nep-gth New Economics Papers
on Game Theory
Issue of 2022‒03‒28
sixteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Collaboration in Bipartite Networks By Chih-Sheng Hsieh; Michael D König; Xiaodong Liu; Christian Zimmermann
  2. Information Design in Concave Games By Alex Smolin; Takuro Yamashita
  3. Preferences and strategic behavior in public goods games By Gilles Grandjean; Mathieu Lefebvre; Marco Mantovani
  4. Weighting the Waiting: Intertemporal Social Preferences By Kirsten Rohde; Job van Exel; Merel van Hulsen
  5. Price formation in financial markets: a game-theoretic perspective By David Evangelista; Yuri Saporito; Yuri Thamsten
  6. Optimal Investment in a Large Population of Competitive and Heterogeneous Agents By Ludovic Tangpi; Xuchen Zhou
  7. Unknottedness of the Graph of Pairwise Stable Networks & Network Dynamics By Julien Fixary
  8. Strategic Behavior in a Serial Newsvendor By Nicole Perez Becker; Benny Mantin; Joachim Arts
  9. Trade Wars, Currency Wars By Stéphane Auray; Michael B. Devereux; Aurélien Eyquem
  10. Narratives, Imperatives, and Moral Persuasion By Roland Bénabou; Armin Falk; Jean Tirole
  11. Other-Regarding Preferences and Giving Decision in a Risky Environment: Experimental Evidence By Mickael Beaud; Mathieu Lefebvre; Julie Rosaz
  12. Cheap Talk and Coordination in the Lab and in the Field: Collective Commercialization in Senegal By Kodjo Aflagah; Tanguy Bernard; Angelino Viceisza
  13. HCMD-zero: Learning Value Aligned Mechanisms from Data By Jan Balaguer; Raphael Koster; Ari Weinstein; Lucy Campbell-Gillingham; Christopher Summerfield; Matthew Botvinick; Andrea Tacchetti
  14. Estimating Possible Subsidy Effects in Broadband Services and Deployment By Mohammadi, Mohammad Ali
  16. Shadow banking and the four pillars of traditional financial intermediation By Emmanuel Farhi; Jean Tirole

  1. By: Chih-Sheng Hsieh (Department of Economics, National Taiwan University); Michael D König (Centre for Economic Policy Research (CEPR), London); Xiaodong Liu (Department of Economics, University of Colorado Boulder); Christian Zimmermann (Department of Economic Research, Federal Reserve Bank of St. Louis)
    Abstract: This paper studies the impact of collaboration on research output. First, we build a micro-founded model for scientific knowledge production, where collaboration between researchers is represented by a bipartite network. The Nash equilibrium of the game incorporates both the complementarity effect between collaborating researchers and the substitutability effect between concurrent projects of the same researcher. Next, we propose a Bayesian MCMC procedure to estimate the structural parameters, taking into account the endogenous participation of researchers in projects. Finally, we illustrate the empirical relevance of the model by analyzing the coauthorship network of economists registered in the RePEc Author Service. The estimated complementarity and substitutability effects are both positive and significant when the endogenous matching between researchers and projects is controlled for, and are downward biased otherwise. To show the importance of correctly estimating the structural model in policy evaluation, we conduct a counterfactual analysis of research incentives. We find that the effectiveness of research incentives tends to be understated when the complementarity effect is ignored and overstated when the substitutability effect is ignored.
    Keywords: bipartite networks, coauthorship networks, research collaboration, spillovers, economics of science
    Date: 2022–02
  2. By: Alex Smolin; Takuro Yamashita
    Abstract: We study information design in games with a continuum of actions such that the players' payoffs are concave in their own actions. A designer chooses an information structure--a joint distribution of a state and a private signal of each player. The information structure induces a Bayesian game and is evaluated according to the expected designer's payoff under the equilibrium play. We develop a method that facilitates the search for an optimal information structure, i.e., one that cannot be outperformed by any other information structure, however complex. We show an information structure is optimal whenever it induces the strategies that can be implemented by an incentive contract in a dual, principal-agent problem which aggregates marginal payoffs of the players in the original game. We use this result to establish the optimality of Gaussian information structures in settings with quadratic payoffs and a multivariate normally distributed state. We analyze the details of optimal structures in a differentiated Bertrand competition and in a prediction game.
    Date: 2022–02
  3. By: Gilles Grandjean (CEREC - Université Saint-Louis - Bruxelles); Mathieu Lefebvre (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Marco Mantovani (University of Milan, Department of Economics, University of Milan Bicocca)
    Abstract: In finitely repeated public goods games, contributions are initially high, and gradually decrease over time. Two main explanations are consistent with this pattern: (i) the population is composed of free-riders, who never contribute, and conditional cooperators, who contribute if others do so as well; (ii) strategic players contribute to sustain mutually beneficial future cooperation, but reduce their contributions as the end of the game approaches. This paper analyzes experimentally these explanations, by manipulating group composition to form homogeneous groups on both the preference and the strategic ability dimensions. Our results highlight the role of strategic ability in sustaining contributions, and suggest that the interaction between the two dimensions also matters: we find that groups that sustain high levels of cooperation are composed of members who share a common inclination toward cooperation and also have the strategic abilities to recognize and reap the benefits of enduring cooperation.
    Keywords: Voluntary contribution,public goods,conditional cooperation,free riding,strategic sophistication
    Date: 2022–03
  4. By: Kirsten Rohde (Erasmus University Rotterdam); Job van Exel (Erasmus University Rotterdam); Merel van Hulsen (Erasmus University Rotterdam)
    Abstract: This paper studies intertemporal social preferences. We introduce intertemporal dictator and ultimatum games where players decide on the timing of monetary payoffs. The setting is two-dimensional rather than one-dimensional, in the sense that inequalities can arise in the time as well as in the social dimension. The results of our experiment show that for equal monetary payoffs, decisions regarding waiting time show similar patterns as decisions regarding monetary payoffs in the standard games. Moreover, decisions regarding waiting time depend on inequalities in monetary payoffs in a systematic way, with this dependence being more pronounced in ultimatum than in dictator games.
    Keywords: Social preferences, time preferences, dictator game, ultimatum game
    Date: 2022–03–20
  5. By: David Evangelista; Yuri Saporito; Yuri Thamsten
    Abstract: We propose two novel frameworks to study the price formation of an asset negotiated in an order book. Specifically, we develop a game-theoretic model in many-person games and mean-field games, considering costs stemming from limited liquidity. We derive analytical formulas for the formed price in terms of the realized order flow. We also identify appropriate conditions that ensure the convergence of the price we find in the finite population game to that of its mean-field counterpart. We numerically assess our results with a large experiment using high-frequency data from ten stocks listed in the NASDAQ, a stock listed in B3 in Brazil, and a cryptocurrency listed in Binance.
    Date: 2022–02
  6. By: Ludovic Tangpi; Xuchen Zhou
    Abstract: This paper studies a stochastic utility maximization game under relative performance concerns in finite agent and infinite agent settings, where a continuum of agents interact through a graphon (see definition below). We consider an incomplete market model in which agents have CARA utilities, and we obtain characterizations of Nash equilibria in both the finite agent and graphon paradigms. Under modest assumptions on the denseness of the interaction graph among the agents, we establish convergence results for the Nash equilibria and optimal utilities of the finite player problem to the infinite player problem. This result is achieved as an application of a general backward propagation of chaos type result for systems of interacting forward-backward stochastic differential equations, where the interaction is heterogeneous and through the control processes, and the generator is of quadratic growth. In addition, characterizing the graphon game gives rise to a novel form of infinite dimensional forward-backward stochastic differential equation of Mckean-Vlasov type, for which we provide well-posedness results. An interesting consequence of our result is the computation of the competition indifference capital, i.e., the capital making an investor indifferent between whether or not to compete.
    Date: 2022–02
  7. By: Julien Fixary (UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We extend Bich-Fixary's theorem ([2]) about the topological structure of the graph of pairwise stable networks. Namely, we show that the graph of pairwise stable networks is not only homeomorphic to the space of societies, but that it is ambient isotopic to a trivial copy of this space (a result in the line of Demichelis-Germano's unknottedness theorem ([7])). Furthermore, we introduce the notion of (extended) network dynamics which refers to families of vector fields on the set of weighted networks whose zeros correspond to pairwise stable networks. We use our version of the unknottedness theorem to show that most of network dynamics can be continuously connected to each other, without adding additional zeros. Finally, we prove that this result has an important consequence on the indices of these network dynamics at any pairwise stable network, a concept that we link to genericity using Bich-Fixary's oddness theorem ([2]).
    Keywords: Pairwise Stability,Unknottedness Theorem,Network Dynamics,Genericity
    Date: 2022–01
  8. By: Nicole Perez Becker (LCL, Université du Luxembourg); Benny Mantin (LCL, Université du Luxembourg); Joachim Arts (LCL, Université du Luxembourg)
    Abstract: We study the interaction between an upstream seller and an intermediate buyer, both of whom face uncertainty related to downstream demand, over a two-period horizon. The buyer replenishes every period, whereas the seller has only one ordering opportunity at the beginning of the horizon. Since both agents make quantity decisions before demand realizes, they face demand mismatch risks and have incentives to limit these risks through their quantity decisions. We study the effects of varying degrees of buyer strategic behavior on inventory decisions and seller profitability
    Keywords: Strategic consumers; multi-unit purchases; inventory games.
    JEL: C73 D24 M11
    Date: 2022
  9. By: Stéphane Auray (CREST-Ensai and Université du Littoral Côte d’Opale, France); Michael B. Devereux (Vancouver School of Economics, University of British Columbia, Canada); Aurélien Eyquem (Université Lumière Lyon2, France)
    Abstract: Countries distort trade patterns (‘trade wars’) to gain strategic advantage relative to one another. At the same time, monetary policies are set independently and have spillover effects on partner countries (‘currency wars’). We combine these two scenarios, and show that they interact in deep and interesting ways. The stance of monetary policy has substantial effects on the equilibrium degree of protection in a Nash equilibrium of the monetary and trade policy game. Trade wars lead to higher equilibrium inflation rates. Cooperation in monetary policy leads to both higher inflation and greater degree of trade protection. By contrast, when monetary policy is constrained by pegged exchange rates or the zero lower bound on interest rates, equilibrium tariffs are lower. Finally, when one country has the dominant currency in trade, it gains a large advantage in a trade war.
    Keywords: Protectionism, Currency Wars, Trade Wars
    JEL: F30 F40 F41
    Date: 2021–09–19
  10. By: Roland Bénabou (Princeton University); Armin Falk (University of Bonn); Jean Tirole (University of Toulouse Capitole)
    Abstract: We study the production and circulation of arguments justifying actions on the basis of morality. By downplaying externalities, exculpatory narratives allow people to maintain a positive image while acting selfishly. Conversely, responsibilizing narratives raise both direct and reputational stakes, fostering prosocial behavior. These rationales diffuse along a linear network, through both costly signaling and strategic disclosure. The norms that emerge reflect local correlation in agents’ incentives (reputation versus influence concerns), with low mixing generating both a polarization of beliefs across groups and less moral behavior on average. Imperatives (general precepts) constitute an alternative mode of moral influence. We analyze their costs and benefits relative to those of narratives, and when the two will be used as substitutes or complements.
    Keywords: Moral behavior, narratives, imperatives, rules, excuses, responsibility, networks, viral transmission, influence, reputation, disclosure, communication, social norms
    JEL: D62 D64 D78 D83 D85 D91 H41 K42 L14 Z13
    Date: 2020–04
  11. By: Mickael Beaud (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Mathieu Lefebvre (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Julie Rosaz (CEREN - Centre de Recherche sur l'ENtreprise [Dijon] - BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC))
    Abstract: We investigate whether and how an individual giving decision is affected in risky environments in which the recipient's wealth is random. We demonstrate that, under risk neutrality, the donation of dictators with a purely ex post view of fairness should, in general, be affected by the riskiness of the recipient's payoff, while dictators with a purely ex ante view should not be. Furthermore, we observe that some influential inequality aversion preferences functions yield opposite predictions when we consider ex post view of fairness. Hence, we report on dictator games laboratory experiments in which the recipient's wealth is exposed to an actuarially neutral and additive background risk. Our experimental data show no statistically significant impact of the recipient's risk exposure on dictators' giving decisions. This result appears robust to both the experimental design (within subjects or between subjects) and the origin of the recipient's risk exposure (chosen by the recipient or imposed on the recipient). Although we cannot sharply validate or invalidate alternative fairness theories, the whole pattern of our experimental data can be simply explained by assuming ex ante view of fairness and risk neutrality.
    Keywords: Laboratory experiments,Dictator games,Background risk
    Date: 2022
  12. By: Kodjo Aflagah (University of Maryland [College Park] - University of Maryland System); Tanguy Bernard (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Angelino Viceisza (Spelman College)
    Abstract: Most developing-country farms are small and engage in cooperative agriculture. Prior literature has argued that mechanisms aimed at facilitating smallholder coordination such as cooperatives are central to stimulating market participation. At the same time, cooperatives have not always been able to engage in collective action. In this paper, we conduct neutrally framed coordination games and a natural field experiment to test the effect of cheap talk among members of groundnut-producing cooperatives in Senegal. In both experiments, we ask farmers how much they intend to contribute to the group prior to them actually doing so and then, confidentially reveal aggregate intentions to other cooperative members. Based on survey and administrative data, we find that (1) revealing farmers' intentions improves collective commercialization and this effect increases with group size and (2) learning in the lab transfers to behavior in the day-to-day environment. Implications for policy and future work are discussed.
    Keywords: Cooperatives,Collective commercialization,Coordination,Cheap talk,Field experiments,Development
    Date: 2022
  13. By: Jan Balaguer; Raphael Koster; Ari Weinstein; Lucy Campbell-Gillingham; Christopher Summerfield; Matthew Botvinick; Andrea Tacchetti
    Abstract: Artificial learning agents are mediating a larger and larger number of interactions among humans, firms, and organizations, and the intersection between mechanism design and machine learning has been heavily investigated in recent years. However, mechanism design methods make strong assumptions on how participants behave (e.g. rationality), or on the kind of knowledge designers have access to a priori (e.g. access to strong baseline mechanisms). Here we introduce HCMD-zero, a general purpose method to construct mechanism agents. HCMD-zero learns by mediating interactions among participants, while remaining engaged in an electoral contest with copies of itself, thereby accessing direct feedback from participants. Our results on the Public Investment Game, a stylized resource allocation game that highlights the tension between productivity, equality and the temptation to free-ride, show that HCMD-zero produces competitive mechanism agents that are consistently preferred by human participants over baseline alternatives, and does so automatically, without requiring human knowledge, and by using human data sparingly and effectively Our detailed analysis shows HCMD-zero elicits consistent improvements over the course of training, and that it results in a mechanism with an interpretable and intuitive policy.
    Date: 2022–02
  14. By: Mohammadi, Mohammad Ali
    Abstract: In this work, the dynamic competition between firms providing internet services is studied. The framework is Markov equilibrium whereby structural parameters are obtained using two-step estimations, allowing for analyzing the situation in case of subsidies for service upgrade. The results show that such subsidy has little effect on the number of firms while increasing the number of fast firms.
    Keywords: Structural estimation, dynamic competition, Markov perfect equilibrium, investment in Internet provision, subsidies
    JEL: C73 L13 L50 L86
    Date: 2021–07–31
  15. By: Haim Shalit (BGU)
    Date: 2022
  16. By: Emmanuel Farhi (Harvard University [Cambridge], NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research); Jean Tirole (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, IAST - Institute for Advanced Study in Toulouse)
    Abstract: Traditional banking is built on four pillars: SME lending, insured deposit taking, access to lender of last resort, and prudential supervision. This paper unveils the logic of the quadrilogy by showing that it emerges naturally as an equilibrium outcome in a game between banks and the government. A key insight is that regulation and public insurance services (LOLR, deposit insurance) are complementary. The model also shows how prudential regulation must adjust to the emergence of shadow banking, and rationalizes structural remedies to counter bogus liquidity hoarding and financial contagion: ring-fencing between regulated and shadow banking and the sharing of liquidity in centralized platforms.
    Keywords: Narrow banks,CCPs,Ring-fencing,Migration,Supervision,Deposit insurance,Lender of last resort,Retail and shadow banks
    Date: 2021–11

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