
on Game Theory 
By:  Li, Peixuan; Dang, Chuangyin; Herings, JeanJacques (Tilburg University, School of Economics and Management) 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:tiu:tiutis:5b68f5d732094a1b924c63675a61c23f&r=gth 
By:  Heifetz, Aviad (Open University Tel Aviv); Minelli, Enrico (University of Brescia); Polemarchakis, Herakles (University of Warwick) 
Abstract:  Purely affective interaction allows the welfare of an individual to depend on her own actions and on the profile of welfare levels of others. Under an assumption on the structure of mutual affection that we interpret as nonexplosive mutual affection, we show that equilibria of simultaneousmove affective interaction are Pareto optimal independently of whether or not an induced standard game exists. Moreover, if purely affective interaction induces a standard game, then an equilibrium profile of actions is a Nash equilibrium of the game, and this Nash equilibrium and Pareto optimal profile of strategies is locally dominan 
Keywords:  purely affective interactions ; Pareto optimality JEL codes: D62 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:wrk:wcreta:76&r=gth 
By:  Reuben Bearman 
Abstract:  If in a signaling game the receiver expects to gain no information by monitoring the signal of the sender, then when a cost to monitor is implemented he will never pay that cost regardless of his offpath beliefs. This is the argument of a recent paper by T. Denti (2021). However, which pooling equilibrium does a receiver anticipate to gain no information through monitoring? This paper seeks to prove that given a sufficiently small cost to monitor any pooling equilibrium with a nonzero index will survive close to the original equilibrium. 
Date:  2023–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2302.01116&r=gth 
By:  Michela Chessa; Nobuyuki Hanaki; Aymeric Lardon; Takashi Yamada 
Abstract:  We experimentally compare two wellknown mechanisms inducing the Shapley value as an ex ante equilibrium outcome of a noncooperative bargaining procedure: the demandbased Winter’s demand commitment bargaining mechanism and the offerbased Hart and MasColell procedure. Our results suggest that the offerbased Hart and MasColell mechanism better induces players to cooperate and to agree on an efficient outcome, whereas the demandbased Winter mechanism better implements allocations that reflect players' effective power, provided that the grand coalition is formed. 
Date:  2022–05 
URL:  http://d.repec.org/n?u=RePEc:dpr:wpaper:1175r&r=gth 
By:  Peter A. Streufert 
Abstract:  This paper uses value functions to characterize the purestrategy subgameperfect equilibria of an arbitrary, possibly infinitehorizon game. It specifies the game's extensive form as a pentaform (Streufert 2023p, coming revision of arXiv:2107.10801), which is a set of quintuples formalizing the abstract relationships between nodes, actions, players, and situations (situations generalize information sets). Because a pentaform is a set, this paper can explicitly partition the game form into piece forms, each of which starts at a (Selten) subroot and contains all subsequent nodes except those that follow a subsequent subroot. Then the set of subroots becomes the domain of a value function, and the pieceform partition becomes the framework for a value recursion which generalizes the Bellman equation from dynamic programming. The main results connect the value recursion with the subgameperfect equilibria of the original game, under the assumptions of upper and lowerconvergence. Finally, a corollary characterizes subgame perfection as the absence of an improving onepiece deviation. 
Date:  2023–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2302.03855&r=gth 
By:  Sakib Anwar, Chowdhury Mohammad (BLDT, University of Winchester); Bruno, Jorge (BLDT, University of Winchester); SenGupta, Sonali (Queens Management School, Queenâ€™s University Belfast.) 
Abstract:  We model a dynamic public good contribution game, where players are (naturally) formed into groups. The groups are exogenously placed in a sequence, with limited information available to players about their groupsâ€™ position in the sequence. Contribution decisions are made by players simultaneously and independently, and the groupsâ€™ total contribution is made sequentially. We try to capture both inter and intragroup behaviors and analyze different situations where players observe partial history about total contributions of their predecessor groups. Given this framework, we show that even when players observe a history of defection (no contribution), a cooperative outcome is achievable. This is particularly interesting in the situation when players observe only their immediate predecessor groupsâ€™ contribution, where we observe that players play an important role in motivating others to contribute. 
Keywords:  Social Dilemmas ; Public Goods ; Position Uncertainty ; Voluntary Contributions ; Fundraising ; Groups JEL codes: C72; D82; H41 
Date:  2022 
URL:  http://d.repec.org/n?u=RePEc:wrk:wcreta:75&r=gth 
By:  Daniil Larionov 
Abstract:  I consider a repeated auction setting with colluding buyers and a seller who adjusts reserve prices over time without longterm commitment. To model the sellerâ€™s concern for collusion, I introduce a new equilibrium concept: collusive public perfect equilibrium (cPPE). For every strategy of the seller I define the corresponding â€œbuyergameâ€ in which the seller is replaced by Nature who chooses the reserve prices for the buyers in accordance with the sellerâ€™s strategy. A public perfect equilibrium is collusive if the buyers cannot achieve a higher symmetric public perfect equilibrium payoff in the corresponding buyergame. In a setting with symmetric buyers with private binary iid valuations and publicly revealed bids, I find a collusive public perfect equilibrium that allows the seller to extract the entire surplus from the buyers in the limit as the discount factor goes to 1. I therefore show that a patient, noncommitted seller can effectively fight collusion even when she can only set reserve prices and has to satisfy stringent public disclosure requirements. 
Keywords:  Repeated Auctions, Auction Design, Collusion, Full Surplus Extraction 
JEL:  D44 D47 C73 
Date:  2023–02 
URL:  http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_392&r=gth 
By:  Aidas Masiliūnas (Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK.) 
Abstract:  We test whether deviations from Nash equilibrium in rentseeking contests can be explained by the slow convergence of payoffbased learning. We identify and eliminate two noise sources that slow down learning: first, opponents are changing their actions across rounds; second, payoffs are probabilistic, which reduces the correlation between expected and realized payoffs. We find that average choices are not significantly different from the riskneutral Nash equilibrium predictions only when both noise sources are eliminated by supplying foregone payoff information and removing payoff risk. Payoffbased learning can explain these results better than alternative theories. We propose a hybrid learning model that combines reinforcement and belief learning with risk, social and other preferences, and show that it fits data well, mostly because of reinforcement learning. 
Keywords:  experiment, contests, reinforcement learning, foregone payoffs, payoff risk, Nash equilibrium 
JEL:  C72 C91 D71 D81 
Date:  2023–01 
URL:  http://d.repec.org/n?u=RePEc:shf:wpaper:2023002&r=gth 
By:  Itai Arieli; Ronen Gradwohl; Rann Smorodinsky 
Abstract:  We study the robustness of cheaptalk equilibria to infinitesimal private information of the receiver in a model with a binary statespace and stateindependent senderpreferences. We show that the senderoptimal equilibrium is robust if and only if this equilibrium either reveals no information to the receiver or fully reveals one of the states with positive probability. We then characterize the actions that can be played with positive probability in any robust equilibrium. Finally, we fully characterize the optimal senderutility under binary receiver's private information, and provide bounds for the optimal senderutility under general private information. 
Date:  2023–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2302.00281&r=gth 
By:  Yiling Chen; Tao Lin 
Abstract:  The classic Bayesian persuasion model assumes a Bayesian and bestresponding receiver. We study a relaxation of the Bayesian persuasion model where the receiver can approximately best respond to the sender's signaling scheme. We show that, under natural assumptions, (1) the sender can find a signaling scheme that guarantees itself an expected utility almost as good as its optimal utility in the classic model, no matter what approximately bestresponding strategy the receiver uses; (2) on the other hand, there is no signaling scheme that gives the sender much more utility than its optimal utility in the classic model, even if the receiver uses the approximately bestresponding strategy that is best for the sender. Together, (1) and (2) imply that the approximately bestresponding behavior of the receiver does not affect the sender's maximal achievable utility a lot in the Bayesian persuasion problem. The proofs of both results rely on the idea of robustification of a Bayesian persuasion scheme: given a pair of the sender's signaling scheme and the receiver's strategy, we can construct another signaling scheme such that the receiver prefers to use that strategy in the new scheme more than in the original scheme, and the two schemes give the sender similar utilities. As an application of our main result (1), we show that, in a repeated Bayesian persuasion model where the receiver learns to respond to the sender by some algorithms, the sender can do almost as well as in the classic model. Interestingly, unlike (2), with a learning receiver the sender can sometimes do much better than in the classic model. 
Date:  2023–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2302.03719&r=gth 
By:  Buchali, Katrin; Grüb, Jens; Muijs, Matthias; Schwalbe, Ulrich 
Abstract:  Recent experimental simulations have shown that autonomous pricing algorithms are able to learn collusive behavior and thus charge supracompetitive prices without being explicitly programmed to do so. These simulations assume, however, that both firms employ the identical pricesetting algorithm based on Qlearning. Thus, the question arises whether the underlying assumption that both firms employ a Qlearning algorithm can be supported as an equilibrium in a game where firms can chose between different pricing rules. Our simulations show that when both firms use a learning algorithm, the outcome is not an equilibrium when alternative price setting rules are available. In fact, simpler price setting rules as for example meeting competition clauses yield higher payoffs compared to Qlearning algorithms. 
Keywords:  pricing algorithms, algorithmic collusion, reinforcement learning 
JEL:  D43 D83 L13 L49 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:zbw:hohdps:012023&r=gth 
By:  Itai Arieli; Yakov Babichenko; Stephan M\"uller; Farzad Pourbabaee; Omer Tamuz 
Abstract:  In a misspecified social learning setting, agents are condescending if they perceive their peers as having private information that is of lower quality than it is in reality. Applying this to a standard sequential model, we show that outcomes improve when agents are mildly condescending. In contrast, too much condescension leads to bad outcomes, as does anticondescension. 
Date:  2023–01 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2301.11237&r=gth 
By:  David K Levine; Andrea Mattozzi; Salvatore Modica 
Date:  2023–02–18 
URL:  http://d.repec.org/n?u=RePEc:cla:levarc:786969000000001811&r=gth 
By:  Paul, Arindam; De, Parikshit 
Abstract:  We consider a vertically related differentiated product mixed duopoly market where a public and private firm compete in the downstream market. The public firm is partially privatized and a welfare maximizing regulator chooses the privatization level. The production of the final commodity requires a key input that is supplied by a foreign monopolist who in the upstream market can practice either uniform or discriminatory pricing. We show that with uniform pricing regime the privatization is always larger under Cournot competition while in case of discriminatory pricing regime, the privatization level under Bertrand competition is always larger. We also find that under discriminatory pricing regime, the CournotBertrand ranking of other relevant variables are sensitive to the degree of substitutability. 
Keywords:  D4, D6, H4, L1, L2 
JEL:  L1 L2 
Date:  2022–09–15 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:116272&r=gth 
By:  Ronen Gradwohl; Moshe Tennenholtz 
Abstract:  We study the costs and benefits of selling data to a competitor. Although selling all consumers' data may decrease total firm profits, there exist other selling mechanisms  in which only some consumers' data is sold  that render both firms better off. We identify the profitmaximizing mechanism, and show that the benefit to firms comes at a cost to consumers. We then construct Paretoimproving mechanisms, in which each consumers' welfare, as well as both firms' profits, increase. Finally, we show that consumer optin can serve as an instrument to induce firms to choose a Paretoimproving mechanism over a profitmaximizing one. 
Date:  2023–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2302.00285&r=gth 