nep-gth New Economics Papers
on Game Theory
Issue of 2022‒05‒16
nine papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Public Information Disclosure under Private Information Acquisition By Takashi Ui
  2. Network formation with NIMBY constraints By Lukas Block
  3. Positional effects in public good provision. Strategic interaction and inertia By Francisco Cabo; Alain Jean-Marie; Mabel Tidball
  4. On the outside-option principle with one-sided options By Watson, Joel
  5. Individual Rationality Conditions Identify Matching Costs in Transferable Utility Matching Games By Suguru Otani
  6. Coalition formation versus free riding in rent-seeking contests (title of the paper) By Lukas Block
  7. Attraction Versus Persuasion By Pak Hung Au; Mark Whitmeyer
  8. Policy Learning with Competing Agents By Roshni Sahoo; Stefan Wager
  9. Capacity investments in a competitive energy market By Lukas Block; Bastian Westbrock

  1. By: Takashi Ui
    Abstract: A policymaker discloses public information to interacting agents who also acquire costly private information. More precise public information reduces the precision and cost of acquired private information. Considering this effect, what disclosure rule should the policymaker adopt? We address this question under two alternative assumptions using a linear quadratic Gaussian game with arbitrary quadratic material welfare and convex information costs. First, the policymaker knows the cost of private information and adopts an optimal disclosure rule to maximize the expected welfare. Second, the policymaker is uncertain about the cost and adopts a robust disclosure rule to maximize the worst-case welfare. Depending on the elasticity of marginal cost, an optimal rule is qualitatively the same as that in the case of either a linear information cost or exogenous private information. Full disclosure is robust if and only if it is optimal under some information costs, even when no disclosure is optimal under other information costs.
    Date: 2022–03
  2. By: Lukas Block (Paderborn University)
    Abstract: We study the structure of power networks in consideration of local protests against certain power lines ('not-in-my-backyard'). An application of a network formation game is used to determine whether or not such protests arise. We examine the existence of stable networks and their characteristics, when no player wants to make an alteration. Stability within this game is only reached if each player is sufficiently connected to a power source but is not linked to more players than necessary. In addition, we introduce an algorithm that creates a stable network. (abstract of the paper)
    Keywords: Network formation, NIMBY, Power networks, Nash stability
    JEL: C71 D72 D74
    Date: 2022–04
  3. By: Francisco Cabo (Universitad de Valladolid); Alain Jean-Marie (UM - Université de Montpellier); Mabel Tidball (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro)
    Abstract: Consumption satisfaction depends on other factors apart from the inherent characteristic of commodities. Among them, positional concerns are central in behavioural economics. Individuals enjoy returns from the ranking occupied by the consumed item. In public good, agents obtain satisfaction from their relative contribution. We analyse how positional preferences for voluntary contribution to a public good favour players' contributions and could lead to social welfare improvements. A two-player public good game is analysed, first a one-shot game and later a simple dynamic game with inertia. Homogeneous and non-homogeneous individuals are considered and particular attention is given to the transition path.
    Keywords: Public good,positional concerns,inertia,static and dynamic game. JEL code: H41,D91,C72,C73
    Date: 2022–04–22
  4. By: Watson, Joel
    Keywords: Near-efficient outside options, Bargaining games, Negotiation, Bargaining solutions, The hold-up problem, Economics
    Date: 2020–06–01
  5. By: Suguru Otani
    Abstract: A widely applied method for matching maximum score estimation, introduced by \cite{fox2010qe}, is founded on measuring assortativeness in a transferable utility matching game by using pairwise stable matchings. This article shows that the use of unmatched agents, transfers, and individual rationality conditions with sufficiently large penalty terms makes it possible to identify a coefficient parameter of a single common constant, that is, a common matching cost in the market.
    Date: 2022–04
  6. By: Lukas Block (Paderborn University)
    Abstract: We study lobby group formation in a two-stage model where the players first form lobby groups that then engage in a rent-seeking contest to influence the legislator. However, the outcome of the contest affects all players according to the ideological distance between the implemented policy and the players' preferences. The players can either lobby by themselves, form a coalition of lobbyists or free ride. We find that free coalition formation is reasonable if either players with moderate preferences face lobby groups with extreme preferences, or if there are two opposing coalitions with an equal number of members. Otherwise, there are always free riders among the players. (abstract of the paper)
    Keywords: Group formation, Rent-seeking, Free riding
    JEL: C71 D72 D74
    Date: 2022–04
  7. By: Pak Hung Au (Department of Economics, The Hong Kong University of Science and Technology); Mark Whitmeyer (Hausdorff Center for Mathematics & Institute for Microeconomics, University of Bonn)
    Abstract: We consider a model of oligopolistic competition in a market with search frictions, in which competing firms with products of unknown quality advertise how much information a consumer’s visit will glean. We characterize the unique symmetric equilibrium of this game, which, due to the countervailing incentives of attraction and persuasion, generates a payoff function for each firm that is linear in the firm’s realized effective value. If the expected quality of the products is sufficiently high (or competition is sufficiently fierce), this corresponds to full information–search frictions beget the first-best level of information provision. If not, this corresponds to information dispersion–firms randomize over signals. If the attraction incentive is absent (due to hidden information or costless search), firms reveal less information and information dispersion does not arise.
    Date: 2021–02
  8. By: Roshni Sahoo; Stefan Wager
    Abstract: Decision makers often aim to learn a treatment assignment policy under a capacity constraint on the number of agents that they can treat. When agents can respond strategically to such policies, competition arises, complicating the estimation of the effect of the policy. In this paper, we study capacity-constrained treatment assignment in the presence of such interference. We consider a dynamic model where heterogeneous agents myopically best respond to the previous treatment assignment policy. When the number of agents is large but finite, we show that the threshold for receiving treatment under a given policy converges to the policy's mean-field equilibrium threshold. Based on this result, we develop a consistent estimator for the policy effect and demonstrate in simulations that it can be used for learning optimal capacity-constrained policies in the presence of strategic behavior.
    Date: 2022–04
  9. By: Lukas Block (Paderborn University); Bastian Westbrock (Hamburg University)
    Abstract: We study the abilities of competitive markets to produce sufficient energy capacities to meet a fixed energy demand. Renewable energy producers with stochastic outputs and no variable costs compete against conventional energy producers with deterministic, pollutant outputs and increasing marginal costs. We find that either market forces are strong enough to serve the entire demand, or they are too weak such that the market fails and nothing is produced. This crucially depends on the relative cost of renewable energy investments, such that relatively cheap renewable energy causes the market to fail. Welfare analyses show that with increasing levels of conventional energy pollution the ability of the market to produce an efficient outcome further declines. As a policy implication, our findings refute the use of a strategic reserve as a blackout backstop solution. Instead, a capacity mechanism consisting of a tax-and-subsidy scheme can align the market outcome with the efficient solution for all pollution levels and relative costs of renewable energy capacities.
    Keywords: Renewable versus conventional energy, capacity mechanisms, strategic reserves, capacity payments
    JEL: D41 L11 Q48
    Date: 2022–04

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