nep-gth New Economics Papers
on Game Theory
Issue of 2022‒04‒25
fifteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Cournot meets Bayes-Nash : A Discontinuity in Behavior Infinitely Repeated Duopoly Games By Argenton, Cedric; Ivanova-Stenzel, Radosveta; Müller, Wieland
  2. A Dynamic Analysis of Criminal Networks By Luca Colombo; Paola Labrecciosa; Agnieszka Rusinowska
  3. Wage-rise contract and mixed Cournot duopoly competition with profit-maximizing and socially concerned firms By Ohnishi, Kazuhiro
  4. Information Preferences of Individual Agents in Linear-Quadratic-Gaussian Network Games By Furkan Sezer; Ceyhun Eksin
  5. "A Game-Theoretic Analysis of Childhood Vaccination Behavior: Nash versus Kant" By Philippe De Donder; Humberto Llavador; Stefan Penczynski; John E. Roemer; Roberto Vélez
  6. Strategic Communication With a Small Conflict of Interest By Francesc Dilmé
  7. Too Much of A Good Thing? By Sanktjohanser, Anna; Hörner, Johannes
  8. Estimating the Social Gap with a Game Theory Model of Lane Changing By Ang Ji; David Levinson
  9. Gender identification and stake size effects in the Impunity Game By Anabel Doñate-Buendía; Hernán Bejarano; Aurora García-Gallego
  10. Allocating Scarce Information By Richard T. Holden; Anup Malani; Chris Teh
  11. Cybersecurity and financial stability By Anand, Kartik; Duley, Chanelle; Gai, Prasanna
  12. Nonlinear Pricing in Oligopoly: How Brand Preferences Shape Market Outcomes By Gomes, Renato; Lozachmeur, Jean-Marie; Maestri, Lucas
  13. Competing with precision: incentives for developing predictive biomarker tests By Brekke, Kurt R.; Dalen, Dag Morten; Straume, Odd Rune
  14. Hours and Wages: A Bargaining Approach By Del Rey, Elena; Naval, Joaquín; Silva, José I.
  15. Bertrand competition in vertically related markets By Tomomichi Mizuno; Kazuhiro Takauchi

  1. By: Argenton, Cedric (Tilburg University, School of Economics and Management); Ivanova-Stenzel, Radosveta; Müller, Wieland (Tilburg University, School of Economics and Management)
    Date: 2022
  2. 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-PSL - 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
  3. By: Ohnishi, Kazuhiro
    Abstract: This paper investigates a Cournot game model with a nonlinear demand function where a profit-maximizing firm competes against a socially concerned firm. The timing of the game is as follows. In stage one, each firm non-cooperatively decides whether to offer a wage-rise contract policy as a strategic commitment device. In stage two, after observing the rival’s decision in stage one, each firm non-cooperatively chooses its actual output. The paper presents the equilibrium solutions of the model.
    Keywords: Cournot model; Corporate social responsibility; Profit-maximizing firm; Socially concerned firm; Wage-rise contract
    JEL: C72 D21 L20
    Date: 2022–03–24
  4. By: Furkan Sezer; Ceyhun Eksin
    Abstract: We consider linear-quadratic-Gaussian (LQG) network games in which agents have quadratic payoffs that depend on their individual and neighbors' actions, and an unknown payoff-relevant state. An information designer determines the fidelity of information revealed to the agents about the payoff state to maximize the social welfare. Prior results show that full information disclosure is optimal under certain assumptions on the payoffs, i.e., it is beneficial for the average individual. In this paper, we provide conditions based on the strength of the dependence of payoffs on neighbors' actions, i.e., competition, under which a rational agent is expected to benefit, i.e., receive higher payoffs, from full information disclosure. We find that all agents benefit from information disclosure for the star network structure when the game is symmetric and submodular or supermodular. We also identify that the central agent benefits more than a peripheral agent from full information disclosure unless the competition is strong and the number of peripheral agents is small enough. Despite the fact that all agents expect to benefit from information disclosure ex-ante, a central agent can be worse-off from information disclosure in many realizations of the payoff state under strong competition, indicating that a risk-averse central agent can prefer uninformative signals ex-ante.
    Date: 2022–03
  5. By: Philippe De Donder; Humberto Llavador; Stefan Penczynski; John E. Roemer; Roberto Vélez
    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: 2022
  6. By: Francesc Dilmé
    Abstract: This paper analyzes strategic information transmission between a sender and a receiver with similar objectives. We provide a first-order approximation of the equilibrium behavior in the general version of the Crawford and Sobel’s (1982) model with a small bias. Our analysis goes beyond the usual uniform-quadratic setting: we uncover how the state-dependent bias and the non-uniform state distribution influence the precision with which each state of the world is communicated. We illustrate the approach by providing novel comparative statics results in different applications.
    Keywords: Strategic Communication, Small Bias
    JEL: C72 D82 D83
    Date: 2022–04
  7. By: Sanktjohanser, Anna; Hörner, Johannes
    Abstract: We consider a repeated game, in which due to private information and a lack of flexible transfers, cooperation cannot be sustained efficiently. In each round, the buyer either buys from the seller or takes an outside option. The fluctuating outside option may be public or private information. When the buyer visits, the seller chooses what quality to provide. We find that the buyer initially forgoes mutually beneficial trades before then visiting more often than he would like to, myopically. Under private information, the relationship recurrently undergoes gradual self-reinforcing downturns when trust is broken and instantaneous recoveries when loyalty is shown.
    Keywords: Trust; Loyalty; Imperfect Monitoring
    JEL: C72 C73 C78
    Date: 2022–04–04
  8. By: Ang Ji; David Levinson (TransportLab, School of Civil Engineering, University of Sydney)
    Abstract: Changing lanes is a commonly-used technique for drivers to either overtake slow-moving cars or enter/exit highway ramps. Optional lane changes may save drivers travel time but increase the risk of collision with others. Drivers make such decisions based on experience and emotion rather than analysis, and thus may fail to select the best solution while in a dynamic state of flux. Unlike human drivers, autonomous vehicles can systematically analyze their surroundings and make real-time decisions accordingly. This paper develops a game theory-based lane-changing model by comparing two types of optimization methods. To realize our expectations, we need to first investigate the payoff function of drivers in discretionary lane-changing maneuvers and then quantify it in an equation of costs that trades-off safety and time-saving. After the evaluation for each alternative strategy combination, the results show that there exists a social gap in the discretionary lane-changing game. To deal with that problem, we provide some suggestions for future policy as well as autonomous vehicle controller designs, offering solutions to reduce the impact of disturbances and crashes caused by inappropriate lane changes, and also, inspire further research about more complex cases.
    Keywords: Discretionary lane changing, game theory, autonomous vehicles, human-driven vehicles, social dilemma, Games, Vehicle crash testing, Game theory, Mathematical model, Safety, Automobiles
    JEL: R41 C7
    Date: 2021
  9. By: Anabel Doñate-Buendía (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Hernán Bejarano (Economics Division, CIDE (Centro de Investigación de Docencia Económicas, A.C.), Ciudad de México, Mexico); Aurora García-Gallego (ICAE and Economics Department, Universidad Complutense de Madrid and LEE and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: In the impunity game, responders, unlike the ultimatum game, cannot affect proposer’s outcomes. Proposers in this game, like in the dictator game, have full control over their own outcome, as rejection from the responder has no effect on their payoff. Thus, the theoretical prediction of this game states that the responder should accept any offer. An experiment is designed aiming at analysing both players’ behaviour in the impunity game when subjects are aware of the gender of their partner. Additionally, we examine the effect of different stake sizes. An online experiment with eight different treatments is implemented, with a total number of 1,210 observations. The main findings are that proposers give to responders an important (around 35%) share on average, and that both the stake size and gender identification affect their decisions. Moreover, responders’ rejection patterns follow the game theoretical prediction, although the hypothesis that knowing your counterpart sex/gender affects responders’ behaviour cannot be rejected. Finally, subjects’ behaviour in this game is found to be determined by their personality and psychopathy traits, as well as by their emotional intelligence level. Other sociodemographic characteristics like place of birth or their employment status are found to also influence their decisions.
    Keywords: impunity game; experiment; gender identification; stake size
    JEL: C90 C88 D63 D64 D91
    Date: 2022
  10. By: Richard T. Holden; Anup Malani; Chris Teh
    Abstract: Sender conveys scarce information to a number of receivers to maximize the sum of receiver payoffs. Each receiver’s payoff depends on the state of the world and an action she takes. The optimal action is state contingent. Under mild regularity conditions, we show that the payoff of each receiver is convex in the amount of information she receives. Thus, it is optimal for Sender to target information to a single receiver. We then study four extensions in which interior information allocations are optimal.
    JEL: D60 D61 D80 D83
    Date: 2022–03
  11. By: Anand, Kartik; Duley, Chanelle; Gai, Prasanna
    Abstract: Cyber attacks can impair banks operations and precipitate bank runs. When digital infrastructure is shared, banks defend themselves by investing in cybersecurity but can free-ride on the security measures of others. Ex ante free-riding by banks interacts with the ex post coordination frictions underpinning bank runs. While the temptation to free-ride induces underinvestment in cybersecurity, the prospect of a run encourages greater investment. System-wide cybersecurity is suboptimal and sensitive to rollover risk and bank heterogeneity. Regulatory measures, including negligence rules, liquidity regulation and cyber hygiene notices, facilitate constrained efficient cybersecurity investment. We suggest testable hypotheses to inform empirical work in this area.
    Keywords: cyber attacks,bank runs,global games,weaker-link public goods
    JEL: G01 G21 G28 H41
    Date: 2022
  12. By: Gomes, Renato; Lozachmeur, Jean-Marie; Maestri, Lucas
    Abstract: We study oligopolistic competition by firms practicing second-degree price discrimination. In line with the literature on demand estimation, our theory allows for comovements between consumers’ taste for quality and propensity to switch brands. If low-type consumers are sufficiently less (more) brand loyal than high types, (i) quality provision is inefficiently low at the bottom (high at the top) of the product line, and (ii) informational rents are negative (positive) for high types, while positive (negative) for low types. We produce testable comparative statics on pricing and quality provision, and show that more competition (in that consumers become less brand-loyal) is welfare-decreasing whenever it tightens incentive constraints (so much so that monopoly may be welfare-superior to oligopoly). Interestingly, pure-strategy equilibria fail to exist whenever brand loyalty is sufficiently different across consumers types. Accordingly, price/quality dispersion ensues from the interplay between self-selection constraints and heterogeneity in brand loyalty.
    Keywords: competition; price discrimination; asymmetric information; preference correlation; price dispersion
    JEL: D82
    Date: 2022–03–29
  13. By: Brekke, Kurt R. (Dept. of Economics, Norwegian School of Economics and Business Administration); Dalen, Dag Morten (BI Norwegian Business School); Straume, Odd Rune (University of Minho and University of Bergen)
    Abstract: We study the incentives of drug producers to develop predictive biomarkers, taking into account strategic interaction between drug producers and health plans. For this purpose we develop a two-dimensional spatial framework that allows us to capture the informational role of biomarkers and their effects on price competition and treatment choices. Although biomarkers increase the information available to prescribers, we identify an anticompetitive effect on the prices set by producers of therapeutically substitutable drugs. We also nd that better information about each patient s most therapeutically appropriate drug does not necessarily lead to more efficient treatment outcomes.
    Keywords: Pharmaceutical markets; Precision medicine; Therapeutic competition; Predictive biomarkers
    JEL: I11 I18 L13 L65
    Date: 2022–03–31
  14. By: Del Rey, Elena; Naval, Joaquín; Silva, José I.
    Abstract: In a recent paper, Bick et al. (2022) show the presence of a hump-shaped relationship between hours and hourly wages with a maximum around 50 hours worked. We show that a model with fixed labor costs where workers and firms bargain in wages and hours can help explain this non-linear relationship. Also, a quantitative version of the model is able to match the empirical hourly-wage to hours worked relationship estimated by those authors for the US.
    Keywords: Fixed labor costs, wage-hours relationship, bargaining
    JEL: J22 J3
    Date: 2022–03–11
  15. By: Tomomichi Mizuno (Graduate School of Economics, Kobe University); Kazuhiro Takauchi (Faculty of Business and Commerce, Kansai University / Research Fellow, Graduate School of Economics, Kobe University)
    Abstract: We build a successive Bertrand model with homogenous good. We show that increasing the pro- duction efficiency of upstream industry can reduce upstream Firms' profits. We also show that increasing the production efficiency of downstream industry may reduce downstream Firms' prof- its. Hence, an industrial policy that aims at improving production efficiency may be undesirable for Firms.
    Date: 2022–04

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