifiable. In addition, I assume that the expert cares only about social welfare. Under mild assumptions, I show that no information transmission can happen at equilibrium when the number of contributors is high or the severity of climate damages is low. Then, contributors ignore scientific reports and act solely upon their prior belief.
    Keywords: Contribution to a public bad, Cheap talk, Climate change
    JEL: D62 D83
    Date: 2021–11–30
  15. By: Mr. Shafik Hebous; Mr. Michael Keen
    Abstract: The recent international agreement on a minimum effective corporate tax rate marks a profound change in global tax arrangements. The appropriate level of that minimum, however, has been, and remains, extremely contentious. This paper explores the strategic responses to a minimum tax, which—the policy objective being to change the rules of tax competition game--—are critical for assessing the design and welfare impact of, and prospects for, this fundamental policy innovation. Analysis and calibration plausibly suggest sizable scope for minima that are Pareto-improving, benefiting low as well as high tax countries, over the uncoordinated equilibrium.
    Keywords: Tax Competition, Minimum Taxation, Corporate Tax Reform, International Taxation; competition game; policy objective; corporate tax reform; best response; country benefit; residence country; Corporate income tax; Competition; Tax avoidance; Global
    Date: 2021–10–22

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