nep-gth New Economics Papers
on Game Theory
Issue of 2022‒02‒14
fifteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. A game-theoretic analysis of childhood vaccination behavior: Nash versus Kant By Philippe de Donder; Humberto Llavador; Stefan Penczynski; John E. Roemer; Roberto Vélez-Grajales
  2. Reduced two-bound core games By Gong, Doudou; Dietzenbacher, Bas; Peters, Hans
  3. The Unilateral Accident Model under a Constrained Cournot-Nash Duopoly By Gérard Mondello; Evens Salies
  4. On trust in Malawi Behaviour in trust games in 18 Malawian villages in 2007 By Moe Skjølsvold, Tomas; Berge, Erling; Bjørnstad, Sverre; Wiig, Henrik
  5. Strategic Storage Investment in Electricity Markets By Dongwei Zhao; Mehdi Jafari; Audun Botterud; Apurba Sakti
  7. Fear and Economic Behavior By Andersson, Lina
  8. Negative results in science: Blessing or (winner's) curse? By Catherine Bobtcheff; Raphaël Levy; Thomas Mariotti
  9. Optimal Discounts in Green Public Procurement By Olga Chiappinelli; Gyula Seres
  10. Endogenous multihoming and network effects: Playstation, Xbox, or both? By Foros, Øystein; Kind, Hans Jarle; Stähler, Frank
  11. Tort Law under Oligopolistic Competition By Gérard Mondello; Evens Salies
  12. The global minimum tax raises more revenues than you think, or much less By Janeba, Eckhard; Schjelderup, Guttorm
  13. Emerging infectious diseases and the economy: climate change, natural world preservation, and containment policies By William Brock; Anastasios Xepapadeas
  14. Cournot, Bertrand or Chamberlin: Market Structures and the Home Market Effect By Kenji Fujiwara
  15. Fuzzy Core Equivalence in Large Economies: A Role for the Infinite-Dimensional Lyapunov Theorem By M. Ali Khan; Nobusumi Sagara

  1. By: Philippe de Donder (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); Humberto Llavador (Unknown); Stefan Penczynski (Unknown); John E. Roemer (Unknown); Roberto Vélez-Grajales (Unknown)
    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: Vaccination,Nash equilibrium,Kantian equilibrium,Social norm
    Date: 2022–01–04
  2. 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 studies Davis-Maschler reduced games of two-bound core games and shows that all these reduced games with respect to core elements are two-bound core games with the same pair of bounds. Based on associated reduced game properties, we axiomatically characterize the core, the nucleolus, and the egalitarian core for two-bound core games. Moreover, we show that the egalitarian core for two-bound core games is single-valued and we provide an explicit expression.
    JEL: C71
    Date: 2022–01–20
  3. By: Gérard Mondello (UCA - Université Côte d'Azur); Evens Salies
    Abstract: This paper extends the basic unilateral accident model to allow for Cournot competition. Two firms compete with production input and prevention as strategic variables under asymmetric capacity constraints. We find that liability regimes exert a crucial influence on the equilibrium price and outputs. Strict liability leads to higher output and higher risk compared to negligence. We also study the conditions under which both regimes converge.
    Keywords: Tort Law,Strict Liability,Negligence Rule,Imperfect Competition,Oligopoly,Cournot Competition JEL Classification: D43,L13,L52,K13
    Date: 2021–12–26
  4. By: Moe Skjølsvold, Tomas (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Berge, Erling (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Bjørnstad, Sverre (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Wiig, Henrik (Centre for Land Tenure Studies, Norwegian University of Life Sciences)
    Abstract: This paper originates from a series of “trust games” performed in Malawi during the summer of 2007. The results from the games are interpreted as pure stylized cases of a social dilemma. Some dilemmas, such as the prisoner’s dilemma, are more difficult to resolve than others. These are also called social traps. A group encountering a social trap can resolve it to the advantage of the group only by cooperation. The experiments were conducted in 18 villages, 6 from each of the 3 regions North, Centre, and South. Fifteen households from each village participated in the study. These were first interviewed, and later one person from each household was selected to play a trust game against another representative from the village. We lost a total of 3 players resulting in game results from 267 trust games. The interviews were analysed separately and provided the material for the construction of indexes by factor analysis (Berge et al. 2020a). The paper discusses the problems encountered in using this type of experiments. Economists specializing in experiments like this will often presume that results from a trust game are a good measure of general trust. The analysis of our data suggests that the game results measure actions. Actions that can be interpreted as demonstrating trust, but not trust as such. The trust games played are constructed as a social trap. The analysis of the data suggests that there is correlation between living in a village imbued by a culture of cooperation and the ability to avoid stepping into the trap in the game. All villages seem to be characterized by a culture of cooperation. Hence all players on average earn by participating in the game. But we also see that just as the theory predicts, the ego-centred players in a village with a high level of cooperation are the players who earn the most. By constructing indexes that characterize the context of each player we see that the ego-centred player earns most in villages located closer to an urban centre and where trust in relatives and family members are strongest. The winnings are somewhat less where trust in traditional authorities is stronger. The outcomes for these general relations are modified by the fact that the impact of the indexes is different in the different regions South, Centre, and North.
    Keywords: Malawi; trust game; villages; factor indexes
    JEL: C72 C93 Z13
    Date: 2022–01–19
  5. By: Dongwei Zhao; Mehdi Jafari; Audun Botterud; Apurba Sakti
    Abstract: Arbitrage is one important revenue source for energy storage in electricity markets. However, a large amount of storage in the market will impact the energy price and reduce potential revenues. This can lead to strategic behaviors of profit-seeking storage investors. To study the investors' strategic storage investments, we formulate a non-cooperative game between competing investors. Each investor decides the storage investment over a long investment horizon, and operates the storage for arbitrage revenues in the daily electricity market. Different investors can deploy storage with different characteristics. Their decisions are coupled due to the market price that is determined by all the investors' decisions. We use market data from California ISO to characterize the storage impact on the market price, based on which we establish a centralized optimization problem to compute the market equilibrium. We show that an increasing number of investors will increase the market competition, which reduces investors' profits but increases the total invested storage capacity. Furthermore, we find that a slight increase in the storage efficiency (e.g., increased charge and discharge efficiency) can significantly improve an investor's profit share in the market.
    Date: 2022–01
  6. By: Gérard Mondello (UCA - Université Côte d'Azur)
    Abstract: This paper analyzes the impact of strict liability on imperfect competition and shows first that it is not an obstacle to achieving a socially optimal level of care. Second, this result is compromised when firms face a scarce generic asset. Under this asset limitation, this paper shows that competition (here a Cournot-Nash duopoly) leads to a lower level of prevention even if more product at lower price is supplied at the equilibrium. Introducing standards linked to operating permits improves the economy's safety level but may lead firms to exit.
    Keywords: Tort Law,Strict Liability,Negligence Rule,Imperfect Competition,Oligopoly,Cournot Competitio
    Date: 2021–12–26
  7. By: Andersson, Lina (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Fear is an important factor in decision-making under risk and uncertainty. Psychology research suggests that fear influences one’s risk attitude and fear may have important consequences for decisions concerning for example investments, crime, conflicts, and politics. I model strategic interactions between players who can be in either a neutral or a fearful state of mind. A player’s state of mind determines his or her utility function. The two main assumptions are that (i) fear is triggered by an increase in the probability or cost of negative outcomes and (ii) a player in the fearful state is more risk averse. A player’s beliefs over the probability and cost of negative outcomes determine how the player transitions between the states of mind. I use psychological game theory to analyze the role of fear in three applications, a robbery game, a bank run game, and a public health intervention.
    Keywords: emotions; fear; risk aversion; psychological game theory
    JEL: C72 D01 D91
    Date: 2022–02
  8. By: Catherine Bobtcheff (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); Raphaël Levy (HEC Paris - Ecole des Hautes Etudes Commerciales); Thomas Mariotti (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, CNRS - Centre National de la Recherche Scientifique)
    Abstract: Two players receiving independent signals on a risky project with common value compete to be the first to invest. We characterize the equilibrium of this preemption game as the publicity of signals varies. Private signals create a winner's curse: the first mover suspects that his rival might have privately received adverse information, hence exited. To compensate, players seek more evidence supporting the project, resulting in later investment. A conservative planner concerned with avoiding unprofitable investments may then prefer private signals. Our results suggest that policy interventions should primarily tackle winner-takes-all competition, and regulate transparency only once competition is sufficiently mild.
    Date: 2022–01
  9. By: Olga Chiappinelli; Gyula Seres
    Abstract: We consider a Green Public Procurement setting where the procurer provides a bid discount to environment-friendly technologies to foster their use. We assume that, before the auction, firms may switch to green technology via a publicly observable costly investment. We show that investment acts as a signaling device. This mitigates the effect of incomplete information on firms’ costs, thereby triggering more competitive bidding, which results in lower prices for the procurer. Therefore, even a procurer with no preference toward green technology can find it optimal to use a discount. Our results challenge the common perception that Green Public Procurement always implies a trade-off between environmental performance and purchasing price.
    Keywords: Public Procurement; Environmental Policy; Auctions
    JEL: D44 H57 Q58 Q55
    Date: 2021
  10. By: Foros, Øystein (Dept. of Economics, Norwegian School of Economics and Business Administration); Kind, Hans Jarle (Dept. of Economics, Norwegian School of Economics and Business Administration); Stähler, Frank (University of Tübingen)
    Abstract: Competition between firms that sell incompatible varieties of network products might be fierce, because it is important for each of them to attract a large number of users. The literature therefore predicts that stronger network effects decrease prices and profits. We show that this prediction hinges critically on an implicit or explicit assumption that each consumer buys only one of the varieties offered in the market (singlehoming consumers). We show that multihoming (some consumers buy more than one variety) may arise endogenously if the number of exclusive features that each variety offers is sufficiently high. In sharp contrast to the conventional prediction under consumer singlehoming, we further show that both prices and profits could increase in the strength of the network effects if (some) consumers multihome. However, this does not necessarily imply that profits are higher under multihoming than under singlehoming. On the contrary, multihoming might constitute a prisoner s dilemma for the firms, in the sense that they could make higher profits if each consumer bought only one of the varieties.
    Keywords: multihoming; incremental pricing; network effects.
    JEL: L13 L14 L82
    Date: 2022–02–06
  11. By: Gérard Mondello (UCA - Université Côte d'Azur); Evens Salies
    Abstract: This article extends the unilateral accident standard model to allow for Cournot competition. Assuming risk-neutrality for the regulator and injurers, it analyzes three liability regimes: strict liability, negligence rule, and strict liability with administrative authorization or permits systems. Under competition the equivalence between negligence rule and strict liability no longer holds, and negligence insures a better level of social care. However, enforcing both a permit system and strict liability restores equivalence between liability regimes. However, whatever the current regime, competition leads to lower the global safety level of industry.
    Keywords: Tort Law,Strict Liability,Negligence rule,Imperfect Competition,Oligopoly,Cournot Competition. JEL: D43,L13,L52,K13
    Date: 2021–12–26
  12. By: Janeba, Eckhard (Dept. of Economics, University of Mannheim); Schjelderup, Guttorm (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: The OECD's proposal for a global minimum tax (GMT) of 15% aims for a reversal of a decades-long race to the bottom of corporate tax rates driven by competition over real investments and profit shifting to low-tax jurisdictions. We study the revenue effects of the GMT by focusing on the induced strategic tax setting effects. The direct effect of the GMT is a reduction in profit shifting, which has a positive effect on revenues in high-tax countries as their tax base grows, and makes higher taxes attractive. A secondary effect, however, is that the value of attracting real foreign investments increases, which intensifies tax competition. We argue that the revenue effects of the GMT depend on the instruments governments use to attract firms. With endogenous corporate tax rates, revenues in non-havens increase if initially tax competition among non-havens is fierce. By contrast, when governments compete via lump sum subsidies, the revenue gains from less profit shifting are exactly offset by higher subsidies.
    Keywords: Global Minimum Tax; Tax Competition; OECD BEPS; Pillar II
    JEL: F23 F55 H25 H73
    Date: 2022–02–07
  13. By: William Brock; Anastasios Xepapadeas
    Abstract: Scientific evidence suggests that anthropogenic impacts on the environment such as land use changes and climate change promote the emergence of infectious diseases in humans. We develop a two-region epidemic-economic (epi-econ) model which unifies short-run disease containment policies with long-run policies which could control the drivers and the severity of infectious diseases. We structure our paper by linking a susceptible-infected-susceptible (SIS) model with an economic model which includes land use choices for agriculture and climate change. In the SIS model the contact number depends on short-run containment policies (e.g., lockdown, social distancing, vaccination), and the long-run policies affecting land use and the preservation of the natural world, and climate change. Utility in each region is determined by a composite consumption good produced by labor, land devoted to agriculture, and energy. Climate change and land use changes which reduce the natural world have an additional cost in terms of infectious disease since they might increase the contact number in the long run. We provide a deterministic solution as a benchmark and we compare it with outcomes derived under ambiguity associated with important parameters of the epi-econ model and ambiguity aversion.
    Keywords: infectious diseases, SIS model, natural world, climate change, containment policy, Nash equilibrium
    JEL: I18 Q54 D81
    Date: 2022–01–29
  14. By: Kenji Fujiwara (School of Economics, Kwansei Gakuin University)
    Abstract: Comparison among Cournot, Bertrand and (Chamberlin) monopolistic competition receives recent attention in industrial organization, but not in New Economic Geography (NEG). To fulfill this gap, we examine how the difference in market structures affects industry location in a footloose capital (FC) model of NEG. We find that the home market effect is strongest in Cournot competition, second strongest in Bertrand competition, and weakest in monopolistic competition.
    Keywords: Cournot competition, Bertrand competition, monopolistic competition, Home market effect
    JEL: D43 F12 F21 L13
    Date: 2022–01
  15. By: M. Ali Khan; Nobusumi Sagara
    Abstract: We present the equivalence between the fuzzy core and the core under minimal assumptions. Due to the exact version of the Lyapunov convexity theorem in Banach spaces, we clarify that the additional structure of commodity spaces and preferences is unnecessary whenever the measure space of agents is "saturated". As a spin-off of the above equivalence, we obtain the coincidence of the core, the fuzzy core, and the Schmeidler's restricted core under minimal assumptions. The coincidence of the fuzzy core and the restricted core has not been articulated anywhere.
    Date: 2021–12

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