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on Game Theory |
| By: | Ana Mauleon (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain); Simon Schopohl (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain); Akylai Taalaibekova (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Vincent Vannetelbosch (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain) |
| Abstract: | We study a coordination game on a fixed connected network where players have to choose between two projects. Some players are moderate (i.e. they are ex-ante indifferent between both projects) while others are stubborn (i.e. they always choose the same project). Benefits for moderate players are increasing in the number of neighbors who choose the same project. In addition, players are either farsighted or myopic. Farsighted players anticipate the reactions of others while myopic players do not. We show that, when all players are farsighted, full coordination among the moderate players is reached except if there are stubborn players for both projects. When the population is mixed, the set of stable strategy profiles is a refinement of the set of Nash equilibrium strategy profiles. In fact, turning myopic players into farsighted ones eliminates gradually the inefficient Nash equilibria. Finally, we consider a social planner who can improve coordination by means of two policy instruments: adding links to the network (socialization) and/or turning myopic players into farsighted ones (education). |
| Keywords: | Networks, Coordination problems, Stubborn players, Farsighted players, Stability |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04085258&r=gth |
| By: | Sugata Marjit; Krishnendu Ghosh Dastidar; Abhilasha Pandey |
| Abstract: | This paper explores the reluctance of men (women) to acknowledge or recognise the work, comments, and claims of new ideas by other men (women) via widespread and intense demonstrations of indifference. Instances like desk rejections by journals by not allowing papers to reach a review stage, deliberately ignoring responses to respectful and cordial emails, or not referring to relevant papers in references may be related to a kind of status-seeking behaviour beyond what is projected as the real reason for such actions. Against this backdrop, this paper draws from the contemporary experimental psychology and economic theory literature on the causes and consequences of status-seeking behaviour. It integrates the idea in a simple two-player non-cooperative game theoretic framework to explain why even in a world where “Recognition” is a socially optimal strategy, “Indifference” will persist at an equilibrium. We also look at the formation of self-pampering clusters in social media as a resistance to indifference. |
| Keywords: | experimental psychology, status-seeking behaviour, indifference, recognition, non-cooperative games, repeated games |
| JEL: | D91 C72 C73 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10409&r=gth |
| By: | Ahmad Naimzada; Marina Pireddu |
| Abstract: | According to the existing empirical literature the price and the exchanged quantity volatility observed in real-world markets may be explained in terms of the endogenous fluctuations generated by the presence of nonlinearities. We then replace with a sigmoid adaptive best response mechanism, characterized by the presence of two horizontal asymptotes, the linear partial best response mechanism considered in Mamada and Perrings (2020), where the effect produced by quadratic emission charges on the dynamics of a Cournot duopoly model with homogeneous goods was investigated. Due to the sigmoid adaptive mechanism, output variation in each period depends also on current production volume. Moreover, the sigmoid nonlinearity, in addition to being well suited to describe the bounded output variations caused by physical, historical and institutional constraints, makes the model able to generate interesting, non-divergent dynamic outcomes, despite the linearity of the demand function and of marginal costs. Additionally, following the suggestion in Mamada and Perrings (2020), we deal with the more general case of differentiated products. Beyond analytically studying the stability of the unique steady state, coinciding with the Nash equilibrium, and the effect produced by the main parameters on the stability region, we propose two dynamical approaches which allow to evaluate the environmental policy efficacy when the Nash equilibrium is not stable and thus the standard comparative statics technique does not fit for the purpose. In particular, the former approach, which is based on a comparison of emissions for different levels of charges, shows that, also in case the Nash equilibrium is not stable, the considered environmental policy may be effective both with complements and with substitutes. The latter approach, consisting in a comparison of emissions along non-stationary trajectories and along the equilibrium path, in the proposed experiments highlights that emissions are larger along non-stationary trajectories. This gives us the opportunity to show how to act on the level of the asymptotes of the sigmoid adjustment mechanism to reduce output variations, reaching at one time a complete stabilization of the system and limiting pollution. |
| Keywords: | Cournot duopoly, emission charges, differentiated goods, sigmoid output adjustment mechanism, environmental policy efficacy, comparative dynamics. |
| JEL: | C61 C62 D43 Q51 Q58 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:517&r=gth |
| By: | Valeria Fanghella (EESC-GEM Grenoble Ecole de Management); Lisette Ibanez (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); John Thøgersen (Aarhus University [Aarhus]) |
| Abstract: | Prosocial behavior is important for a well-functioning society, but many people try to avoid situations where they could act prosocially. This paper studies the avoidance of a prosocial request, how it is affected by social pressure, and whether request avoidance and social pressure generate spillover effects on following prosocial behaviors. To this aim, we conduct an incentivized online experiment (N=1400), where participants play two consecutive dictator games with a charity. In the first game, we vary the type of game and information provided in a 2 x 2 between-subject design: (i) standard dictator game or dictator game with costly opt-out; (ii) with or without social information (mean donation in a previous session). The second game is a standard dictator game for all and aims to capture spillover effects from the first decision. We find that the opt-out option leads to significantly lower donations, especially when social information is present (but this effect is not statistically significant). The negative effect of the opt-out option spills over to the second donation decision. We also observe a negative spillover effect after a standard dictator game. Social information reduces donations in a standard dictator game, but also allows to mitigate the negative spillover effect from the first to the second behavior. |
| Keywords: | prosocial behavior, opt-out option, social information, spillover, charitable giving, selfimage |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04093001&r=gth |
| By: | Lotem Ikan; David Lagziel |
| Abstract: | The indoctrination game is a complete-information contest over public opinion. The players exert costly effort to manifest their private opinions in public in order to control the discussion, so that the governing opinion is similar to theirs. Our analysis provides a theoretical foundation for the silent majority and vocal minority phenomena, i.e., we show that all moderate opinions remain mute in equilibrium while allowing extremists full control of the discussion. Moreover, we prove that elevated exposure to others' opinions increases the observed polarization among individuals. Using these results, we formulate a new social-learning framework, referred to as an indoctrination process. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.02604&r=gth |
| By: | Steve Phelps; Yvan I. Russell |
| Abstract: | In this study, we investigate the capacity of large language models (LLMs), specifically GPT-3.5, to operationalise natural language descriptions of cooperative, competitive, altruistic, and self-interested behavior in social dilemmas. Our focus is on the iterated Prisoner's Dilemma, a classic example of a non-zero-sum interaction, but our broader research program encompasses a range of experimental economics scenarios, including the ultimatum game, dictator game, and public goods game. Using a within-subject experimental design, we instantiated LLM-generated agents with various prompts that conveyed different cooperative and competitive stances. We then assessed the agents' level of cooperation in the iterated Prisoner's Dilemma, taking into account their responsiveness to the cooperative or defection actions of their partners. Our results provide evidence that LLMs can translate natural language descriptions of altruism and selfishness into appropriate behaviour to some extent, but exhibit limitations in adapting their behavior based on conditioned reciprocity. The observed pattern of increased cooperation with defectors and decreased cooperation with cooperators highlights potential constraints in the LLM's ability to generalize its knowledge about human behavior in social dilemmas. We call upon the research community to further explore the factors contributing to the emergent behavior of LLM-generated agents in a wider array of social dilemmas, examining the impact of model architecture, training parameters, and various partner strategies on agent behavior. As more advanced LLMs like GPT-4 become available, it is crucial to investigate whether they exhibit similar limitations or are capable of more nuanced cooperative behaviors, ultimately fostering the development of AI systems that better align with human values and social norms. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.07970&r=gth |
| By: | Daniela Di Cagno; Werner Güth; Tim Lohse; Francesca Marazzi; Lorenzo Spadoni |
| Abstract: | We modify the Acquiring-a-Company game to study lying in ultimatum bargaining. Privately informed sellers send messages about the alleged value of their company to potential buyers. Via random information leaks, buyers can learn the true value before proposing a price which the seller finally accepts or not. Two-thirds of all sellers exaggerate the company’s value to persuade buyers to offer more, especially when the true value is small. Surprisingly, a higher leak probability does not increase truthtelling. However, it decreases overreporting and increases underreporting. Buyers who found out value misreporting anchor their price proposals on the true value but do not explicitly discriminate against liars. Sellers are fully opportunistic and make their acceptances dependent on the resulting positive payoff. Even if morality concerns do not seem to matter much, probabilistic leaks enhance welfare. That suggests to politically facilitate and encourage e.g. whistle blowing. |
| Keywords: | acquiring-a-company experiments, information leaks, cheap talk (not) lying, ultimatum bargaining |
| JEL: | C78 C91 D83 D91 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10406&r=gth |
| By: | Giampaolo Bonomi; Ali Uppal |
| Abstract: | We develop a simple game-theoretic model to determine the consequences of explicitly including financial market stability in the central bank objective function, when policymakers and the financial market are strategic players, and market stability is negatively affected by policy surprises. We find that the inclusion of financial sector stability among the policy objectives can induce an inefficiency, whereby market anticipation of policymakers' goals biases investment choices. When the central bank has private information about its policy intentions, the equilibrium communication is vague, because fully informative communication is not credible. The appointment of a ``kitish'' central banker, who puts little weight on market stability, reduces these inefficiencies. If interactions are repeated, communication transparency and overall efficiency can be improved if the central bank punishes any abuse of market power by withholding forward guidance. At the same time, repeated interaction also opens the doors to collusion between large investors, with uncertain welfare consequences. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.08958&r=gth |
| By: | Sarita Rosenstock |
| Abstract: | This paper motivates and develops a framework for understanding how the socio-technical systems surrounding AI development interact with social welfare. It introduces the concept of ``signaling'' from evolutionary game theory and demonstrates how it can enhance existing theory and practice surrounding the evaluation and governance of AI systems. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.02561&r=gth |
| By: | Siddhartha Banerjee; Kamesh Munagala; Yiheng Shen; Kangning Wang |
| Abstract: | A seller is pricing identical copies of a good to a stream of unit-demand buyers. Each buyer has a value on the good as his private information. The seller only knows the empirical value distribution of the buyer population and chooses the revenue-optimal price. We consider a widely studied third-degree price discrimination model where an information intermediary with perfect knowledge of the arriving buyer's value sends a signal to the seller, hence changing the seller's posterior and inducing the seller to set a personalized posted price. Prior work of Bergemann, Brooks, and Morris (American Economic Review, 2015) has shown the existence of a signaling scheme that preserves seller revenue, while always selling the item, hence maximizing consumer surplus. In a departure from prior work, we ask whether the consumer surplus generated is fairly distributed among buyers with different values. To this end, we aim to maximize welfare functions that reward more balanced surplus allocations. Our main result is the surprising existence of a novel signaling scheme that simultaneously $8$-approximates all welfare functions that are non-negative, monotonically increasing, symmetric, and concave, compared with any other signaling scheme. Classical examples of such welfare functions include the utilitarian social welfare, the Nash welfare, and the max-min welfare. Such a guarantee cannot be given by any consumer-surplus-maximizing scheme -- which are the ones typically studied in the literature. In addition, our scheme is socially efficient, and has the fairness property that buyers with higher values enjoy higher expected surplus, which is not always the case for existing schemes. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.07006&r=gth |
| By: | Christopher Sandmann; Nicolas Bonneton |
| Abstract: | This paper proves the existence of a non-stationary equilibrium in the canonical searchand- matching model with heterogeneous agents. Non-stationarity entails that the number and characteristics of unmatched agents evolve endogenously over time. An equilibrium exists under minimal regularity conditions and for both paradigms considered in the literature: transferable and non-transferable utility. We suggest that our proof strategy applies more broadly to a class of continuous-time, infinite-horizon models with a continuum of heterogeneous agents, also referred to as mean-field games, that evolve deterministically over time. |
| Keywords: | equilibrium existence, search and matching, non-stationary, mean-field game |
| JEL: | C62 C78 D50 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_427&r=gth |
| By: | Anderson, Edward (University of Sydney Business School, Australia, and Imperial College Business School); Holmberg, Pär (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We study multi-unit auctions where bidders have single-unit demand and asymmetric information. For symmetric equilibria, we identify circumstances where uniform-pricing is better for the auctioneer than pay-as-bid pricing, and where transparency improves the revenue of the auctioneer. An issue with the uniform-price auction is that seemingly collusive equilibria can exist. We show that such outcomes are less likely if the traded volume of the auctioneer is uncertain. But if bidders are asymmetric ex-ante, then both a price floor and a price cap are normally needed to get a unique equilibrium, which is well behaved. |
| Keywords: | Multi-unit auction; Single-unit demand; Uniform pricing; Pay-as-bid; Asymmetric information; Publicity effect |
| JEL: | C72 D44 D82 |
| Date: | 2023–05–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1460&r=gth |
| By: | Ga\"etan Fournier; Alberto Grillo; Yevgeny Tsodikovich |
| Abstract: | We study candidates' positioning when adjustments are possible in response to new information about voters' preferences. Re-positioning allows candidates to get closer to the median voter but is costly both financially and electorally. We examine the occurrence and the direction of the adjustments depending on the ex-ante positions and the new information. In the unique subgame perfect equilibrium, candidates anticipate the possibility to adjust in response to future information and diverge ex-ante in order to secure a cost-less victory when the new information is favorable. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.02834&r=gth |
| By: | Ying Chen (University of Nottingham Ningbo China); Tom Lane (University of Nottingham Ningbo China); Stuart McDonald (University of Nottingham Ningbo China) |
| Abstract: | We experimentally explore public good production levels, and the endogenous formation of network structures to facilitate output sharing, among agents with heterogeneous production costs or valuations. Results corroborate the key theoretical insights of Kinateder & Merlino (2017) characterizing how agents form core-periphery networks. However, subjects often produce more and form denser networks than predicted, which sometimes reduces efficiency. There is some tendency for behaviour to converge towards the theoretical equilibrium over repeated play. Our results help us understand the emergence of the ‘law of the few’ in realworld networks, and suggest it is driven by endogenous sorting of heterogeneous agents. |
| Keywords: | Local public goods; Network formation; Experiment; Heterogeneity |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2023-02&r=gth |
| By: | Jerry Anunrojwong; Santiago R. Balseiro; Omar Besbes |
| Abstract: | A seller wants to sell an item to $n$ buyers. The buyer valuations are drawn i.i.d. from a distribution, but the seller does not know this distribution; the seller only knows the support $[a, b]$. To be robust against the lack of knowledge of the environment and buyers' behavior, the seller optimizes over DSIC mechanisms, and measures the worst-case performance relative to an oracle with complete knowledge of buyers' valuations. Our analysis encompasses both the regret and the ratio objectives. For these objectives, we derive an optimal mechanism in closed form as a function of the support and the number of buyers $n$. Our analysis reveals three regimes of support information and a new class of robust mechanisms. i.) With "low" support information, the optimal mechanism is a second-price auction (SPA) with a random reserve, a focal class in the earlier literature. ii.) With "high" support information, we show that second-price auctions are strictly suboptimal, and an optimal mechanism belongs to a novel class of mechanisms we introduce, which we call $\textbf{pooling auctions}$ (POOL); whenever the highest value is above a threshold, the mechanism still allocates to the highest bidder, but otherwise the mechanism allocates to a uniformly random buyer, i.e., pools low types. iii.) With "moderate" support information, a randomization between SPA and POOL is optimal. We also characterize optimal mechanisms within nested central subclasses of mechanisms: standard mechanisms (only allocate to the highest bidder), SPA with random reserve, and SPA with no reserve. We show strict separations across classes, implying that deviating from standard mechanisms is necessary for robustness. Lastly, we show that the same results hold under other distribution classes that capture "positive dependence" (mixture of i.i.d., exchangeable and affiliated), as well as i.i.d. regular distributions. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.09065&r=gth |
| By: | Kevin Techer (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique, UJM - Université Jean Monnet - Saint-Étienne) |
| Abstract: | This paper studies hazardous waste transportation problems. Due to their dangerous nature, the transportation of these waste implies a risk of incident having irreversible consequences on the environment. This problem has lead to a body of legal statutes that monitor the generation, storage and transportation of hazardous waste. Assuming that the transport of hazardous waste is done in a cooperative manner on a transport network, this paper investigates how to share the cost of maintaining and operating such network among the involved agents. We analyze the hazardous transportation problem from the viewpoint of axiomatic analysis. We consider several axioms that are derived from different environmental law principles and provide a characterization of a new allocation rule: the responsibility rule. Then we show that the responsibility rule coincides with the multi-choice Shapley value of an appropriate multi-choice game. |
| Keywords: | Hazardous waste Transportation network Cost allocation Multi-choice games. JEL Codes: C71 Q53 R42, Hazardous waste, Transportation network, Cost allocation, Multi-choice games. JEL Codes: C71, Q53, R42 |
| Date: | 2023–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04099139&r=gth |
| By: | Martin Peitz; Susumu Sato |
| Abstract: | We propose a tractable model of asymmetric platform oligopoly. Users from two distinct groups who are subject to within-group and cross-group network effects decide which platform to join. We characterize the equilibrium when platforms manage user access by setting participation fees. We explore the effects of platform entry, change of incumbent platforms’ quality under free entry, and partial compatibility on market outcomes. We show how the analysis can be extended to partial user participation and zero fees for one of the user groups. |
| Keywords: | oligopoly theory; aggregative games; network effects; two-sided markets; two-sided single-homing; free entry; compatibility |
| JEL: | L13 L41 D43 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_428&r=gth |
| By: | Nicodemo De Vito |
| Abstract: | Hierarchies of conditional beliefs (Battigalli and Siniscalchi 1999) play a central role for the epistemic analysis of solution concepts in sequential games. They are practically modelled by type structures, which allow the analyst to represent the players' hierarchies without specifying an infinite sequence of conditional beliefs. Here, we study type structures that satisfy a "richness" property, called completeness. This property is defined on the type structure alone, without explicit reference to hierarchies of beliefs or other type structures. We provide sufficient conditions under which a complete type structure represents all hierarchies of conditional beliefs. In particular, we present an extension of the main result in Friedenberg (2010) to type structures with conditional beliefs. KEYWORDS: Conditional probability systems, hierarchies of beliefs, type structures, completeness, terminality. JEL: C72, D80 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.08940&r=gth |
| By: | Parikshit Ghosh (Department of Economics, Delhi School of Economics); Debraj Ray (New York University and University of Warwick) |
| Abstract: | The enforcement of relational contracts is especially challenging in anonymous environments when there are opportunities to start new partnerships after a transgression. Building on Ghosh and Ray (1996), we study norms within bilateral partnerships that exhibit gradually increasing cooperation, thus serving to deter deviations. However, socially beneficial gradualism may be undermined by partners renegotiating to greater cooperation from the outset. We show that incomplete information regarding partner patience ameliorates this tension even as it adds to the anonymity of the environment. Specifically, gradualism is now bilaterally desirable, and has the social by-product of maintaining individual cooperation. We also study a one-sided version of this problem in which only one of the partners exhibits moral hazard, and offer tentative thoughts on generalizing the theory to environments with richer gradations of incomplete information. JEL Classification: C73, D85, D86. Key Words: relational contracts, social norms, gradualism, trust-building, dynamic games. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:336&r=gth |
| By: | Felix Fie{\ss}inger; Mitja Stadje |
| Abstract: | Focusing on gains instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i) law-invariant, ii) cash- or shift-invariant, and iii) positively homogeneous, and possibly plugged into a general function. We model the market via a generalized version of the multi-dimensional Black-Scholes model using $\alpha$-stable L\'evy processes and give supplementary results for the classical Black-Scholes model. The optimal solution to this problem is a Nash subgame equilibrium given by the solution of an extended Hamilton-Jacobi-Bellman equation. Moreover, we show that the optimal solution is deterministic and unique under appropriate assumptions. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.09471&r=gth |
| By: | Michael S. Michael; Panos Hatzipanayotou (Athens University of Economics and Business); Nikos Tsakiris |
| Abstract: | We develop a model of two small open asymmetric economies with two tradable and one non-tradable goods, capital mobility and consumption generated cross border pollution. We show that the Nash equilibrium calls for a consumption tax and capital tax (subsidy) when the consumption of the tradable (non-tradable) good pollutes. In this model, the consumption tax causes pollution leakages between the two countries which is partly offset by the capital tax or subsidy. Thus, the existence of non-tradable goods and international capital mobility induce the small countries to act strategically. In the absence of capital taxes, consumption taxes are lower to their rates when capital taxes are also present since are used strategically to mitigate the pollution leakage. |
| Keywords: | Pollution Leakage, Non-tradable Goods, Capital Mobility, Capital and Consumption Taxes, Consumption-generated Cross-border Pollution |
| JEL: | F15 F18 F20 H20 |
| Date: | 2023–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:aue:wpaper:2312&r=gth |