nep-gth New Economics Papers
on Game Theory
Issue of 2022‒05‒23
fourteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Control and spread of contagion in networks with global effects By John Higgins; Tarun Sabarwal
  2. A Rotating Proposer Mechanism for Team Formation By Jian Low; Chen Hajaj; Yevgeniy Vorobeychik
  3. Eigen mode selection in human subject game experiment By Zhijian Wang; Qinmei Yao; Yijia Wang
  4. The Variability of Conditional Cooperation in Sequential Prisoner’s Dilemmas By Simon Gaechter; Kyeongtae Lee; Martin Sefton
  5. Contests to Incentivize a Target Group By Edith Elkind; Abheek Ghosh; Paul Goldberg
  6. Optimal Accuracy of Unbiased Tullock Contests with Two Heterogeneous Players By Marco Sahm
  7. Reserve Prices as Signals By Onur A. Koska; Frank Stähler
  8. Preferences and Perceptions in Provision and Maintenance Public Goods By Simon Gaechter; Felix Koelle; Simone Quercia
  9. Competing Sellers in Security-Bid Auctions under Risk-Averse Bidders By Diego Carrasco-Novoa; Allan Hernández-Chanto
  10. On the Robustness of Second-Price Auctions in Prior-Independent Mechanism Design By Jerry Anunrojwong; Santiago Balseiro; Omar Besbes
  11. Learning Through Imitation: an Experiment By Marina Agranov; Gabriel Lopez-Moctezuma; Philipp Strack; Omer Tamuz
  12. Auctioning Multiple Goods without Priors By Wanchang Zhang
  13. Initially contestable property rights and Coase: evidence from the lab By Lana Friesen; Ian A. MacKenzie; Mai Phuong Nguyen
  14. Regulation through Reference Prices By Alfredo Salgado

  1. By: John Higgins (Department of Economics, University of Wisconsin, Madison, WI 53706, USA); Tarun Sabarwal (Department of Economics, University of Kansas, Lawrence, KS 66045, USA)
    Abstract: We study proliferation of an action in binary action network coordination games that are generalized to include global effects. This captures important aspects of proliferation of a particular action or narrative in online social networks, providing a basis to understand their impact on societal outcomes. Our model naturally captures complementarities among starting sets, network resilience, and global effects, and highlights interdependence in channels through which contagion spreads. We present new, natural, and computationally tractable algorithms to define and compute equilibrium objects that facilitate the general study of contagion in networks and prove their theoretical properties. Our algorithms are easy to implement and help to quantify relationships previously inaccessible due to computational intractability. Using these algorithms, we study the spread of contagion in scale-free networks with 1,000 players using millions of Monte Carlo simulations. Our analysis provides quantitative and qualitative insight into the design of policies to control or spread contagion in networks. The scope of application is enlarged given the many other situations across different fields that may be modeled using this framework.
    Keywords: Network games, coordination games, contagion, algorithmic computation
    JEL: C62 C72
    Date: 2022–04
  2. By: Jian Low; Chen Hajaj; Yevgeniy Vorobeychik
    Abstract: We present a rotating proposer mechanism for team formation, which implements a Pareto efficient subgame perfect Nash equilibrium of an extensive-form team formation game.
    Date: 2022–04
  3. By: Zhijian Wang; Qinmei Yao; Yijia Wang
    Abstract: Eigen mode selection ought to be a practical issue in some real game systems, as it is a practical issue in the dynamics behaviour of a building, bridge, or molecular, because of the mathematical similarity in theory. However, its reality and accuracy have not been known in real games. We design a 5-strategy game which, in the replicator dynamics theory, is predicted to exist two eigen modes. Further, in behaviour game theory, the game is predicted that the mode selection should depends on the game parameter. We conduct human subject game experiments by controlling the parameter. The data confirm that, the predictions on the mode existence as well as the mode selection are significantly supported. This finding suggests that, like the equilibrium selection concept in classical game theory, eigen mode selection is an issue in game dynamics theory.
    Date: 2022–04
  4. By: Simon Gaechter (University of Nottingham); Kyeongtae Lee (Economic Research Institute, Bank of Korea); Martin Sefton (University of Nottingham)
    Abstract: We examine how conditional cooperation is related to the material payoffs in a Sequential Prisoner’s Dilemma experiment. We have subjects play eight SPDs with varying payoffs, systematically varying the material gain to the second-mover and the material loss to the first-mover when the second-mover defects in response to cooperation. We find that few second-movers are conditionally cooperative in all eight games, and most second-movers change their strategies from game to game. Second-movers are less likely to conditionally cooperate when the gain is higher and when the loss is lower. This pattern is consistent with models of distributional preferences.
    Keywords: prisoner’s dilemma, conditional cooperation,
    Date: 2022–10
  5. By: Edith Elkind; Abheek Ghosh; Paul Goldberg
    Abstract: We study how to incentivize agents in a target group to produce a higher output in the context of incomplete information, by means of rank-order allocation contests. We describe a symmetric Bayes--Nash equilibrium for contests that have two types of rank-based prizes: prizes that are accessible only to the agents in the target group; prizes that are accessible to everyone. We also specialize this equilibrium characterization to two important sub-cases: (i) contests that do not discriminate while awarding the prizes, i.e., only have prizes that are accessible to everyone; (ii) contests that have prize quotas for the groups, and each group can compete only for prizes in their share. For these models, we also study the properties of the contest that maximizes the expected total output by the agents in the target group.
    Date: 2022–04
  6. By: Marco Sahm
    Abstract: I characterize the optimal accuracy level r of an unbiased Tullock contest between two players with heterogeneous prize valuations. The designer maximizes the winning probability of the strong player or the winner’s expected valuation by choosing a contest with an all-pay auction equilibrium (r ≥ 2). By contrast, if she aims at maximizing the expected aggregate effort or the winner’s expected effort, she will choose a contest with a pure-strategy equilibrium, and the optimal accuracy level r
    Keywords: Tullock contest, heterogeneous valuations, accuracy, discrimination, optimal design, all-pay auction
    JEL: C72 D72
    Date: 2022
  7. By: Onur A. Koska; Frank Stähler
    Abstract: This paper discusses the role of secret versus public reserve prices when bidders’ valuations depend positively on the seller’s private signal. A public reserve price is announced before the auction starts, and a secret reserve price is disclosed after the highest bid has been reached. The public reserve price regime may warrant a distortion as a good seller type may have to increase the reserve price beyond payo˙-maximization in order to be able to credibly signal her type. We introduce and determine a rational signaling equilibrium which adds two domination-based conditions to the belief structure of a weak perfect Bayesian equilibrium. We show that a secret (public) reserve price design qualifies as an equilibrium if the distortion is large (small).
    Keywords: auctions, interdependent values, optimal reserve prices, rational signaling
    JEL: D44
    Date: 2022
  8. By: Simon Gaechter (University of Nottingham); Felix Koelle (University of Cologne); Simone Quercia (University of Verona)
    Abstract: We study two generic versions of public goods problems: in Provision problems, the public good does not exist initially and needs to be provided; in Maintenance problems, the public good already exists and needs to be maintained. We document a robust asymmetry in preferences and perceptions in two incentive-equivalent versions of these public good problems. We find fewer conditional cooperators and more free riders in Maintenance than Provision, a difference that is replicable, stable, and reflected in perceptions of kindness. Incentivized control questions administered before gameplay reveal dilemma-specific misperceptions but controlling for them neither eliminates game-dependent conditional cooperation, nor differences in perceived kindness of others’ cooperation. Thus, even when sharing the same game form, Maintenance and Provision are different social dilemmas that require separate behavioral analyses. A theory of revealed altruism can explain some features of our results.
    Keywords: maintenance and provision social dilemmas, conditional cooperation, kindness, misperceptions, experiments, revealed altruism
    Date: 2022–09
  9. By: Diego Carrasco-Novoa (School of Economics, University of Queensland, Brisbane, Australia); Allan Hernández-Chanto (School of Economics, University of Queensland, Brisbane, Australia)
    Abstract: We analyze security-bid auctions in which two risk-neutral sellers compete for riskaverse bidders. Sellers face a tradeoff in steepness because steeper securities extract more surplus but feature lower participation ex-ante. Nonetheless, steeper securities also provide higher insurance, making bidders more aggressive. We show that when bidders are homogeneously risk-averse, all equilibria are symmetric. Meanwhile, when they are heterogeneously risk-averse, there is always an equilibrium in which one seller chooses a steeper family to serve the more-risk-averse bidders, while the other chooses a flatter family to serve the less-risk-averse bidders. This result resembles a “Hotelling location” model in the steepness spectrum.
    Date: 2022–04
  10. By: Jerry Anunrojwong; Santiago Balseiro; Omar Besbes
    Abstract: Classical Bayesian mechanism design relies on the common prior assumption, but the common prior is often not available in practice. We study the design of prior-independent mechanisms that relax this assumption: the seller is selling an indivisible item to $n$ buyers such that the buyers' valuations are drawn from a joint distribution that is unknown to both the buyers and the seller; buyers do not need to form beliefs about competitors, and the seller assumes the distribution is adversarially chosen from a specified class. We measure performance through the worst-case regret, or the difference between the expected revenue achievable with perfect knowledge of buyers' valuations and the actual mechanism revenue. We study a broad set of classes of valuation distributions that capture a wide spectrum of possible dependencies: independent and identically distributed (i.i.d.) distributions, mixtures of i.i.d. distributions, affiliated and exchangeable distributions, exchangeable distributions, and all joint distributions. We derive in quasi closed form the minimax values and the associated optimal mechanism. In particular, we show that the first three classes admit the same minimax regret value, which is decreasing with the number of competitors, while the last two have the same minimax regret equal to that of the case $n = 1$. Furthermore, we show that the minimax optimal mechanisms have a simple form across all settings: a second-price auction with random reserve prices, which shows its robustness in prior-independent mechanism design. En route to our results, we also develop a principled methodology to determine the form of the optimal mechanism and worst-case distribution via first-order conditions that should be of independent interest in other minimax problems.
    Date: 2022–04
  11. By: Marina Agranov; Gabriel Lopez-Moctezuma; Philipp Strack; Omer Tamuz
    Abstract: We compare how well agents aggregate information in two repeated social learning environments. In the first setting agents have access to a public data set. In the second they have access to the same data, and also to the past actions of others. Despite the fact that actions contain no additional payoff relevant information, and despite potential herd behavior, free riding and information overload issues, observing and imitating the actions of others leads agents to take the optimal action more often in the second setting. We also investigate the effect of group size, as well as a setting in which agents observe private data and others’ actions.
    JEL: C92 D83
    Date: 2022–04
  12. By: Wanchang Zhang
    Abstract: I consider a mechanism design problem of selling multiple goods to multiple bidders when the designer has minimal amount of information. I assume that the designer only knows the upper bounds of bidders' values for each good and has no additional distributional information. The designer takes a minimax regret approach. The expected regret from a mechanism given a joint distribution over value profiles and an equilibrium is defined as the difference between the full surplus and the expected revenue. The designer seeks a mechanism, referred to as a minimax regret mechanism, that minimizes her worst-case expected regret across all possible joint distributions over value profiles and all equilibria. I find that a separate second-price auction with random reserves is a minimax regret mechanism for general upper bounds. Under this mechanism, the designer holds a separate auction for each good; the formats of these auctions are second-price auctions with random reserves.
    Date: 2022–04
  13. By: Lana Friesen (School of Economics, University of Queensland, Brisbane, Australia); Ian A. MacKenzie (School of Economics, University of Queensland, Brisbane, Australia); Mai Phuong Nguyen (School of Economics, University of Queensland, Brisbane, Australia)
    Abstract: This article investigates how the existence of initially contestable property rights affects the efficiency of the Coase theorem. We design a two-stage experiment that incorporates a stage where property rights are initially allocated to participants followed by a stage that allows bargaining between participants. In stage one, participants endogenously choose their effort (and thus the probability) to appropriate the property rights before entering an unstructured bargaining game. We find the presence of costly appropriation activity to obtain the property rights makes it significantly less likely that the efficient outcome is reached. We introduce bargaining costs and find that allowing for symmetric bargaining costs has no impact on the likelihood of the efficient outcome being reached, whereas asymmetric bargaining costs between outcomes substantially reduces the likelihood of reaching an efficient outcome.
    Keywords: Coasean bargaining, transaction costs, experiment, property rights, contest
    JEL: C92 Q52
    Date: 2022–05
  14. By: Alfredo Salgado
    Abstract: This paper theoretically analyzes the role of reference prices on competition and welfare in a context of a circular city model with free entry and reference prices, in which paying market prices above a reference negatively affects the utility of consumers. Agents interact in a three-stage game: 1. A policymaker chooses a reference price to maximize consumer welfare. 2. Firms make their entry decision. 3. Firms compete in prices and consumers make their consumption decisions. We find that in equilibrium the market price and the optimal reference price chosen by the policymaker always coincide. In addition, it is shown that the use of reference prices reduces market equilibrium prices compared with the case without reference prices, which implies a net welfare gain for consumers. These gains could be higher in less competitive environments and lower in the presence of higher marginal costs.
    JEL: C7 D4 D9 L1 L2 L5
    Date: 2022–03

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