nep-gth New Economics Papers
on Game Theory
Issue of 2023‒11‒27
ten papers chosen by
Sylvain Béal, Université de Franche-Comté

  1. Conjugate Persuasion By Ian Jewitt; Daniel Quigley
  2. Tractable Aggregation in Endogenous Network Formation Models By Jose M. Betancourt
  3. Secret vs Public Rings in Common Value Auctions By Ceesay, Muhammed
  4. The Buyer Power Effect of Retail Mergers: An Empirical Model of Bargaining with Equilibrium of Fear By Céline Bonnet; Zohra Bouamra-Mechemache; Hugo Molina
  5. Trust in times of AI By Francesco Bogliacino; Paolo Buonanno; Francesco Fallucchi; Marcello Puca
  6. Disclosure and Incentives in Teams By Paula Onuchic; João Ramos
  7. Sequential School Choice with Public and Private Schools By Andersson, Tommy; Dur, Umut; Ertemel, Sinan; Kesten, Onur
  8. On the Alignment of Consumer Surplus and Total Surplus Under Competitive Price Discrimination By Dirk Bergemann; Benjamin Brooks; Stephen Morris
  9. Collective Search in Networks By Niccolò Lomys
  10. Credibility in Credence Goods Markets By Xiaoxiao Hu; Haoran Lei

  1. By: Ian Jewitt; Daniel Quigley
    Abstract: We consider a class of persuasion games in which the sender has rank-dependent (Yaari (1987)) preferences. Like much of the recent Bayesian persuasion literature, we allow the sender to choose from a rich set of information structures and assume the receiver’s action depends only on her posterior expectation of a scalar state variable. Conjugate to the standard problem, our sender’s utility is linear in posterior the mean, but may be nonlinear in probabilities. We geometrically characterize the sender’s optimal commitment payoff and identify the corresponding optimal information structure. When the state is continuously distributed, communication takes a monotone partitional form. Our characterization admits a simple analysis of comparative statics—for instance, we find that “grading on a curve” is a feature of optimal design. Finally, we apply our analysis to several problems of economic interest including information design in auctions and elections, as well as the design of equilibrium insurance contracts in the face of the ‘favorite-longshot’ bias.
    Date: 2023–08–16
  2. By: Jose M. Betancourt
    Abstract: This paper presents new conditions under which the stationary distribution of a stochastic network formation process can be characterized in terms of a generating function. These conditions are given in terms of a transforming function between networks: if the total transformation between two networks is independent of how these networks transform into each other (by adding or deleting links), then the process is reversible and a generating function can be constructed. When the network formation process is given by discrete choices of link formation, this procedure is equivalent to proving that the game with the associated utilities is a potential game. This implies that the potential game characterization is related to reversibility and tractability of network formation processes. I then use the characterized stationary distribution to study long-run properties of simple models of homophilic dynamics and international trade. The effects of adding forward-looking agents and switching costs are also discussed.
    Date: 2023–10
  3. By: Ceesay, Muhammed
    Abstract: For a single-object second-price common value auction with colluding bidders, and assuming an ``almost all-inclusive ring", we analyze whether an auctioneer who knows that a bidding ring is present at the auction should reveal their presence, and if so, whether to make the revelation publicly, or secretly to the non-ring bidder. We show that for a family of value functions, and assuming (where possible) that bidders use symmetric strategies, publicly revealing that a ring is present induces the non-ring bidder to submit a bid higher than the amount he bids when he (the non-ring bidder) is convinced that the auction is purely noncooperative. On one hand, this means that conditional on a ring operating at the auction, the auctioneer may improve his position by publicly announcing the ring presence, rather than keeping the ring concealed. On the other hand, this presents a new way that an auctioneer can cheat at the auction without having to employ shills, as even in the absence of colluding bidders, simply inducing bidders to believe that they are facing a ring causes them to bid higher than they would have.
    JEL: D44
    Date: 2023
  4. By: Céline Bonnet (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Zohra Bouamra-Mechemache (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Hugo Molina (AgroParisTech)
    Abstract: We develop a bilateral oligopoly framework with manufacturer-retailer bargaining to analyze the impact of retail mergers on market outcomes. We show that the surplus division between manufacturers and retailers depends on three bargaining forces and can be interpreted in terms of "equilibrium of fear". We estimate our framework in the French soft drink industry and find that retailers have a higher bargaining power than manufacturers. Using counterfactual simulations, we highlight that retail mergers increase retailers' fear of disagreement which weakens their bargaining power vis-à-vis soft drink manufacturers and leads to higher wholesale and retail prices.
    Keywords: Bilateral oligopoly, Bargaining, Retail mergers, Soft drink industry
    Date: 2023
  5. By: Francesco Bogliacino (Università di Bergamo); Paolo Buonanno (Università di Bergamo); Francesco Fallucchi (Università di Bergamo); Marcello Puca (Università di Bergamo, CSEF and Webster University Geneva)
    Abstract: In an online, pre-registered experiment, we explore the impact of AI mediated communication within the context of a Trust Game with unverifiable actions. We compare a baseline treatment, where no communication is allowed, to treatments where participants can use free-form communication or have the additional option of using ChatGPT-generated promises, which were assessed in a companion experiment. We confirm previous observations that communication bolsters trust and trustworthiness. In the AI treatment, trustworthiness sees the most significant increase, yet trust levels decline for those who opt not to write a message. AI-generated promises become more frequent but garner less trust. Consequently, the overall trust and efficiency levels in the AI treatment align with that of human communication. Contrary to our assumptions, less trustworthy individuals do not show a higher propensity to delegate messages to ChatGPT.
    Keywords: Artificial Intelligence, Trust Game, ChatGPT, Experiment.
    JEL: C93 D83 D84 D91
    Date: 2023–10–24
  6. By: Paula Onuchic; João Ramos
    Abstract: We consider a team-production environment where all participants are motivated by career concerns, and where a team’s joint productive outcome may have different reputational implications for different team members. In this context, we characterize equilibrium disclosure of team-outcomes when team-disclosure choices aggregate individual decisions through some deliberation protocol. In contrast with individual disclosure problems, we show that equilibria often involve partial disclosure. Furthermore, we study the effort-incentive properties of equilibrium disclosure strategies implied by different deliberation protocols; and show that the partial disclosure of team outcomes may improve individuals’ incentives to contribute to the team. Finally, we study the design of deliberation protocols, and characterize productive environments where effort-incentives are maximized by unilateral decision protocols or more consensual deliberation procedures.
    Date: 2023–05–31
  7. By: Andersson, Tommy (Department of Economics, Lund University); Dur, Umut (Department of Economics, North Carolina State University); Ertemel, Sinan (Department of Economics, Istanbul Technical University); Kesten, Onur (School of Economics, University of Sydney)
    Abstract: Motivated by school admissions in Turkey and Sweden, we investigate a sequential two-stage admission system with public and private schools. A sequential notion of truthfulness, called straightforwardness, is introduced. Contrary to one-stage systems, sequentiality leads to a trade-off between the existence of a straightforward equilibrium and non-wastefulness. We identify the unique set of rules for two-stage systems that guarantees the existence of a straightforward equilibrium and reduces waste. Existing admission systems are analyzed within our general framework.
    Keywords: market design; sequential school choice; private schools; public schools; straight- forward SPNE; non-wastefulness
    JEL: C71 C78 D47 D71 D78 D82
    Date: 2023–10–31
  8. By: Dirk Bergemann (Yale University); Benjamin Brooks (University of Chicago); Stephen Morris (Massachusetts Institute of Technology)
    Abstract: A number of producers of heterogeneous goods with heterogeneous costs compete in prices. When producers know their own production costs and consumers know their values, consumer surplus and total surplus are aligned: the information structure and equilibrium that maximize consumer surplus also maximize total surplus. We report when alignment extends to the case where either consumers are uncertain about their own values or producers are uncertain about their own costs, and we also give examples showing when it does not. Less information for either producers or consumers may intensify competition in a way that benefits consumers but results in inefficient production.
    Date: 2023–11–12
  9. By: Niccolò Lomys (CSEF and Università degli Studi di Napoli Federico II.)
    Abstract: I study the dynamics of collective search in networks. Bayesian agents act in sequence, observe the choices of their connections, and privately acquire information about the qualities of different actions via sequential search. If search costs are not bounded away from zero, maximal learning occurs in sufficiently connected networks where individual neighborhood realizations weakly distort agents’ beliefs about the realized network. If search costs are bounded away from zero, maximal learning is possible in several stochastic networks, including almost-complete networks, but generally fails otherwise. When agents observe random numbers of immediate predecessors, the learning rate, the probability of wrong herds, and long-run efficiency properties are the same as in the complete network. The density of indirect connections affects convergence rates. Network transparency has short-run implications for welfare and efficiency.
    Keywords: Networks; Bayesian Learning; Search; Speed and Efficiency of Social Learning.
    JEL: C7 D6 D8
    Date: 2023–10–18
  10. By: Xiaoxiao Hu; Haoran Lei
    Abstract: An expert seller chooses an experiment to influence a client's purchasing decision, but may manipulate the experiment result for personal gain. When credibility surpasses a critical threshold, the expert chooses a fully-revealing experiment and, if possible, manipulates the unfavorable result. In this case, a higher credibility strictly benefits the expert, whereas the client never benefits from the expert's services. We also discuss policies regarding monitoring expert's disclosure and price regulation. When prices are imposed exogenously, monitoring disclosure does not affect the client's highest equilibrium value. A lower price may harm the client when it discourages the expert from disclosing information.
    Date: 2023–10

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