nep-gth New Economics Papers
on Game Theory
Issue of 2023‒10‒09
twenty-two papers chosen by
Sylvain Béal, Université de Franche-Comté

  1. Nash Equilibrium Existence without Convexity By Conrad Kosowsky
  2. Data Linkage Between Markets: Does Emergence of an Informed Insurer Cause Consumer Harm? By Francesc Dilmé
  3. Robust equilibria in cheap-talk games with fairly transparent motives By Jan-Henrik Steg; Elshan Garashli; Michael Greinecker; Christoph Kuzmics
  4. Persuading an audience: Testing information design in the laboratory By Andreas G. B. Ziegler
  5. Degree Centrality, von Neumann-Morgenstern Expected Utility and Externalities in Networks By René van den Brink; Agnieszka Rusinowska
  6. Screening with Persuasion By Dirk Bergemann; Tibor Heumann; Stephen Morris
  7. Potentials in Social Environments By Thomas Demuynck; Jean-Jacques Herings; Christian Seel
  8. Measuring Higher-Order Rationality with Belief Control By Wei James Chen; Meng-Jhang Fong; Po-Hsuan Lin
  9. Solutions to Equilibrium HJB Equations for Time-Inconsistent Deterministic Linear Quadratic Control: Characterization and Uniqueness By Yunfei Peng; Wei Wei
  10. A Wind Tunnel Test of Wind Farm Auctions By Xinyu Li; Marco Haan; Sander Onderstal; Jasper Veldman
  11. Juries and Information Aggregation in Dynamic Environments By Esteban Colla-De-Robertis
  12. Dishonesty as a collective‐risk social dilemma By Shuguang Jiang; Marie Claire Villeval
  13. On disclosure of participation in innovation contests: a dominance result By Bo Chen; Emilios Galariotis; Lijun Ma; Zijia Wang; Zhaobo Zhu
  14. Determinants of Agricultural Fires: An Aggregative Games Approach By Wilfredo L. Maldonado; Jessica A. Barbosa
  15. Limits to Competition: Strategies for Promoting Jurisdictional Cooperation By David R. Agrawal
  16. Constructing a type-adjustable mechanism to yield Pareto-optimal outcomes By Haoyang Wu
  17. Merger Analysis with IIA Demand and Type Aggregation By Volker Nocke; Nicolas Schutz
  18. Dynamic Stability of Cooperative Investment under Uncertainty By Ketelaars, Martijn; Borm, Peter; Kort, Peter
  19. Label to match - Firms’ signaling decisions when not everyone cares By Fritz, Qi Gao
  20. Mobility and income distribution By Nicolas Piluso; Gabriel Colletis; Adrien Blanchet; Mehdi Badra
  21. Reputation Effects with Endogenous Records By Harry Pei
  22. Ecosystems and Complementary Platforms By Jeon, Doh-Shin; Lefouili, Yassine; Li, Yaxin; Simcoe, Timothy

  1. By: Conrad Kosowsky
    Abstract: In this paper, I prove the existence of a pure-strategy Nash equilibrium for a large class of games with nonconvex strategy spaces. Specifically, if each player's strategies form a compact, connected Euclidean neighborhood retract and if all best-response correspondences are null-homotopic, then the game has a pure-strategy Nash equilibrium. As an application, I show how this result can prove the fundamental theorem of algebra.
    Date: 2023–08
  2. By: Francesc Dilmé
    Abstract: This paper introduces and analyzes sequentially stable outcomes in extensive games. An outcome ω is sequentially stable if for any ε>0, any version of the game where players make mistakes with small enough probability has a perfect "-equilibrium with outcome close to ω. Unlike stable outcomes (Kohlberg and Mertens, 1986), sequentially stable outcomes exist for all finite games and are sequentially rational. If there is a unique sequentially stable outcome, such an outcome is the unique stable outcome of the game’s agent normal form. Also, sequentially stable outcomes satisfy versions of forward induction, iterated strict equilibrium dominance, and invariance to simultaneous moves. In signaling games, sequentially stable outcomes pass the standard selection criteria, and when payoffs are generic, they coincide with stable outcomes.
    Keywords: Sequential stability, stable outcome, signaling games
    JEL: C72 C73
    Date: 2023–09
  3. By: Jan-Henrik Steg; Elshan Garashli; Michael Greinecker; Christoph Kuzmics
    Abstract: We show that sender-optimal equilibria in cheap-talk games with a binary state space and state-independent preferences are robust to perturbations of the sender's preferences that allow for slight state-dependence. Other equilibria generally fail to be robust.
    Date: 2023–09
  4. By: Andreas G. B. Ziegler (University of Amsterdam)
    Abstract: Governments, central banks, and private organizations frequently face the challenge of convincing their audience to take a specific action. One key choice is whether to send a public message that can coordinate the audience’s actions or to rely instead on private messages that may differ across audience members and thereby miscoordinate actions. This paper uses a laboratory experiment to test whether public or private messages are more persuasive and how this depends on the audience’s strategic environment. In the experiment, public signals are most persuasive. The results match the theoretical prediction that public persuasion works best when the receivers’ strategic environment features strategic complements. However, contrary to theory, public signals are equally persuasive as private ones under strategic substitutes. Senders respond to this pattern by engaging more frequently in public communication, especially when the receivers’ environment features strategic complements.
    Keywords: information design, Bayesian persuasion, laboratory experiment, Bayes correlated equilibria, obedience, recommendations
    JEL: D83 D82 C92
    Date: 2023–08–23
  5. By: René van den Brink (VU University Amsterdam and Tinbergen Institute); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne, 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)
    Abstract: This paper aims to connect the social network literature on centrality measures with the economic literature on von Neumann-Morgenstern expected utility functions using cooperative game theory. The social network literature studies various concepts of network centrality, such as degree, betweenness, connectedness, and so on. This resulted in a great number of network centrality measures, each measuring centrality in a different way. In this paper, we aim to explore which centrality measures can be supported as von Neumann-Morgenstern expected utility functions, reflecting preferences over different network positions in different networks. Besides standard axioms on lotteries and preference relations, we consider neutrality to ordinary risk. We show that this leads to a class of centrality measures that is fully determined by the degrees (i.e. the numbers of neighbours) of the positions in a network. Although this allows for externalities, in the sense that the preferences of a position might depend on the way how other positions are connected, these externalities can be taken into account only by considering the degrees of the network positions. Besides bilateral networks, we extend our result to general cooperative TU-games to give a utility foundation of a class of TU-game solutions containing the Shapley value.
    Keywords: weighted network, degree, centrality measure, externalities, neutrality to ordinary risk, expected utility function
    Date: 2023–08
  6. By: Dirk Bergemann (Cowles Foundation, Yale University); Tibor Heumann (Pontificia Universidad Catolica de Chile); Stephen Morris (Dept. of Economics, MIT)
    Abstract: We consider a general nonlinear pricing environment with private information. The seller can control both the signal that the buyers receive about their value and the selling mechanism. We characterize the optimal menu and information structure that jointly maximize the seller's profit. The optimal screening mechanism has finitely many items even with a continuum of values. We identify sufficient conditions under which the optimal mechanism has a single item. Thus the seller decreases the variety of items below the efficient level in order to reduce the information rents of the buyers.
    Keywords: Nonlinear Pricing, Screening, Bayesian Persuasion, Finite Menu, Second-Degree Price Discrimination, Recommender System
    JEL: D44 D47 D83 D84
    Date: 2023–09
  7. By: Thomas Demuynck; Jean-Jacques Herings; Christian Seel
    Abstract: We develop and extend notions of potentials for normal-form games (Monderercand Shapley, 1996) to present a uniffied approach for the general class of social environments. The different potentials and corresponding social environments can be ordered in terms of their permissiveness. We classify different methods to construct potentials and we characterize potentials for specific examples such as matching problems, vote trading, multilateral trade, TU games, and various pillage games.
    Keywords: Potential games, social environments.
    Date: 2023–09
  8. By: Wei James Chen; Meng-Jhang Fong; Po-Hsuan Lin
    Abstract: Determining an individual's strategic reasoning capability based solely on choice data is a complex task. This complexity arises because sophisticated players might have non-equilibrium beliefs about others, leading to non-equilibrium actions. In our study, we pair human participants with computer players known to be fully rational. This use of robot players allows us to disentangle limited reasoning capacity from belief formation and social biases. Our results show that, when paired with robots, subjects consistently demonstrate higher levels of rationality and maintain stable rationality levels across different games compared to when paired with humans. This suggests that strategic reasoning might indeed be a consistent trait in individuals. Furthermore, the identified rationality limits could serve as a measure for evaluating an individual's strategic capacity when their beliefs about others are adequately controlled.
    Date: 2023–09
  9. By: Yunfei Peng; Wei Wei
    Abstract: In this paper we study a class of HJB equations which solve for equilibria for general time-inconsistent deterministic linear quadratic control problems within the intra-personal game theoretic framework, where the inconsistency arises from non-exponential discount functions. We characterize the solutions to the HJB equations using a class of Riccati equations with integral terms. By studying the uniqueness of solutions to the integro-differential Riccati equations, we prove the uniqueness of solutions to the equilibrium HJB equations.
    Date: 2023–08
  10. By: Xinyu Li (PBL Netherlands); Marco Haan (University of Amsterdam); Sander Onderstal (University of Groningen); Jasper Veldman (University of Amsterdam)
    Abstract: Globally, governments increasingly rely on auctions to advance renewable energy. This paper studies the design of wind farm auctions and evaluates the impact of price guarantees and subsidies on auction efficiency, government revenue, and renewable-energy production. While the theoretical analysis suggests that the price guarantee has no effect, our laboratory experiment suggests that the price guarantee improves efficiency and that it often increases production and revenue. An important explanation for these results is that less risk averse subjects tend to bid less aggressively and produce less. Without the price guarantee, and hence with more uncertainty in the auction, this increases the chances that risk-loving bidders win the auction, thus compromising auction efficiency. The subsidy is less effective than suggested by theory. Bidders with a higher valuation tend to bid more conservatively than the equilibrium prediction, thus neutralizing the efficiency-enhancing effect of the subsidy.
    Keywords: Auctions, Experiments, Wind farms, Renewable energy
    JEL: C92 D44 F64 H23 Q58
    Date: 2023–08–03
  11. By: Esteban Colla-De-Robertis (Universidad Panamericana)
    Abstract: We study information aggregation through voting in dynamic environments. We show that the voting rule under which an informative vote is a Nash equilibrium entails a time-varying quota, which suggests that efficient information aggregation requires the use of time-varying voting rules. We also show that a time-invariant simple majority quota rule is asymptotically efficient, that is when the size of the committee tends to infinity. We discuss possible applications to the monitoring and managing of natural resources and the environment.
    Keywords: Condorcet Jury Theorem - Information aggregation - Partially Observable Markov Decision Processes - Management of natural resources - Environment
    Date: 2023–09
  12. By: Shuguang Jiang; Marie Claire Villeval (GATE - GATE - GATE - Groupe d'Analyse et de Théorie Economique -UMR5824)
    Abstract: We investigated lying as a collective‐risk social dilemma. Misreporting resulted in increased individual earnings but when total claims reached a certain threshold, all group members were at risk of collective sanction, regardless of their individual behavior. Due to selfishness and miscoordination, most individuals earned less than the reservation payoff from honest reporting in the group. However, preferences for truth‐telling lowered the risk of collective sanction in this setting compared to a social dilemma game in which players could make direct claims without lying. The risk of sanctions decreased with risk aversion and a smaller group size.
    Keywords: Dishonesty, Collective Risk, Public Bad, Group Size, Individualism, D01
    Date: 2023–07–10
  13. By: Bo Chen (Shenzhen University [Shenzhen]); Emilios Galariotis (Audencia Business School); Lijun Ma (Shenzhen University [Shenzhen]); Zijia Wang (Renming University of China); Zhaobo Zhu (Audencia Business School)
    Abstract: This paper examines the effects of disclosing the actual number of participants in innovation contests with endogenous stochastic entry. We model innovation contests as a two-bidder allpay auction with complete information, but in which each bidder has to incur a private cost to participate. The contest organizer observes solvers' participation decisions ex post and can commit ex ante to either fully disclosing or concealing the number of participating solvers. We characterize the equilibrium behavior of the solvers and compare the performances of the disclosure policies by four criteria. We find that full concealment dominates full disclosure in terms of expected total bid and expected winner's bid. Full concealment is dominated by full disclosure in terms of prize allocation efficiency and solvers' welfare. These findings are in sharp contrast to those under exogenous entry.
    Keywords: Auctions/bidding, Contest, Crowdsourcing, Stochastic entry, Disclosure
    Date: 2023–06–23
  14. By: Wilfredo L. Maldonado; Jessica A. Barbosa
    Abstract: The effects of deforestation through land fires used by farmers (specially, smallholders) are twofold. From the individual point of view, they prepare the land improving its fertility. On the other side, the aggregate decision has a negative impact on air and water quality, degrading the environment, and this is reverted as a negative impact of the productivity of the land. In this work we present an aggregative game framework which includes those effects and allows us to analyze the impact of cost fires variations and number of farmers. Finally, using data from Brazilian research institutes, we test the sign and the size of the impacts of those determinants on the aggregate deforestation in Brazil for the period 2009 to 2018.
    Keywords: Aggregative games; land use; deforestation
    JEL: C72 D62 Q5
    Date: 2023–09–18
  15. By: David R. Agrawal
    Abstract: Inefficiencies from tax competition may result in governments seeking to limit fiscal competition via tax treaties, harmonization, minimum tax rates, or interjurisdictional cooperation. I propose a general model applicable to studying many types of taxing instruments, which allows for the comparison of various policy responses to promote jurisdictional cooperation. Comparing across policies, the model suggests a clear revenue dominance of partial harmonization among a subset of jurisdictions. Minimum tax rates revenue-dominate complete harmonization, but fail to raise revenues as much as partial harmonization. A selective review of the empirical literature identifies evidence consistent with the predictions of the theoretical model. The framework sketched in this paper can be further enriched by researchers seeking to determine the welfare effects of policy responses to interjurisdictional competition.
    JEL: C7 H2 H7 R5
    Date: 2023–09
  16. By: Haoyang Wu
    Abstract: In mechanism design theory, agents' types are described as their private information, and the designer may reveal some public information to affect agents' types in order to obtain more payoffs. Traditionally, both each agent's private type and the public information are represented as a random variable respectively. In this paper, we propose a type-adjustable mechanism where each agent's private type is represented as a function of two parameters, \emph{i.e.}, his intrinsic factor and an external control factor. Each agent's intrinsic factor is modeled as a private random variable, and the external control factor is modeled as a solution of the designer's optimization problem. The advantage of the type-adjustable mechanism is that by choosing an optimal value of control factor as public information, the designer may obtain Pareto-optimal outcomes, beneficial not only to herself but also to all agents. As a comparison, in an auction with interdependent values where the public information is represented as a random variable, only the seller will benefit from public information. In the end, we compare the type-adjustable mechanism with other relevant models.
    Date: 2023–09
  17. By: Volker Nocke; Nicolas Schutz
    Abstract: We propose a framework for merger analysis with multiproduct firms under generalized CES (GCES) and generalized multinomial logit (GMNL) demand. Despite allowing for arbitrary firm and product heterogeneity, we obtain the type aggregation property: All relevant information about a firm's product portfolio can be summarized in a uni-dimensional sufficient statistic, the firm's type. Indeed, GCES and GMNL are shown to be the only IIA demand systems giving rise to that property. Relative to standard CES and MNL demand, our generalization implies that prices, locally, can be strategic complements or substitutes, depending on the local behavior of the curvature of indirect utility. In turn, this distinction is shown to determine whether competition authorities should be more or less strict on mergers in more competitive industries. We obtain further results on the static and dynamic consumer surplus effects of mergers, the aggregate surplus and external effects of mergers, and on the relationship between the market power effect of a merger and the merger-induced change in the Herfindahl index.
    Keywords: multiproduct firms, aggregative game, oligopoly pricing, IIA demand, type aggregation, horizontal merger, Herfindahl index, generalized CES demand, generalized multinomial logit demand
    JEL: L13 L40 D43
    Date: 2023–09
  18. By: Ketelaars, Martijn (Tilburg University, Center For Economic Research); Borm, Peter (Tilburg University, Center For Economic Research); Kort, Peter (Tilburg University, Center For Economic Research)
    Keywords: cooperative investment projects; synergies between stakeholders; investment schemes; dynamic stability
    Date: 2023
  19. By: Fritz, Qi Gao
    Abstract: In this paper, I propose a model to investigate firms’ signaling decisions on the product level. By seeking (imperfect) third-party certification, firms can label their products with good quality for which only some consumers care. Combining the signaling game with a matching problem, I am able to investigate the impact of the size of conscious consumers and asymmetric firm size on firms’ signaling decisions. In general, the level of certification costs determines the occurrence of different equilibria. While more conscious buyers unambiguously increase the probability of separating and semi-separating equilibria, the effect on the pooling equilibrium is not that straightforward. Asymmetric firm size negatively influences the occurrences of all equilibria. However, product allocation schemes play an important role in such negative effects.
    Date: 2023–09–04
  20. By: Nicolas Piluso (CERTOP - Centre d'Etude et de Recherche Travail Organisation Pouvoir - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse - CNRS - Centre National de la Recherche Scientifique); Gabriel Colletis (LEREPS - Laboratoire d'Etude et de Recherche sur l'Economie, les Politiques et les Systèmes Sociaux - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - Institut d'Études Politiques [IEP] - Toulouse - ENSFEA - École Nationale Supérieure de Formation de l'Enseignement Agricole de Toulouse-Auzeville); Adrien Blanchet (UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse); Mehdi Badra (IMT - Institut de Mathématiques de Toulouse UMR5219 - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INSA Toulouse - Institut National des Sciences Appliquées - Toulouse - INSA - Institut National des Sciences Appliquées - UT - Université de Toulouse - UT2J - Université Toulouse - Jean Jaurès - UT - Université de Toulouse - UT3 - Université Toulouse III - Paul Sabatier - UT - Université de Toulouse - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article presents a model for income distribution among factors of production in the context of a globalised economy. Previous models are most often static and do not take into account the geographical location of the factors of production nor the mobility costs that result. We have created a dynamic Nash bargaining model that integrates the geographical distance between companies and the mobility costs for each production factor. The main result of this model is that income distribution closely depends on mobility costs: production factors with low mobility costs are those whose incomes increase most rapidly.
    Keywords: Factors of production, Income, Mobility costs, Regulation
    Date: 2023
  21. By: Harry Pei
    Abstract: A patient firm interacts with a sequence of consumers. The firm is either an honest type who supplies high quality and never erases its action, or an opportunistic type who can choose what quality to supply and may erase its action at a low cost. We show that in every equilibrium, the firm has an incentive to build a reputation for supplying high quality until its continuation value exceeds its commitment payoff, but its ex ante payoff must be close to its minmax value when it has a sufficiently long lifespan. Therefore, even a small fraction of opportunistic types can wipe out the firm's returns from building reputations. Even if the honest type can commit to disclosure policies, the opportunistic type's payoff cannot exceed its equilibrium payoff when the firm reveals no information, regardless of the disclosure policy the honest type commits to.
    Date: 2023–08
  22. By: Jeon, Doh-Shin; Lefouili, Yassine; Li, Yaxin; Simcoe, Timothy
    Abstract: Motivated by several examples, including Internet of Things patent licensing, we develop a tractable model of multi-product ecosystems, where one or more plat- forms provide inputs to a set of devices linked through demand-side externalities. Prices depend on each device's Katz-Bonacich centrality in a network dened by the externalities, and we show how the relevant network diers for an ecosystem monop- olist, a social planner, or a group of complementary platforms. We use the model to revisit Cournot's analysis of complementary monopolies in a platform setting, and to analyze a partial (one-sided) merger of complementary platforms.
    Keywords: Multi-sided Market, Complementary Platforms, Network, Centrality, ; IoT, Licensing
    Date: 2023–09–13

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