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on Game Theory |
| By: | Debraj Ray; Rajiv Vohra |
| Abstract: | We axiomatically characterize bargaining outcomes in the presence of coalitional threats. As in Nash’s solution, these involve the product of payoffs net of disagreement points, but coalitional threats appear as conventional constraints, and are not netted out from payoffs as disagreement points are. This asymmetry is implied by a new “expansion axiom†(along with standard axioms), one that is automatically satisfied in the standard bargaining problem. We then endogenize coalitional threats using internal consistency, requiring coalitions to be constrained by their subcoalitions just as the grand coalition is. For games with convex payoff sets, this consistent solution coincides with one in which the only threat from each coalition is their “standard†Nash solution, unconstrained by subcoalitions. For transferable-utility games, this observation uncovers a connection between the coalitional solution and the egalitarian solution of Dutta and Ray (1989, 1991). |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2024-001&r=gth |
| By: | Subhayu Bandyopadhyay; Todd Sandler |
| Abstract: | The paper offers a game-theoretical model that includes three participants – the terrorist organization, its foreign fighters, and the adversarial host government. In stage 1, the terrorist group induces foreign fighters to emigrate through wage incentives, while the host government deters these fighters through proactive border security. Foreign fighters decide whether to emigrate from their source country (extensive margin) in stage 2, after which these fighters determine their level of attacks (intensive margin) in stage 3. Comparative statics to the Nash equilibrium are tied to changes in the employment or opportunity cost in the source country, as well as to changes in radicalization. Our basic model provides a theoretical foundation to recent empirical results. An extension involves a four-stage game with the host government assuming a leadership role prior to the terrorist group choosing its wage incentive. |
| Keywords: | foreign fighters; extensive and intensive margins; three-stage game; selective incentives; proactive border security |
| JEL: | D74 H56 C72 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:98197&r=gth |
| By: | Dietzenbacher, Bas (RS: GSBE other - not theme-related research, QE Math. Economics & Game Theory); Dogan, Emre |
| Abstract: | This paper identifies the maximal domain of transferable utility games on which population monotonicity (no player is worse off when additional players enter the game) and egalitarian core selection (no other core allocation can be obtained by a transfer from a richer to a poorer player) are compatible, which is the class of games with an egalitarian population monotonic allocation scheme. On this domain, which strictly includes the class of convex games, population monotonicity and egalitarian core selection together characterize the Dutta-Ray solution. We relate the class of games with an egalitarian population monotonic allocation scheme to several other classes of games. |
| JEL: | C71 |
| Date: | 2024–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2024007&r=gth |
| By: | Francesc Dilmé |
| Abstract: | This paper studies repeated trade with noisy information about previous transactions. A buyer has private information about his willingness to pay, which is either low or high, and buys goods from different sellers over time. Each seller observes a noisy history of signals about the buyer’s previous purchases and sets a price. We compare the cases where previous prices are observable to sellers with the case where they are not. We show that more signal precision is counterbalanced by two equilibrium mechanisms that slow learning and keep incentives in balance: (1) sellers offer discounted prices more often, and (2) the buyer rejects high prices with a higher probability. The effect of making prices observable depends on the signal precision: When the signal is imprecise, making prices public strengthens the discounting mechanism, improving efficiency and buyer welfare; when the signal is precise, making prices public activates the rejection mechanism, and efficiency and buyer welfare may decrease. Independently of the price observability, the buyer tends to benefit from a more precise signal about previous purchases. |
| Keywords: | Repeated Trade, Asymmetric Information, Internet Cookies |
| JEL: | C73 C78 D82 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_538&r=gth |
| By: | Gabriele Camera (Economic Science Institute, Chapman University); Alessandro Gioffré (University of Florence) |
| Abstract: | The literature on cooperation in infinitely repeated Prisoner’s Dilemmas covers the extreme opposites of the matching spectrum: partners, a player’s opponent never changes, and strangers, a player’s opponent randomly changes in every period. Here, we extend the analysis to settings where the opponent changes, but not in every period. In these temporary partnerships, players can deter some deviations by directly sanctioning their partner. Hence, relaxing the extreme assumption of one-period matchings can support some cooperation also off equilibrium because a class of strategies emerges that are less extreme than the typical “grim†strategy. We establish conditions supporting full cooperation as a subgame perfect equilibrium under a social norm that complements direct sanctions with a cyclical community sanction. Though this strategy less effectively incentivizes cooperation, it more effectively incentivizes punishment after a deviation, hence, can be preferable to the grim strategy under certain conditions. |
| Keywords: | prisoner’s dilemma, random matching, social norms |
| JEL: | E4 E5 C7 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:24-07&r=gth |
| By: | Jean-Christophe Pereau (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This article aims at modelling compensation between gainers and losers as a system of bilateral bargaining games involving one or two mediators when unanimity is required for the implementation of an economic policy. Results show that there is no unanimity on the choice of negotiation protocol due to the conflicting interests between gainers and losers. But if we assume that the mediators have the choice of the protocol, they always prefer simultaneous rather than stackeberg Nash-in-Nash negotiations. |
| Keywords: | Nash-in-Nash negotiation, Nash bargaining solution, Gainers, Losers |
| Date: | 2023–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04548608&r=gth |
| By: | Nicolas Jacquemet (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, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Jason F. Shogren (Departement of Economics and Finance, University of Wyoming - UW - University of Wyoming); Adam Zylbersztejn (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique); Stéphane Luchini (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Social norms like the mutual belief in reciprocity facilitate economic exchange. But this reciprocity norm requires trust among traders, which can be challenging to create among strangers even with communication. The honesty oath is a time-honored mechanism that societies use to overcome this challenge-taking a solemn oath to tell the truth sends a trustworthy signal of real economic commitment given incomplete contracts. Herein we explore how the truth-telling oath creates trust within the sequential reciprocity trust game with pre-play, fixed-form, and cheap-talk communication. Four key results emerge: (1) communication under oath creates more trust and cooperative behavior; but (2) the oath induces a selection effect-it makes people more wary of using communication as a signal. (3) Although the overall net effect on cooperation is positive, the oath cannot reverse a general decay of cooperation over time. (4) By comparing the oath's performance to mild and deterrent fines for deception, we find that the oath is behaviorally equivalent to mild fines. The deterrent fine induces the highest level of cooperation. |
| Keywords: | fine, Trust game, cooperation, communication, commitment, deception, oath |
| Date: | 2023–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-04391214&r=gth |
| By: | Cemil Selcuk |
| Abstract: | This note pursues two primary objectives. First, we analyze the outcomes of an all-pay auction within a store where buyers with and without financial constraints arrive at varying rates, and where buyer types are private information. Second, we investigate the selection of an auction format (comprising first-price, second-price, and all-pay formats) in a competitive search setting, where sellers try to attract customers. Our results indicate that if the budget constraint is not too restrictive, the all-pay rule emerges as the preferred selling format in the unique symmetric equilibrium. This is thanks to its ability to prompt buyers to submit lower bids, thereby generally avoiding budget constraints, while allowing the seller to collect all bids. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.08762&r=gth |
| By: | Sujata Goala; Mridu Prabal Goswami; Surajit Borkotokey |
| Abstract: | The distribution of efficient individuals in the economy and the efforts that they will put in if they are hired, there are two important concerns for a technologically advanced firm. wants to open a new branch. The firm does not have information about the exact level of efficiency of an individual when she is hired. We call this situation incomplete information. The standard principal agent models assume that employees know their efficiency levels. Hence these models design incentive-compatible mechanisms. An incentive-compatible mechanism ensures that a participant does not have the incentive to misreport her efficiency level. This paper does not assume that employees know how efficient they are. This paper assumes that the production technology of the firm is intelligent, that is, the output of the machine reveals the efficiency levels of employees. Employees marginal contributions to the total output of the intelligent machine, the probability distribution of the levels of efficiency and employees costs of efforts together define a game of incomplete information. A characterization of ex-ante Nash Equilibrium is established. The results of the characterization formalize the relationship between the distribution of efficiency levels and the distribution of output. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.16056&r=gth |
| By: | Bahel, Eric; Gómez-Rúa, María; Vidal-Puga, Juan |
| Abstract: | We study cost-sharing rules in network problems where agents seek to ship quantities of some good to their respective locations, and the cost on each arc is linear in the flow crossing it. In this context, Core Selection requires that each subgroup of agents pay a joint cost share that is not higher than its stand-alone cost. We prove that the demander rule, under which each agent pays the cost of her shortest path for each unit she demands, is the unique cost-sharing rule satisfying both Core Selection and Merge Proofness. The Merge Proofness axiom prevents distinct nodes from reducing their joint cost share by merging into a single node. An alternative characterization of the demander rule is obtained by combining Core Selection and Cost Solidarity. The Cost Solidarity axiom says that each agent's cost share should be weakly increasing in the cost matrix. |
| Keywords: | Shortest path games, cost sharing, core, merge proofness, solidarity |
| JEL: | C71 D85 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120606&r=gth |
| By: | Randriamaro, Mary Tiana (A2F Consulting); Espinola-Arredondo, Ana (School of Economic Sciences, Washington State University); Fuente, David (School of the Earth, Ocean & Environment, University of South Carolina); Cook, Joseph (School of Economic Sciences, Washington State University) |
| Abstract: | Utility customer nonpayment and debt is an issue in many cities in the Global South, jeopardizing utilities’ ability to recover operations and maintenance costs through tariffs and their ability to finance system expansions or improvements. We develop a two-stage game that describes the interaction between a utility and a representative household in which the utility chooses whether to disconnect a non-paying household and the household decides whether to pay their bill. The model introduces a moral cost to customers who skip payment and political pressure on utilities to avoid disconnecting a non-paying household. We show that a lower moral aversion to non-payment makes disconnection more likely. We also model the impact of changing the availability of alternative water sources that a disconnected household can access. We find that when the relative price of these sources is high, the household is more likely to pay a bill, making the threat of disconnection less likely. |
| Keywords: | game theory; utility bill payment; water finance; utility policy |
| JEL: | C72 L97 Q25 |
| Date: | 2024–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunefd:2024_001&r=gth |
| By: | Esther Gal-Or; Muhammad Zia Hydari; Rahul Telang |
| Abstract: | Software vulnerabilities enable exploitation by malicious hackers, compromising systems and data security. This paper examines bug bounty programs (BBPs) that incentivize ethical hackers to discover and responsibly disclose vulnerabilities to software vendors. Using game-theoretic models, we capture the strategic interactions between software vendors, ethical hackers, and malicious hackers. First, our analysis shows that software vendors can increase expected profits by participating in BBPs, explaining their growing adoption and the success of BBP platforms. Second, we find that vendors with BBPs will release software earlier, albeit with more potential vulnerabilities, as BBPs enable coordinated vulnerability disclosure and mitigation. Third, the optimal number of ethical hackers to invite to a BBP depends solely on the expected number of malicious hackers seeking exploitation. This optimal number of ethical hackers is lower than but increases with the expected malicious hacker count. Finally, higher bounties incentivize ethical hackers to exert more effort, thereby increasing the probability that they will discover severe vulnerabilities first while reducing the success probability of malicious hackers. These findings highlight BBPs' potential benefits for vendors beyond profitability. Earlier software releases are enabled by managing risks through coordinated disclosure. As cybersecurity threats evolve, BBP adoption will likely gain momentum, providing vendors with a valuable tool for enhancing security posture and stakeholder trust. Moreover, BBPs envelop vulnerability identification and disclosure into new market relationships and transactions, impacting software vendors' incentives regarding product security choices like release timing. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.17497&r=gth |
| By: | Iván Barreda-Tarrazona (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Ainhoa Jaramillo-Gutiérrez (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain); Marina Pavan (LEE & Economics Department, Universitat Jaume I, Castellón-Spain); Gerardo Sabater-Grande (LEE and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | We gather information from a large laboratory sample comprising 1161 subjects and study gender differences in altruism using a dual-role dictator game. For robustness purposes, we control for factors potentially affecting the role of gender in dictator giving, such as the subject's age, cognitive ability, and personality traits, together with the dictator's response time and self-reported emotions motivating the decision. We find that women behave in a significantly more generous way than men: after controlling for the factors mentioned above, females transfer 7.5 percentage points more of their endowment than males. The only factor moderating this relationship between gender and dictator giving is agreeableness, which increases transfers significantly more for males than for females. |
| Keywords: | altruism; gender differences; dictator game; big five personality traits; cognitive ability; emotions. |
| JEL: | C91 C72 D64 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2024/03&r=gth |
| By: | Miller, David A; Watson, Joel |
| Keywords: | Economics, Applied Economics, Economic Theory, equilibrium selection, active contracting, bargaining power, relationships, Applied economics, Economic theory |
| Date: | 2023–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:qt2dg817mv&r=gth |
| By: | Ahmed Kouider Aissa; Alessandro Tampieri |
| Abstract: | We investigate the interaction between consumers' environmental concern, environmental corporate social responsibility (ECSR), and environmental regulations during the transition towards sustainable production. We study an economy in which a subpopulation of consumers is sensitive to environmental issues. In this setting, we analyse the steady-state equilibrium in a framework à la Droste et al. (2002), where rms compete in quantities and decide whether or not to engage in ECSR activities, which ultimately reduce the impact of production on the environment. We nd that the variation of social welfare with the increase of ECSR rms is U-shaped, driven by the variation in consumer surplus, while environmental damage is minimised when all rms adopt ECSR practices. Therefore, the short-run social incentives to pursue a transition towards sustainable production are scarce. In contrast, there exists a private incentive to internalise emissions and to proliferate ECSR rms, as prots increase with the proportion of ECSR rms. |
| Keywords: | Mixed oligopoly markets, emission reduction investment, evolutionary dynamics |
| JEL: | C73 H23 L13 L21 M14 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_04.rdf&r=gth |
| By: | Jiachen T. Wang; Zhun Deng; Hiroaki Chiba-Okabe; Boaz Barak; Weijie J. Su |
| Abstract: | Generative artificial intelligence (AI) systems are trained on large data corpora to generate new pieces of text, images, videos, and other media. There is growing concern that such systems may infringe on the copyright interests of training data contributors. To address the copyright challenges of generative AI, we propose a framework that compensates copyright owners proportionally to their contributions to the creation of AI-generated content. The metric for contributions is quantitatively determined by leveraging the probabilistic nature of modern generative AI models and using techniques from cooperative game theory in economics. This framework enables a platform where AI developers benefit from access to high-quality training data, thus improving model performance. Meanwhile, copyright owners receive fair compensation, driving the continued provision of relevant data for generative model training. Experiments demonstrate that our framework successfully identifies the most relevant data sources used in artwork generation, ensuring a fair and interpretable distribution of revenues among copyright owners. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.13964&r=gth |
| By: | Alexander L. Brown; Daniel G. Stephenson; Rodrigo A. Velez |
| Abstract: | This paper experimentally evaluates four mechanisms intended to achieve the Uniform outcome in rationing problems (Sprumont, 1991). Our benchmark is the dominant-strategy, direct-revelation mechanism of the Uniform rule. A strategically equivalent mechanism that provides non-binding feedback during the reporting period greatly improves performance. A sequential revelation mechanism produces modest improvements despite not possessing dominant strategies. A novel, obviously strategy-proof mechanism, devised by Arribillaga et al. (2023), does not improve performance. We characterize each alternative to the direct mechanism, finding general lessons about the advantages of real-time feedback and sequentiality of play as well as the potential shortcomings of an obviously strategy-proof mechanism. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.11883&r=gth |
| By: | John M. Barrios; Jeremy Bertomeu; Radhika Lunawat; Ibrahima Sall |
| Abstract: | We examine the impacts of ethical declarations on market transactions through a controlled laboratory experiment, where privately-informed sellers issue a public report prior to a first-price auction. We find that while signing an ethical statement does not reduce misreporting by sellers, it significantly increases buyer trust, often skewing the terms of the trade in favor of sellers. Contrary to rational expectations, buyers consistently struggle to undo the bias. In counterfactual scenarios, from our structural analysis, we find that price efficiency improves when buyers rationally process uncertainty about sellers' ethical preferences, yet bias persists even when buyers have more accurate perceptions of sellers'’ ethical standards. Overall, our results suggests that disclosure interventions aimed at enhancing ethical conduct in market settings may not necessarily lead to more efficient pricing or reduced bias, and in some instances, may even disadvantage certain market participants. |
| JEL: | D53 G10 G14 G4 G41 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32385&r=gth |