nep-gth New Economics Papers
on Game Theory
Issue of 2023‒02‒20
eighteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Do people share opportunities? By Mohamed Belhaj; Frédéric Deroïan; Mathieu Faure
  2. A Nash equilibrium for differential games with moving-horizon strategies By Di Bartolomeo Giovanni; Semmler Willi; Saltari Entrico
  3. Epictetusian Rationality and Evolutionary Stability By Ponthiere, Gregory
  4. Show your strength in the hammer-nail game: a Nim game with incomplete information. By Gisèle Umbhauer
  5. Decarbonization of financial markets: a mean-field game approach By Pierre Lavigne; Peter Tankov
  6. Regulating For-Hire Autonomous Vehicles for An Equitable Multimodal Transportation Network By Jing Gao; Sen Li
  7. Auctions without commitment in the auto-bidding world By Aranyak Mehta; Andres Perlroth
  8. What about the others? Conditional cooperation, climate change perception and ecological actions By Becchetti, Leonardo; Conzo, Gianluigi; Salustri, Francesco
  9. Honesty and Epistemological Implementation of Social Choice Functions with Asymmetric Information By Hitoshi Matsushima
  10. Do different people report the same social norms? By Geoffrey Castillo; Lawrence Choo; Veronika Grimm
  11. Virtue of Simplicity in Asymmetric Auctions By Shraman Banerjee; Swagata Bhattacharjee
  12. Patents with simultaneous innovations: The non-obviousness requirement and the direction of innovation By Fabio M. Manenti; Luca Sandrini
  13. The price of cost-effectiveness thresholds By Kurt R. Brekke; Dag Morten Dalen; Odd Rune Straume
  14. Efficiency in Collective Decision-Making via Quadratic Transfers By Jon X. Eguia; Nicole Immorlica; Steven P. Lalley; Katrina Ligett; Glen Weyl; Dimitrios Xefteris
  15. Cooperation, allocation and strategy in interactive decision-making By Schouten, Jop
  16. First Best Implementation with Costly Information Acquisition By Daniil Larionov; Hien Pham; Takuro Yamashita; Shuguang Zhu
  17. Monotone Comparative Statics for Equilibrium Problems By Alfred Galichon; Larry Samuelson; Lucas Vernet
  18. Binary Mechanisms under Privacy-Preserving Noise By Farzad Pourbabaee; Federico Echenique

  1. By: Mohamed Belhaj (Aix-Marseille Univ, CNRS, Ecole Centrale, AMSE, Marseille, France.); Frédéric Deroïan (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Mathieu Faure (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.)
    Abstract: A set of agents is aware of the existence of an economic opportunity, and compete for the associated prize. We study incentives to communicate about the existence of this economic opportunity to uninformed agents when the winner of the prize shares it with others, through some exogenous sharing rule. Communicating about the opportunity has two conflicting effects: it increases competition, but it can also increase the likelihood of receiving a large share of the prize. We find that, for any sharing rule, there is a minimum equilibrium, which Pareto dominates all other equilibria. We also find that under bilaterally symmetric sharing, more sharing generates more communication. We then discuss these results along several extensions.
    Keywords: rival opportunity; sharing network; communication; investment
    JEL: C72 D83 D85
    Date: 2023–01
  2. By: Di Bartolomeo Giovanni; Semmler Willi; Saltari Entrico
    Abstract: Our paper aims to introduce a moving-horizon interaction in a strategic context. We assume that, in each instant, players can predict the effects of their actions and those of their opponents on a finite moving horizon. We define an equilibrium concept consistent in this setting and develop an appropriate algorithm to compute it using nonlinear model predictive control techniques. Focusing on the length of the forecasting horizon, we propose two economic interpretations for our equilibrium based on the limited rationality and political economy literature. Finally, we consider a debt stabilization game in a monetary union to provide some practical insights into our approach.
    Date: 2022–03
  3. By: Ponthiere, Gregory
    Abstract: An economic interpretation of Epictetus's precept of 'Taking away aversion from all things not in our power' consists of extending the do- main of indifference beyond its boundaries under non-ethical preferences, so as to yield indifference between outcomes differing only on things out- side one's control. This paper examines the evolutionary dynamics of a population composed of Nash agents and Epictetusian agents matched randomly and interacting in the prisoner's dilemma game. It is shown that, whether or not the types of players are common knowledge, nei- ther the Nash nor the Epictetusian type is an evolutionary stable strategy under perfectly random matching. However, if the matching process ex- hibits a suffi ciently high degree of assortativity, the Epictetusian type is an evolutionary stable strategy, and drives the Nash type to extinction.
    Keywords: ethical preferences, evolutionary stability, cooperation, prisoner's dilemma, Epictetus
    JEL: C73 C62 D60
    Date: 2023
  4. By: Gisèle Umbhauer
    Abstract: We study the hammer-nail game, a game played in the French TV show “Fort Boyard”, by transforming this game into a Nim game with incomplete information. In this game, two players are in front of a nail slightly driven into a wooden support. Both have a hammer and in turn hit the nail. The winner is the first player able to fully drive the nail into the support. A player is of strength f if he is able, with one swing of the hammer, to drive the nail at most f millimeters into the support. We study the perfect Bayesian Nash equilibria of this game with incomplete information on the players’strength, and we also look at the equilibrium behavior when strength is combined with dexterity.
    Keywords: Nim game, incomplete information, subgame perfect Nash equilibrium, perfect Bayesian equilibrium, Fort Boyard.
    JEL: C72
    Date: 2023
  5. By: Pierre Lavigne; Peter Tankov
    Abstract: We build a model of a financial market where a large number of firms determine their dynamic emission strategies under climate transition risk in the presence of both green-minded and neutral investors. The firms aim to achieve a trade-off between financial and environmental performance, while interacting through the stochastic discount factor, determined in equilibrium by the investors' allocations. We formalize the problem in the setting of mean-field games and prove the existence and uniqueness of a Nash equilibrium for firms. We then present a convergent numerical algorithm for computing this equilibrium and illustrate the impact of climate transition risk and the presence of green-minded investors on the market decarbonization dynamics and share prices. We show that uncertainty about future climate risks and policies leads to higher overall emissions and higher spreads between share prices of green and brown companies. This effect is partially reversed in the presence of environmentally concerned investors, whose impact on the cost of capital spurs companies to reduce emissions.
    Date: 2023–01
  6. By: Jing Gao; Sen Li
    Abstract: This paper assesses the equity impacts of for-hire autonomous vehicles (AVs) and investigates regulatory policies that promote the spatial and social equity in future autonomous mobility ecosystems. To this end, we consider a multimodal transportation network, where a ride-hailing platform operates a fleet of AVs to offer mobility-on-demand services in competition with a public transit agency that offers transit services on a transportation network. A game-theoretic model is developed to characterize the intimate interactions between the ride-hailing platform, the transit agency, and multiclass passengers with distinct income levels. An algorithm is proposed to compute the Nash equilibrium of the game and conduct an ex-post evaluation of the performance of the obtained solution. Based on the proposed framework, we evaluate the spatial and social equity in transport accessibility using Theil index, and find that although the proliferation of for-hire AVs in the ride-hailing network improves overall accessibility, the benefits are not fairly distributed among distinct locations or population groups, implying that the deployment of AVs will enlarge the existing spatial and social inequity gaps in the transportation network if no regulatory intervention is in place. To address this concern, we investigate two regulatory policies that can improve transport equity: (a) a minimum service-level requirement on ride-hailing service, which improves the spatial equity in the transport network; (b) a subsidy on ride-hailing trips that serve as first/last-mile connection to public transit, which promotes the use of public transit and improves the social equity of the transport network. We show that the minimum service-level requirement entails a trade-off: as a higher minimum service level is imposed, the spatial inequity reduces, but the social inequity will be exacerbated. In contrast...
    Date: 2023–01
  7. By: Aranyak Mehta; Andres Perlroth
    Abstract: Advertisers in online ad auctions are increasingly using auto-bidding mechanisms to bid into auctions instead of directly bidding their value manually. One prominent auto-bidding format is the target cost-per-acquisition (tCPA) which maximizes the volume of conversions subject to a return-of-investment constraint. From an auction theoretic perspective however, this trend seems to go against foundational results that postulate that for profit-maximizing bidders, it is optimal to use a classic bidding system like marginal CPA (mCPA) bidding rather than using strategies like tCPA. In this paper we rationalize the adoption of such seemingly sub-optimal bidding within the canonical quasi-linear framework. The crux of the argument lies in the notion of *commitment*. We consider a multi-stage game where first the auctioneer declares the auction rules; then bidders select either the tCPA or mCPA bidding format and then, if the auctioneer lacks commitment, it can revisit the rules of the auction (e.g., may readjust reserve prices depending on the observed bids). Our main result is that so long as a bidder believes that the auctioneer lacks commitment to follow the rule of the declared auction then the bidder will make a higher profit by choosing the tCPA format over the mCPA format. We then explore the commitment consequences for the auctioneer. In a simplified version of the model where there is only one bidder, we show that the tCPA subgame admits a *credible* equilibrium while the mCPA format does not. That is, when the bidder chooses the tCPA format the auctioneer can credibly implement the auction rules announced at the beginning of the game. We also show that, under some mild conditions, the auctioneer's revenue is larger when the bidder uses the tCPA format rather than mCPA. We further quantify the value for the auctioneer to be able to commit to the declared auction rules.
    Date: 2023–01
  8. By: Becchetti, Leonardo; Conzo, Gianluigi; Salustri, Francesco
    Abstract: Climate challenge can be modelled as a multiplayer prisoner's dilemma where any ecological action - i.e., purchasing an electric car or adopting sustainable life styles - is a costly action in terms of economic resources, time, and effort for individuals. According to the well-known embedded social dilemma, even though the social benefit is maximised when everyone takes ecological actions, the Nash equilibrium of the game if all players have standard self-interested preferences is not acting. In this paper we analyse how this ecological prisoner's dilemma is affected by people's perception. Using the European Social Survey, we look at how urgent the climate threat is perceived by respondents and what they think about other countries' willingness to take ecological actions. Theoretical predictions suggest that the former increases, while the latter does not affect willingness to take ecological actions. Our empirical findings on a large sample of European citizens however show that both factors positively affect willingness to take actions. We interpret the positive effect of other country action on the individual responsibility to take actions in terms of conditional cooperation and show that the effect is weaker in countries and regions with higher social capital.
    Keywords: climate change, perception, ecological actions, social dilemma, conditional cooperation
    JEL: H41 Q54 Q58
    Date: 2023
  9. By: Hitoshi Matsushima (Department of Economics, University of Tokyo)
    Abstract: We investigate the implementation of social choice functions with asymmetric information concerning the state from an epistemological perspective. Although agents are either selfish or honest, they do not expect other participants to be honest. However, an honest agent may exist not among participants but in their higher-order beliefs. We assume that “all agents are selfish†never happens to be common knowledge. We show a positive result in general asymmetric information environments, demonstrating that with a minor restriction on signal correlation called information diversity, any incentive-compatible social choice function, whether ethical or nonethical, is uniquely implementable in the Bayesian Nash equilibrium.
    Date: 2022–12
  10. By: Geoffrey Castillo (VCEE - Vienna Center for Experimental Economics, University of Vienna); Lawrence Choo (China Center for Behavioral Economics and Finance, Southwestern University of Finance and Economics); Veronika Grimm (FAU - Friedrich-Alexander Universität Erlangen-Nürnberg)
    Abstract: If the Krupka-Weber (2013) norm-elicitation task captures pre-existing social norms, then the elicited norms should be independent of one's role in a game or one's social preferences. We test this idea in a complex game that features rich interactions. We find that different people, even when they have conflicting incentives, report the same social norms. Our results further validate the use of the Krupka-Weber task to measure social norms.
    Keywords: social norms, norm elicitation, laboratory experiment, methodology, ultimatum game
    Date: 2022–07–08
  11. By: Shraman Banerjee (Department Of Economics, Shiv Nadar University); Swagata Bhattacharjee (Department Of Economics, Ashoka University)
    Abstract: In single object auctions with asymmetric bidders, the Myerson Optimal auction is difficult to implement because of its informational requirements, complexity, and a possible discouragement effect on the bidders. This paper experimentally studies the performance of a "Simple" auction (Hartline and Roughgarden, 2009) vis-a-vis Optimal auction. We find that Simple auction revenue- approximates Optimal auction better than what the theory predicts: under weak asymmetry the revenue difference is not statistically significant. We explore the bidding behavior and show that the high type bidders get discouraged in Optimal auction. We also explore the role of cognitive ability in the bidding behavior.
    Keywords: Optimal Auction, Simple Auction, Asymmetric Bidders, Experiment.
    JEL: D44 C90
    Date: 2023–02–02
  12. By: Fabio M. Manenti (Department of Economics and Management M. Fanno, University of Padova); Luca Sandrini (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics)
    Abstract: We model a three-stage duopolistic game where firms first simultaneously choose the technological direction of their innovation, then invest in the chosen direction, and finally, compete. Investments can be in competing or non-competing innovations and their outcome is uncertain. If successful, a firm can be imitated by the rival. Patent protection prevents imitation and is granted to non-obvious innovations. We show that compared to a regime where negligible innovations are patentable, strengthening the non-obviousness requirement for patentability can increase market efficiency. Importantly, we also show that the level of the requirement may affect the direction of firms' R&D trajectories. While in a mild patent regime firms tend to invest in competing technologies, a stricter non-obviousness requirement may induce firms to operate in different technological areas, and this increases social welfare and consumer surplus. We illustrate our general theory through a stylised model of Cournot competition with process innovations.
    Keywords: patents, R&D, non-obviousness, direction of innovation
    JEL: L13 O31 O34
    Date: 2023–02
  13. By: Kurt R. Brekke (Norwegian School of Economics (NHH), Department of Economics); Dag Morten Dalen (BI Norwegian Business School); Odd Rune Straume (NIPE/Center for Research in Economics and Management, University of Minho, Portugal; and Department of Economics, University of Bergen, Norway)
    Abstract: Health systems around world are increasingly adopting cost-effectiveness (CE) analysis to inform decisions about access and reimbursement. We study how CE thresholds imposed by a health plan for granting reimbursement affect drug producers´ pricing incentives and patients´access to new drugs. Analysing a sequential pricing game between an incumbent drug producer and a potential entrant with a new drug, we show that CE thresholds may have adverse effects for payers and patients. A stricter CE threshold may induce the incumbent to switch pricing strategy from entry accommodation to entry deterrence, limiting patients´ access to the new drug. Otherwise, irrespective of whether entry is deterred or accommodated, a stricter CE threshold is never pro-competitive and may in fact facilitate a collusive outcome with higher prices of both drugs. Compared to a laissez-faire policy, the use of CE thresholds can only increase the surplus of a health plan if it leads to entry deterrence in which the price reduction by the incumbent necessary to deter entry outweighs the health loss to patients not getting access to the new drug.
    Keywords: Pharmaceuticals; Health Plans; Cost-effectiveness analysis; ICER; Therapeutic competition
    JEL: I11 I18 L13 L65
    Date: 2022
  14. By: Jon X. Eguia (Michigan State U.); Nicole Immorlica (Microsoft); Steven P. Lalley (U. Chicago); Katrina Ligett (Hebrew U.); Glen Weyl (Microsoft); Dimitrios Xefteris (U. Cyprus)
    Abstract: Consider the following collective choice problem: a group of budget constrained agents must choose one of several alternatives. Is there a budget balanced mechanism that: i) does not depend on the specific characteristics of the group, ii) does not require unaffordable transfers, and iii) implements utilitarianism if the agents' preferences are quasilinear and their private information? We study the following procedure: every agent can express any intensity of support or opposition to each alternative, by transferring to the rest of the agents wealth equal to the square of the intensity expressed; and the outcome is determined by the sums of the expressed intensities. We prove that as the group grows large, in every equilibrium of this quadratic-transfers mechanism, each agent's transfer converges to zero, and the probability that the efficient outcome is chosen converges to one.
    Date: 2023–01
  15. By: Schouten, Jop (Tilburg University, School of Economics and Management)
    Date: 2022
  16. By: Daniil Larionov; Hien Pham; Takuro Yamashita; Shuguang Zhu
    Abstract: We study mechanism design with flexible but costly information acquisition. There is a principal and four or more agents, sharing a common prior over the set of payoff-relevant states. The principal proposes a mechanism to the agents who can then acquire information about the state of the world by privately designing a signal device. As long as it is costless for each agent to acquire a signal that is independent from the state, we show that there exists a mechanism which allows the principal to implement any social choice rule at zero information acquisition cost to the agents.
    Keywords: Mechanism Desgin, Implementation, First Best, Information Acquisition
    JEL: D82
    Date: 2022–12
  17. By: Alfred Galichon (NYU - New York University [New York] - NYU - NYU System, CIMS - Courant Institute of Mathematical Sciences [New York] - NYU - New York University [New York] - NYU - NYU System, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Larry Samuelson (Yale University [New Haven]); Lucas Vernet (Centre de recherche de la Banque de France - Banque de France, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We introduce a notion of substitutability for correspondences and establish a monotone comparative static result, unifying results such as the inverse isotonicity of M-matrices, Berry, Gandhi and Haile's identification of demand systems, monotone comparative statics, and results on the structure of the core of matching games without transfers (Gale and Shapley) and with transfers (Demange and Gale). More specifically, we introduce the notions of unified gross substitutes and nonreversingness and show that if Q : P ⇒ Q is a supply correspondence defined on a set of prices P which is a sublattice of R N , and Q satisfies these two properties, then the set of equilibrium prices Q −1 (q) associated with a vector of quantities q ∈ Q is increasing (in the strong set order) in q; and it is a sublattice of P .
    Date: 2022–07–15
  18. By: Farzad Pourbabaee; Federico Echenique
    Abstract: We study mechanism design for public-good provision under a noisy privacy-preserving transformation of individual agents' reported preferences. The setting is a standard binary model with transfers and quasi-linear utility. Agents report their preferences for the public good, which are randomly ``flipped, '' so that any individual report may be explained away as the outcome of noise. We study mechanisms that seek to preserve the public decisions made in the presence of noise (noise sensitivity), pursue efficiency, and mitigate the effect of noise on revenue. The paper analyzes the trade-offs between these competing considerations.
    Date: 2023–01

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