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on Game Theory |
| By: | Ben Hambly; Renyuan Xu; Huining Yang |
| Abstract: | We consider two-player non-zero-sum linear-quadratic Gaussian games in which both players aim to minimize a quadratic cost function while controlling a linear and stochastic state process {using linear policies}. The system is partially observable with asymmetric information available to the players. In particular, each player has a private and noisy measurement of the state process but can see the history of their opponent's actions. The challenge of this asymmetry is that it introduces correlations into the players' belief processes for the state and leads to circularity in their beliefs about their opponents beliefs. We show that by leveraging the information available through their opponent's actions, both players can enhance their state estimates and improve their overall outcomes. In addition, we provide a closed-form solution for the Bayesian updating rule of their belief process. We show that there is a Nash equilibrium which is linear in the estimation of the state and with a value function incorporating terms that arise due to errors in the state estimation. We illustrate the results through an application to bargaining which demonstrates the value of these information corrections. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.15842&r=gth |
| By: | Joffrey Derchu; Dimitrios Kavvathas; Thibaut Mastrolia; Mathieu Rosenbaum |
| Abstract: | We study a toy two-player game for periodic double auction markets to generate liquidity. The game has imperfect information, which allows us to link market spreads with signal strength. We characterize Nash equilibria in cases with or without incentives from the exchange. This enables us to derive new insights about price formation and incentives design. We show in particular that without any incentives, the market is inefficient and does not lead to any trade between market participants. We however prove that quadratic fees indexed on each players half spread leads to a transaction and we propose a quantitative value for the optimal fees that the exchange has to propose in this model to generate liquidity. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.15805&r=gth |
| By: | Daher, Wassim; Karam, Fida; Ahmed, Naveed |
| Abstract: | We study a generalization of the Kyle (1985) static model with two risk neutral insiders to the case where each insider is partially informed about the value of the stock and compete under Stackelberg setting. First, we characterize the linear Bayesian equilibrium. Then, we carry out a comparative statics analysis. Our findings reveal that partial information increases the insiders profits in a Stackelberg setting than in a Cournot setting. Finally we study the impact of the information sharing on equilibrium outcomes. |
| Keywords: | Insider trading, Risk neutrality, Partial Information, Stackelberg structure, Kyle model |
| JEL: | D82 G14 |
| Date: | 2023–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:118138&r=gth |
| By: | Robert P. Gilles; Lina Mallozzi |
| Abstract: | We introduce a new network centrality measure founded on the Gately value for cooperative games with transferable utilities. A directed network is interpreted as representing control or authority relations between players--constituting a hierarchical network. The power distribution of a hierarchical network can be represented through a TU-game. We investigate the properties of this TU-representation and investigate the Gately value of the TU-representation resulting in the Gately power measure. We establish when the Gately measure is a Core power gauge, investigate the relationship of the Gately with the $\beta$-measure, and construct an axiomatisation of the Gately measure. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.02274&r=gth |
| By: | De Francesco, Massimo A.; Salvadori, Neri |
| Abstract: | This paper studies price competition among a given number of capacity-constrained producers of a homogeneous commodity under the efficient rationing rule and constant (and identical) marginal cost until full capacity, when demand is a continuous, non-increasing, and non-negative function defined on the set of non-negative prices and is positive, strictly decreasing, twice differentiable and (weakly) concave when positive. The focus is on general properties of equilibria in the region of the capacity space in which no pure strategy equilibria exist. We study how the properties that are known to hold for the duopoly are generalized to the oligopoly and, on the contrary, what properties do not need to hold in oligopoly. Our inquiry reveals, among other properties, the possibility of an atom in the support of a firm smaller than the largest one and the properties that such an atom entails. Although the characterization of equilibria is far from being complete, this paper provides substantial elements in this direction. |
| Keywords: | Bertrand-Edgeworth; Price game; Oligopoly; Duopoly; Mixed strategy equilibrium. |
| JEL: | C72 D43 L13 |
| Date: | 2023–08–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:118237&r=gth |
| By: | Bryan S. Graham; Andrin Pelican |
| Abstract: | This paper introduces a simulation algorithm for evaluating the log-likelihood function of a large supermodular binary-action game. Covered examples include (certain types of) peer effect, technology adoption, strategic network formation, and multi-market entry games. More generally, the algorithm facilitates simulated maximum likelihood (SML) estimation of games with large numbers of players, T, and/or many binary actions per player, M (e.g., games with tens of thousands of strategic actions, TM = O(10⁴)). In such cases the likelihood of the observed pure strategy combination is typically (i) very small and (ii) a TM-fold integral who region of integration has a complicated geometry. Direct numerical integration, as well as accept-reject Monte Carlo integration, are computationally impractical in such settings. In contrast, we introduce a novel importance sampling algorithm which allows for accurate likelihood simulation with modest numbers of simulation draws. |
| Date: | 2023–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:azt:cemmap:15/23&r=gth |
| By: | John Higgins; Tarun Sabarwal |
| Abstract: | We study proliferation of an action in binary action network coordination games that are generalized to include global effects. This captures important aspects of proliferation of a particular action or narrative in online social networks, providing a basis to understand their impact on societal outcomes. Our model naturally captures complementarities among starting sets, network resilience, and global effects, and highlights interdependence in channels through which contagion spreads. We present new, natural, and computationally tractable algorithms to define and compute equilibrium objects that facilitate the general study of contagion in networks and prove their theoretical properties. Our algorithms are easy to implement and help to quantify relationships previously inaccessible due to computational intractability. Using these algorithms, we study the spread of contagion in scale-free networks with 1, 000 players using millions of Monte Carlo simulations. Our analysis provides quantitative and qualitative insight into the design of policies to control or spread contagion in networks. The scope of application is enlarged given the many other situations across different fields that may be modeled using this framework. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.00062&r=gth |
| By: | Chowdhury Mohammad Sakib Anwar; Konstantinos Georgalos |
| Abstract: | Gallice and Monz\'on (2019) present a natural environment that sustains full co-operation in one-shot social dilemmas among a finite number of self-interested agents. They demonstrate that in a sequential public goods game, where agents lack knowledge of their position in the sequence but can observe some predecessors' actions, full contribution emerges in equilibrium due to agents' incentive to induce potential successors to follow suit. In this study, we aim to test the theoretical predictions of this model through an economic experiment. We conducted three treatments, varying the amount of information about past actions that a subject can observe, as well as their positional awareness. Through rigorous structural econometric analysis, we found that approximately 25% of the subjects behaved in line with the theoretical predictions. However, we also observed the presence of alternative behavioural types among the remaining subjects. The majority were classified as conditional co-operators, showing a willingness to cooperate based on others' actions. Some subjects exhibited altruistic tendencies, while only a small minority engaged in free-riding behaviour. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.00179&r=gth |
| By: | Scott Barrett |
| Abstract: | I model the ocean as an array of lines set within a two-dimensional frame, and show how the Exclusive Economic Zone emerged as an equilibrium in customary international law. I find that custom codifies the efficient Nash equilibrium of enclosure for nearshore fisheries. For highly migratory and offshore fisheries, enclosure is inefficient, and customary law supports a more efficient “free sea” regime. The model also identifies the trigger for changes in property rights and the reason choice of a particular limit, like the current 200-mile zone, is arbitrary. In an asymmetric, regional sea, I find that the scope of the EEZ is determined by the relative power of coastal and distant water states, and need not be efficient. Finally, I find that proposals to nationalize the seas or ban fishing on the high seas are neither efficient nor supportable as equilibria in customary law. |
| Keywords: | customary international law, exclusive economic zone, ocean fisheries, closure of high seas |
| JEL: | K33 F55 Q22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10567&r=gth |
| By: | Martin Peitz; Anton Sobolev; Paul Wegener |
| Abstract: | Advertisers post ads on publishers’ websites to attract the attention of consumers (who visit both available publishers). Since advertisers are competing in the product market, an advertiser may have an incentive to foreclose its competitor through excessive advertising. An ad blocker may be present and charge publishers for whitelisting. We fully characterize the equilibrium in which ad blocker, publishers, and advertisers make strategic pricing decisions. Under some conditions, the ad blocker sells whitelisting to one publisher and both publishers are strictly better off than without the ad blocker. Under other conditions, not only publishers but also advertisers or consumers are worse off. |
| Keywords: | advertising, advertiser competition, ad blocker, whitelisting, imperfect competition |
| JEL: | L12 L13 L15 M37 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_448&r=gth |
| By: | E. Lance Howe (Department of Economics, University of Alaska Anchorage); James J. Murphy (Department of Economics, University of Alaska Anchorage); Drew Gerkey (Oregon State University); Olga B. Stoddard (Department of Economics, Bringham Young University); Colin Thor West (University of North Carolina, Chapel Hill) |
| Abstract: | This paper investigates how dictator giving varies by social context and worthiness of the recipient. We conduct lab-in-the-field experiments in Kamchatka, Russia, and Western Alaska, as well as a lab experiment with university students, in which we vary social distance and recipient characteristics across treatments. We ask what motivates individuals to share and whether offers from a dictator game, where dictators give from own-earnings, can tell us something more fundamental about social norms and sharing. Results indicate that subjects living in rural Indigenous communities, in both Russia and Alaska, who depend heavily on wild food harvests and possess strong sharing norms, are significantly more likely to give positive amounts compared to university students. We also find that in Indigenous communities, family relations and financial needs are prioritized in giving decisions. We suggest that treatment differences correspond to social norm differences in our study areas. |
| Keywords: | dictator game, experimental economics, lab-in-the-field experiments, sharing, risk pooling |
| JEL: | C93 D64 |
| Date: | 2023–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2023-03&r=gth |
| By: | Marina Agranov; Ran Eilat; Konstantin Sonin |
| Abstract: | We analyze a model of political competition in which the elite forms endogenously to aggregate information and advise the uninformed median voter which candidate to choose. The median voter knows whether or not the endorsed candidate is biased toward the elites, but might still prefer the biased candidate if the elite’s endorsement provides sufficient information about her competence. The elite size and the degree of information aggregation by the elite depend on the extent to which the median voter follows the elite’s advice. A higher cost of redistribution minimizes the elite’s information advantage, hinders information transmission, and decreases the expected competence of the elected politician. |
| JEL: | D72 D83 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31510&r=gth |