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on Game Theory |
| By: | Berliant, Marcus |
| Abstract: | Workers generally commute on a daily basis, so we model commuting as a repeated game. The folk theorem implies that for sufficiently large discount factors, the repeated commuting game has as a Nash equilibrium any feasible strategy that is uniformly better than the minimax strategy payoff for a commuter in the one shot game, repeated over the infinite horizon. This includes the efficient equilibria. An example where the efficient payoffs strictly dominate the one shot Nash equilibrium payoffs is provided. Our conclusions pose a challenge to congestion pricing in that equilibrium selection could be at least as effective in improving welfare. We examine evidence from St. Louis to determine what equilibrium strategies are actually played in the repeated commuting game. |
| Keywords: | Repeated game; Nash equilibrium; Commuting; Folk theorem |
| JEL: | R41 |
| Date: | 2023–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119020&r=gth |
| By: | Christian W. Bach; Jérémie Cabessa (DAVID - Données et algorithmes pour une ville intelligente et durable - DAVID - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines) |
| Abstract: | Aumann's seminal agreement theorem deals with the impossibility for agents to acknowledge their distinct posterior beliefs. We consider agreeing to disagree in an extended framework with lexicographic probability systems. A weak agreement theorem in the sense of identical posteriors only at the first lexicographic level obtains. Somewhat surprisingly, a possibility result does emerge for the deeper levels. Agents can agree to disagree on their posteriors beyond the first lexicographic level. By means of mutual absolute continuity as an additional assumption, a strong agreement theorem with equal posteriors at every lexicographic level ensues. Subsequently, we turn to games and provide epistemic conditions for the classical solution concept of perfect equilibrium. Our lexicographic agreement theorems turn out to be pivotal in this endeavour. The hypotheses of mutual primary belief in caution, mutual primary belief in rationality, and common knowledge of conjectures characterize perfect equilibrium epistemically in our lexicographic framework. |
| Keywords: | Agreeing to disagree; Epistemic game theory; Lexicographic probability systems; Mutual absolute continuity; Perfect equilibrium; Static games |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04271274&r=gth |
| By: | Aaron S. Berman (Economic Science Institute, Chapman University); Laurence R. Iannaccone (Institute for the Study of Religion, Economics and Society, Argyros School of Business and Economics, Chapman University); Mouli Modak (Smith Institute for Political Economy and Philosophy, Chapman University) |
| Abstract: | People belong to many diferent groups, and few belong to the same network of groups. Moreover, people routinely reduce their involvement in dysfunctional groups while increasing involvement in those they fnd more attractive. The net efect can be an increase in overall cooperation and the partial isolation of free-riders, even if free-riders are never punished, excluded, or recognized. We formalize and test this conjecture with an agent-based social simulation and a multi-good extension of the standard repeated public goods game. The experiment places 16 subjects in two four-person groups arranged in a 16-group checkerboard lattice that ensures no two subjects share membership in more than one group. Our initial results from ffteen sessions (fve in each of three diferent treatments) strongly suggest that multi-group settings can indeed raise overall cooperation and reduce the impact of free-riders. We extend our understanding of this setting by imposing greater heterogeneity between groups through interweaving AI players amongst the human subjects; whereby initial sessions of this amplifes the aforementioned efects. |
| Keywords: | cooperation, public goods game, lab experiment, multi-group |
| JEL: | C72 C73 C91 C92 H41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:23-12&r=gth |
| By: | Heijmans, Roweno J.R.K. (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | The interplay between strategic beliefs and policy complicates policy design in coordination games. To untangle this relationship, we study policy design in the context of equilibrium selection. We characterize the unique subsidy scheme that selects a targeted strategy vector as the unique equilibrium of a coordination game. These subsidies are continuous in model parameters and do not make the targeted strategies strictly dominant. While discrimination is optimal in games with multiple equilibria (Segal, 2003; Winter, 2004), we construct a non-discriminatory subsidy scheme the cost of which converges to that of a least-cost discriminatory policy when agents are symmetric. |
| Keywords: | Coordination; global games; contracting with externalities; incentives in teams; networks; unique implementation |
| JEL: | D81 D82 D83 D86 H20 |
| Date: | 2023–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2023_020&r=gth |
| By: | Giuseppe Attanasi (UNIROMA - Università degli Studi di Roma "La Sapienza" = Sapienza University [Rome]); Claire Rimbaud (Leopold Franzens Universität Innsbruck - University of Innsbruck); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We investigate whether a player's guilt aversion is modulated by the co-players' vulnerability. To this goal, we introduce new variations of a three-player Trust game in which we manipulate payoff vulnerability and endowment vulnerability. The former is the traditional vulnerability which arises when a player's material payoff depends on another player's action (e.g., recipient's payoff in a Dictator game). The latter arises when a player's initial endowment is entrusted to another player (e.g., trustor's endowment in a Trust game). Treatments vary whether trustees can condition their decision on the belief of a co-player who is payoff-vulnerable and/or endowment-vulnerable, or not vulnerable at all, and the decision rights of the vulnerable player. We find that trustees' guilt aversion is insensitive to both the dimension of the co-player's vulnerability and to the decision rights of the co-player. Guilt is activated even absent vulnerability of the co-player whose beliefs are disappointed. It is triggered by the willingness to respond to the co-player's beliefs on his strategy, regardless of whether this strategy concerns this player or a third player's vulnerability, that is, indirect vulnerability. |
| Keywords: | Guilt Aversion, Vulnerability, Psychological Game Theory, Trust Game, Dictator Game, Experiment |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03620418&r=gth |
| By: | Guerrazzi, Marco; Candido, Giuseppe |
| Abstract: | In this paper, building upon a q-model of investment with adjustment costs, we address the strategic determinants of the price of newly installed productive capacity. Specifically, we develop a differential game in which a competitive producer of consumption goods deals with a seller of capital goods endowed with market power. From a theoretical perspective, we show that an open-loop Stackelberg equilibrium with non-cooperative features requires the producer of consumption goods to be more impatient than the seller of capital goods. Thereafter, relying on some numerical simulations, we show that our theoretical setting is able to replicate the countercyclical pattern of the relative price of capital goods as well as its negative relationship with the investment-output ratio. |
| Keywords: | Price of capital goods; Tobin's q; Internal and external adjustment costs; Differential games. |
| JEL: | C72 D24 E22 G31 |
| Date: | 2023–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119118&r=gth |
| By: | Marilyn Pease; Mark Whitmeyer |
| Abstract: | We introduce a way to compare actions in decision problems. An action is safer than another if the set of beliefs at which the decision-maker prefers the safer action increases in size (in the set inclusion sense) as the decision-maker becomes more risk averse. We provide a full characterization of this relation and discuss applications to robust belief elicitation, contracting, Bayesian persuasion, game theory, and investment hedging. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.17517&r=gth |
| By: | Fulin Guo |
| Abstract: | This paper studies the action dynamics of network coordination games with bounded-rational agents. I apply the experience-weighted attraction (EWA) model to the analysis as the EWA model has several free parameters that can capture different aspects of agents' behavioural features. I show that the set of possible long-term action patterns can be largely different when the behavioural parameters vary, ranging from a unique possibility in which all agents favour the risk-dominant option to some set of outcomes richer than the collection of Nash equilibria. Monotonicity and non-monotonicity in the relationship between the number of possible long-term action profiles and the behavioural parameters are explored. I also study the question of influential agents in terms of whose initial predispositions are important to the actions of the whole network. The importance of agents can be represented by a left eigenvector of a Jacobian matrix provided that agents' initial attractions are close to some neutral level. Numerical calculations examine the predictive power of the eigenvector for the long-run action profile and how agents' influences are impacted by their behavioural features and network positions. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.18835&r=gth |
| By: | Giorgio Fabbri (Univ.Grenoble Alpes, CNRS, INRIA, Grenoble INP, GAEL, Grenoble, France); Silvia Faggian (Department of Economics, University Of Venice Ca' Foscari, Italy); Giuseppe Freni (Department of Business and Economics, University of Naples "Parthenope", Naples, Italy.) |
| Abstract: | We study the dynamics of the exploitation of a natural resource distributed among and flowing between several nodes connected via a weighted, directed network. The network represents both the locations and the interactions of the resource nodes. A regulator decides to designate some of the nodes as natural reserves where no exploitation is allowed. The remaining nodes are assigned (one-to-one) to players, who will exploit the resource at the node. We show how the equilibrium exploitation and the resource stocks depend on the productivity of the resource sites, on the structure of the connections between the sites, and on the number and the preferences of the agents. The best locations to host nature reserves are identified according to the model's parameters, and we find that they correspond to the most central (in the sense of eigenvector centrality) nodes of a suitably redefined network that considers the nodes' productivity. |
| Keywords: | Harvesting, spatial models, differential games, nature reserve |
| JEL: | Q28 C72 Q23 C61 R12 Q20 R11 C73 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2022:03&r=gth |
| By: | Christian Basteck; Frank Huettner |
| Abstract: | We consider manipulations in the context of coalitional games, where a coalition aims to increase the total payoff of its members. An allocation rule is immune to coalitional manipulation if no coalition can benefit from internal reallocation of worth on the level of its subcoalitions (reallocation-proofness), and if no coalition benefits from a lower worth while all else remains the same (weak coalitional monotonicity). Replacing additivity in Shapley's original characterization by these requirements yields a new foundation of the Shapley value, i.e., it is the unique efficient and symmetric allocation rule that awards nothing to a null player and is immune to coalitional manipulations. We further find that for efficient allocation rules, reallocation-proofness is equivalent to constrained marginality, a weaker variant of Young's marginality axiom. Our second characterization improves upon Young's characterization by weakening the independence requirement intrinsic to marginality. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.20415&r=gth |
| By: | Heczko, Alexander; Kittsteiner, Thomas; Ott, Marion |
| Abstract: | In a lab experiment, we analyze the benefits of increasing competition on auction platforms hosting multiple auctioneers of a homogeneous good. We find that increasing competition by merging separated individual auctions increases market efficiency and also buyers' payoffs, while there is no evidence of an increase in the auctioneers' expected revenues. Furthermore, competing auctioneers decrease reserve prices significantly when the number of competitors increases. Then, auctioneers' revenues decrease whereas buyers' payoffs and efficiency are enhanced. Different to previous findings for the monopolistic seller case, competing auctioneers do not increase reserve prices significantly when the number of buyers increases. For our theoretical model, we provide closed-form equilibrium reserve-price functions of competing auctioneers. |
| Keywords: | Competing auctions, merging markets, parallel auctions, reserve price, experiment |
| JEL: | D44 D47 D82 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:279549&r=gth |
| By: | Gechun Liang; Moris Strub; Yuwei Wang |
| Abstract: | We study portfolio management within a competitive environment under a new framework of predictable relative forward performance processes (PRFPP). Each agent trades a distinct stock following a binomial distribution with probabilities for a positive return depending on the market regime characterized by a binomial common noise. For both the finite population and mean field games, we construct and analyse PRFPPs for initial data of the CARA class along with the associated equilibrium strategies. We find that relative performance concerns do not necessarily lead to more investment in the risky asset. Under some parameter constellations, agents short a stock with positive expected excess return. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.04841&r=gth |
| By: | Robbins, Blaine G (New York University Abu Dhabi); Karell, Daniel; Siegenthaler, Simon; Kamm, Aaron |
| Abstract: | Leaders are a part of virtually every group and organization, and while they help solve the various collective action problems that groups face, they can also be unprincipled and incompetent, pursuing their own interests over those of the group. What types of circumstances foster prosocial leadership and motivate leaders to pursue group interests? In a modified dictator game (N = 798), we examine the effects of piece-rate subsidies (or pay per unit of work performed) and the relative price of giving (or the size of the benefit to others for giving) on prosocial behavior and norms about giving. We find that subsidies increase giving by leaders, that the relative price of giving is unrelated to prosocial behavior, and that neither affects norms about giving. Furthermore, the introduction and removal of a subsidy does not undermine giving over time. Our results imply that subsidies increase group welfare by motivating leaders to allocate a larger share of resources to group members. |
| Date: | 2023–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:3umys&r=gth |
| By: | Ethan Holdahl; Jiabin Wu |
| Abstract: | This paper studies a preference evolution model in which a population of agents are matched to play a sequential prisoner's dilemma in an incomplete information environment. An institution can design an incentive-compatible screening scheme, such as a special zone that requires an entry fee, or a costly label for purchase, to segregate the conditional cooperators from the non-cooperators. We show that institutional intervention of this sort can help the conditional cooperators to prevail when the psychological benefit of cooperating for them is sufficiently strong and the membership of the special zone or the label is inheritable with a sufficiently high probability. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.02813&r=gth |
| By: | Tarun Sabarwal (Department of Economics, University of Kansas, Lawrence, KS 66045, USA) |
| Abstract: | We develop a universal theory of equilibrium for models with complementarities on partially ordered sets (posets), unifying lattice-based theories used widely in economics and other disciplines and poset-based theories useful to study stochastic systems in many settings. Our theorems for extremal equilibria, structure of equilibrium set, and monotone comparative statics (MCS) of equilibrium generalize both types of theories in a unified manner. This extends to new theorems for MCS of the infimum equilibrium set, supremum equilibrium set, full equilibrium set, and isotone equilibrium set, and to a universal theory of order approximation of equilibria as well. As an application, we show new, deeper structural features of equilibrium in the canonical isotone stochastic dynamic economy with correlated shocks due to Hopenhayn and Prescott (1992). |
| Keywords: | complementarities; Equilibrium; Fixed Point; Poset; Monotone Comparative Statics; Stochastic System. |
| JEL: | C02 C60 C62 C70 D70 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:202312&r=gth |
| By: | Basak Bayramoglu (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-François Jacques (ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel); Sylvaine Poret (Inrae) |
| Abstract: | The European Union (EU) Green Deal and its Farm to Fork Strategy are intended to promote sustainable food systems to achieve EU climate-neutrality by 2050. The Farm to Fork action plan also foresees the introduction of a harmonized mandatory front-of-pack nutrition labelling scheme in 2023. The EU countries have yet to reach agreement on the nutrition labelling scheme, which will also have environmental impacts. This article raises the question of whether at the European level, countries should seek agreements on both climate mitigation and nutrition policies (full agreement as in the case of the Green Deal) or should negotiate separate climate and nutrition policy agreements (as for the nutritional labelling). To address this question, this paper develops a game-theoretic model with multiple countries where each country implements a climate policy and a nutrition policy, We compare the consequences in terms of total emissions, the level of the nutrition policy and the welfare under different institutional arrangements of a non-cooperative equilibrium, full agreement, and three alternative agreements. Our results show in particular that full agreement always leads to the lowest total emissions at the expense of the level of nutrition policy in some cases. In an extension of our analysis, we show that agreements that include cooperation over nutrition policies do not necessarily imply formation of a larger coalition of signatory countries, even if a nutrition policy has positive or negative impacts on emissions. |
| Abstract: | Le Green Deal de l'Union européenne (UE) et sa stratégie "de la ferme à la fourchette" visent à promouvoir des systèmes alimentaires durables afin d'atteindre la neutralité climatique de l'UE d'ici 2050. Le plan d'action "De la ferme à la fourchette" prévoit également l'introduction d'un système obligatoire harmonisé d'étiquetage nutritionnel sur les emballages des produits en 2023. Les pays de l'UE doivent encore parvenir à un accord sur ce système d'étiquetage nutritionnel, qui aura également des répercussions sur l'environnement. Cet article soulève la question de savoir si, au niveau européen, les pays devraient chercher à conclure des accords sur les politiques d'atténuation du changement climatique et les politiques nutritionnelles (accord complet comme dans le cas du Green Deal) ou s'ils devraient négocier des accords distincts sur les politiques climatiques et nutritionnelles (comme dans le cas de l'étiquetage nutritionnel). Nous comparons les conséquences en termes d'émissions totales, le niveau de la politique nutritionnelle et du bien-être des différents arrangements institutionnels d'un équilibre non coopératif, d'un accord complet et de trois accords alternatifs. Nos résultats montrent en particulier que l'accord complet conduit toujours aux émissions totales les plus faibles, au détriment du niveau de la politique nutritionnelle dans certains cas. Dans une extension de notre analyse, nous montrons que les accords qui incluent une coopération sur les politiques nutritionnelles n'impliquent pas nécessairement la formation d'une plus grande coalition de pays signataires, même si une politique nutritionnelle a des impacts positifs ou négatifs sur les émissions. |
| Keywords: | climate mitigation, nutrition policy, healthy diets, cooperation, agreement |
| Date: | 2023–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04287708&r=gth |
| By: | Mallesh Pai; Max Resnick |
| Abstract: | Currently, over 90% of Ethereum blocks are built using MEV-Boost, an auction that allows validators to sell their block-building power to builders who compete in an open English auction in each slot. Shortly after the merge, when MEV-Boost was in its infancy, most block builders were neutral, meaning they did not trade themselves but rather aggregated transactions from other traders. Over time, integrated builders, operated by trading firms, began to overtake many of the neutral builders. Outside of the integrated builder teams, little is known about which advantages integration confers beyond latency and how latency advantages distort on-chain trading. This paper explores these poorly understood advantages. We make two contributions. First, we point out that integrated builders are able to bid truthfully in their own bundle merge and then decide how much profit to take later in the final stages of the PBS auction when more information is available, making the auction for them look closer to a second-price auction while independent searchers are stuck in a first-price auction. Second, we find that latency disadvantages convey a winner's curse on slow bidders when underlying values depend on a stochastic price process that change as bids are submitted. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.09083&r=gth |
| By: | Yingkai Li; Jonathan Libgober |
| Abstract: | A principal seeks to learn about a binary state and can do so by enlisting an agent to acquire information over time using a Poisson information arrival technology. The agent learns about this state privately, and his effort choices are unobserved by the principal. The principal can reward the agent with a prize of fixed value as a function of the agent's sequence of reports and the realized state. We identify conditions that each individually ensure that the principal cannot do better than by eliciting a single report from the agent after all information has been acquired. We also show that such a static contract is suboptimal under sufficiently strong violations of these conditions. We contrast our solution to the case where the agent acquires information "all at once;" notably, the optimal contract in the dynamic environment may provide strictly positive base rewards to the agent even if his prediction about the state is incorrect. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.19147&r=gth |
| By: | Junqian Li (School of Economics, Shandong University); Yuqing Liu (School of Economics, University of Queensland, Brisbane, Australia); Nhan Buu Phan (School of Economics, University of Queensland, Brisbane, Australia); Shino Takayama (School of Economics, University of Queensland, Brisbane, Australia) |
| Abstract: | In this paper, we study the trading strategies of informed traders in a simulated asset market. There is a risky asset with two possible values, and participants receive private information about the value of the asset. Market maker’s quotes are computationally simulated. We study whether the trading behavior of informed traders—specifically, the frequency of manipulative trading versus honest trading—is influenced by various conditions, including the bid–ask spread, retrading possibilities, and the risk attitude of traders. Our findings suggest that manipulation occurs in both long (e.g., 15 periods) and short (e.g., five periods) trading rounds. Furthermore, there is a significant increase in the number of manipulators when the bid–ask spread is narrow rather than wide. Our results also indicate that risk-seeking participants engage in manipulation more frequently than other participants. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:665&r=gth |
| By: | Yannai A. Gonczarowski; Yoram Moses |
| Abstract: | Formally, for common knowledge to arise in a dynamic setting, knowledge that it has arisen must be simultaneously attained by all players. As a result, new common knowledge is unattainable in many realistic settings, due to timing frictions. This unintuitive phenomenon, observed by Halpern and Moses (1990), was discussed by Arrow et al. (1987) and by Aumann (1989), was called a paradox by Morris (2014), and has evaded satisfactory resolution for four decades. We resolve this paradox by proposing a new definition for common knowledge, which coincides with the traditional one in static settings but generalizes it in dynamic settings. Under our definition, common knowledge can arise without simultaneity, particularly in canonical examples of the Haplern-Moses paradox. We demonstrate its usefulness by deriving for it an agreement theorem \`a la Aumann (1976), and showing that it arises in the setting of Geanakoplos and Polemarchakis (1982) with timing frictions added. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.04374&r=gth |