nep-gth New Economics Papers
on Game Theory
Issue of 2023‒07‒17
33 papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. Equilibrium in Functional Stochastic Games with Mean-Field Interaction By Eduardo Abi Jaber; Eyal Neuman; Moritz Vo{\ss}
  2. SThe puzzling three-player beauty contest game: play 10 to win. By Gisèle Umbhauer
  3. Heuristic Centered-Belief Players By Irenaeus Wolff
  4. Nash Equilibrium and Axiom of Choice Are Equivalent By Conrad Kosowsky
  5. Discounted stochastic games, the 3M property and stationary Markov perfect equilibria By Fu, Jing; Page, Frank
  6. Parameterized state-contingent games, 3M minimal Nash correspondences, and connectedness By Fu, Jing; Page, Frank
  7. Nash implementation in a many-to-one matching market By Noelia Juarez; Paola B. Manasero; Jorge Oviedo
  8. Layered networks, equilibrium dynamics, and stable coalitions By Fu, Jing; Page, Frank; Zigrand, Jean-Pierre
  9. Economic Warfare By Daniel Spiro
  10. Feedback Design in Strategic-Form Games with Ambiguity Averse Players By Frédéric Koessler; Marieke Pahlke
  11. Risk aversion promotes cooperation By Jay Armas; Wout Merbis; Janusz Meylahn; Soroush Rafiee Rad; Mauricio J. del Razo
  12. Ambiguous consumer tastes and product differentiation By Olivier Kayser
  13. Coordination with Differential Time Preferences: Experimental Evidence By Marina Agranov; Jeongbin Kim; Leeat Yariv
  14. General dualities between best replies and undominated actions By Sudhir A. Shah
  15. Why Does the Folk Theorem Do Not Seem to Work When It Is Mostly Needed? By Johann Caro-Burnett; Sebastian Galiani; Gustavo Torrens
  16. Average monotonic cooperative games with nontransferable utility By Giménez-Gómez, José Manuel; Sudhölter, Peter; Vilella Bach, Misericòrdia
  17. Worst-Case Equilibria in First-Price Auctions By Vitali Gretschko; Helene Mass
  18. Auctioning Corporate Bonds: A Uniform-Price under Investment Mandates By Labrini Zarpala
  19. Coordinated Dynamic Bidding in Repeated Second-Price Auctions with Budgets By Yurong Chen; Qian Wang; Zhijian Duan; Haoran Sun; Zhaohua Chen; Xiang Yan; Xiaotie Deng
  20. Discrete Rule Learning in First Price Auctions By Jason Shachat; Lijia Wei
  21. A game-theoretic systematic of interactions and dynamics in the conservation and management of spatial ecosystem services By Drechsler, Martin
  22. Robust Predictions in Games with Rational Inattention By Tommaso Denti; Doron Ravid
  23. Price Competition and Endogenous Product Choice in Networks: Evidence from the US airline Industry By ; Cristina Gualdani; Kevin Remmy
  24. No response to changes in marginal incentives in one-shot public good experiments By Natalie Struwe; Esther Blanco; James M. Walker
  25. A Real Effort vs. Standard Public Goods Experiment: Overall More All-or-Nothing, Lower Average Contributions and Men Become More Selfish in the Effort-Loss Frame By Tobias Schütze; Philipp C. Wichardt; Philipp Christoph Wichardt
  26. Proof-of-work consensus by quantum sampling By Deepesh Singh; Boxiang Fu; Gopikrishnan Muraleedharan; Chen-Mou Cheng; Nicolas Roussy Newton; Peter P. Rohde; Gavin K. Brennen
  27. Fair integer programming under dichotomous preferences By Tom Demeulemeester; Dries Goossens; Ben Hermans; Roel Leus
  28. Bilateral communication in procurement auctions By Brosig-Koch, Jeannette; Heinrich, Timo; Sterner, Martin
  29. How beautiful people see the world: Cooperativeness judgments of and by beautiful people By Adam Zylbersztejn; Zakaria Babutsidze; Nobuyuki Hanaki; Astrid Hopfensitz
  30. An index of competitiveness and cooperativeness for normal-form games By Thomas Demuynck; Christian Seel; Giang Tran
  31. Exploitation of Collective Bargaining in the Labor Market By Saglam, Ismail
  32. The Optimal Antitrust Policies for Vertical Price Restraints in a Non-Green Supply Chain By Saglam, Ismail
  33. Greenwashing your personality By Fabienne Cantner; Christoph Drobner; Sebastian J. Goerg

  1. By: Eduardo Abi Jaber; Eyal Neuman; Moritz Vo{\ss}
    Abstract: We consider a general class of finite-player stochastic games with mean-field interaction, in which the linear-quadratic cost functional includes linear operators acting on controls in $L^2$. We propose a novel approach for deriving the Nash equilibrium of the game explicitly in terms of operator resolvents, by reducing the associated first order conditions to a system of stochastic Fredholm equations of the second kind and deriving their closed form solution. Furthermore, by proving stability results for the system of stochastic Fredholm equations we derive the convergence of the equilibrium of the $N$-player game to the corresponding mean-field equilibrium. As a by-product we also derive an $\varepsilon$-Nash equilibrium for the mean-field game, which is valuable in this setting as we show that the conditions for existence of an equilibrium in the mean-field limit are less restrictive than in the finite-player game. Finally we apply our general framework to solve various examples, such as stochastic Volterra linear-quadratic games, models of systemic risk and advertising with delay, and optimal liquidation games with transient price impact.
    Date: 2023–06
  2. By: Gisèle Umbhauer
    Abstract: In this paper, we study the 3-player beauty contest game. This 3-player guessing game has the same Nash equilibrium than the usual (large) N-player beauty contest game but it has also nice specific properties. To highlight these properties, we study classroom experiments on 2-player, 3-player and large N-player guessing games, both from a theoretical and behavioral point of view. The spirit of the paper is the spirit of the French newspaper Jeux et Stratégie which, in the early eighties, proposed the beauty contest game to his fun of logic readers. As a matter of facts, we wonder if it is possible to win the 3-player guessing game. So we show that, despite the 3-player beauty contest game has no weakly dominant strategy, it is possible to play it in a way that leads to win with a large probability, provided the parameter a is lower than 0.75. And we argue that playing 10 for a=0.6 ensures a large probability to win.
    Keywords: beauty-contest game, 3-player game, guess, nombre d’or, dominance, win area, behavioral heuristic.
    JEL: C72 C9
    Date: 2023
  3. By: Irenaeus Wolff
    Abstract: Strategic behavior oft‰en diverges from Nash-equilibrium, in particular in unexperienced play. I provide data from a class of simple discoordination games and show that none of the popular models of behavioural game theory predicts the predominant aggregate choice patt‹ern. And yet, Noisy Introspection (Goeree and Holt, 2004) readily accounts for about half of the individual observations. Th‘e reason for the apparent paradox and the mismatch of the aggregate data and the models is a disregarded behavioural type that makes up about 25% of the population. Th‘ese 25% hold beliefs that peak in the centre of the option set and that are roughly symmetric. In addition, the players show a more heuristic process translating their belief into actions, as their choices cannot be explained readily by quantal responding. Th‘e behavioural patt‹ern of a ‘centered belief’ in connection with boundedly-rational decision-making is present also in another prominent game from the literature on behavioural game theory, the 11–20 game. Finally, I show that classifying players as ‘heuristic centered-belief types’ by one game’s beliefs has predictive power for behaviour in the other game.
    Keywords: Nash-equilibrium, quantal-response equilibrium, level-k, cognitive hierarchy, salience theory, noisy introspection, central-tendency bias.
    Date: 2023
  4. By: Conrad Kosowsky
    Abstract: In this paper, I prove that existence of pure-strategy Nash equilibrium in games with infinitely many players is equivalent to the axiom of choice.
    Date: 2023–05
  5. By: Fu, Jing; Page, Frank
    Abstract: We show that all discounted stochastic games DSGs satisfying the usual assumptions have Nash payoff selection correspondences having fixed points. Our fixed point result is surprising because it is well known that Nash payoff selection correspondences are badly behaved, being in general neither convex valued nor closed valued in the appropriate topologies (in this case the weak star topologies). Here we show that because all DSGs satisfying the usual assumptions have upper Caratheodory (uC) Nash (equilibrium) correspondences containing uC Nash sub-correspondences having the 3M property (defined here), these uC Nash sub-correspondences are continuum valued and therefore induce interval-valued uC player payoff sub-correspondences - and therefore, Caratheodory approximable uC player payoff sub-correspondences. Finally, because these uC player payoff sub-correspondences are Caratheodory approximable, their induced Nash payoff selection sub-correspondences have fixed points - implying that the DSGs to which they belong have stationary Markov perfect equilibria.
    Keywords: m-tuples of Caratheodory functions; upper Caratheodory correspondences; the 3M property; continuum valued upper Caratheodory sub-correspondences; weak star upper semicontinuous measurable selection valued correspondences; approximate Caratheodory selections; discounted stochastic games; stationary Markov perfect equilibria
    JEL: C70
    Date: 2022–04–12
  6. By: Fu, Jing; Page, Frank
    Abstract: Under mild assumptions on primitives, we show that all parameterized state-contingent games (PSGs) have upper Caratheodory (uC) Nash (equilibrium) correspondences which contain minimal uC Nash correspondences having the 3M property (defined here). This implies that all PSGs have Nash correspondences made up of minimal uC Nash correspondences taking closed, connected, and essential Nash equilibrium values (essential in the sense of Fort, 1950). It then follows from Fu and Page (2022b), that because all PSGs have continuum valued minimal Nash correspondences, all PSGs have Caratheodory approximable Nash payoff correspondences - which in turn implies that all PSGs have approximable Nash payoff selection correspondences, and therefore have Nash payoff selection correspondences with fixed points.
    Keywords: m-tuples of Caratheodory functions; upper Caratheodory correspondences; continuum valued upper Caratheodory sub-correspondences; weak star upper semicontinuous measurable selection valued correspondences; approximate Caratheodory selections; fixed points of nonconvex; measurable selection valued correspondences induced by the composition of an m-tuple of Caratheodory functions with a continuum valued upper Caratheodory sub-correspondence
    JEL: C00 C70
    Date: 2022–03–25
  7. By: Noelia Juarez; Paola B. Manasero; Jorge Oviedo
    Abstract: In a many-to-one matching market with substitutable preferences, we analyze the game induced by a stable rule. When both sides of the market play strategically, we show that any stable rule implements, in Nash equilibrium, the individually rational matchings. Also, when only workers play strategically and firms' preferences satisfy the law of aggregated demand, we show that any stable rule implements, in Nash equilibrium, the stable matchings.
    Date: 2023–05
  8. By: Fu, Jing; Page, Frank; Zigrand, Jean-Pierre
    Abstract: An important aspect of network dynamics that has been missing from our understanding of network dynamics in various applied settings is the influence of strategic behavior in determining equilibrium network dynamics. Our main objective hear to say what we can regarding the emergence of stable club networks - and therefore, stable coalition structures - based on the stability properties of strategically determined equilibrium network formation dynamics. Because club networks are layered networks, our work here can be thought of as a first work on the dynamics of layered networks. In addition to constructing a discounted stochastic game model (i.e., a DSG model) of club network formation, we show that (1) our DSG of network formation possesses a stationary Markov perfect equilibrium in players' membership action strategies and (2) we identify the assumptions on primitives which ensure that the induced equilibrium Markov process of layered club network formation satisfies the Tweedie Stability Conditions (2001) and that (3) as a consequence, the equilibrium Markov network formation processes generates a unique decomposition of the set of state-network pairs into a transient set together with finitely many basins of attraction. Moreover, we show that if there is a basin containing a vio set (a visited infinitely often set) of club networks sufficiently close together, then the coalition structures across club networks in the vio set will be the same (i.e., closeness across networks in a vio set leads to invariance in coalition structure across networks in a vio set).
    Keywords: club networks; stable coalition structures; networks as partial functions; Harris recurrent sets; basins of attraction; discounted stochastic games; stationary Markov perfect equilibria; equilibrium
    JEL: C70
    Date: 2022–03–25
  9. By: Daniel Spiro
    Abstract: What actions should we expect countries to take when engaged in economic warfare? This paper first shows that the goal of winning a war implies a very simple and intuitive objective of economic warfare: maximize one’s own less the opponent’s (weight-adjusted) payoff. This objective function is then applied to a number of canonical strategic economic environments showing how warfare transforms them. In a warfare-equilibrium between a buyer and a seller, the traded quantity is lower than in peace but, surprisingly, the price may be lower. The analysis shows when trade will altogether collapses in war and when trade will persist between the parties despite it. A prisoner’s-dilemma game (e.g., monopolistic competition or climate-change mitigation) remains a prisoner's-dilemma game also in war, and cooperation may be impossible also under infinite repetition. A coordination game with heterogeneous preferences (e.g., choosing technological standard) in war collapses to either deliberate miscoordination or to ‘matching pennies’ where one country is trying to imitate the other which is trying to avoid this. The results are interpreted through the lens of the current economic warfare between Russia and the West.
    Keywords: economic warfare, conflict, sanction, trade
    JEL: C72 D74 F51
    Date: 2023
  10. By: Frédéric Koessler (HEC Paris - Ecole des Hautes Etudes Commerciales, GREGHEC - Groupement de Recherche et d'Etudes en Gestion - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique); Marieke Pahlke (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: We use a notion of maxmin self-confirming equilibrium (MSCE) to study the optimal design of players' feedbacks about others' behavior in games with ambiguity averse players. Coarse feedbacks shape strategic uncertainty and can therefore modify players' equilibrium strategies in an advantageous way. We characterize MSCE and study the equilibrium implications of coarse feedbacks in various classes of games. We show how feedbacks should be optimally designed to improve contributions in generalized volunteer dilemmas and public good games with strategic substitutes, strategic complements, or more general production functions. We also study games with negative externalities and strategic substitutes such as Cournot oligopolies. In general, perfect and no feedbacks are suboptimal. Some results are extended to α-maxmin preferences.
    Keywords: Self-confirming equilibrium, Ambiguity aversion, Information feedback, Strategic uncertainty, Public good games, Volunteer dilemma
    Date: 2023–03
  11. By: Jay Armas; Wout Merbis; Janusz Meylahn; Soroush Rafiee Rad; Mauricio J. del Razo
    Abstract: Cooperative dynamics are central to our understanding of many phenomena in living and complex systems, including the transition to multicellularity, the emergence of eusociality in insect colonies, and the development of full-fledged human societies. However, we lack a universal mechanism to explain the emergence of cooperation across length scales, across species, and scalable to large populations of individuals. We present a novel framework for modelling cooperation games with an arbitrary number of players by combining reaction networks, methods from quantum mechanics applied to stochastic complex systems, game theory and stochastic simulations of molecular reactions. Using this framework, we propose a novel and robust mechanism based on risk aversion that leads to cooperative behaviour in population games. Rather than individuals seeking to maximise payouts in the long run, individuals seek to obtain a minimum set of resources with a given level of confidence and in a limited time span. We explicitly show that this mechanism leads to the emergence of new Nash equilibria in a wide range of cooperation games. Our results suggest that risk aversion is a viable mechanism to explain the emergence of cooperation in a variety of contexts and with an arbitrary number of individuals greater than three.
    Date: 2023–06
  12. By: Olivier Kayser
    Abstract: Considering that firms have multiple consumer taste distributions, we introduce in the vertical differentiation framework an ambiguous demand in a duopoly. We investigate the effects of ambiguity aversion on product differentiation and pricing choices. By specifying these distributions by Heaviside functions we obtain results on the existence and form of several Subgame-Perfect Nash Candidate Equilibria. The associated equilibrium prices are decreasing with ambiguity aversion. Under the market coverage assumption, we show that the level of differentiation is always maximal whatever the degree of ambiguity aversion. Finally, we study which of the Subgame-Perfect Nash Candidate Equilibria is the solution of the game depending on the width of the taste distributions and the degree of ambiguity aversion.
    Keywords: Vertical differentiation, Ambiguous consumer tastes, Ambiguous demand, Ambiguity aversion
    JEL: C72 D43 L13 D8
    Date: 2023
  13. By: Marina Agranov; Jeongbin Kim; Leeat Yariv
    Abstract: The experimental literature on repeated games has largely focused on settings where players discount the future identically. In applications, however, interactions often occur between players whose time preferences differ. We study experimentally the effects of discounting differentials in infinitely repeated coordination games. In our data, differential discount factors play two roles. First, they provide a coordination anchor: more impatient players get higher payoffs first. Introducing even small discounting differentials reduces coordination failures significantly. Second, with pronounced discounting differentials, intertemporal trades are prevalent: impatient players get higher payoffs for an initial phase and patient players get higher payoffs in perpetuity afterward.
    Keywords: repeated games, discounting, intertemporal trade, experiments
    JEL: C73 C92 D15 D25
    Date: 2023
  14. By: Sudhir A. Shah (Department of Economics, Delhi School of Economics)
    Abstract: The central results of this paper are dualities between actions in a decision problem that are not strongly (resp., weakly) dominated over a state space and actions that are best (resp., internal-best) replies to a state. These results hold for action and state spaces that are subsets of abstract topological vector spaces, which significantly expands their set of applications in comparison to their predecessors. This is demonstrated in the game theoretic setting by applying the dualities to a player’s decision problem in an abstract many-player game as well as in the s-additive, the absolutely continuous, and the finitely additive mixed extensions of many-player games; the third extension is applicable to discontinuous games. In all these applications, the noncooperative nature of the games is preserved by disallowing correlated decision-making by the players. The results also allow welfare theoretic applications such as the characterisation of various notions of efficient outcomes in terms of the best reply properties of the outcomes. JEL classification: C72, D81 Key words: duality, best reply, internal-best reply, strong domi-nance, weak dominance, Pareto efficiency, Utilitarian efficiency
    Date: 2023–06
  15. By: Johann Caro-Burnett; Sebastian Galiani; Gustavo Torrens
    Abstract: In International Relations the canonical model of inter-estate interactions is a one-shot security competition game. The model has the structure of a prisoners dilemma, which results in an equilibrium with two sources of inefficiency: excessive arming and possibly the destruction associated with open conflict. Standard arguments in game theory suggest that more cooperative outcomes should emerge given that states often engage in repeated interactions. Historical record, on the contrary, shows cycles of peace, arms races, and serious instances of open conflict. Long-lasting disarmed peace is rarely observed. The paper develops a unified model of conflict that reveals possible theoretical mechanisms to produce such historical outcomes.
    JEL: F5
    Date: 2023–06
  16. By: Giménez-Gómez, José Manuel; Sudhölter, Peter; Vilella Bach, Misericòrdia
    Abstract: A non-negative transferable utility (TU) game is average monotonic if there exists a non-negative allocation according to which the relative worth is not decreasing when enlarging the coalition. We generalize this definition to the nontransferable utility (NTU) case. It is shown that an average monotonic NTU game shares several properties with an average monotonic TU game. In particular it has a special core element and there exists a population monotonic allocation scheme. We show that an NTU bankruptcy game is average monotonic with respect to the claims vector. Keywords: nontransferable utility; average monotonicity; core; population monotonicity JEL classification: C71
    Keywords: Jocs cooperatius (Matemàtica), 33 - Economia,
    Date: 2022
  17. By: Vitali Gretschko; Helene Mass
    Abstract: The usual analysis of bidding in first-price auctions assumes that bidders know the distribution of valuations. We analyze first-price auctions in which bidders do not know the precise distribution of their competitors’ valuations, but only the mean of the distribution. We propose a novel equilibrium solution concept based on worst-case reasoning. We find an essentially unique and efficient worst-case equilibrium of the first-price auction, which has appealing properties from both the bidders’ and the seller’s point of view.
    Keywords: Auctions, worst-case equilibria, uncertainty
    JEL: D44 D81 D82
    Date: 2023–06
  18. By: Labrini Zarpala
    Abstract: This paper examines how risk and budget limits on investment mandates affect the bidding strategy in a uniform-price auction for issuing corporate bonds. I prove the existence of symmetric Bayesian Nash equilibrium and explore how the risk limits imposed on the mandate may mitigate severe underpricing, as the symmetric equilibrium's yield positively relates to the risk limit. Investment mandates with low-risk acceptance inversely affect the equilibrium bid. The equilibrium bid provides insights into the optimal mechanism for pricing corporate bonds conveying information about the bond's valuation, market power, and the number of bidders. These findings contribute to auction theory and have implications for empirical research in the corporate bond market.
    Date: 2023–06
  19. By: Yurong Chen; Qian Wang; Zhijian Duan; Haoran Sun; Zhaohua Chen; Xiang Yan; Xiaotie Deng
    Abstract: In online ad markets, a rising number of advertisers are employing bidding agencies to participate in ad auctions. These agencies are specialized in designing online algorithms and bidding on behalf of their clients. Typically, an agency usually has information on multiple advertisers, so she can potentially coordinate bids to help her clients achieve higher utilities than those under independent bidding. In this paper, we study coordinated online bidding algorithms in repeated second-price auctions with budgets. We propose algorithms that guarantee every client a higher utility than the best she can get under independent bidding. We show that these algorithms achieve maximal coalition welfare and discuss bidders' incentives to misreport their budgets, in symmetric cases. Our proofs combine the techniques of online learning and equilibrium analysis, overcoming the difficulty of competing with a multi-dimensional benchmark. The performance of our algorithms is further evaluated by experiments on both synthetic and real data. To the best of our knowledge, we are the first to consider bidder coordination in online repeated auctions with constraints.
    Date: 2023–06
  20. By: Jason Shachat (Durham University Business School); Lijia Wei (School of Economics and Management, Wuhan University)
    Abstract: We present a hidden Markov model of discrete strategic heterogeneity and learning in first price independent private values auctions. The model includes three latent bidding rules: constant absolute mark-up, constant percentage mark-up, and strategic best response. Rule switching probabilities depend upon a bidder's past auction outcomes and a myopic reinforcement learning dynamic. We apply this model to a new experiment that varies the number of bidders and the auction frame between forward and reverse. We find the proportion of bidders following constant absolute mark-up increases with experience, and is higher when the number of bidders is large. The primary driver here is subjects' increased propensity to switch strategies when they experience a loss (win) reinforcement when following a strategic (heuristic) rule.
    Keywords: private value auction; discrete heterogeneity; learning; hidden Markov model; laboratory experiment
    JEL: D44 C72 C92 D87 C15
    Date: 2023
  21. By: Drechsler, Martin
    Abstract: Since many ecosystem services involve spatial scales beyond farm size, their preservation and management in agricultural systems depends on the interaction of the landowners. For the analysis of such interactive land use a dynamic generic land-use model is developed that considers different payoff structures in a systematic manner and relates land-use dynamics to payoff structure in a generic manner. A landowner’s own payoff depends on the land use on neighbouring land parcels. The landowners’ payoffs are interpreted in a game-theoretic manner which allows for a game-theoretic classification of the different land-use dynamics generated by the model. The model is analysed to determine the proportion, spatial aggregation and temporal turnover of land-use measures. The model results are applied to a number of cases from the literature in which the management of ecosystem services involves a regional scale, including pollinator conservation, pest control, and coordination incentives for the conservation of species in fragmented landscapes. Four main domains of model behaviour are identified, characterised by the proportions and temporal turnover of land-use measures, and whether the system has one or two stable equilibria. The borders between different domains are characterised by high behaviour-induced spatial aggregation of land-use measures.
    Keywords: ecosystem services, land use, simulation model, spatial externality
    JEL: C63 C65 Q20 Q57
    Date: 2023–06
  22. By: Tommaso Denti; Doron Ravid
    Abstract: We derive robust predictions in games involving flexible information acquisition, also known as rational inattention (Sims 2003). These predictions remain accurate regardless of the specific methods players employ to gather information. Compared to scenarios where information is predetermined, rational inattention reduces welfare and introduces additional constraints on behavior. We show these constraints generically do not bind; the two knowledge regimes are behaviorally indistinguishable in most environments. Yet, we demonstrate the welfare difference they generate is substantial: optimal policy depends on whether one assumes information is given or acquired. We provide the necessary tools for policy analysis in this context.
    Date: 2023–06
  23. By: (ENAC & Toulouse School of Economics, University of Toulouse Capitole, Toulouse, France.); Cristina Gualdani (Queen Mary University of London, London, United Kingdom); Kevin Remmy (University of Mannheim, Mannheim, Germany.)
    Abstract: We develop a two-stage game in which competing airlines first choose the networks of markets to serve in the first stage before competing in price in the second stage. Spillovers in entry decisions across markets are allowed, which accrue on the demand, marginal cost, and fixed cost sides. We show that the second-stage parameters are point identified, and we design a tractable procedure to set identify the first-stage parameters and to conduct inference. Further, we estimate the model using data from the domestic US airline market and find significant spillovers in entry. In a counterfactual exercise, we evaluate the 2013 merger between Amer-ican Airlines and US Airways. Our results highlight that spillovers in entry and post-merger network readjustments play an important role in shaping post-merger outcomes.
    Keywords: endogenous market structure, multiple equilibria, oligopoly, product reposition-ing, mergers, remedies, bankruptcy.
    Date: 2023–06–21
  24. By: Natalie Struwe; Esther Blanco; James M. Walker
    Abstract: We report novel results from changes in the marginal per capita return (MPCR) in a oneshot public good game where participants make a single provision decision. Data was collected using three “data collection processes”: an online experiment conducted on Prolific, an online experiment conducted with a subject pool of university students, and an experiment implemented following the conventional procedures of the economic laboratory with university students. In three between-subject treatment conditions, we confront participants from each of these three samples with either a low MPCR of 0.4, a high MPCR of 0.8 holding constant the individual endowment, or a high MPCR of 0.8 reducing the individual endowment to hold constant maximum possible group earnings. Based on a total sample size of 952 participants, we find that, unlike results from previous experiments where subjects make multiple contribution decisions in varying experimental designs, contributions to the public good are not different for the different MPCR conditions we study.We consider these results to be highly relevant in highlighting the limits to our understanding of cooperative behavior for settings without repeated interactions.
    Keywords: Voluntary contribution mechanism, Public goods, Marginal per capita return, Social dilemma, Experiments
    JEL: C91 C92 H41
    Date: 2023–08
  25. By: Tobias Schütze; Philipp C. Wichardt; Philipp Christoph Wichardt
    Abstract: Many environment related public goods require investment of time or effort rather than simply money. Yet, most experimental studies on public good games focus on a distribution of money. In the present paper, we report results from an experiment (N=181) comparing an effort based public goods game (both in gain/loss frame) to a standard (gain/loss) public goods game. We find lower average contributions and more free-riders in the effort treatments. These differences are highly significant statistically and in terms of effects size; the most notable effect showing for men in the loss frame (comparing standard vs. effort, contributions drop from 76.7% to 17.0%, free-riders increase from 8.3% to 82.6%, full-contributors drop from 50.0% to 13.0%). The findings suggest that the provision of environmental public goods faces more impediments than common experimental findings indicate. Moreover, they suggest that especially men become more self-focused when required to mitigate a loss with effort. Given that many environmental public goods are about avoiding losses by taking action and that most political decision makers are still men, the latter result seems to be relevant from a policy perspective.
    Keywords: public goods, real effort, climate change, loss aversion, gender effects
    JEL: C91 D91 H41 Q54
    Date: 2023
  26. By: Deepesh Singh; Boxiang Fu; Gopikrishnan Muraleedharan; Chen-Mou Cheng; Nicolas Roussy Newton; Peter P. Rohde; Gavin K. Brennen
    Abstract: Since its advent in 2011, boson-sampling has been a preferred candidate for demonstrating quantum advantage because of its simplicity and near-term requirements compared to other quantum algorithms. We propose to use a variant, called coarse-grained boson-sampling (CGBS), as a quantum Proof-of-Work (PoW) scheme for blockchain consensus. The users perform boson-sampling using input states that depend on the current block information, and commit their samples to the network. Afterward, CGBS strategies are determined which can be used to both validate samples and to reward successful miners. By combining rewards to miners committing honest samples together with penalties to miners committing dishonest samples, a Nash equilibrium is found that incentivizes honest nodes. The scheme works for both Fock state boson sampling and Gaussian boson sampling and provides dramatic speedup and energy savings relative to computation by classical hardware.
    Date: 2023–05
  27. By: Tom Demeulemeester; Dries Goossens; Ben Hermans; Roel Leus
    Abstract: One cannot make truly fair decisions using integer linear programs unless one controls the selection probabilities of the (possibly many) optimal solutions. For this purpose, we propose a unified framework when binary decision variables represent agents with dichotomous preferences, who only care about whether they are selected in the final solution. We develop several general-purpose algorithms to fairly select optimal solutions, for example, by maximizing the Nash product or the minimum selection probability, or by using a random ordering of the agents as a selection criterion (Random Serial Dictatorship). As such, we embed the black-box procedure of solving an integer linear program into a framework that is explainable from start to finish. Moreover, we study the axiomatic properties of the proposed methods by embedding our framework into the rich literature of cooperative bargaining and probabilistic social choice. Lastly, we evaluate the proposed methods on a specific application, namely kidney exchange. We find that while the methods maximizing the Nash product or the minimum selection probability outperform the other methods on the evaluated welfare criteria, methods such as Random Serial Dictatorship perform reasonably well in computation times that are similar to those of finding a single optimal solution.
    Date: 2023–06
  28. By: Brosig-Koch, Jeannette; Heinrich, Timo; Sterner, Martin
    Abstract: We ask how buyers can make use of bilateral communication in a procurement setting with moral hazard. We focus on a setting where buyers and potential sellers can exchange cheap-talk messages before trading and where the seller is determined via a buyer-determined procurement auction. In this type of auction, buyers can freely choose among bidders based on bidders’ observable characteristics and the prices they ask for. In a controlled laboratory experiment, we find that buyers use free-form text messages to make requests and to reduce social distance. The relationship between the offers sellers make and the messages they send is mediated by buyers’ requests. But, in general, buyers may increase their profits by choosing sellers who promise high quality or large profits. Furthermore, despite the cheap-talk nature of requests, buyers in our experiment increase their profits by specifically demanding high quality or large profits.
    Keywords: procurement auctions; bilateral communication; social distance; promises; requests; moral hazard
    JEL: C91 D44 D83
    Date: 2023–06
  29. By: Adam Zylbersztejn (Univ Lyon 2, Université Lumière Lyon 2, GATE UMR 5824, 69130 Ecully, France; research fellow at Vistula University Warsaw (AFiBV), Warsaw, Poland); Zakaria Babutsidze (SKEMA Business School, Université Côte d’Azur (GREDEG) and OFCE, Sciences Po Paris); Nobuyuki Hanaki (Institute of Social and Economic Research, Osaka University); Astrid Hopfensitz (Emlyon Business School and GATE, Ecully, France)
    Abstract: Perceived beauty is one of the strongest predictors of perceived cooperativeness, causing the “beauty bias”. Through a large three-step incentivized behavioral and rating experiment (N=357), we study (1) the relevance of beauty ratings for predicting cooperativeness in an incentivized game and (2) the beauty bias in incentivized predictions of cooperativeness. We additionally (3) investigate if one’s beauty influences the beauty bias in predictions of cooperativenes of others. Our findings demonstrate the robustness of the beauty bias despite its irrelevance for making accurate predictions. We further observe that individuals are affected by the beauty bias irrespective of their beauty. Overall, the results highlight the importance of strong institutions that protect individuals from falling prey to the beauty bias.
    Keywords: cooperation, beauty, perception, hidden action game, experiment
    JEL: C72 D83
    Date: 2023
  30. By: Thomas Demuynck; Christian Seel; Giang Tran
    Date: 2022–05–01
  31. By: Saglam, Ismail
    Abstract: We consider a collective bargaining model for the determination of labor hours and wages in the presence of a government that can tax corporate income. The original form of this model was developed by Del Rey et al. (2022) in the absence of taxes. Using our modified model with taxes, we investigate whether workers or the firm can exploit the bargaining equilibrium, with the help of Sertel's (1992a) pre-donation idea, by committing to transfer a part of their would-be payoffs to the other party. We show that pre-donation by any party cannot affect the equilibrium hours or the social welfare while it may affect the welfare distribution in the economy if and only if the corporate tax rate is positive. In case this tax rate is positive, we find that making pre-donation to the firm is beneficial for workers. Moreover, the optimal pre-donation of workers enables them to fully extract the tax revenue that the government could obtain in the absence of pre-donation while keeping the welfare of the firm unchanged. On the other hand, making pre-donation to workers is harmful to the firm and beneficial for the government while having no effect on the welfare of workers.
    Keywords: Wage determination; Nash bargaining; pre-donation; exploitation.
    JEL: C78 E24 J31
    Date: 2023–02
  32. By: Saglam, Ismail
    Abstract: This paper studies the optimal antitrust policies for vertical price restraints in an infinitely-lived non-green supply chain channel that emits air pollution during production. The channel involves a supplier and a retailer that can either engage in sequential (Stackelberg) price competition where the supplier moves first or engage in vertical price coordination where they choose the retail price to maximize their joint profits and choose the wholesale price using the generalized Nash bargaining. We first consider the absence of an antitrust authority and characterize a necessary and sufficient condition for the stability of coordination, which we call internal stability. Then, we characterize the socially optimal antitrust policies. The policies we consider involve the costly auditing of the channel to detect coordination at a fixed probability in each period and a penalty fee charged to the channel members in case coordination is detected. When coordination is internally unstable, it is socially optimal to prevent its formation if the relative abatement cost of collusive emissions is sufficiently large or if the minimum cost of auditing is sufficiently small. In the case where coordination is internally stable, destabilization is also an option for the antitrust authority. In this case, our necessary and sufficient conditions characterizing the optimal antitrust decisions imply that it is socially optimal to destabilize (allow) the vertical price coordination of the channel if both the minimum cost of auditing and the relative abatement cost of collusive emissions are sufficiently small (large) and to prevent it otherwise.
    Keywords: Supply chain; vertical price coordination; vertical price restraints; antitrust policy.
    JEL: D43 L11 L22 L42 Q52
    Date: 2023–05
  33. By: Fabienne Cantner (Technical University of Munich (TUMCS)); Christoph Drobner (Technical University of Munich (TUMCS)); Sebastian J. Goerg (Technical University of Munich (TUMCS, SOM))
    Abstract: Behaving more sustainable has been shown to signal cooperativeness in social dilemmas. We investigate whether people exploit this apparent signaling value by in ating their intention to behave sustainably without changing their actual behavior. We explore this question in an online experiment in which participants self-report the importance of sustainability in their daily lives before engaging in a prisoner's dilemma game. Using a between-subjects design, we manipulate whether participants have the opportunity to adjust their self-reported sustainability scores after receiving instructions for the game. The results show that almost 30% of participants increase their sustainability scores in anticipation of higher transfers from their matched partners. However, this greenwashing strategy proves to be unsuccessful, as higher sustainability scores do not lead to higher transfers.
    Keywords: Greenwashing, Social Dilemma, Signaling, Sustainability
    JEL: C91 H41 Q50
    Date: 2023–06

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