nep-gth New Economics Papers
on Game Theory
Issue of 2022‒04‒18
fourteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Incentive Compatibility in Two-Stage Repeated Stochastic Games By Bharadwaj Satchidanandan; Munther A. Dahleh
  2. Cournot meets Bayes-Nash : A Discontinuity in Behavior Infinitely Repeated Duopoly Games By Argenton, Cedric; Ivanova-Stenzel, Radosveta; Müller, Wieland
  3. Strong Forward Induction in Monotonic Multi-Sender Signaling Games By Peter Vida; Takakazu Honryo; Helmuts Azacis
  4. Stable Decompositions of Coalition Formation Games By Agustín G. Bonifacio; Elena Inarra; Pablo Neme
  5. Statistical Inference in Evolutionary Dynamics By Ryoji Sawa
  6. A Dynamic Analysis of Criminal Networks By Luca Colombo; Paola Labrecciosa; Agnieszka Rusinowska
  7. Fictitious Play with Maximin Initialization By Sam Ganzfried
  8. Treating Symmetric Buyers Asymmetrically By Shraman Banerjee
  9. Partial Verifiability Induced Contests By Octavian Strimbu
  10. An Equilibrium Model of the First-Price Auction with Strategic Uncertainty: Theory and Empirics By Bernhard Kasberger
  11. Politically influenced counterterrorism policy and welfare efficiency By Subhayu Bandyopadhyay; Todd Sandler
  12. Bargaining over a Divisible Good in the Market for Lemons By Dino Gerardi; Lucas Maestri; Ignacio Monzón
  13. Reduced-Form Allocations with Complementarity: A 2-Person Case By Xu Lang
  14. The Combinatorial Multi-Round Ascending Auction By Bernhard Kasberger; Alexander Teytelboym

  1. By: Bharadwaj Satchidanandan; Munther A. Dahleh
    Abstract: We address the problem of mechanism design for two-stage repeated stochastic games -- a novel setting using which many emerging problems in next-generation electricity markets can be readily modeled. Repeated playing affords the players a large class of strategies that adapt a player's actions to all past observations and inferences obtained therefrom. In other settings such as iterative auctions or dynamic games where a large strategy space of this sort manifests, it typically has an important implication for mechanism design: It may be impossible to obtain truth-telling as a dominant strategy equilibrium. Consequently, in such scenarios, it is common to settle for mechanisms that render truth-telling only a Nash equilibrium, or variants thereof, even though Nash equilibria are known to be poor models of real-world behavior owing to each player having to make overly specific assumptions about the behaviors of the other players in order for them to employ their Nash equilibrium strategy. In general, the lesser the burden of speculation in an equilibrium, the more plausible it is that it models real-world behavior. Guided by this maxim, we introduce a new notion of equilibrium called Dominant Strategy Non-Bankrupting Equilibrium (DNBE) which requires the players to make very little assumptions about the behavior of the other players to employ their equilibrium strategy. Consequently, a mechanism that renders truth-telling a DNBE as opposed to only a Nash equilibrium could be quite effective in molding real-world behavior along the desired lines. Finally, we present a mechanism for two-stage repeated stochastic games that renders truth-telling a Dominant Strategy Non-Bankrupting Equilibrium. The mechanism also guarantees individual rationality and maximizes social welfare.
    Date: 2022–03
  2. By: Argenton, Cedric (Tilburg University, TILEC); Ivanova-Stenzel, Radosveta; Müller, Wieland (Tilburg University, TILEC)
    Keywords: cournot; Bayesian game; Bayes-Nash equilibrium; repeated games; collusion; cooperation; experimental economics
    Date: 2022
  3. By: Peter Vida; Takakazu Honryo; Helmuts Azacis (Université de Cergy-Pontoise, THEMA)
    Abstract: We introduce a new solution concept called strong forward induction which is implied by strategic stability in generic finite multi-sender signaling games (Proposition 1) and can be easily extended to and applied in arbitrary extensive form games with perfect recall. We apply this notion to infinite monotonic 10 signaling games and show that a unique pure strong forward induction equilibrium exists and its outcome is necessarily non-distorted (Theorem 1). Finally, we show that in this class of games the non-distorted equilibrium outcomes are limits of stable outcomes of finite games (Proposition 2).
    Keywords: multi-sender signaling, forward induction, strategic stability, monotonic games
    JEL: C72 D82
    Date: 2022
  4. By: Agustín G. Bonifacio (Universidad Nacional de San Luis/CONICET); Elena Inarra (University of the Basque Country); Pablo Neme (Universidad Nacional de San Luis/CONICET)
    Abstract: It is known that a coalition formation game may not have a stable coalition structure. In this study we propose a new solution concept for these games, which we call “stable decomposition”, and show that each game has at least one. This solution consists of a collection of coalitions organized in sets that “protect” each other in a stable way. When sets of this collection are singletons, the stable decomposition can be identified with a stable coalition structure. As an application, we study convergence to stability in coalition formation games.
    Keywords: Coalition formation, matching, absorbing sets, stable decompositions.
    JEL: C71 C78
    Date: 2022–01
  5. By: Ryoji Sawa
    Abstract: We introduce evolutionary dynamics for two-action games where agents with diverse preferences use statistical inference to guide their behavior. We show that the dynamic converges to a Bayesian sampling equilibrium with statistical inference (SESI) and the set of Bayesian SESIs is globally asymptotically stable. We discuss the global convergence to a unique Bayesian SESI in anti-coordination games, a welfare-improving tax scheme, equilibrium selection in coordination games, an application to the diffusion of behavior on networks, and the extension of heterogeneity to the inference procedures.
    Date: 2022–03
  6. By: Luca Colombo (Deakin University, Burwood, Australia - Deakin University [Burwood]); Paola Labrecciosa (Monash Business School); Agnieszka Rusinowska (CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, 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)
    Abstract: The paper presents a novel approach based on di¤erential games to the study of criminal networks. We extend the static crime network game (Ballester et al., 2004, 2006) to a dynamic setting. First, we determine the relationship between the Markov Perfect Equilibrium (MPE) and the vector of Bonacich centralities. The established proportionality between the Nash equilibrium and the Bonacich centrality in the static game does not hold in general in the dynamic setting. Next, focusing on regular networks, we provide an explicit characterization of equilibrium strategies, and conduct comparative dynamic analysis with respect to the network size, network density, and implicit growth rate of total wealth in the economy. Contrary to the static game, where aggregate equilibrium increases with network size and density, in the dynamic setting, more criminals or more connected criminals can lead to a decrease in total crime, both in the short run and at the steady state. We also examine another novel issue in the network theory literature, i.e., the existence of a voracity e¤ect, occurring when an increase in the implicit growth rate of total wealth in the economy lowers economic growth. We do identify the presence of such a voracity e¤ect in our setting.
    Keywords: differential games,Markov Perfect Equilibrium,social networks,criminal networks,Bonacich centrality
    Date: 2022–02–28
  7. By: Sam Ganzfried
    Abstract: Fictitious play has recently emerged as the most accurate scalable algorithm for approximating Nash equilibrium strategies in multiplayer games. We show that the degree of equilibrium approximation error of fictitious play can be significantly reduced by carefully selecting the initial strategies. We present several new procedures for strategy initialization and compare them to the classic approach, which initializes all pure strategies to have equal probability. The best-performing approach, called maximin, solves a nonconvex quadratic program to compute initial strategies and results in a nearly 75% reduction in approximation error compared to the classic approach when 5 initializations are used.
    Date: 2022–03
  8. By: Shraman Banerjee (Department Of Economics, Shiv Nadar University)
    Abstract: We investigate a finite-horizon dynamic pricing problem of a seller under limited commitment. Even when the buyers are ex-ante symmetric to the seller, the seller can charge different prices to different buyers. We show that under the class of posted-price mechanisms this asymmetric treatment of symmetric buyers strictly revenue-dominates symmetric treatment. The seller implements this by using a priority-based deterministic tie-breaking rule instead of using a random tie-breaking rule. The effect of asymmetric treatment on revenue increment increases monotonically as we increase the time horizon of the game.
    Keywords: Dynamic Pricing, Asymmetric Mechanism.
    JEL: C70 D42 D44 D82
    Date: 2022–03–25
  9. By: Octavian Strimbu
    Abstract: In a simple common agency (a first-price menu auction with two bidders), the interest groups compete for the political prize awarded by an official. I show that if in the complete information setting one drops the perfect verifiability of the outcome assumption, the ensuing game turns out to be a contest. As the conicting interest groups observe but may only partially verify the policy chosen by the official, they will play mixed strategies. I characterize these strategies and the interest groups'betting behaviour relative to their verification technologies. The probability of getting an inefficient policy as outcome of the inuence game is derived from the equilibrium strategies.
    Keywords: Contests, Common agency, Partial verifiability
    JEL: D44 D72 D80
    Date: 2022–04
  10. By: Bernhard Kasberger
    Abstract: In many first-price auctions, bidders face considerable strategic uncertainty: They cannot perfectly anticipate the other bidders' bidding behavior. We propose a model in which bidders do not know the entire distribution of opponent bids but only the expected (winning) bid and lower and upper bounds on the opponent bids. We characterize the optimal bidding strategies and prove the existence of equilibrium beliefs. Finally, we apply the model to estimate the cost distribution in highway procurement auctions and find good performance out-of-sample.
    Date: 2022–02
  11. By: Subhayu Bandyopadhyay; Todd Sandler
    Abstract: The paper examines how two targeted countries strategically deploy their counterterror forces when lobbying defense firms influence counterterror provision. For proactive measures, lobbying activities in a single targeted country lessen underprovision, raise overall counterterrorism, and reduce terrorism. Welfare decreases in the politically influenced country but increases in the other targeted country owing to enhanced free riding. Lobbying influence on the targeted countries’ welfare is tied to terrorists’ targeting preferences and how the lobbied government weighs citizens’ welfare. For key parametric values, lobbying in both targeted countries may result in the first-best equilibrium. With two-country lobbying, international policy coordination by at-risk governments may lead, surprisingly, to less efficient outcomes than the noncooperative equilibrium. Additionally, lobby-influenced defensive countermeasures generally affect efficiency adversely.
    Keywords: proactive counterterror and lobbying; drones; unilateral Nash equilibrium; politically influenced Nash equilibrium; welfare efficiency
    JEL: D74 H23 H41
    Date: 2022–03
  12. By: Dino Gerardi (Collegio Carlo Alberto/University of Turin); Lucas Maestri (FGV/EPGE); Ignacio Monzón (Collegio Carlo Alberto/University of Turin)
    Abstract: We study bargaining with divisibility and interdependent values. A buyer and a seller trade a divisible good. The seller is privately informed about its quality, which can be high or low. Gains from trade are positive and decreasing. The buyer makes offers over time. Divisibility introduces a new channel of competition between the buyer’s present and future selves. The buyer’s temptation to split the purchases of the high-quality good is detrimental to him. As bargaining frictions vanish and the good becomes arbitrarily divisible, the high-quality good is traded smoothly over time and the buyer’s payoff shrinks to zero.
    Keywords: : bargaining, gradual sale, Coase conjecture, divisible objects, interdependent valuations, market for lemons.
    Date: 2022–01
  13. By: Xu Lang
    Abstract: We investigate the implementation of reduced-form allocation probabilities in a two-person bargaining problem without side payments, where the agents have to select one alternative from a finite set of social alternatives. We provide a necessary and sufficient condition for the implementability. We find that the implementability condition in bargaining has some new feature compared to Border's theorem. Our results have applications in compromise problems and package exchange problems where the agents barter indivisible objects and the agents value the objects as complements.
    Date: 2022–02
  14. By: Bernhard Kasberger; Alexander Teytelboym
    Abstract: The Combinatorial Multi-Round Auction (CMRA) is a new auction format which has already been used in several recent European spectrum auctions. We characterize equilibria in the CMRA that feature auction-specific forms of truthful bidding, demand expansion, and demand reduction for settings in which bidders have either decreasing or non-decreasing marginal values. In particular, we establish sufficient conditions for riskless collusion. Overall, our results suggest that the CMRA might be an attractive auction design in the presence of highly complementary goods on sale. We discuss to what extent our theory is consistent with outcomes data in Danish spectrum auctions and how our predictions can be tested using bidding data.
    Date: 2022–03

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