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on Game Theory |
| By: | Meng-Jhang Fong; Po-Hsuan Lin; Thomas R. Palfrey |
| Abstract: | This paper develops a framework to extend the strategic form analysis of cursed equilibrium (CE) developed by Eyster and Rabin (2005) to multi-stage games. The approach uses behavioral strategies rather than normal form mixed strategies, and imposes sequential rationality. We define cursed sequential equilibrium (CSE) and compare it to sequential equilibrium and standard normal-form CE. We provide a general characterization of CSE and establish its properties. We apply CSE to five applications in economics and political science. These applications illustrate a wide range of differences between CSE and Bayesian Nash equilibrium or CE: in signaling games; games with preplay communication; reputation building; sequential voting; and the dirty faces game where higher order beliefs play a key role. A common theme in several of these applications is showing how and why CSE implies systematically different behavior than Bayesian Nash equilibrium in dynamic games of incomplete information with private values, while CE coincides with Bayesian Nash equilibrium for such games. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.11971&r=gth |
| By: | Francesco Caruso (Università di Napoli Federico II); Maria Carmela Ceparano (Università di Napoli Federico II); Jacqueline Morgan (Università di Napoli Federico II and CSEF) |
| Abstract: | The study on how equilibria behave when perturbations occur in the data of a game is a fundamental theme, since actions and payoffs of the players may be affected by uncertainty or trembles. In this paper we investigate the asymptotic behavior of the subgame perfect Nash equilibrium (SPNE) in one-leader one-follower Stackelberg games under perturbations both of the action sets and of the payoff functions. To pursue this aim, we consider a general sequence of perturbed Stackelberg games and a set of assumptions that fit the usual types of perturbations. We study if the limit of SPNEs of the perturbed games is an SPNE of the original game and if the limit of SPNE outcomes of perturbed games is an SPNE outcome of the original game. We fully positively answer when the follower’s best reply correspondence is single valued. When the follower’s best reply correspondence is not single valued, the answer is positive only for the SPNEs outcomes; whereas the answer for SPNEs may be negative, even if the perturbation does not affect the sets and affects only one payoff function. However, we show that under suitable non-restrictive assumptions it is possible to obtain an SPNE starting from the limit of SPNEs of perturbed games, possibly modifying the limit at just one point. |
| Keywords: | Subgame perfect Nash equilibrium two-player Stackelberg game; action and/or payoff perturbation; convergence; asymptotic behavior; variational stability. |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:661&r=gth |
| By: | Francisco Cabo (UVa - Universidad de Valladolid [Valladolid]); Alain Jean-Marie (NEO - Network Engineering and Operations - CRISAM - Inria Sophia Antipolis - Méditerranée - Inria - Institut National de Recherche en Informatique et en Automatique); Mabel Tidball (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier) |
| Abstract: | Consumption satisfaction depends on other factors apart from the inherent characteristic of commodities. Among them, positional concerns are central in behavioral economics. Individuals enjoy returns from the ranking occupied by the consumed item. In public good, agents obtain satisfaction from their relative contribution. We analyze how positional preferences for voluntary contribution to a public good favor players' contributions and could lead to social welfare improvements. A two-player public good game is analyzed, 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. |
| Date: | 2022–07–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03947632&r=gth |
| By: | Yuxuan Lu; Qian Qi; Xi Chen |
| Abstract: | We develop a model of coordination and allocation of decentralized multi-sided markets, in which our theoretical analysis is promisingly optimizing the decentralized transaction packaging process at high-throughput blockchains or Web 3.0 platforms. In contrast to the stylized centralized platform, the decentralized platform is powered by blockchain technology, which allows for secure and transparent Peer-to-Peer transactions among users. Traditional single-chain-based blockchains suffer from the well-known blockchain trilemma. Beyond the single-chain-based scheme, decentralized high-throughput blockchains adopt parallel protocols to reconcile the blockchain trilemma, implementing any tasking and desired allocation. However, unneglectable network latency may induce partial observability, resulting in incoordination and misallocation issues for the decentralized transaction packaging process at the current high-throughput blockchain protocols. To address this problem, we consider a strategic coordination mechanism for the decentralized transaction packaging process by using a game-theoretic approach. Under a tractable two-period model, we find a Bayesian Nash equilibrium of the miner's strategic transaction packaging under partial observability. Along with novel algorithms for computing equilibrium payoffs, we show that the decentralized platform can achieve an efficient and stable market outcome. The model also highlights that the proposed mechanism can endogenously offer a base fee per gas without any restructuration of the initial blockchain transaction fee mechanism. The theoretical results that underlie the algorithms also imply bounds on the computational complexity of equilibrium payoffs. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.10944&r=gth |
| By: | Pierpaolo Battigalli; Emiliano Catonini |
| Abstract: | We study strategic reasoning in a signaling game where players have common belief in an outcome distribution and in the event that the receiver believes that the sender's first-order beliefs are independent of her payoff-type. We characterize the behavioral implications of these epistemic hypotheses through a rationalizability procedure with second-order belief restrictions. Our solution concept is related to, but weaker than Divine Equilibrium (Banks and Sobel, 1987). First, we do not obtain sequential equilibrium, but just Perfect Bayesian Equilibrium with heterogeneous off-path beliefs (Fudenberg and He, 2018). Second, when we model how the receiver may rationalize a particular deviation, we take into account that some types could have preferred a different deviation, and we show this is natural and relevant via an economic example. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:681&r=gth |
| By: | Martí Jané Ballarín (Universitat de Barcelona) |
| Abstract: | We study the complexity of computing the Banzhaf index in weighted voting games with cooperation restricted by an incompatibility graph. With an existing algorithm as a starting point, we use concepts from complexity theory to show that, for some classes of incompatibility graphs, the problem can be solved efficiently, as long as the players have "small" weights. We also show that for some other class of graphs it is unlikely that we can find efficient algorithms to compute the Banzhaf index in the corresponding restricted game. Finally, we discuss the complexity of deciding whether the index of a player is non-zero. |
| Keywords: | Banzhaf index, Graphs, Algorithms. |
| JEL: | C71 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:441web&r=gth |
| By: | Flavio M. Menezes (Australian Institute for Business and Economics, University of Queensland, Brisbane, Australia); John Quiggin (School of Economics, University of Queensland, Brisbane, Australia) |
| Abstract: | This paper reconciles the concepts of ex ante and ex post supply function equilibria of, respectively, Klemperer and Meyer (1989) and Menezes and Quiggin (2020) with the conjectural variations equilibrium of Bowley (1924) and Bresnahan (1981). We show that under appropriate conditions, the ex ante and ex post equilibrium supply curves coincide with each other and with the consistent conjectural equilibrium solution. Further, this is a dominant strategy equilibrium for both ex ante and ex post games, and represents the case in which players are indifferent regarding move order. We explore the implications of our results for empirical work. |
| Keywords: | Imperfect competition, games in supply functions, conjectural variations |
| JEL: | D43 L13 |
| Date: | 2023–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uqaibe:1&r=gth |
| By: | Hyunwook Kang; P. R. Kumar |
| Abstract: | On typical modern platforms, users are only able to try a small fraction of the available items. This makes it difficult to model the exploration behavior of platform users as typical online learners who explore all the items. Towards addressing this issue, we propose to interpret a recommender system as a bandit exploration coordinator that provides counterfactual information updates. In particular, we introduce a novel algorithm called Counterfactual UCB (CFUCB) which is guarantees user exploration coordination with bounded regret under the presence of linear representations. Our results show that sharing information is a Subgame Perfect Nash Equilibrium for agents in terms of regret, leading to each agent achieving bounded regret. This approach has potential applications in personalized recommender systems and adaptive experimentation. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.12571&r=gth |
| By: | Dylan Laplace Mermoud (Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne); Michel Grabisch (Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne, Paris School of Economics); Peter Sudhölter (University of Southern Denmark) |
| Abstract: | Minimal balanced collections are a generalization of partitions of a finite set of n elements and have important applications in cooperative game theory and discrete mathematics. However, their number is not known beyond n = 4. in this paper we investigate the problem of generating minimal balanced collections and implement the Peleg algorithm, permitting to generate all minimal balanced collections till n = 7. Secondly, we provide pratical algorithms to check many properties of coalitions and games, based on minimal balanced collections, in a way which is faster than linear programming based methods. In particular we construct an algorithm to check if the core of a cooperative game is a stable set in the sense of von Neumann and Morgenstern. The algorithm implements a theorem according to which the core is a stable set if and only if a certain nested balancedness condition is valid. The second level of this condition requires to generalize the notion of balanced collection to balanced sets |
| Keywords: | minimal balanced collection; cooperative game; core; stable set; hypergraph; algorithm |
| JEL: | C71 C44 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:23001&r=gth |
| By: | Armenak Antinyan (Cardiff Business School, Cardiff University, Cardiff, United Kingdom and Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, China); Luca Corazzini (Department of Economics and VERA, Ca’ Foscari University of Venice, Venezia, Italy and MUEEL, Masaryk University, Brno, Czech Republic); Miloš Fišar (Competence Center for Experimental Research, Vienna University of Economics and Business, Vienna, Austria, MUEEL, Masaryk University, Brno, Czech Republic, and Department of Economics, Ca’ Foscari, University of Venice, Venezia, Italy); Tommaso Reggiani (Cardiff Business School, Cardiff University, United Kingdom and MUEEL, Masaryk University, Brno, Czech Republic, and IZA) |
| Abstract: | There has been an increasing interest in altruistic behaviour in the domain of losses recently. Nevertheless, there is no consensus in whether the monetary losses make individuals more generous or more selfish. Although almost all relevant studies rely on a dictator game to study altruistic behaviour, the experimental designs of these studies differ in how the losses are framed, which may explain the diverging findings. Utilizing a dictator game, this paper studies the impact of loss framing on altruism. The main methodological result is that the dictators’ prosocial behaviour is sensitive to the loss frame they are embedded in. More specifically, in a dictator game in which the dictators have to share a loss between themselves and a recipient, the monetary allocations of the dictators are more benevolent than in a standard setting without a loss and in a dictator game in which the dictators have to share what remains of their endowments after a loss. These differences are explained by the different social norms that the respective loss frames invoke. |
| Keywords: | loss, framing, altruism, dictator game, experiment, social norms |
| JEL: | C91 D02 D64 |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:mub:wpaper:2022-11&r=gth |
| By: | Juan Larrosa (Universidad Nacional del Sur/CONICET); Fernando Tohmé (Universidad Nacional del Sur/CONICET) |
| Abstract: | The present paper analyzes a network formation problem, and in particular the existence of circular networks that constitute efficient Nash equilibria. We consider two ways in which they may arise as solutions. One in the framework presented by Bala and Goyal. In it an agent receives a payoff which is increasing in the number of agents to which he is directly or indirectly connected, while it is decreasing in the number of agents to whom he is directly connected. The other approach departs from their assumptions in two crucial aspects. On one hand, we assume that connecting to an agent pays off not only for the number of connections that the agent can provide but also for her intrinsic value. On the other hand, we assume that each path connecting two agents has an associated cost which is the sum of the number of edges it includes, and which has to be paid by each agent in the path. In both approaches it is possible to obtain circular networks as efficient Nash equilibria. But, while in Bala and Goyal’s approach this is only one possibility (the other is the empty network), in our alternative approach, if the number of agents is larger than 3, it is the unique result. |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:215&r=gth |
| By: | Semmler Willi; Di Bartolomeo Giovanni; Fard Behnaz Minooei; Braga Joao Paulo |
| Abstract: | Governments attempt to incentivize the energy sector to replace old technologies with new ones based on renewable energy as the most effective way to combat climate change. Yet, in the energy sector prevail fossil fuel incumbents, which inhibit renewable energy entrants. Our paper provides a game-theoretic stylization of competition between those two types of firms. Incumbents set prices, and entrants respond with quantity adjustments. In the context of a dynamic limit pricing model, we study the entry dynamics in a market in which the dominant firms (fossil fuel energy suppliers) face the entry of a group of competitive fringe firms (renewable energy suppliers) when the dominant firms have easier access to financial markets. Still, the fringe firms finance their expansion with internal finance. We also investigate the effect of the public support of renewable energy firms through subsidies. Our model is built on Judd and Peterson (1986, JET), but our solutions are obtained through a non-linear model predictive control algorithm. By this technique, we can predict the outcome of the competition between incumbents and entrants and the impact of financial and fiscal policies considering moving-horizon strategies. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:ter:wpaper:00158&r=gth |
| By: | David Spector (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) |
| Abstract: | Many collusive agreements involve the exchange of self-reported sales data between competitors, which use them to monitor compliance with a target market share allocation. Such communication may facilitate collusion even if it is unverifiable cheap talk and the underlying information becomes publicly available with a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocation mechanisms after unexpected swings, limiting the recourse to price wars. Such communication may allow firms to earn profits that could not be earned in any collusive, symmetric pure-strategy equilibrium without communication. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03760756&r=gth |
| By: | Yeganeh Alimohammadi; Aranyak Mehta; Andres Perlroth |
| Abstract: | Auto-bidding has recently become a popular feature in ad auctions. This feature enables advertisers to simply provide high-level constraints and goals to an automated agent, which optimizes their auction bids on their behalf. In this paper, we examine the effect of different auctions on the incentives of advertisers to report their constraints to the auto-bidder intermediaries. More precisely, we study whether canonical auctions such as first price auction (FPA) and second price auction (SPA) are auto-bidding incentive compatible (AIC): whether an advertiser can gain by misreporting their constraints to the autobidder. We consider value-maximizing advertisers in two important settings: when they have a budget constraint and when they have a target cost-per-acquisition constraint. The main result of our work is that for both settings, FPA and SPA are not AIC. This contrasts with FPA being AIC when auto-bidders are constrained to bid using a (sub-optimal) uniform bidding policy. We further extend our main result and show that any (possibly randomized) auction that is truthful (in the classic profit-maximizing sense), scalar invariant and symmetric is not AIC. Finally, to complement our findings, we provide sufficient market conditions for FPA and SPA to become AIC for two advertisers. These conditions require advertisers' valuations to be well-aligned. This suggests that when the competition is intense for all queries, advertisers have less incentive to misreport their constraints. From a methodological standpoint, we develop a novel continuous model of queries. This model provides tractability to study equilibrium with auto-bidders, which contrasts with the standard discrete query model, which is known to be hard. Through the analysis of this model, we uncover a surprising result: in auto-bidding with two advertisers, FPA and SPA are auction equivalent. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.13414&r=gth |
| By: | Mallesh Pai; Max Resnick; Elijah Fox |
| Abstract: | Smart contracts offer a way to credibly commit to a mechanism, as long as it can be expressed as an easily computable mapping from inputs, in the form of transactions on-chain, to outputs: allocations and payments. But proposers decide which transactions to include, allowing them to manipulate these mechanisms and extract temporary monopoly rents known as MEV. Motivated by both general interest in running auctions on-chain, and current proposals to conduct MEV auctions on-chain, we study how these manipulations effect the equilibria of auctions. Formally, we consider an independent private value auction where bidders simultaneously submit private bids, and public tips, that are paid to the proposer upon inclusion. A single additional bidder may bribe the proposer to omit competing bids. We show that even if bids are completely sealed, tips reveal bids in equilibrium, which suggests that encrypting bids may not prevent manipulation. Further, we show that collusion at the transaction inclusion step is extremely profitable for the colluding bidder: as the number of bidders increases, the probability that the winner is not colluding and the economic efficiency of the auction both decrease faster than $1/n$. Running the auction over multiple blocks, each with a different proposer, alleviates the problem only if the number of blocks is larger than the number of bidders. We argue that blockchains with more than one concurrent proposer can credibly execute auctions on chain, as long as tips can be conditioned on the number of proposers that include the transaction. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.13321&r=gth |
| By: | Alger, Ingela; Lehmann, Laurent |
| Abstract: | We develop a model for the evolution of preferences guiding behavior in pairwise interactions in groupstructured populations. The model uses the conceptual platform of long-term evolution theory and covers different interaction scenarios, including conditional preference expression upon recognition of interactant’s type. We apply the model to the evolution of semi-Kantian preferences at the fitness level, which combine self-interest and a Kantian interest evaluating own behavior in terms of consequences for own fitness if the interactant also adopted this behavior. We look for the convergence stable and uninvadable value of the Kantian coefficient, i.e., the weight attached to the Kantian interest, a quantitative trait varying between zero and one. We consider three scenarios: (a) incomplete information; (b) complete information and incomplete plasticity; and (c) complete information and complete plasticity, where individuals can, not only recognize the type of their interaction partner (complete information), but also conditionally express the Kantian coefficient upon it (complete plasticity). For (a), the Kantian coefficient tends to evolve to equal the coefficient of neutral relatedness between interacting individuals; for (b), it evolves to a value that depends on demographic and interaction assumptions, while for (c) individuals become pure Kantians when interacting with individuals of the same type, while they apply the Kantian coefficient that is uninvadable in a panmictic population under complete information when interacting with individuals with a different type. Overall, our model connects several concepts for analysing the evolution of behavior rules for strategic interactions that have been emphasized in different and sometimes isolated literatures. |
| Keywords: | evolution of semi-Kantian preferences; group-structured populations; fitness; convergence stability; uninvadability; Homo moralis |
| Date: | 2023–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127807&r=gth |
| By: | Elliott, M.; Galeotti, A.; Koh, A.; Li, W. |
| Abstract: | There are many markets that are networked in these sense that not all consumers have access to (or are aware of) all products, while, at the same time, firms have some information about consumers and can distinguish some consumers from some others (for example, in online markets through cookies). With unit demand and price-setting firms we give a complete characterization of all welfare outcomes achievable in equilibrium (for arbitrary buyer-seller networks and arbitrary information structures), as well as the designs (networks and information structures) which implement them. |
| Date: | 2023–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2313&r=gth |
| By: | Alger, Ingela; Weibull, Jörgen W. |
| Abstract: | Theorem 1 in Alger and Weibull (Games and Economic Behavior, 2016) consists of two statements. The first establishes that Homo moralis with the right degree of morality is evolutionarily stable. The second statement is a claim about sufficient conditions for other goal functions to be evolutionarily unstable. However, the proof given for that claim presumes that all relevant sets are non-empty, while the hypothesis of the theorem does not guarantee that. We here prove instability under a stronger hypothesis that guarantees existence, and we also establish a new and closely related result. As a by-product, we also obtain an extension of Theorem 1 in Alger and Weibull (Econometrica, 2013). |
| Keywords: | Preference evolution; evolutionary stability; morality, Homon moralis. |
| JEL: | C73 D01 D03 |
| Date: | 2023–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127819&r=gth |
| By: | Sanjit Dhami; Mengxing Wei |
| Abstract: | We consider the psychological and social foundations of human contributions and punishments in a voluntary contributions mechanism with punishment (VCMP). We eliminate ‘dynamic economic linkages’ between the two stages of our ‘modified’ VCMP to rule out other potential explanations. We use a beliefs-based model, rooted in psychological game theory, to derive rigorous theoretical predictions that are then tested with pre-registered experiments in China and the UK. Social norms, culture, and endogenous emotions are the key determinants of contributions and punishments. The emotions of shame, frustration, and anger, play a key role in our theoretical and empirical analysis through ‘dynamic psychological linkages’. We provide potential microfoundations for the inherent human tendency to follow social norms and punish norm violators, while respecting boundedly rational strategic decision making. |
| Keywords: | cooperation and punishment, emotions-shame, frustration, anger, social norms, culture, bounded rationality |
| JEL: | C91 C92 D01 D91 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10220&r=gth |
| By: | Ingela Alger (TSE-R - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-François Laslier (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) |
| Abstract: | This paper revisits two classical problems in the theory of voting—viz. the divided majority problem and the strategic revelation of information—in the light of evolutionarily founded partial Kantian morality. It is shown that, compared to electorates consisting of purely self-interested voters, such Kantian morality helps voters solve coordination problems and improves the information aggregation properties of equilibria, even for modest levels of morality. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:hal-03682814&r=gth |
| By: | Andrea Canidio; Vincent Danos |
| Abstract: | We provide a game-theoretic analysis of the problem of front-running attacks. We use it to distinguish attacks from legitimate competition among honest users for having their transactions included earlier in the block. We also use it to introduce an intuitive notion of the severity of front-running attacks. We then study a simple commit-reveal protocol and discuss its properties. This protocol has costs because it requires two messages and imposes a delay. However, it is effective at preventing the most severe front-running attacks while preserving legitimate competition between users, guaranteeing that the earliest transaction in a block belongs to the honest user who values it the most. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.13785&r=gth |
| By: | Benoît Le Maux; Sarah Necker |
| Abstract: | We use a ten-round online mind game to determine whether the effect of honesty nudges depends on timing and content. Reminding individuals about the right thing to do increases honesty. Including information that it is possible to assess an individual’s dishonesty strengthens the effect of the intervention. Both types of intervention are similarly effective when they take place before an individual has made any decision or after individuals have played five rounds of the mind game. Nudging an individual after they have made five decisions allows us to add personalized information based on the individual’s previous response; however, this does not increase honesty. Examining the reaction to nudges based on previous behavior shows that (presumably) honest and dishonest individuals respond by reducing overreporting. The effect of the different nudge content is driven by those previously dishonest. |
| Keywords: | dishonesty, lying, cheating, honesty nudge, moral reminder, deterrence |
| JEL: | C91 C92 M52 J28 J33 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10221&r=gth |