nep-gth New Economics Papers
on Game Theory
Issue of 2023‒09‒11
six papers chosen by
Sylvain Béal, Université de Franche-Comté

  1. Weighted position value for Network games By Niharika Kakoty; Surajit Borkotokey; Rajnish Kumar; Abhijit Bora
  2. The Effect of Framing in Sealed-Bid Auctions: Theory and Experiments By Yutaka Kayaba; Jun Maekawa; Hitoshi Matsushima
  3. Fine-Tuning Games: Bargaining and Adaptation for General-Purpose Models By Benjamin Laufer; Jon Kleinberg; Hoda Heidari
  4. Commitment to the truth creates trust in market exchange: Experimental evidence By Nicolas Jacquemet; Stéphane Luchini; Jason F. Shogren; Adam Zylbersztejn
  5. The Central Influencer Theorem: Spatial Voting Contests with Endogenous Coalition Formation By Subhasish M. Chowdhury; Sang-Hyun Kim
  6. Stochastic Optimal Investment Strategy for Net-Zero Energy Houses By Mengmou Li; Taichi Tanaka; A. Daniel Carnerero; Yasuaki Wasa; Kenji Hirata; Yasumasa Fujisaki; Yoshiaki Ushifusa; Takeshi Hatanaka

  1. By: Niharika Kakoty; Surajit Borkotokey; Rajnish Kumar; Abhijit Bora
    Abstract: In Network games under cooperative framework, the position value is a link based allocation rule. It is obtained from the Shapley value of an associated cooperative game where the links of the network are considered players. The Shapley value of each of the links is then divided equally among the players who form those links. The inherent assumption is that the value is indifferent to the weights of the players in the network. Depending on how much central a player is in the network, or the ability of making links with other players etc., for example, players can be considered to have weights. Thus, in such situations, dividing the Shapley value equally among the players can be an over-simplistic notion. We propose a generalised version of the position value: the weighted position value that allocates the Shapley shares proportional to the players' weights. These weights of the players are exogenously given. We provide two axiomatic characterizations of our value. Finally, a bidding mechanism is formulated to show that any sub-game perfect equilibrium (SPE) of this mechanism coincides with the weighted position value.
    Date: 2023–08
  2. By: Yutaka Kayaba (Department of Economics, University of Tokyo); Jun Maekawa (Department of Economics, Osaka University of Economics and Law); Hitoshi Matsushima (Department of Economics, University of Tokyo)
    Abstract: We investigate strategic games with imperfect information, such as sealed-bid auctions, wherein players are not good at hypothetical thinking and are therefore unable to select even dominant strategies unless devices to guide them are put in place. We propose a measure to encourage such bounded-rational players to engage in hypothetical thinking. We consider a frame as a multi-stage game format with imperfect information within a range consistent with an inherent strategic game. We showed that a well-specified frame has a significant effect on the promotion of hypothetical thinking. By comparing the second-price auction as a non-frame format and the ascending proxy auctions as framed formats, we theoretically demonstrate that framing can eliminate overbidding and encourage bidders to act more sincerely. These theoretical findings were confirmed by both online and laboratory experimental results.
    Date: 2023–08
  3. By: Benjamin Laufer; Jon Kleinberg; Hoda Heidari
    Abstract: Major advances in Machine Learning (ML) and Artificial Intelligence (AI) increasingly take the form of developing and releasing general-purpose models. These models are designed to be adapted by other businesses and agencies to perform a particular, domain-specific function. This process has become known as adaptation or fine-tuning. This paper offers a model of the fine-tuning process where a Generalist brings the technological product (here an ML model) to a certain level of performance, and one or more Domain-specialist(s) adapts it for use in a particular domain. Both entities are profit-seeking and incur costs when they invest in the technology, and they must reach a bargaining agreement on how to share the revenue for the technology to reach the market. For a relatively general class of cost and revenue functions, we characterize the conditions under which the fine-tuning game yields a profit-sharing solution. We observe that any potential domain-specialization will either contribute, free-ride, or abstain in their uptake of the technology, and we provide conditions yielding these different strategies. We show how methods based on bargaining solutions and sub-game perfect equilibria provide insights into the strategic behavior of firms in these types of interactions, and we find that profit-sharing can still arise even when one firm has significantly higher costs than another. We also provide methods for identifying Pareto-optimal bargaining arrangements for a general set of utility functions.
    Date: 2023–08
  4. By: Nicolas Jacquemet (Paris School of Economics and U. Paris 1 Panthéon-Sorbonne); Stéphane Luchini (Aix-Marseille U., CNRS, EHESS, Centrale Marseille, Aix-Marseille School of Economics); Jason F. Shogren (Department of Economics, U. Wyoming); Adam Zylbersztejn (Univ Lyon, Université Lyon 2, GATE UMR 5824, F-69130 Ecully, France; research fellow at Vistula University Warsaw (AFiBV), Warsaw, Poland)
    Abstract: Social norms like the mutual belief in reciprocity facilitate economic exchange. But this reciprocity norm requires trust among traders, which can be challenging to create among strangers even with communication. The honesty oath is a time-honored mechanism that societies use to overcome this challenge – taking a solemn oath to tell the truth sends a trustworthy signal of real economic commitment given incomplete contracts. Herein we explore how the truth-telling oath creates trust within the sequential reciprocity trust game with pre-play, fixed-form, and cheap-talk communication. Four key results emerge: (1) communication under oath creates more trust and cooperative behavior; but (2) the oath induces a selection effect – it makes people more wary of using communication as a signal. (3) Although the overall net effect on cooperation is positive, the oath cannot reverse a general decay of cooperation over time. (4) By comparing the oath's performance to mild and deterrent fines for deception, we find that the oath is behaviorally equivalent to mild fines. The deterrent fine induces the highest level of cooperation.
    Keywords: Trust game; cooperation; communication; commitment; deception; fine; oath
    JEL: C72 D83
    Date: 2023
  5. By: Subhasish M. Chowdhury (Department of Economics, University of Sheffield, Sheffield S1 4DT, UK); Sang-Hyun Kim (School of Economics, Yonsei University, Seoul 03722, South Korea)
    Abstract: We introduce a spatial voting contest without the ‘one person, one vote’ restriction. Players exert costly effort to influence the policy and the outcome is obtained through an adjustment function. Players are heterogeneous in terms of the position in the policy line, disutility function, and the effort cost. In equilibrium, two groups endogenously emerge: players in one group try to implement more leftist policy, while those in the other group try more rightist one. Since the larger group suffers a more severe free-riding problem, the equilibrium policy converges to the center only when the larger group has a cost advantage. We demonstrate how the location of the center (i.e., the steady-state point) can be either median, or a mean of all points, or a mean of the extreme points, depending on the convexities of the utility and cost functions. This reflects some well-known results as special cases. We extend the model to an infinite horizon setting and show that the median outcome can be reached only under certain conditions.
    Keywords: Spatial Competition; Contest; Lobbying; Median Voter Theorem
    JEL: C72 D72 D74 D78
    Date: 2023–08
  6. By: Mengmou Li; Taichi Tanaka; A. Daniel Carnerero; Yasuaki Wasa; Kenji Hirata; Yasumasa Fujisaki; Yoshiaki Ushifusa; Takeshi Hatanaka
    Abstract: In this research, we investigate Net-Zero Energy Houses (ZEH), which harness regionally produced electricity from photovoltaic(PV) panels and fuel cells, integrating them into a local power system in pursuit of achieving carbon neutrality. This paper examines the impact of electricity sharing among users who are working towards attaining ZEH status through the integration of PV panels and battery storage devices. We propose two potential scenarios: the first assumes that all users individually invest in storage devices, hence minimizing their costs on a local level without energy sharing; the second envisions cost minimization through the collective use of a shared storage device, managed by a central manager. These two scenarios are formulated as a stochastic convex optimization and a cooperative game, respectively. To tackle the stochastic challenges posed by multiple random variables, we apply the Monte Carlo sample average approximation (SAA) to the problems. To demonstrate the practical applicability of these models, we implement the proposed scenarios in the Jono neighborhood in Kitakyushu, Japan.
    Date: 2023–08

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