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on Game Theory |
| By: | Goerlach, Joseph-Simon (Bocconi University); Motz, Nicolas (Universidad Complutense de Madrid) |
| Abstract: | Despite recent advances, no general methods for computing bargaining power in non-cooperative games exist. We propose a number of axioms such a measure should satisfy and show that they characterise a unique function. The principle underlying this measure is that the influence of a player can be assessed according to how much changes in this player's preferences affect outcomes. Considering specific classes of games, our approach nests existing measures of power. We present applications to cartel formation, the non- cooperative model of the household, and legislative bargaining. |
| Keywords: | bargaining power, non-cooperative games |
| JEL: | C72 C78 D01 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16809&r=gth |
| By: | Damien Berriaud; Ezzat Elokda; Devansh Jalota; Emilio Frazzoli; Marco Pavone; Florian D\"orfler |
| Abstract: | Recent years have seen a surge of artificial currency-based mechanisms in contexts where monetary instruments are deemed unfair or inappropriate, e.g., in allocating food donations to food banks, course seats to students, and, more recently, even for traffic congestion management. Yet the applicability of these mechanisms remains limited in repeated auction settings, as it is challenging for users to learn how to bid an artificial currency that has no value outside the auctions. Indeed, users must jointly learn the value of the currency in addition to how to spend it optimally. In this work, we study the problem of learning to bid in two prominent classes of artificial currency auctions: those in which currency, which users spend to obtain public resources, is only issued at the beginning of a finite period; and those where, in addition to the initial currency endowment, currency payments are redistributed to users at each time step. In the latter class, the currency has been referred to as karma, since users do not only spend karma to obtain public resources but also gain karma for yielding them. In both classes, we propose a simple learning strategy, called adaptive karma pacing, and show that this strategy a) is asymptotically optimal for a single user bidding against competing bids drawn from a stationary distribution; b) leads to convergent learning dynamics when all users adopt it; and c) constitutes an approximate Nash equilibrium as the number of users grows. Our results require a novel analysis in comparison to adaptive pacing strategies in monetary auctions, since we depart from the classical assumption that the currency has known value outside the auctions, and moreover consider that the currency is both spent and gained in the class of auctions with redistribution. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.04057&r=gth |
| By: | Halaburda, Hanna (New York U); He, Zhiguo (U of Chicago); Li, Jiasun (George Mason U) |
| Abstract: | The designs of many new blockchains are inspired by the Byzantine fault tolerance (BFT) problem. While traditional BFT protocols assume most system nodes behave honestly, we recognize that blockchains are deployed in environments where nodes are subject to strategic incentives. This paper thus develops an economic framework for analyzing distributed consensus formation with explicit incentive considerations. We formalize the consensus formation process in a dynamic game with imperfect information and preplay communication where non-Byzantine nodes are Knightian uncertain about Byzantine actions, and characterize all of its symmetric equilibria. Our findings enrich those from traditional BFT algorithms, offer guidance for designing blockchains in trustless environments, and also provide a theoretical framework bridging distributed consensus and game theoretical modeling. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:4137&r=gth |
| By: | Hikmet Gunay (Department of Economics University of Manitoba, Canada.); Ricardo Huamán-Aguilar (Departamento de Economía de la Pontificia Universidad Católica del Perú.) |
| Abstract: | In a second-price sequential auction with global and local bidders, we analyze the correct selling order of goods when the number of bidders in each leg of the auction is different with laboratory experiments. Theoretically, selling the good with a large number of bidders last should generate an (almost) efficient outcome but selling it first should result in an inefficient outcome with a positive probability. Our experimental results show that selling that good last generates a more efficient outcome than selling it first. Hence, the experimental results show that the selling order has to be taken into account while designing a sequential auction. JEL Classification-JE: C90, C91, C92, D44. |
| Keywords: | Experimental economics, Lab experiments, Sequential auctions, Auction theory. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:pcp:pucwps:wp00530&r=gth |
| By: | Yasuko Kawahata |
| Abstract: | This research note is organized with respect to a novel approach to solving problems related to the spread of fake news and effective fact-checking. Focusing on the least-cost routing problem, the discussion is organized with respect to the use of Metzler functions and Metzler matrices to model the dynamics of information propagation among news providers. With this approach, we designed a strategy to minimize the spread of fake news, which is detrimental to informational health, while at the same time maximizing the spread of credible information. In particular, through the punitive dominance problem and the maximum compensation problem, we developed and examined a path to reassess the incentives of news providers to act and to analyze their impact on the equilibrium of the information market. By applying the concept of entanglement to the context of information propagation, we shed light on the complexity of interactions among news providers and contribute to the formulation of more effective information management strategies. This study provides new theoretical and practical insights into issues related to fake news and fact-checking, and will be examined against improving informational health and public digital health. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.02342&r=gth |
| By: | Margot Belguise |
| Abstract: | Politicians are sometimes accused of sending “red herrings”, irrelevant information meant to distract their audience from other information. When do they succeed in fooling voters? How is this affected by the media? This paper proposes a model of election with red herring. An incumbent running for re-election may send an irrelevant ”tale” to distract voters from a scandal. Some politicians may simply enjoy telling irrelevant tales, making it difficult for voters to recognize red herrings. Red herrings can thus be ”successful” in that the incumbent is re-elected despite the scandal. Equilibrium characterization sheds light on two non-trivial results. First, the game sometimes has multiple equilibria: society may coordinate on equilibria with no or some successful red herring through a self-fulfilling social norm of tale-telling. However, high media attention to tales may discipline scandal-free politicians due to voter suspicion of tales, leaving a unique equilibrium with no successful red herring. A dynamic extension introduces feedbacks between the pool of politicians and media attention. Polar cases in which red herring is predicted to increase over time or on the contrary disappear are highlighted. A second extension shows that voter polarization is predicted to have ambiguous effects on politician discipline and thereby on screening. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:not:notnic:2023-12&r=gth |
| By: | Dehez, Pierre (Université catholique de Louvain, LIDAM/CORE, Belgium); Pacini, Pier Mario |
| Abstract: | We reconsider the necessary and sufficient conditions under which the Shapley value of a 3-player superadditive game belongs to the core. We then compute the proportion of games whose Shapley value belongs to the core within the set of balanced superadditive games. |
| Keywords: | Core ; Shapley value |
| JEL: | C71 |
| Date: | 2024–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2024001&r=gth |
| By: | Thomas Giebe (Department of Economics and Statistics, School of Business and Economics, Linnaeus University, Sweden); Oliver Gürtler (Department of Economics, University of Cologne, Germany) |
| Abstract: | In competitive settings, disparities in player strength are common. It is intuitively unclear whether a stronger player would opt for larger or smaller effort compared to weaker players. Larger effort could leverage their strength, while lower effort might be justified by their higher probability of winning regardless of effort. We analyze contests with three or more players, exploring when stronger players exert larger or lower effort. To rank efforts, it suffices to compare marginal utilities in situations where efforts are equal. Effort ranking depends on differences in hazard rates (which are smaller for stronger players) and reversed hazard rates (which are larger for stronger players). Compared to weaker players, stronger players choose larger effort in winner-takes-all contests and lower effort in loser-gets-nothing contests. Effort rankings can be non-monotonic in contests with several identical prizes, and they depend on the slopes of players’ pdfs in contests with linear prize structure. |
| Keywords: | contest theory, heterogeneity, player strength |
| JEL: | C72 D74 D81 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:285&r=gth |
| By: | Sukjin Han; Hiroaki Kaido; Lorenzo Magnolfi |
| Abstract: | A key primitive of a strategic environment is the information available to players. Specifying a priori an information structure is often difficult for empirical researchers. We develop a test of information ordering that allows researchers to examine if the true information structure is at least as informative as a proposed baseline. We construct a computationally tractable test statistic by utilizing the notion of Bayes Correlated Equilibrium (BCE) to translate the ordering of information structures into an ordering of functions. We apply our test to examine whether hubs provide informational advantages to certain airlines in addition to market power. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.19425&r=gth |
| By: | Chung, A. |
| Abstract: | We study a novel target prize contest between two heterogeneous contestants featuring sabotage. The contestants first choose a target prize should they win the contest, then exert two types of effort: (i) productive effort which directly enhances their performance; and (ii) destructive effort which reduces the opponent’s performance. While both types of effort incur constant marginal costs (in the respective levels of effort), the productive effort’s marginal cost is an increasing function of the target prize. We show that when contestants are allowed to choose their own target prize, they do not sabotage each other in any subgame perfect equilibrium. |
| Keywords: | Endogenous prize contest, target prize, productive and destructive effort, sabotage, Tullock contests, encouragement effect |
| Date: | 2024–02–29 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2409&r=gth |
| By: | Stephan Lauermann (The University of Bonn, Department of Economics); Asher Wolinsky (Northwestern University, Department of Economics) |
| Abstract: | Auction models are convenient abstractions of informal price-formation processes that arise in markets for assets or services. These processes involve frictions such as bidder recruitment costs for sellers, participation costs for bidders, and limitations on sellers' commitment abilities. This paper develops an auction model that captures such frictions. We derive several novel predictions; in particular, we find that outcomes are often inefficient, and the market sometimes unravels. |
| Keywords: | Auctions |
| JEL: | D44 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:288&r=gth |
| By: | Luca Anderlini (Department of Economics, Georgetown University); Larry Samuelson (Yale University); Daniele Terlizzese (Einaudi Institute for Economics and Finance) |
| Abstract: | We examine an economy in which interactions are more productive if agents can trust others to refrain from cheating. Some agents are scoundrels, who always cheat, while others cheat only if the cost of cheating, a decreasing function of the proportion of cheaters, is sufficiently low. The economy exhibits multiple equilibria. As the proportion of scoundrels in the economy declines, the high-trust equilibrium can be disrupted by arbitrarily small perturbations or infusions of low-trust agents, while the low-trust equilibrium becomes impervious to perturbations and infusions of high-trust agents. The resilience of trust may thus hinge upon the prevalence of scoundrels. |
| Keywords: | Trust, Robustness, Fragility, Assimilation, Disruption |
| JEL: | C72 C79 D02 D80 |
| Date: | 2024–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~24-24-02&r=gth |
| By: | Yu He; Alexander Lam; Minming Li |
| Abstract: | We take the classic facility location problem and consider a variation, in which each agent's individual cost function is equal to their distance from the facility multiplied by a scaling factor which is determined by the facility placement. In addition to the general class of continuous scaling functions, we also provide results for piecewise linear scaling functions which can effectively approximate or model the scaling of many real world scenarios. We focus on the objectives of total and maximum cost, describing the computation of the optimal solution. We then move to the approximate mechanism design setting, observing that the agents' preferences may no longer be single-peaked. Consequently, we characterize the conditions on scaling functions which ensure that agents have single-peaked preferences. Under these conditions, we find results on the total and maximum cost approximation ratios achievable by strategyproof and anonymous mechanisms. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.18908&r=gth |
| By: | Hemant Bhargava; Antoine Dubus; David Ronayne; Shiva Shekhar |
| Abstract: | Large, generalist, technology firms—so-called “big-tech” firms—powerful in their primary market, routinely enter secondary markets consisting of specialist firms. Naturally, one might expect a specialist firm to be fiercely protective of its data as a way to maintain its market position in the secondary market. Counter to this intuition, we demonstrate that a specialist firm willingly shares its market data with an intruding tech generalist. We do so by developing a model of cross-market competition in which data collected via consumer usage in each market is a factor of product quality in both markets. We show that a specialist firm shares its data to strategically create co-dependence between the two firms, thereby softening competition and transforming the generalist firm from a traditional competitor into a co-opetitor. For the generalist intruder, data from the specialist firm substitute for its own investments in product quality in the secondary market. As such, the act of sharing data makes the intruder a stakeholder in the valuable data collected by the specialist, and consequently in the specialist’s continued success. Moreover, while the firms benefit from data sharing, consumers can be worse off from the weaker price competition and lower investments in innovation. Our results have managerial and policy implications, notably on account of backlash against data collection and the market power of big tech firms. |
| Keywords: | data-driven quality improvements, externalities, co-opetition, data sharing |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10963&r=gth |
| By: | Pak Hung Au; Mark Whitmeyer |
| Abstract: | We study the ramifications of increased commitment power for information provision in an oligopolistic market with search frictions. Although prices are posted and, therefore, guide search, if firms cannot commit to information provision policies, there is no active search at equilibrium so consumers visit (and purchase from) at most one firm. If firms can guide search by both their prices and information policies, there exists a unique symmetric equilibrium exhibiting price dispersion and active search. Nevertheless, when the market is thin, consumers prefer the former case, which features intense price competition. Firms always prefer the latter. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.11754&r=gth |