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on Game Theory |
| By: | Takashi Ui |
| Abstract: | In games with incomplete and ambiguous information, rational behavior depends not only on fundamental ambiguity (ambiguity about states) but also on strategic ambiguity (ambiguity about others' actions). We study the impact of strategic ambiguity in global games. Ambiguous-quality information makes more players choose an action yielding a constant payoff, whereas (unambiguous) low-quality information makes more players choose an ex-ante best response to the uniform belief over the opponents' actions. If the ex-ante best-response action yields a constant payoff, sufficiently ambiguous-quality information induces a unique equilibrium, whereas sufficiently low-quality information generates multiple equilibria. In applications to financial crises, we demonstrate that news of more ambiguous quality triggers a debt rollover crisis, whereas news of less ambiguous quality triggers a currency crisis. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2303.12263&r=gth |
| By: | Saglam, Ismail |
| Abstract: | This paper considers a duopoly with asymmetric costs and demand uncertainty to study the welfare effects of pretend-but-perform regulation (PPR) of Koray and Sertel (1988) under three modes of competition, involving the Cournot, conjectural variations, and supply function competitions. PPR induces a two-stage game where each firm declares in the first stage a cost report and produces in the second stage accordingly. Theoretically characterizing and numerically computing the equilibrium of this game, we show that the consumer surplus increases if PPR is applied under the Cournot competition and it decreases if PPR is applied under the other modes of competition. |
| Keywords: | Duopoly; regulation, Cournot, conjectural variations, supply function equilibrium. |
| JEL: | D43 L13 L51 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116767&r=gth |
| By: | Nicole B\"auerle; Tamara G\"oll |
| Abstract: | We consider the strategic interaction of $n$ investors who are able to influence a stock price process and at the same time measure their utilities relative to the other investors. Our main aim is to find Nash equilibrium investment strategies in this setting in a financial market driven by a Brownian motion and investigate the influence the price impact has on the equilibrium. We consider both CRRA and CARA utility functions. Our findings show that the problem is well-posed as long as the price impact is at most linear. Moreover, numerical results reveal that the investors behave very aggressively when the price impact is beyond a critical parameter. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2303.18161&r=gth |
| By: | Fabien Gensbittel (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse 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); Marcin Peski (University of Toronto); Jérôme Renault (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse 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) |
| Abstract: | We define the distance between two information structures as the largest possible difference in value across all zero-sum games. We provide a tractable characterization of distance and use it to discuss the relation between the value of information in games versus single-agent problems, the value of additional information, informational substitutes, complements, or joint information. The convergence to a countable information structure under value-based distance is equivalent to the weak convergence of belief hierarchies, implying, among other things, that for zero-sum games, approximate knowledge is equivalent to common knowledge. At the same time, the space of information structures under the value-based distance is large: there exists a sequence of information structures where players acquire increasingly more information, and ε > 0 such that any two elements of the sequence have distance of at least ε. This result answers by the negative the second (and last unsolved) of the three problems posed by J.F. Mertens in his paper Repeated Games , ICM 1986. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01869139&r=gth |
| By: | Kim L. Böhm; Sebastian J. Goerg; Lilia Wasserka-Zhurakhovska; Lilia Zhurakhovska |
| Abstract: | Using an online experiment with two distinct dishonesty games, we analyze how dishonesty in men and women is influenced by either thinking or learning about the dishonesty of others in a related, but different situation. Thinking is induced by eliciting a belief about others’ dishonesty in a different game. We find that such belief elicitation (1) increases males’ (but not females’) dishonesty and (2) has no influence on participants’ beliefs about the dishonesty of others in the game that they themselves play. Learning is induced by receiving a signal about the actual honest or dishonest choices of others in a different game. We find that the level of unethical behavior provided in such a signal (1) increases females’ (but not males’) dishonesty and (2) is positively correlated with participants’ beliefs about the dishonesty of others in the game that they themselves play. We conclude that gender matters when examining how unethical behavior spreads. Both genders update their beliefs about others’ dishonesty in the same way when presented with information about others’ choices, but dishonesty in men is triggered by merely thinking about others’ dishonesty, while women only respond to actual information on others’ dishonesty. |
| Keywords: | dishonesty, unethical behaviour, thinking and learning about other’s dishonesty, gender, experiment |
| JEL: | C90 D01 D80 D91 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10314&r=gth |
| By: | Vessela Daskalova (University College Dublin, University of Toulouse Capitole); Nicolaas J.Vriend (Queen Mary University of London) |
| Abstract: | Players may categorize the strategies available to them. In many games there are different ways to categorize one’s strategies (different frames) and which ones players use has implications for the outcomes realized. This paper proposes a model of agents who learn which frames to use through reinforcement. As a case study we fit the model to existing experimental data from coordination games. The analysis shows that the model fits the data well as it matches the key stylized facts. It suggests a trade-off of using coarser versus finer representations of the strategy set when it comes to learning. |
| Keywords: | Variable Frame Theory, Coordination games, Categorization, Reinforcement learning, Focal points, Bounded rationality |
| JEL: | C63 C72 C91 D9 |
| Date: | 2021–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:929&r=gth |
| By: | Fabian Gerstmeier (HU Berlin); Yigit Oezcelik (University of Liverpool); Michel Tolksdorf (TU Berlin) |
| Abstract: | We study the efficacy of rebate rules in reward-based crowdfunding, where a project is only realized when a funding goal is met, and only those who pledge at least a reservation price receive a reward from the project. We propose and experimentally test two rebate rules against the customary all-or-nothing model. Firstly, we adapt the proportional rebate rule from threshold public good games to our reward-based setting. Secondly, we develop the novel bid-cap rule. Here, pledges must only be paid up to a cap, which is determined ex-post such that the provision point is exactly met. Theoretically, the bid-cap rule induces weakly less variance in payments compared with the proportional rebate rule. In our experiment, we find that both rebate rules induce higher pledges and increase the project realization rate in comparison to the all-or-nothing model. Further, we can confirm that the variance of payments is lower under the bid-cap rule compared with the proportional rebate rule. |
| Keywords: | crowdfunding; laboratory experiment; provision point mechanism; rebates; |
| JEL: | C72 C92 H41 |
| Date: | 2023–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:392&r=gth |
| By: | Siyu Chen; Jibang Wu; Yifan Wu; Zhuoran Yang |
| Abstract: | We study the incentivized information acquisition problem, where a principal hires an agent to gather information on her behalf. Such a problem is modeled as a Stackelberg game between the principal and the agent, where the principal announces a scoring rule that specifies the payment, and then the agent then chooses an effort level that maximizes her own profit and reports the information. We study the online setting of such a problem from the principal's perspective, i.e., designing the optimal scoring rule by repeatedly interacting with the strategic agent. We design a provably sample efficient algorithm that tailors the UCB algorithm (Auer et al., 2002) to our model, which achieves a sublinear $T^{2/3}$-regret after $T$ iterations. Our algorithm features a delicate estimation procedure for the optimal profit of the principal, and a conservative correction scheme that ensures the desired agent's actions are incentivized. Furthermore, a key feature of our regret bound is that it is independent of the number of states of the environment. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2303.08613&r=gth |
| By: | Eckhard Janeba; Guttorm Schjelderup |
| Abstract: | The OECD’s proposal for a global minimum tax (GMT) of 15% aims for a reversal of a decline of corporate tax rates. We study the revenue effects of the GMT by focusing on strategic tax setting effects. The direct effect from less profit shifting increases revenues in high-tax countries. A secondary effect, however, is that the value of attracting foreign investments increases, which intensifies tax competition. We show that when governments compete via firm-specific or uniform subsidies, the revenue gains from less profit shifting are exactly offset by higher subsidies. When competition is by tax rates, revenues may increase however. |
| Keywords: | global minimum tax, tax competition, OECD BEPS, Pillar II |
| JEL: | F23 F55 H25 H73 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10318&r=gth |
| By: | Chia-Hui Chen; Kong-Pin Chen; Junichiro Ishida |
| Abstract: | Despite widespread use in online transactions, rating systems only provide summary statistics of buyers' diverse opinions at best. To investigate the consequences of this coarse form of information aggregation, we consider a dynamic lemons market in which buyers share their evaluations anonymously through a rating system. When the buyers have diverse preferences, the value of a good rating depends endogenously on the seller's pricing strategy, which in turn creates complicated dynamic interactions and results in stochastic price fluctuations. Occasional flash sales induced by the rating system yield a non-trivial welfare effect that stands in sharp contrast to standard adverse selection models: all buyers are weakly better off with information asymmetry than without. Incentivizing buyers to leave ratings may backfire by exacerbating the seller's strategic pricing incentives. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1203&r=gth |
| By: | Beckman, Jayson; Ivanic, Maros; Shaik, Saleem |
| Abstract: | Aghion et al. (2007) developed a dynamic bargaining model that considers bilateral versus multilateral trade agreements. Employing a ‘Nash in Nash’ applied general equilibrium framework, we provide empirical evidence for their approach. Considering the Trans-Pacific Partnership (TPP), our model determines the welfare maximizing set of bilateral trade agreements by sectors (there are ten) and compares that to an agreement involving all countries/sectors. We find that a multilateral agreement generates more collective welfare than most bilateral agreements and that this welfare gain is unlikely to be achieved by countries’ individual pursuit of bilateral agreements. We find that superadditivity (i.e., additional welfare associated with the expansion of free trade to additional sectors and countries) holds across all regions and all sectors, but not for every pair of regions and sectors. Thus, it is possible for a set of regions to increase their collective welfare by excluding some sectors from their trade agreement. |
| Keywords: | International Relations/Trade, International Relations/Trade |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ags:pugtwp:333437&r=gth |
| By: | Daniel J. Hernandez (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS); Fernando Jaramillo (Universidad del Rosario, Bogota, Colombia); Hubert Kempf (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS); Fabien Moizeau (Université de Rennes, CNRS, CREM-UMR6211, F-35000 Rennes, France); Thomas Vendryes (Université Paris Saclay, Ecole Normale Supérieure Paris-Saclay, CEPS) |
| Abstract: | The need to insure against idiosyncratic income risk leads to the formation of risksharing groups in village economies where formal financial markets are absent. We develop a theoretical model to address the impact of limited commitment and social control on the extent of informal risk sharing when agents are induced to form such risk-sharing coalitions. Social control increases the prospect of future punishment of present defectors and thus mitigates the absence of commitment. A defection-proof core-partition exists, is unique and homophilic. Riskier societies may not be more segmented and may not pay a higher cost for insurance. A higher social control leads to a less segmented society but does not necessarily lead to a lower price for sharing risk. We provide evidence, based on data on Thai villages, that consumption smoothing conforms with our theoretical result of homophily-based coalitions and that social control contributes to a lesser segmentation of a society. |
| Keywords: | Risk Sharing, Informal Insurance, Group Formation, Social Control, Risk Heterogeneity, Homophily, Dyadic Models, Thailand |
| JEL: | C71 D81 O12 O17 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:2023-03&r=gth |