nep-gth New Economics Papers
on Game Theory
Issue of 2024‒01‒01
eighteen papers chosen by
Sylvain Béal, Université de Franche-Comté

  1. Contingent Reasoning and Dynamic Public Goods Provision By Evan M. Calford; Timothy N. Cason
  2. Price Stickiness and Strategic Uncertainty: An Experimental Study By Yukihiko Funaki; Kohei Kawamura; Nobuyuki Uto; Kozo Ueda
  3. Network Effects on Information Acquisition by DeGroot Updaters By Miguel Risco
  4. Accounting for preferences and beliefs in social framing effects By Bernold, Elizabeth; Gsottbauer, Elisabeth; Ackermann, Kurt A.; Murphy, Ryan
  6. Consensus and Disagreement: Information Aggregation under (not so) Naive Learning By Abhijit Banerjee; Olivier Compte
  7. A linear model for freight transportation By Valencia-Toledo, Alfredo; Vidal-Puga, Juan
  8. Using the Strategy Method and Elicited Beliefs to Explain Group Size and MPCR Effects in Public Good Experiments By Gächter, Simon; Fages, Diego Marino
  9. Policy-advising Competition and Endogenous Lobbies By Foerster, Manuel; Habermacher, Daniel
  10. Rebate rules in reward-based crowdfunding: Introducing the bid-cap rule By Gerstmeier, Fabian; Oezcelik, Yigit; Tolksdorf, Michel
  11. The Free Rider Effect and Market Power in Trade Agreements By Woan Foong Wong
  12. The Optimal Design Of Elimination Tournaments With A Superstar By Daria Tabashnikova; Marina Sandomirskaia
  13. Narrative Persuasion By Fries, Tilman; Barron, Kai
  14. “Sherlocking” and Platform Information Policy By Jay Pil Choi; Kyungmin Kim; Arijit Mukherjee
  15. Can parallel airline alliances be welfare improving? The case of airline-airport vertical agreement. By Adrián, Nerja
  16. Identification using Revealed Preferences in Linearly Separable Models By Nikhil Agarwal; Pearl Z. Li; Paulo J. Somaini
  17. Multibrand Price Dispersion By Mark Armstrong; John Vickers
  18. Information spillovers in experience goods competition By Chen, Zhuoqiong; Stanton, Christopher; Thomas, Catherine

  1. By: Evan M. Calford; Timothy N. Cason
    Abstract: Contributions toward public goods often reveal information that is useful to others considering their own contributions. This experiment compares static and dynamic contribution decisions to determine how contingent reasoning differs in dynamic decisions where equilibrium requires understanding how future information can inform about prior events. This identifies partially cursed individuals who can only extract partial information from contingent events, others who are better at extracting information from past rather than future or concurrent events, and Nash players who effectively perform contingent thinking. Contrary to equilibrium, the dynamic provision mechanism does not lead to lower contributions than the static mechanism.
    Keywords: Cursed equilibrium; Voluntary contributions; Club goods; Laboratory experiment
    JEL: C91 D71 D91 H41
    Date: 2023–03
  2. By: Yukihiko Funaki; Kohei Kawamura; Nobuyuki Uto; Kozo Ueda
    Abstract: We identify a minimal set of components to generate price stickiness by a laboratory experiment on an oligopolistic price setting game. Our design involves repeated aggregate shocks to the market but features no uncertainty in their timing and magnitude, no real-nominal distinction, or no need to compute the best response to the prices of the other subjects. We find persistent price stickiness when prices are strategic complements and fully anticipated shocks lower the equilibrium price. We argue that the observed downward stickiness can be attributed to the presence of strategic uncertainty and strategic complementarity, combined with an asymmetric payoff structure such that adjusting an individual price faster than others toward the lower equilibrium price can potentially lead to a significant loss, compared to faster adjustment to the higher equilibrium price.
    Keywords: strategic complements; sticky prices; bounded rationality
    JEL: C92 E32 E52
    Date: 2023–12
  3. By: Miguel Risco
    Abstract: In today’s world, social networks have a significant impact on information processes, shaping individuals’ beliefs and influencing their decisions. This paper proposes a model to understand how boundedly rational (DeGroot) individuals behave when seeking information to make decisions in situations where both social communication and private learning take place. The model assumes that information is a local public good, and individuals must decide how much effort to invest in costly information sources to improve their knowledge of the state of the world. Depending on the network structure and agents’ positions, some individuals will invest in private learning, while others will free-ride on the social supply of information. The model shows that multiple equilibria can arise, and uniqueness is controlled by the lowest eigenvalue of a matrix determined by the network. The lowest eigenvalue roughly captures how two-sided a network is. Two-sided networks feature multiple equilibria. Under a utilitarian perspective, agents would be more informed than they are in equilibrium. Social welfare would be improved if influential agents increased their information acquisition levels.
    Keywords: Information Acquisition, Learning, Public Goods, Network Effects, Information Diffusion, Bounded Rationality
    JEL: C72 D61 D83 D85 H41
    Date: 2023–04
  4. By: Bernold, Elizabeth; Gsottbauer, Elisabeth; Ackermann, Kurt A.; Murphy, Ryan
    Abstract: Past experiments show systematic differences in contributions to public goods under various framing conditions. Several explanations of these differences have been presented. Some suggest that social frames affect subjects' preferences, while others suggest that framing changes subjects' beliefs about others, and thus in turn affects behavior. In this paper, we test the effect of framing on the level of contributions in a series of public goods games designed to separate the impact of preferences from beliefs in shaping cooperative decisions. This is achieved by implementing a social value orientation measure to elicit social preferences from decision makers, which are then analyzed in concert with reported beliefs about others’ cooperation and own contribution decisions from the linear public goods games. While we find mixed results on framing effects, our study demonstrates that preferences and beliefs are significant predictors of cooperation. Furthermore, the degree to which they influence cooperation is either strengthened or weakened by framing.
    Keywords: cooperation; framing; public good game; social value orientation (svo); beliefs; 100014 143199/1
    JEL: M40 J1
    Date: 2023–06–13
  5. By: Pierpaolo Battigalli
    Abstract: In a recent paper, Lin & Palfrey (2022, revised2023) developed a theory of cognitive hierarchies (CH) in sequential games and observed that this solution concept in not reduced-normal-form invariant. In this note I qualify this observation by showing that the CH model is normal-form invariant, and that the diferences arising from the application of the CH model to the reduced normal form depend only on how randomization by level-0 types is modeled. Indeed, while the uniform behavior strategy in the extensive form yields the uniform mixed strategy in the normal form, the latter does not correspond to the uniform randomization in the reduced normal form, because different reduced strategies may correspond to sets of equivalent strategies with different cardinalities. I also note that results in the literature on transformations of sequential games imply that the sequential CH modelof Lin & Palfrey is in variant to the interchanging of essentially simultaneous moves, but it is not invariant to coalescing of moves(and, of course, its inverse, sequential agents splitting).Finally, I note that the independence of ex ante beliefs about the level-types of co-players is preserved by updated beliefs conditional on information sets in all games with observable deviators. Keywords: Cognitive hierarchies, sequential games, extensive form, normal form, structurally reduced normal form, coalescing of moves, independence, observable deviators.
    Date: 2023
  6. By: Abhijit Banerjee; Olivier Compte
    Abstract: We explore a model of non-Bayesian information aggregation in networks. Agents non-cooperatively choose among Friedkin-Johnsen type aggregation rules to maximize payoffs. The DeGroot rule is chosen in equilibrium if and only if there is noiseless information transmission, leading to consensus. With noisy transmission, while some disagreement is inevitable, the optimal choice of rule amplifies the disagreement: even with little noise, individuals place substantial weight on their own initial opinion in every period, exacerbating the disagreement. We use this framework to think about equilibrium versus socially efficient choice of rules and its connection to polarization of opinions across groups.
    Date: 2023–11
  7. By: Valencia-Toledo, Alfredo; Vidal-Puga, Juan
    Abstract: We propose a new freight transportation problem to distribute the benefit of ore transportation throughout a linear route to compensate the communities located on it. Such distribution aims to avoid conflicts generated by the transportation that causes external costs such as air, water, and land pollution to communities that can block the route, forcing more expensive alternatives. We propose a solution based on stability and fairness principles. In particular, we present some reasonable properties to characterize a family of assignment rules for determining compensation to local communities.
    Keywords: Cooperative game theory; core; mining; freight transportation
    JEL: C71 D74
    Date: 2023–11–21
  8. By: Gächter, Simon (University of Nottingham); Fages, Diego Marino (University of Durham)
    Abstract: In this paper we disentangle the role of cooperative preferences and beliefs for explaining MPCR and group size effects in public goods games. To achieve this, we use the ABC approach, which explains cooperation as a function of cooperative attitudes and beliefs. We measure cooperative attitudes using the incentive-compatible strategy method by Fischbacher et al. (2001, Economics Letters, 71-3, 397–404)(FGF). However, to keep the incentives in the strategy method equal across all group sizes (which FGF does not), we also compare FGF with a version of the strategy method that is scalable to any group size. We find that preference types are similar across strategy methods, group sizes of 3 and 9, and MPCRs of 0.4 and 0.8. Further experiments with group sizes of 3 and 30 again find similar distributions of conditional preferences. The ABC approach predicts actual cooperation in all conditions and for both strategy methods and reveals that, controlling for elicited preferences, differences in cooperation levels observed across the various games are mostly due to differences in beliefs.
    Keywords: public goods, group size, MPCR, strategy method, ABC approach, conditional cooperation, experiments
    JEL: C92 H41
    Date: 2023–11
  9. By: Foerster, Manuel; Habermacher, Daniel
    JEL: C72 D72 D82 D83
    Date: 2023
  10. By: Gerstmeier, Fabian; Oezcelik, Yigit; Tolksdorf, Michel
    JEL: C72 C92 H41
    Date: 2023
  11. By: Woan Foong Wong
    Abstract: Regional trade agreements have proliferated in the past two decades while multilateral trade negotiations have stalled. Both these agreements are governed by the WTO and have to abide by the non-discriminatory (Most-Favored Nation, MFN) clause to varying degrees-regional agreements to a lesser extent than multilateral agreements. This paper investigates the free rider effect that can stem from the MFN clause and how it impacts country incentives towards these agreements. Free-riding occurs because countries cannot be excluded from the benefits of other countries’ liberalizations and thus have less incentive to contribute to the cost of liberalization by signing trade agreements and offering their own market access. I extend the equilibrium model of endogenous trade liberalization via trade agreements developed by Saggi and Yildiz (2010) to better capture the effects of MFN. Within multilateral agreements, I show that the free rider effect eliminates global free trade as an equilibrium even when countries have symmetric market power. Within regional agreements, smaller countries are excluded more under the equilibrium with MFN compared to without.
    Keywords: trade agreements, tariffs, World Trade Organization, coalition proof Nash equilibrium, multilateral trade agreements, preferential trade agreements, welfare
    JEL: F10 F13
    Date: 2023
  12. By: Daria Tabashnikova (National Research University Higher School of Economics); Marina Sandomirskaia (National Research University Higher School of Economics)
    Abstract: We study single- and double-elimination tournaments with heterogeneous players of two types: regular players and a superstar. Players choose efforts in each match with linear costs, winning with a probability calculated with the Tullock success function. We consider several designer maximization problems: total efforts, probability of winning the strongest player, and a weighted composed function. We show that a double-elimination tournament is less profitable in most cases, except when the tournament organizer is concerned about the probability that the superstar wins the tournament.
    Keywords: single-elimination tournament, double-elimination tournament, tournament design, heterogeneous players, superstar
    JEL: C72 D47 Z20
    Date: 2023
  13. By: Fries, Tilman; Barron, Kai
    JEL: D83 G40 G50 C90
    Date: 2023
  14. By: Jay Pil Choi; Kyungmin Kim; Arijit Mukherjee
    Abstract: Platform-run marketplaces may exploit third-party sellers’ data to develop competing products, but potential for future competition can deter sellers’ entry. We explore how this trade-off affects the platform’s referral fee and its own entry decision. We first characterize the platform’s optimal referral fee under full commitment on entry decision and study its economic implications. We then analyze the extent to which the platform’s own information sharing policy substitutes for its commitment to entry. We characterize the platform’s optimal information policy and examine how it interacts with the platform’s fee structure. Our findings highlight the importance of considering the platform’s fee structure as a regulatory response in the policy debates on marketplace regulation.
    Keywords: hybrid platforms, referral fee, information design
    JEL: D82 D42 L10
    Date: 2023
  15. By: Adrián, Nerja
    Abstract: Parallel airline alliances have negative effects on consumers a priori; however, they can be counteracted if airports may modify the behavior of airlines. In particular, vertical airport–airline agreements allow the airport to influence the competition downstream market, changing the effects of parallel alliances. In this paper, we analyze the effects of parallel alliances in the context of competition between vertical airport–airline pairs competition. We show that under the influence of airports, parallel alliances are welfare improving, and the number of passengers increases, against former studies. These results offer a new brand of analyses to be considered by authorities that evaluate parallel alliances.
    Keywords: Airlines parallel alliances; Concession revenue sharing; Vertical agreements; Airports competition
    JEL: D43 D47 L13 L93 R49
    Date: 2022–11–26
  16. By: Nikhil Agarwal; Pearl Z. Li; Paulo J. Somaini
    Abstract: Revealed preference arguments are commonly used when identifying models of both single-agent decisions and non-cooperative games. We develop general identification results for a large class of models that have a linearly separable payoff structure. Our model allows for both discrete and continuous choice sets. It incorporates widely studied models such as discrete and hedonic choice models, auctions, school choice mechanisms, oligopoly pricing and trading games. We characterize the identified set and show that point identification can be achieved either if the choice set is sufficiently rich or if a variable that shifts preferences is available. Our identification results also suggests an estimation approach. Finally, we implement this approach to estimate values in a combinatorial procurement auction for school lunches in Chile.
    JEL: C51 C57
    Date: 2023–11
  17. By: Mark Armstrong; John Vickers
    Abstract: We study a market in which several firms potentially each supply a number of “brands” of fundamentally the same product. In fashion, for example, a single firm might retail similar items under different labels and different prices. Consumers differ in which products they consider for their purchase, and firms compete using (multi-dimensional) mixed pricing strategies for their brands. Using relative elasticity conditions, we discuss when firms choose to offer uniform pricing across their brands, and when they use segmented pricing so that one “discount” brand is always priced below another. We solve duopoly models in which equilibria can be derived for all parameters. We discuss the impact of introducing a new brand, of imposing a requirement to set uniform prices across a firm’s brands, and of mergers between single-brand firms.
    Date: 2023–11–30
  18. By: Chen, Zhuoqiong; Stanton, Christopher; Thomas, Catherine
    Abstract: Trialing an experience good allows consumers to learn their value for the sampled good and also informs beliefs about their value for similar products. These demand-side information spillovers across products create a relatively well-informed group of potential future consumers for rival firms. When both switching consumers and repeat buyers are profitable, firms face reduced incentives to set a low initial price to attract inexperienced consumers. Switchers and repeat buyers are more likely to be profitable in new product categories that build on major innovations and when firms can price discriminate based on purchasing history. We suggest that competing products and services arising from new innovations often have demand-side information spillovers from any product trial and are, hence, settings where competing firms can make overall profits even when selling products that consumers perceive to be indistinguishable prior to initial trial.
    Keywords: experience goods; duopoly; behavior based price discrimination; product differentiation; information spillovers; No. 71903046) and the “Shenzhen Peacock Program” (No. GA11409002).
    JEL: J50
    Date: 2023–08–11

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