nep-gth New Economics Papers
on Game Theory
Issue of 2023‒05‒08
sixteen papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. A coordination game approach to higher education growth By José Pedro Pontes
  2. Player-centered incomplete cooperative games By Martin Cerny; Michel Grabisch
  3. Power Asymmetry in Repeated Play of Provision and Appropriation Games By James C. Cox; Vjollca Sadiraj; James M. Walker
  4. One-bound core games By Gong, Doudou; Dietzenbacher, Bas; Peters, Hans
  5. Education spread and economic development - a coordination game approach By José Pedro Pontes
  6. Festival Games: Inebriated and Sober Altruists By Giuseppe Attanasi; James C. Cox; Vjollca Sadiraj
  7. Eliciting Awareness By Evan Piermont
  8. The Effects of Incentives on Choices and Beliefs in Games: An Experiment By Teresa Esteban-Casanelles; Duarte Gon\c{c}alves
  9. Interoperability between Ad-Financed Platforms with Endogenous Multi-Homing By Marc Bourreau; Adrien Raizonville; Guillaume Thébaudin
  10. Mean-field equilibrium price formation with exponential utility By Masaaki Fujii; Masashi Sekine
  11. Deciding for Others: Local Public Good Contributions with Intermediaries By Andrej Angelovski; Praveen Kujal; Christos Mavridis
  12. Diversity Fosters Learning in Environments with Experimentation and Social Learning By Cunha, Douglas; Monte, Daniel
  13. Wage Bargaining and Labor Market Policy with Biased Expectations By Almut Balleer; Georg Duernecker; Susanne Forstner; Johannes Goensch
  14. Egoism and Altruism in Intergroup Conflict By Simon Varaine; Raùl Magni-Berton; Ismaël Benslimane; Paolo Crosetto
  15. Data, Competition, and Digital Platforms By Dirk Bergemann; Alessandro Bonatti
  16. Classroom Competition, Student Effort, and Peer Effects By Mark R. Rosenzweig; Bing Xu

  1. By: José Pedro Pontes
    Abstract: This paper examines the evoluon of higher educaon in Portugal under the light of an n-person (Stag Hunt) coordinaon game. Such a game exhibits two strict Nash equilibrium points, namely ?when all youngsters decide to work immediately, and ?when they all decide to join a university. Harsanyi and Selten (1988)’s risk dominance concept is used to select the ? Nash equilibrium. We consider two alternave coordinaon requirements in the n – person Stag Hunt, namely unanimity and the k – coordinaon requirement, that allows the university to break even. Even though the unanimity game is formally noncooperave, it represents in fact the result of a cooperave agreement as was emphasized by John Nash (1950, 1953). By contrast, the k – coordinaon game is purely noncooperave and it is driven by efficiency consideraons. By applying these concepts to higher educaon spread across Portuguese regions between 2001 and 2021, we could reach two main conclusions. First, the distribuon of higher educaon across regions seems to be mainly affected by a k – coordinaon constraint, i.e., the share of terary-educated people appears to be higher in densely populated regions where the high fixed costs of seng up a college are more easily covered. Second, public policy appears to be oriented to achieve unanimity in the youngsters’ decisions to join a university by smulang college aendance in sparsely populated regions. Such a policy purpose might make the college system less effecve and limit its expansion in the future.
    Keywords: Educaon, Regional Development, Coordinaon Games, Risk Dominance.
    JEL: C72 I20 O12 R11
    Date: 2023–04
  2. By: Martin Cerny (Charles University, Prague, Czech Republic); Michel Grabisch (Centre d'Economie de la Sorbonne - Paris School of Economics Université Paris 1 Panthéon-Sorbonne)
    Abstract: The computation of a solution concept of a cooperative game usually employs values of all coalitions. However, in somme applications, the values of some of the coalitions might be unknown due to high costs associated with their determination or simply because it is not possible to determine them exactly. We introduce a method to approximate standard solution concepts based only on partial characteristic function of the cooperative game. In this paper, we build on our previous results and generalise the results of our methods to a significantly larger class of structures of incomplete information
    Keywords: cooperative game; incomplete game; Shapley value; core; tau-value
    JEL: C71
    Date: 2023–03
  3. By: James C. Cox; Vjollca Sadiraj; James M. Walker
    Abstract: This paper studies the effect of power asymmetry on resolution of social dilemmas in repeated play of linear public good games. The experiment uses a 2X2 design that crosses power symmetry or asymmetry in games with positive (provision) or negative (appropriation) externalities. Our data suggest that power asymmetry has a detrimental effect on voluntary allocations to a public good, with the effect being more pronounced in the asymmetric-power appropriation game. Allocations to a public good increase with "social" income, which is inconsistent with allocations by different individuals being strategic substitutes. With power asymmetry, second movers earn more than first movers in the appropriation game but not in the provision game.
    JEL: C73 C52 H41
    Date: 2023–04
  4. By: Gong, Doudou; Dietzenbacher, Bas (RS: GSBE other - not theme-related research, QE Math. Economics & Game Theory); Peters, Hans (RS: GSBE other - not theme-related research, RS: FSE DACS Mathematics Centre Maastricht, QE Math. Economics & Game Theory)
    Abstract: This paper introduces the new class of one-bound core games, where the core can be described by either a lower bound or an upper bound on the payoffs of the players, named lower bound core games and upper bound core games, respectively. We study the relation of the class of one-bound core games with several other classes of games and characterize the new class by the structure of the core and in terms of Davis-Maschler reduced games. We also provide explicit expressions and axiomatic characterizations of the nucleolus for one-bound core games, and show that the nucleolus coincides with the Shapley value when these games are convex.
    JEL: C71
    Date: 2023–04–25
  5. By: José Pedro Pontes
    Abstract: TEven though education exhibits strong positive externalities, there exists abundant evidence that the positive correlation between the spread of higher education and aggregate productivity tends to gradually disappear as a larger number of students attend college. To rationalize this apparent contradiction, we model college attendance through a coordination (Stag Hunt) game, where a set of youngsters decide whether to enrol in college or immediately enter the labour market. The benefits of higher education are reaped by everyone only if all youngsters decide to engage in higher education. We argue that the reward to college education tends to decline as it becomes widespread on account of two factors. First, the wage premium of skilled labour falls due to an increased supply. Then, new colleges tend to be set up in less dense areas, so that the average distance between a youngster’s residence and the closest university rises. The decrease in the reward of tertiary education is multiplied by its impact on the result of a Stag Hunt game. If such a reward is high, there will likely be a switch from the “risk dominant” Nash equilibrium, where no youngster decides to engage in tertiary education, to the “payoff dominant” equilibrium with unanimous enrolment in college. By contrast when the net reward of higher education becomes relatively low the outcome of the Stag Hunt will be instead a coordination breakdown, which might even lead to a fall in the productivity of the agents involved. The latter result was found in laboratory studies by Straub (1995) and Schmidt et al. (2003) among others and we can explain it in theoretical terms if we allow for incomplete information in the Stag Hunt game.
    Keywords: Education and Economic Development, Coordination Games, Incomplete Information Games
    JEL: C72 I25
    Date: 2023–04
  6. By: Giuseppe Attanasi (Sapienza University of Rome, Italy; BETA, University of Strasbourg, France; Université Côte d'Azur, CNRS, GREDEG, France); James C. Cox (Georgia State University); Vjollca Sadiraj (Georgia State University)
    Abstract: We run a staged field experiment during three concerts in the South of Italy, characterized by the same traditional music and a comparable average level of alcohol consumption by attendees. Individual blood alcohol concentration (BAC) is measured through electronic breathalyzers. The experimental games proposed to concert attendees are contractions (mini-games) of the private-property and the common-property trust game in Cox et al. (2009). We elaborate predictions on behavior of participants with null vs. positive BAC based on the revealed altruism theory of Cox et al. (2008). We find that alcohol consumption leads to less pro-social behavior (measured as either trust or reciprocity) independently of the version (private-property or common-property) of the trust game. Furthermore, inebriated participants show strategic altruism in the role of first mover (trust), but not in the role of second mover (reciprocity) in the trust game.
    Keywords: Staged Field Experiment, Alcohol, Trust Game, Trust, Reciprocity, Private vs. Common Property, Tourists
    JEL: C72 C93 Z10 Z32
    Date: 2022–11
  7. By: Evan Piermont
    Abstract: This paper examines how a decision maker might incentive an expert, who is more aware than himself, to reveal novel contingencies. In particular, the decision maker will take an action that determines, along with the resolution of uncertainty, the payoffs to both players. I delineate the exact level of commitment needed to ensure full revelation: any fully revealing incentive scheme is equivalent to a dynamic game wherein each round the decision maker proposes a plan of action and the expert chooses to reveal some novel contingencies. The game ends when nothing novel is revealed and the expert chooses which of the proposed plans gets implemented. That is, the decision maker must be able to commit that once a plan of action is proposed, it cannot be taken off the table. I then consider the set of robust strategies -- those strategies that maximize the worst case outcome across any possible awareness type of the expert -- and show they are characterized by a principle of myopic optimality: at each round, the decision maker maximizes his payoff as if the expert had nothing further to reveal. It turns out, this myopic principle also solves the mechanism designer's problem: the set of outcomes that are achievable by any incentive compatible and Pareto efficient mechanism are delineated by the set of robust strategies in the above dynamic game.
    Date: 2023–04
  8. By: Teresa Esteban-Casanelles; Duarte Gon\c{c}alves
    Abstract: How and why do incentive levels affect strategic behavior? This paper examines an experiment designed to identify the causal effect of scaling up incentives on choices and beliefs in strategic settings by holding fixed opponents' actions. In dominance-solvable games, higher incentives increase action sophistication and best-response rates and decrease mistake propensity. Beliefs tend to become more accurate with higher own incentives in simple games. However, opponents with higher incentive levels are harder to predict: while beliefs track opponents' behavior when they have higher incentive levels, beliefs about opponents also become more biased. We provide evidence that incentives affect cognitive effort and that greater effort increases performance and predicts choice and belief sophistication. Overall, the data lends support to combining both payoff-dependent mistakes and costly reasoning.
    Date: 2023–04
  9. By: Marc Bourreau; Adrien Raizonville; Guillaume Thébaudin
    Abstract: Platform interoperability is considered a powerful tool to promote competition in digital markets when network effects are at play. We study the effect of interoperability on competition between two ad-financed platforms, allowing for endogenous multi-homing of consumers. When the platforms are symmetric and decide non-cooperatively on their level of interoperability, interoperability emerges in equilibrium if the value of multi-homers relative to single-homers is sufficiently low for advertisers. From a welfare perspective, the equilibrium level of interoperability can be either too low or too high. When one (“large”) platform has an installed base of customers, its incentive to make its services interoperable is lower than for the other, smaller platform. However, mandating interoperability between the asymmetric platforms is not always socially optimal.
    Keywords: interoperability, platform competition, multi-homing, advertising
    JEL: L13 L86 L15
    Date: 2023
  10. By: Masaaki Fujii (Quantitative Finance Course, Graduate School of Economics, The University of Tokyo.); Masashi Sekine (Quantitative Finance Course, Graduate School of Economics, The University of Tokyo.)
    Abstract: In this paper, we study a problem of equilibrium price formation among many investors with exponential utility. The investors are heterogeneous in their initial wealth, risk-averseness parameter, as well as stochastic liability at the terminal time. We characterize the equilibrium risk-premium process of the risky stocks in terms of the solution to a novel mean- eld backward stochastic differential equation (BSDE), whose driver has quadratic growth both in the stochastic integrands and in their conditional expectations. We prove the existence of a solution to the mean- eld BSDE under several conditions and show that the resultant risk-premium process actually clears the market in the large population limit.
    Date: 2023–04
  11. By: Andrej Angelovski (Middlesex University); Praveen Kujal (Middlesex University and Chapman University); Christos Mavridis (Gabriele d’Annunzio University of Chieti-Pescar)
    Abstract: Given the prevalence of local public goods, whose broader use is often limited by distance and borders, we propose a potential solution to the free-riding problem by having each participant/beneficiary delegate the public good contribution decision to a non-local intermediary who neither puts in own endowment into the public good nor benefits from it. Intermediaries make decisions under two compensation mechanisms where the incentives for the intermediary are either non-aligned (fixed) or aligned (variable) with those of the beneficiary. We find that the use of intermediaries, regardless of whether their compensation is aligned or not with that of the beneficiary, significantly increases contributions to the provision of the public good. We conclude that individuals behave differently when they (formally) make decisions for someone else even if their incentive structures are identical.
    Keywords: Public goods, intermediaries, delegation
    JEL: H4 C91 D90
    Date: 2023
  12. By: Cunha, Douglas; Monte, Daniel
    Abstract: We study long-lived rational agents who learn through experimentation and observing each other’s actions. Experimentation and social learning, even when combined, often lead to learning failures as agents may stop experimenting due to the Rothschild effect or social conformity. We show that when there is diversity in preferences, there will be complete learning in the limit, thereby overcoming these learning failures. Our analysis demonstrates the critical interaction between experimentation, social learning, and diversity and provides a new rationale for the increasingly held view that diversity is crucial in institutions.
    Keywords: two armed bandits, social learning, diversity
    JEL: D00 D83
    Date: 2023–04–18
  13. By: Almut Balleer; Georg Duernecker; Susanne Forstner; Johannes Goensch
    Abstract: Recent research documents mounting evidence for sizable and persistent biases in individual labor market expectations. This paper incorporates subjective expectations into a general equilibrium labor market model and studies the implications of biased expectations for wage bargaining, vacancy creation, worker flows and labor market policies. Importantly, we find that under the widely used period-by-period Nash bargaining protocol, the model generates a counterfactual relationship between workers’ job separation expectations and wages. Instead, a wage setting process with less frequent wage renegotiations is found to be empirically consistent. Moreover, we show that the presence of biased beliefs can qualitatively alter the equilibrium effects of labor market policies. Lastly, when allowing for biased firms’ beliefs, we establish that only the difference between firms’ and workers’ biases matters for the bargained wage but not the size of biases.
    Keywords: subjective expectations, labor markets, search and matching, bargaining, policy
    JEL: E24 J64 D84
    Date: 2023
  14. By: Simon Varaine (PACTE - Pacte, Laboratoire de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes); Raùl Magni-Berton (PACTE - Pacte, Laboratoire de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes); Ismaël Benslimane (PACTE - Pacte, Laboratoire de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes); Paolo Crosetto (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)
    Abstract: Studies have shown that intergroup conflict may result from two distinct human motives: the desire to obtain personal retributions from conflict ( egoism), and the desire to sacrifice for the benefit of the ingroup ( parochial altruism). Yet, the relative strength of these motives is open to debate. In this study, we compare behaviors in two Intergroup Prisoner's Dilemmas (IPD), which respectively capture altruistic and egoistic motives to generate conflict. Egoistic motives result in about 40% more conflict than altruistic motives. Yet, parochial altruism generates more conflict when three conditions are gathered: i) other ingroup members are parochial altruists, ii) the outgroup is aggressive and iii) the outgroup is rich. Implications regarding the diverging structural causes of terrorism and civil wars are discussed.
    Keywords: parochial altruism, egoism, intergroup prisoner dilemma, intergroup conflict, terrorism, civil war
    Date: 2023–04–03
  15. By: Dirk Bergemann (Cowles Foundation, Yale University); Alessandro Bonatti
    Abstract: We analyze digital markets where a monopolist platform uses data to match multiproduct sellers with heterogeneous consumers who can purchase both on and off the platform. The platform sells targeted ads to sellers that recommend their products to consumers and reveals information to consumers about their values. The revenueoptimal mechanism is a managed advertising campaign that matches products and preferences efficiently. In equilibrium, sellers offer higher qualities at lower unit prices on than off the platform. Privacy-respecting data-governance rules such as organic search results or federated learning can lead to welfare gains for consumers.
    Keywords: Data, Data, Privacy, Data Governance, Digital Advertising, Competition, Digital Platforms, Digital Intermediaries, Personal Data, Matching, Price Discrimination, Automated Bidding, Algorithmic Bidding, Managed Advertising Campaigns, Showrooming
    JEL: D18 D44 D82 D83
    Date: 2023–04
  16. By: Mark R. Rosenzweig; Bing Xu
    Abstract: This paper studies how rewards based on class rank affect student effort and performance using a game-theoretic classroom competition model and data from the resettlement of Southeast Asian refugees in the US. The paper finds that variation in the presence of strong or weak students changes the incentives and test scores of incumbent students depending on their ability group in accord with the competition model, with increases in the number of strong students lowering effort among strong and weak incumbents but raising the test scores of weak incumbents. The results suggest that competition induced by rank-based rewards within homogeneous ability groups lowers overall effort levels, while the presence of strong students directly augments the performance, but not the effort levels, of weak students despite the competition. The paper also rules out a number of alternative explanations for these school composition effects, including disruptions, teacher-initiated changes in curriculum in response to changing class composition, selective incumbent-student school exit, and endogenous responses of refugee location choices to school performance.
    JEL: I21 I24 J15
    Date: 2023–04

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