nep-gth New Economics Papers
on Game Theory
Issue of 2022‒10‒10
thirty-one papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Interactive Information Design By Frédéric Koessler; Marie Laclau; Tristan Tomala
  2. The Emergence of League and Sub-League Structure in the Population Lotto Game By Giovanni Artiglio; Aiden Youkhana; Joel Nishimura
  3. Portfolio Liquidation Games with Self-Exciting Order Flow By Fu, Guanxing; Horst, Ulrich; Xia, Xiaonyu
  4. Colonel Blotto games with a head start By Leopold Aspect; Christian Ewerhart
  5. Anchored Strategic Reasoning By Ivanova-Stenzel, Radosveta; Seres, Gyula
  6. Optimal coalition splitting with heterogenous strategies By Raouf Boucekkine; Carmen Camacho; Weihua Ruan; Benteng Zou
  7. Strategic investments in multi-stage General Lotto games By Rahul Chandan; Keith Paarporn; Mahnoosh Alizadeh; Jason R. Marden
  8. Cores of Games via Total Dual Integrality, with Applications to Perfect Graphs and Polymatroids By Vijay V. Vazirani
  9. Labor Supply in Pandemic Environments: An Aggregative Games Approach By Luciana C. Fiorini; Wilfredo L. Maldonado
  10. How to preempt attacks in multi-front conflict with limited resources By Kai A. Konrad; Florian Morath
  11. Signaling Motives in Lying Games By Fries, Tilman
  12. Collective Brand Reputation By Nocke, Volker; Strausz, Roland
  13. Cooperation, Competition, and Welfare in a Matching Market By Bester, Helmut; Sákovics, József
  14. The Bargaining Trap By Schweighofer-Kodritsch, Sebastian
  15. The Eurovision Song Contest: voting rules, biases and rationality By Victor Ginsburgh; J.D. Moreno-Ternero
  16. Social Preferences and the Variability of Conditional Cooperation By Baader, Malte; Gächter, Simon; Lee, Kyeongtae; Sefton, Martin
  17. A potential mechanism of gas supply-security cooperation based on a game-theoretic model By D\'avid Csercsik
  18. Oligopoly with common resource: A Lindahl-Cournot approach By Jacques Thépot
  19. Sophocles's Play: Greek Theater and Psychological Game Theory By Laurent Gauthier
  20. Reputation for Toughness By Stefano Barbieri; Marco Serena
  21. Voluntary participation in a terror group and counterterrorism policy By Subhayu Bandyopadhyay; Todd Sandler
  22. Bargaining in the Shadow of Uncertainty By Marina Agranov; Hülya Eraslan; Chloe Tergiman
  23. Incentives to differentiate under environmental liability laws : Product customization and precautionary effort By Eric Langlais; Andreea Cosnita-Langlais
  24. Joint production planning, pricing and retailer selection with emission control based on Stackelberg game and nested genetic algorithm By Linda Zhang; Gang D.U.; Jun W.U.; Yujie M.A.
  25. All-Pay Competition with Captive Consumers By Foucart, Renaud; Friedrichsen, Jana
  26. Agency Problems in a Competitive Conglomerate with Production Constraints By Jose de Jesus Herrera-Velasquez
  27. Revisiting the Effects of Group Identity and Information Diversity in a Leader-member Public Goods Experiment By Yuning Tang; Qinxin Guo; Junyi Shen
  28. Focusing Climate Negotiations on a Uniform Common Commitment Can Promote Cooperation By Schmidt, Klaus M.; Ockenfels, Axel
  29. United We Stand: On the Benefits of Coordinated Punishment By Vicente Calabuig; Natalia Jimenez; Gonzalo Olcina; Ismael Rodriguez-Lara
  30. Ignorance, Intention and Stochastic Outcomes By Friedrichsen, Jana; Momsen, Katharina; Piasenti, Stefano
  31. Setting Interim Deadlines to Persuade By Maxim Senkov

  1. By: Frédéric Koessler (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marie Laclau (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Tristan Tomala (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, HEC Paris - Ecole des Hautes Etudes Commerciales)
    Abstract: We study the interaction between multiple information designers who try to influence the behavior of a set of agents. When each designer can choose information policies from a compact set of statistical experiments with countable support, such games always admit subgame perfect equilibria. When designers produce public information, every equilibrium of the simple game in which the set of messages coincides with the set of states is robust in the sense that it is an equilibrium with larger and possibly infinite and uncountable message sets. The converse is true for a class of Markovian equilibria only. When designers produce information for their own corporation of agents, robust pure strategy equilibria exist and are characterized via an auxiliary normal form game in which the set of strategies of each designer is the set of outcomes induced by Bayes correlated equilibria in her corporation.
    Keywords: Statistical experiments,Splitting games,Sharing rules,Information design,Bayesian persuasion
    Date: 2022
  2. By: Giovanni Artiglio; Aiden Youkhana; Joel Nishimura
    Abstract: In order to understand if and how strategic resource allocation can constrain the structure of pair-wise competition outcomes in competitive human competitions we introduce a new multiplayer resource allocation game, the Population Lotto Game. This new game allows agents to allocate their resources across a continuum of possible specializations. While this game allows non-transitive cycles between players, we show that the Nash equilibrium of the game also forms a hierarchical structure between discrete `leagues' based on their different resource budgets, with potential sub-league structure and/or non-transitive cycles inside individual leagues. We provide an algorithm that can find a particular Nash equilibrium for any finite set of discrete sub-population sizes and budgets. Further, our algorithm finds the unique Nash equilibrium that remains stable for the subset of players with budgets below any threshold.
    Date: 2022–08
  3. By: Fu, Guanxing (The Hong Kong Polytechnic University); Horst, Ulrich (HU Berlin); Xia, Xiaonyu (Wenzhou University)
    Abstract: We analyze novel portfolio liquidation games with self-exciting order flow. Both the N-player game and the mean-field game are considered. We assume that players’ trading activities have an impact on the dynamics of future market order arrivals thereby generating an additional transient price impact. Given the strategies of her competitors each player solves a mean-field control problem. We characterize open-loop Nash equilibria in both games in terms of a novel mean-field FBSDE system with unknown terminal condition. Under a weak interaction condition we prove that the FBSDE systems have unique solutions. Using a novel su
    Keywords: stochastic games; mean-field games; portfolio liquidation; Hawkes process; singular terminal value;
    JEL: E20 H30
    Date: 2022–05–05
  4. By: Leopold Aspect; Christian Ewerhart
    Abstract: This paper studies Colonel Blotto games with two battlefi elds where one player has a head start in the form of additional troops on one of the battlefi elds. Such games arise naturally in marketing, electoral competition, and military conflict. Sion and Wolfe (1957) have shown that, if the strategy space is continuous, a mixed-strategy Nash equilibrium need not exist. Therefore, we consider a fi nite approximation. Using the iterated elimination of (weakly) dominated strategies, we identify an equilibrium for all parameter constellations and discuss its uniqueness properties. In equilibrium, resource decisions are typically not uniform but tend to concern units that roughly correspond in size to multiples of the head start. Moreover, competition takes the form of a hide- and-seek game, where the favorite tries to outguess the number of units that the underdog commits to the balanced battlefi eld. Somewhat unexpectedly, equilibrium payoffs of finite approximations of the Sion-Wolfe game accumulate around precisely three values. We also discuss the relation to the model with heterogeneous budgets but no head start.
    Keywords: Colonel Blotto games, head start, Nash equilibrium, finite approximation
    JEL: C62 C72 D72
    Date: 2022–08
  5. By: Ivanova-Stenzel, Radosveta (TU Berlin); Seres, Gyula (HU Berlin)
    Abstract: Anchoring is a robust behavioral phenomenon modeled predominantly as a bias in individual judgment. We propose a game-theoretic model that considers players’ beliefs about others’ behavior as a mediator for the effect of the anchor on a player’s choice. The results establish that anchoring in strategic interactions reported in the literature can be rationalized by anchored beliefs about the opponents’ intentions. Notwithstanding, we also demonstrate that a player might adjust away from rather than toward the anchor in games where choices are strategic substitutes.
    Keywords: anchoring bias; auctions; games; incomplete information; strategy;
    JEL: D01 D91 C72
    Date: 2022–01–25
  6. By: Raouf Boucekkine (ESC Rennes School of Business - ESC [Rennes] - ESC Rennes School of Business); Carmen Camacho (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Weihua Ruan (Purdue University Northwest); Benteng Zou (University of Luxembourg [Luxembourg])
    Abstract: We consider a group of players initially members of a coalition managing cooperatively a public bad, in this case, the stock of pollution. Countries are technologically heterogeneous but the pollution damage is uniform. We essentially attempt to characterize the conditions under which a country may eventually split and when it splits within an infinite horizon multi-stage differential game. In contrast to the existing literature, we do not assume that after splitting, the splitting player and the remaining coalition will adopt Markovian strategies. Instead, we assume that the latter will remain committed to the collective control of pollution and play open-loop, while the splitting player plays Markovian. Within a full linear-quadratic model, we characterize the optimal strategies. We later compare with the outcomes of the case where the splitting player and the "remaining" coalition play both Markovian. We highlight several interesting results in terms of the implications for longterm pollution levels and the duration of coalitions with heterogenous strategies.
    Keywords: Coalition splitting,environmental agreements,differential games,multistage optimal control,precommitment vs Markovian
    Date: 2022–09
  7. By: Rahul Chandan; Keith Paarporn; Mahnoosh Alizadeh; Jason R. Marden
    Abstract: In adversarial interactions, one is often required to make strategic decisions over multiple periods of time, wherein decisions made earlier impact a player's competitive standing as well as how choices are made in later stages. In this paper, we study such scenarios in the context of General Lotto games, which models the competitive allocation of resources over multiple battlefields between two players. We propose a two-stage formulation where one of the players has reserved resources that can be strategically pre-allocated across the battlefields in the first stage. The pre-allocation then becomes binding and is revealed to the other player. In the second stage, the players engage by simultaneously allocating their real-time resources against each other. The main contribution in this paper provides complete characterizations of equilibrium payoffs in the two-stage game, revealing the interplay between performance and the amount of resources expended in each stage of the game. We find that real-time resources are at least twice as effective as pre-allocated resources. We then determine the player's optimal investment when there are linear costs associated with purchasing each type of resource before play begins, and there is a limited monetary budget.
    Date: 2022–09
  8. By: Vijay V. Vazirani
    Abstract: LP-duality theory has played a central role in the study of cores of games, right from the early days of this notion to the present time. The classic paper of Shapley and Shubik \cite{Shapley1971assignment} introduced the "right" way of exploiting the power of this theory, namely picking problems whose LP-relaxations support polyhedra having integral vertices. So far, the latter fact was established by showing that the constraint matrix of the underlying linear system is {\em totally unimodular}. We attempt to take this methodology to its logical next step -- {\em using total dual integrality} -- thereby addressing new classes of games which have their origins in two major theories within combinatorial optimization, namely perfect graphs and polymatroids. In the former, we address the stable set and clique games and in the latter, we address the matroid independent set game. For each of these games, we prove that the set of core imputations is precisely the set of optimal solutions to the dual LPs. Another novelty is the way the worth of the game is allocated among sub-coalitions. Previous works follow the {\em bottom-up process} of allocating to individual agents; the allocation to a sub-coalition is simply the sum of the allocations to its agents. The {\em natural process for our games is top-down}. The optimal dual allocates to "objects" in the grand coalition; a sub-coalition inherits the allocation of each object with which it has non-empty intersection.
    Date: 2022–09
  9. By: Luciana C. Fiorini (Economics Department, Business School, The University of Western Australia); Wilfredo L. Maldonado (University of Sao Paulo)
    Abstract: In this paper we analyze the effects that pandemic processes have on labor supply decisions using an aggregative game framework. The individual payoff depends on her labor supply and on the probability of being infected, which in turn, depends on the aggregate labor supply. We show the effects of social and sanitary public policies on the Nash equilibrium and analyze its expectational stability. The results indicate that compensating policies as well as sanitary policies can attenuate the damaging effect of pandemic and stabilize expectations regarding the aggregate decision of labor supply. We also find a set of parameters where two-period cycles for the expectations revision map may arise, implying the oscillating behavior of the probability of contagion in this class of models.
    Keywords: Labor supply, pandemic, aggregative games
    JEL: C72 J28 J38
    Date: 2022
  10. By: Kai A. Konrad; Florian Morath
    Abstract: We study equilibrium in a multi-battle attack-and-defense game in which victory in each single battle is deterministically awarded to the player who expends more conflict resources in the respective battle. One player has a predetermined budget which can be allocated across two battlefields. The cost of the budget is sunk. The other player can mobilize an arbitrary amount of resources at given marginal costs. Our analysis reveals a strategic advantage of the player with the fixed and given budget: this player wins all battlefields with probability one if the budget is at least half the total value of winning.
    Keywords: OR in defense, attack and defense, multi-battle conflict, Blotto budget, all-pay contest
    JEL: D72 D74
    Date: 2022–06
  11. By: Fries, Tilman (WZB Berlin)
    Abstract: This paper studies the implications of agents signaling their moral type in a lying game. In the theoretical analysis, a signaling motive emerges where agents dislike being suspected of lying and where some types of liars are more stigmatized than others. The equilibrium prediction of the model can explain experimental data from previous studies, in particular on partial lying, where some agents dishonestly report a non payo
    Keywords: lying; image concerns; honesty; experiment;
    JEL: C91 D82 D90
    Date: 2021–01–14
  12. By: Nocke, Volker (Mannheim University); Strausz, Roland (HU Berlin)
    Abstract: We develop a theory of collective brand reputation for markets in which product quality is jointly determined by local and global players. In a repeated game of imperfect public monitoring, we model collective branding as an aggregation of quality signals generated in different markets. Such aggregation yields a beneficial informativeness effect for incentivizing the global player. It however also induces harmful free-riding by local, market-specific players. The resulting tradeoff yields a theory of optimal brand size and revenue sharing that applies to platform markets, franchising, licensing, umbrella branding, and firms with team production.
    Keywords: collective branding; reputation; free-riding; repeated games; imperfect monitoring;
    Date: 2022–04–19
  13. By: Bester, Helmut (HU Berlin and FU Berlin); Sákovics, József (University of the Balearic Islands and University of Edinburgh)
    Abstract: We investigate the welfare effect of increasing competition in an anonymous two-sided matching market, where matched pairs play an infinitely repeated Prisoner’s Dilemma. Higher matching efficiency is usually considered detrimental as it creates stronger incentives for defection. We point out, however, that a reduction in matching frictions also increases welfare because more agents find themselves in a cooperative relationship. We characterize the conditions for which increasing competition increases overall welfare. In particular, this is always the case when the incentives for defection are high.
    Keywords: cooperation; prisoner's dilemma; competition; welfare; matching; trust building;
    JEL: C72 C73 C78
    Date: 2022–07–21
  14. By: Schweighofer-Kodritsch, Sebastian (HU Berlin)
    Abstract: I revisit the Rubinstein (1982) model for the classic problem of price haggling and show that bargaining can become a “trap,” where equilibrium leaves one party strictly worse off than if no transaction took place (e.g., the equilibrium price exceeds a buyer’s valuation). This arises when one party is impatient about capturing zero surplus (e.g., Rubinstein’s example of fixed bargaining costs). Augmenting the protocol with unilateral exit options for responding bargainers generally removes the trap.
    Keywords: alternating offers; bargaining; time preferences; haggling costs; outside options;
    JEL: C78 D03 D74
    Date: 2021–12–27
  15. By: Victor Ginsburgh; J.D. Moreno-Ternero
    Abstract: We analyze and evaluate the rules and results at the 2021 Eurovision Song Contest. We first concentrate on the various voting procedures and explore several alternatives (inspired by classical contributions in social choice and game theory) that could make a difference for the results. We also discuss other important issues, such as simplicity, contrast effects and whether experts are better judges than tele-voters. Our findings raise the question of whether the voting procedures used by the Eurovision Song Contest authorities are fail-safe. We endorse instead the use of the so-called Shapley voting procedure for judges as well as tele-voters.
    Keywords: Biases; Borda; Eurovision song contest; Shapley method; Voting
    Date: 2022
  16. By: Baader, Malte (University of Zurich); Gächter, Simon (University of Nottingham); Lee, Kyeongtae (Bank of Korea); Sefton, Martin (University of Nottingham)
    Abstract: We experimentally examine how the incentive to defect in a social dilemma affects conditional cooperation. In our first study we conduct online experiments in which subjects play eight Sequential Prisoner's Dilemma games with payoffs systematically varied across games. We find that few second movers are conditionally cooperative (i.e., cooperate if and only if the first mover cooperates) in all eight games. Instead, most second-movers change strategies between games. The rate of conditional cooperation is higher when the own gain from defecting is lower and when the loss imposed on the first mover from defecting is higher. This pattern is consistent with both social preference models and stochastic choice models. To explore which model explains our findings we employ a second study to jointly estimate noise and social preference parameters at the individual level. The majority of our subjects place significantly positive weight on others' payoffs, supporting the underlying role of social preferences in conditional cooperation.
    Keywords: Sequential Prisoner's Dilemma, conditional cooperation, social preferences
    JEL: A13 C91
    Date: 2022–08
  17. By: D\'avid Csercsik
    Abstract: The escalating gas-supply crisis in the EU calls for immediate political and regulatory actions to improve the energy security. Currently, all member states are aiming to fill their reservoirs independently, while it is not clear how solidarity will or even could be put into practice in the future, i.e. how the accumulated reserves of one or more members may be potentially redistributed to help others in need. In this paper we aim to formalize a simple game-theoretic model in order to capture the basic features of the problem, considering the related uncertainty of the future conditions related to reservoir levels and possible transmission bottlenecks as well. We propose a mechanism for supply-security related cooperation, which is based on voluntary participation, and may contribute to the more efficient utilization of storage capacities if its principles may be later implemented. We demonstrate the operation of the proposed framework on a simple example and show that under the assumption of risk-averse participants, the concept exhibits potential.
    Date: 2022–09
  18. By: Jacques Thépot (LaRGE Research Center, Université de Strasbourg)
    Abstract: This paper is motivated by two correlated trends observed in the digital economy: (i) the increasing need for common infrastructures providing data and facilities (ii) the monopolization of key industries. We develop a Cournot oligopoly model where a public good is used as common resource of firms with heterogeneous productivities. The public good is provided by a public agency charging Lindahl prices as wholesale prices. When the agency is a zero-profit entity, the market equilibrium price is an increasing function of the Herfindahl index of the productivities. This result is extended to alternative situation in terms of objective and cost structure of the agency. In mixed resource-based industries, private provision of the resource is also available. Strong firms (with high productivity) may have an incentive to share the common resource with the weak ones and then to reduce the use of the private resource. The misrevelation of productivities is an essential issue in this public good context. It is proved here that productivities are underevaluated in the common resource case and overevaluated in the private case.
    Keywords: oligopoly, commons, Lindahl prices, misreporting.
    JEL: C72 D43 H41
    Date: 2022
  19. By: Laurent Gauthier (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis)
    Abstract: The application of economic approaches, in particular game theory, to literature (Brams 2011) or to historical narratives (Mongin 2018) has seen some development over time but has generally remained an off-the-run endeavour, one important issue being that they may reflect the authors' interpretation more than the underlying texts. A loosely related body of research, focused on quantitative approaches to character relations in literature, has shown their complexity but not provided any theoretical framework (Kenna, MacCarron, and MacCarron 2017; Labatut and Bost 2019). We aim to bridge this gap by focusing on decision in drama as devices for writers to produce works of optimal interest to their audience. We use the apparatus of psychological game theory (Gilboa and Schmeidler 1988; Battigalli and Dufwenberg 2020) in order to represent the tension between surprise and convention in literary work, and obtain certain theoretical optimal patterns. We test this model on the earliest plays available, from the Greek theater of the 5th century BC, which were produced in a highly competitive environment. We show that the frequency of refusals and of important decisions, the unpredictability of these important decisions, the distribution of decisions among characters, and of the timing between actions, all behave in a manner consistent with the model.
    Keywords: Ancient Greece,psychological game theory,games and literature,Theater Studies
    Date: 2022–08–20
  20. By: Stefano Barbieri; Marco Serena
    Abstract: We study reputation for toughness in finitely repeated contests. Players are rational (payoff-maximizing), or "tough" (always exerting an exogenous high "tough effort"). In the unique symmetric equilibrium, a rational player has strictly positive payoff only if she is monopolizing reputation. In a reputational oligopoly, a fierce war of attrition to become the reputational monopolist may yield overdissipation. In a reputational monopolist, overdissipation never happens and the monopolist mixes between a non-tough effort to cash in on her reputation today and the tough effort to boost her reputation. In our main application, criminal groups build reputation for toughness in illegal markets.
    JEL: C72 D82 D83
    Date: 2021–09
  21. By: Subhayu Bandyopadhyay; Todd Sandler
    Abstract: A three-stage game investigates how counterterrorism measures are affected by volunteers’ choice in joining a terrorist group. In stage 1, the government chooses both proactive and defensive countermeasures, while looking ahead to the anticipated size and actions of terrorist groups. After radicalized individuals choose whether to join a terrorist group in stage 2, group members then allocate their time between work and terrorist operations. Based on wages and government counterterrorism, the game characterizes the extensive margin determining group size and the intensive margin indicating the group’s level of attacks. Comparative statics show how changes in wages or radicalization impact the optimal mix between defensive and proactive countermeasures. Higher (lower) wages favor a larger (smaller) mix of proactive measures over defensive actions. In the absence of backlash, enhanced radicalization of terrorist members calls for a greater reliance on defensive actions. The influence of backlash on counterterrorism is also examined.
    Keywords: terrorist supporters' occupational choice; rational terrorist supply; radicalization and wage rate; optimal mix between proactive and defensive countermeasures; backlash
    JEL: C72 D71 H56
    Date: 2022–09
  22. By: Marina Agranov; Hülya Eraslan; Chloe Tergiman
    Abstract: We experimentally study unanimity and majority voting rules in multilateral bargaining environments with stochastic future surplus. In these settings, reaching agreement when expected future surplus is sufficiently higher than the current surplus is inefficient. Theoretically, such inefficiencies never arise under unanimity rule but can arise under majority rule as players try to avoid endogenous risk of being excluded from the winning coalitions in the future. We find strong support for this prediction both when the unanimity rule is predicted to lead to more delays, and when both rules should lead to identical levels of delays. We also find that there are more delays than predicted under the majority rule. Using data from conversations among the bargainers and the type of proposals that are implemented, we find that these deviations arise as a result of more egalitarian sharing than predicted by theory, and therefore, lower risk of being excluded from the winning coalitions in the future.
    JEL: C7 C92 D0 D7
    Date: 2022–09
  23. By: Eric Langlais; Andreea Cosnita-Langlais
    Abstract: We endogenize location/product specification choices in a spatial Cournot duopoly on the linear market, when firms' output entails an accidental harm to the environment. Under a strict liability regime, the equilibrium involves no differentiation when the expected harm is low enough. This outcome is suboptimal, and identical to the spatial pattern obtained under a no-liability regime. With larger harm, the equilibrium displays some dispersion/product differentiation, the degree of which is increasing with the level of harm towards the first best locations/product choices. Our results are robusts when allowing for firms' investment in environmental measures. Moreover, we show that vertical/care differentiation occurs whenever horizontal product differentiation arises. Finally, we show that under a negligence rule, firms always comply with the due care level, but the equilibrium involves no differentiation, either horizontal/product or vertical/care.
    Keywords: Cournot competition, spatial model, strategic location, product choice, horizontal differentiation, vertical differentitation, environmental liability, strict liability, negligence.
    JEL: L41 K21 D82
    Date: 2022
  24. By: Linda Zhang (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Gang D.U.; Jun W.U.; Yujie M.A.
    Abstract: In practice, it is of paramount importance that firms make joint decisions in production planning, pricing and retailer selection while considering emission regulation. This is because the joint decisions can ensure firms to obtain higher profits while contributing to sustainable environments. However, due to the problem complexity, no models facilitating such decision making are available. This study aims to develop a model to help firms make optimal joint decisions. To model the situations where a manufacturer is the leader and the retailers are followers, we adopt the Stackelberg game theory and develop a 0–1 mixed nonlinear bilevel program to maximize the profits of both the manufacturer and his retailers. We further develop a nested genetic algorithm to solve the game model. Numerical examples demonstrate (i) the applicability of the game model and the algorithm and (ii) the robustness of the algorithm. Managerial insights are obtained, suggesting that (i) manufacturers need to identify the capacity ranges (called capacity traps) where capacity increases result in reduced profits when making decisions to optimize profits; (ii) retailers should make suitable, e.g., pricing decisions so that the manufacturers can include them in the supply chains; (iii) both manufacturers and retailers may not need to consider the carbon emission buying (or selling) price when making decisions.
    Keywords: Stackelberg game,Nonlinear bilevel programming,Nested genetic algorithm,Emission control,Joint decision making
    Date: 2020–12–15
  25. By: Foucart, Renaud (Lancaster University); Friedrichsen, Jana (HU Berlin)
    Abstract: We study a game in which two firms compete in quality to serve a market consisting of consumers with different initial consideration sets. If both firms invest below a certain threshold, they only compete for those consumers already aware of their existence. Above this threshold, a firm is visible to all and the highest investment attracts all consumers. On the one hand, the existence of initially captive consumers introduces an anti-competitive element: holding fixed the behavior of its rival, a firm with a larger captive segment enjoys a higher payoff from not investing at all. On the other hand, the fact that a firm’s initially captive consumers can still be attracted by very high quality introduces a pro-competitive element: a high investment becomes more profitable for the underdog when the captive segment of the dominant firm increases. The share of initially captive consumers therefore has a non-monotonic effect on the investment levels of both firms and on consumer surplus. We relate our findings to competition cases in digital markets.
    Keywords: consideration set; regulation; all-pay auction; endogenous prize; digital markets;
    JEL: D04
    Date: 2021–01–12
  26. By: Jose de Jesus Herrera-Velasquez (Graduate School of Economics, Kyoto University)
    Abstract: This study explores the reciprocal effects between agency problems and market competition. We develop an adverse selection model of a competing conglomerate with production constraints. The conglomerate participates as the leader in two different duopolistic markets with a Stackelberg-Cournot framework and heteroge- neous goods. The conglomerate is run by its headquarters and two division man- agers. The agency problem arises because the market demand size is a manager's private information, which the headquarters try to elicit by a contract mechanism. We fully characterize a first and a second-best contract. When the production constraints make the first best outcome unattainable, the second-best contract is either separating or pooling, depending on the severity of the constraints. The sep- arating second-best contract sometimes improves the ex-ante welfare in comparison to a symmetric information benchmark. The pooling second-best contract never improves the ex-ante welfare. We also find that at an intermediate level of substi- tutability, the second-best contract is most likely to coincide with the first-best one, and any departure from that level toward either substitutability or complementarity makes the attainment of the first-best outcome less likely.
    Keywords: Adverse Selection; Contract Mechanism; Multimarket Competition; Stackelberg Oligopoly; Production Constraint
    JEL: C70 D21 D43 D82 D86 L13
    Date: 2022–09
  27. By: Yuning Tang (Graduate School of Economics, Kobe University, JAPAN); Qinxin Guo (School of International Economics and Trade, Shanghai Lixin University of Accounting and Finance, CHINA); Junyi Shen (Research Institute for Economics and Business Administration, Kobe University, JAPAN)
    Abstract: We investigate the willingness to cooperate between leaders and members in a repeated public goods experiment, when there is group identity and information diversity between them. The participants who play the role of leader, first decide their contributions to the team project. Subsequently, members also decide their contributions. The results indicate that having the same group identity as the leader has a positive effect on members' intention to fully cooperate with the leader Additionally, in the case of being in the same group, disclosing information only to members may increase cooperation. Finally, cooperative behavior between members is closely related to the identity of the leader and information diversity.
    Keywords: Leadership; Beliefs; Group identity; Information diversity; Public goods experiment
    JEL: C72 C91 D63
    Date: 2022–09
  28. By: Schmidt, Klaus M. (LMU Munich); Ockenfels, Axel (University of Cologne)
    Abstract: International cooperation on the reduction of greenhouse gas emissions, disarmament, or free trade needs to be negotiated. The success of such negotiations depends on how they are designed. In the context of international climate change policy, it has been proposed [e.g., Weitzman J of the Association of Environmental and Resource Economists (2014)] that shifting the negotiation focus to a uniform common commitment (such as a uniform minimum carbon price) would lead to more ambitious cooperation. Yet, a proof-of-concept for this important claim is lacking. Based on game theoretical analyses, we present experimental evidence that strongly supports this conjecture. In our study, human subjects negotiate contributions to a public good. Subjects differ in their benefits and costs of cooperation. Participation in the negotiations and all commitments are voluntary. We consider treatments in which agreements are enforceable, and treatments in which they have to be self-enforcing. In both situations, negotiating a uniform common commitment is more successful in promoting cooperation than negotiating individual commitments (as in the Paris agreement) and complex common commitments that tailor the commitment to the specific situation of each party (as attempted with the Kyoto protocol). Furthermore, as suggested by our model, a uniform common commitment benefits most from being enforced.
    Keywords: cooperation; negotiation design; common commitment; reciprocity; climate policy;
    Date: 2021–01–04
  29. By: Vicente Calabuig (University of Valencia); Natalia Jimenez (Universidad Pablo de Olavide); Gonzalo Olcina (University of Valencia); Ismael Rodriguez-Lara (Universidad de Granada and Economic Science Institute, Chapman University)
    Abstract: Coordinated punishment occurs when punishment decisions are complements; i.e., this punishment device requires a specific number of punishers to be effective; otherwise, no damage will be inflicted on the target. While societies often rely on this punishment device, its benefits are unclear compared with uncoordinated punishment, where punishment decisions are substitutes. We argue that coordinated punishment can prevent the free-riding of punishers and show, both theoretically and experimentally, that this may be beneficial for cooperation in a team investment game, compared with uncoordinated punishment.
    Keywords: Team investment game, coordinated punishment, uncoordinated punishment, freeriding, cooperation
    JEL: C9 D02 D03 D69 J01
    Date: 2022
  30. By: Friedrichsen, Jana (FU Berlin, HU Berlin, DIW and WZB); Momsen, Katharina (University of Innsbruck); Piasenti, Stefano (HU Berlin and DIW)
    Abstract: In sequential interactions, both the agent’s intention and the outcome of his choice may influence the principal’s action. While outcomes are typically observable, intentions are more likely to be hidden, leaving potential wiggle room for the principal when deciding on a reciprocating action. We employ a controlled experiment to investigate how intentions and outcome affect the principal’s actions and whether principals use hidden information as an excuse to behave more selfishly. We find that principals react mainly to the intention of the agent. When intentions are not revealed by default, principals tend to select into information based on their inclination to behave more prosocially. While information avoidance is frequent and selfishness is higher with hidden information, we do not find evidence of a strategic exploitation of moral wiggle room.
    Keywords: information avoidance; dictator game; moral wiggle room; intentions; reciprocity;
    JEL: D91 C91
    Date: 2022–06–21
  31. By: Maxim Senkov
    Abstract: This paper studies the optimal design of self-reporting on the progress of a project by a rent-seeking agent reporting to a principal who is concerned with accomplishing the project before an exogenous deadline. The project has two stages: completing the first stage serves as a milestone and completing the second stage accomplishes the project. I show that if the project is sufficiently promising ex ante, then the agent commits to provide only the good news that the project is accomplished. If the project is not promising enough ex ante, the agent persuades the principal to start the funding by committing to provide not only good news but also the bad news that the milestone of the project has not been reached by an interim deadline.
    Keywords: dynamic Bayesian persuasion; informational incentives; interim deadline; multistage project;
    JEL: D82 D83 G24
    Date: 2022–08

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