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on Game Theory |
| By: | Squintani, Francesco (University of Warwick) |
| Abstract: | This paper brings together two major research streams in economic theory : information transmission in networks and strategic communication. The model embeds persuasion games of strategic disclosure by Milgrom (1981) into the communication network framework by Jackson and Wolinsky (1996). I find that the unique optimal network is a line in which players are ordered according to their bliss points. This ordered line is also pairwise-stable. This …nding stands in sharp contrast to previous results in network studies, that identify stars as the optimal and pairwise-stable networks when communication is non-strategic and subject to technological constraints. While stars are the most centralized minimally-connected networks, the line is the most decentralized one. These results may be especially relevant to political economy applications, such as networks of policymakers, interest groups, or judges |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wcreta:88 |
| By: | Riku Watanabe (Graduate School of Economics, Osaka University) |
| Abstract: | This study examines how corporate social responsibility (CSR) practices by oligopolistic firms impact pollution levels in a steady state. I develop a dynamic game model for polluting firms that adopt CSR. The analysis reveals that a firm’s CSR awareness drives its production strategy to align with the socially optimal level in both open-loop Nash equilibrium and Markov perfect Nash equilibrium. Achieving this social optimum is possible if firms are fully committed to CSR. The study explores two scenarios: excess pollution or underproduction, which depend on the pollutant’s impact on utility. Notably, when the pollutant’s damage to utility is significant, even a modest commitment to CSR can effectively reduce excessive pollution. These findings offer valuable insights for government policy, suggesting that stringent environmental regulations might be less necessary if firms are attentive to CSR. |
| Keywords: | Corporate social responsibility; Pollution; Oligopoly; Differential games |
| JEL: | H41 L13 Q20 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2410 |
| By: | Fujisawa, Chieko |
| Abstract: | When firms use advertising to differentiate their products and increase consumer appreciation of their products, the strategy, i.e., price or quantity, depends on the degree of product differentiation and the magnitude of advertising costs. If advertising costs in Bertrand competition are very much lower than advertising costs in Cournot competition, the firms will choose Bertrand competition. If advertising costs in Bertrand competition are comparable to advertising costs in Cournot competition, both firms will choose Cournot competition. If advertising costs in Bertrand competition are lower than those in Cournot competition, and differentiation is, to some extent greater, firms adopt different strategies each other. This is because firms take advantage of the different advertising effectiveness of competitors under the conditions of cost and differentiation increase profitability. There is also a mixed strategy option under these conditions. Furthermore, the differentiation strategy with advertising increases firms' profits and increases consumer surplus and total surplus compared to the case without advertising. |
| Keywords: | Online media advertising, Mass media advertising, differentiation strategy, Cournot competition, Bertrand competition, Duopoly model |
| JEL: | D43 L13 M37 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:itsb24:302462 |
| By: | Andrew Koh; Ricky Li; Kei Uzui |
| Abstract: | We analyze inertial coordination games: dynamic coordination games with an endogenously changing state that depends on (i) a persistent fundamental that players privately learn about; and (ii) past play. We give a tight characterization of how the speed of learning shapes equilibrium dynamics: the risk-dominant action is selected in the limit if and only if learning is slow such that posterior precisions grow sub-quadratically. This generalizes results from static global games and endows them with an alternate learning foundation. Conversely, when learning is fast, equilibrium dynamics exhibit persistence and limit play is shaped by initial play. Whenever the risk dominant equilibrium is selected, the path of play undergoes a sudden transition when signals are precise, and a gradual transition when signals are noisy. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.08145 |
| By: | Luca Anderlini; GaOn Kim |
| Abstract: | We consider auctions with N+1 bidders. Of these, N are symmetric and N+1 is "sufficiently strong" relative to the others. The auction is a "tournament" in which the first N players bid to win the right to compete with N+1. The bids of the first N players are binding and the highest bidder proceeds to a second-price competition with N+1. When N+1's values converge in distribution to an atom above the upper end of the distribution of the N bidders and the rest of the distribution is drained away from low values sufficiently slowly, the auction's expected revenue is arbitrarily close to the one obtained in a Myerson (1981) optimal auction. The tournament design is "detail free" in the sense that no specific knowledge of the distributions is needed in addition to the fact that bidder N+1 is stronger than the others as required. In particular, no additional information about the value of the atom is needed. This is important since mis-calibrating by a small amount an attempt to implement the optimal auction can lead to large losses in revenue. We provide an interpretation of these results as possibly providing guidelines to a seller on how to strategically "populate" auctions with a single bidder even when only weaker bidders are available. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.11048 |
| By: | Marco Battaglini; Thomas R. Palfrey |
| Abstract: | We study the volunteer’s dilemma in environments with heterogeneous preferences and private information. We characterize the efficiency properties of equilibrium, which is a departure from all the previous literature that focuses only on the probability of group success. While the probability of success may be non-monotonic in the size of the group, we show that per-capita welfare is always increasing for all types, strictly for sufficiently high types. As group size increases, the expected utility of every type converges to the expected utility of the type with the lowest possible cost, which is the same expected utility when there is no free rider problem, i.e., when there is only a single player in the game and that player has the lowest possible cost. |
| JEL: | C78 D71 D72 H41 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32999 |
| By: | Riku Watanabe (Graduate School of Economics, Osaka University) |
| Abstract: | This study introduces uncertainty into a simple growth model of common capital accumulation by considering consumption externalities. We consider two equilibrium concepts, including the Markovperfect Nash equilibrium and cooperative solution, and examine how uncertainty affects the difference in the growth of common capital. Our results show that individuals’ attitudes toward uncertainty change depending on the consumption externality type. Consumption externality types exist wherein the expected growth rate of common capital increases as uncertainty increases. We conclude that the problem of the “tragedy of the commons†is improved by greater uncertainty if individuals demonstrate jealousy and “keeping up with the Joneses, †or admiration and “running away from the Joneses.†|
| Keywords: | Stochastic differential games; Resource extraction; Consumption externalities; Markovperfect Nash equilibrium |
| JEL: | C73 E21 Q20 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2409 |
| By: | Harry O'Rahilly (Department of Economics and School of Politics and International Relations, University College Dublin, Dublin, Ireland); Patrick Paul Walsh (Department of Economics and School of Politics and International Relations, University College Dublin, Dublin, Ireland) |
| Abstract: | We model the retail motor fuel market in Ireland in a two-stage market entry game, with exogenous sunk costs in stage one, and price competition with horizontal product differentiation in stage two, utilizing Salop (1979). Using GIS tools, we show how driving times, benchmarked against road distance and straight-line measures, alter estimates of the disutility of traveling between rival locations. We estimate a robust and unbiased long-run equilibrium relationship between mark-ups and market structure, identified by driving times between locations to conduct an ex-post evaluation of a merger and divestment remedies in the retail motor fuel market in Ireland. |
| Keywords: | Market Structure, Performance; Spatial Econometrics |
| JEL: | L10 L38 |
| Date: | 2024–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:ucd:wpaper:202404 |
| By: | Gonzalo Cisternas; Aaron Kolb |
| Abstract: | Expectations can play a significant role in driving economic outcomes, with central banks factoring market sentiment into policy decisions and market participants forming their own assumptions about monetary policy. But how well do central banks understand the expectations of market participants—and vice versa? Our model, developed in a recent paper, features a dynamic game between (i) a monetary authority that cannot commit to an inflation target and (ii) a set of market participants that understand the incentives created by that credibility problem. In this post, we describe the game, a type of Keynesian beauty contest: its main novelty is that each side attempts, with varying degrees of accuracy, to forecast the other’s beliefs, resulting in new findings regarding the levels and trajectories of inflation. |
| Keywords: | central banks; credibility; forecasts |
| JEL: | D82 E5 |
| Date: | 2024–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:98892 |
| By: | Niklas Valentin Lehmann |
| Abstract: | This review article examines the challenge of eliciting truthful information from multiple individuals when such information cannot be verified against an objective truth, a problem known as information elicitation without verification (IEWV). This article reviews over 25 mechanisms designed to incentivize truth-telling in such scenarios, and their effectiveness in empirical studies. The analysis finds that although many mechanisms theoretically ensure truthfulness as a Bayesian Nash Equilibrium, empirical evidence of such mechanisms working in practice is very limited and generally weak. Consequently, more empirical research is needed to validate mechanisms. Given that many mechanisms are very complex and cannot be easily conveyed to research subjects, this review suggests that simpler, more intuitive mechanisms may be easier to test and apply. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.07277 |
| By: | Martin J. Osborne |
| Abstract: | The members of a finite set of office-motivated politicians choose sequentially whether to become candidates in an electoral competition. Each candidate chooses a position from a set X that is a (possibly strict) subset of the set of all positions. I show that if X is a subset of a one-dimensional interval, a tie is possible only among candidates who choose the same position, and a candidate wins if her vote share exceeds 1/2 and only if it is at least as large as any other candidate's vote share, then in every subgame perfect equilibrium the first and last politicians to move enter at one of the members of X closest to the median of the citizens' favorite positions and the remaining politicians do not enter. The assumption about ties is satisfied if the winner of the election is chosen from among the candidates with the highest vote shares by a mediator with strict preferences over positions or if the set X does not admit ties at distinct positions. |
| Keywords: | Electoral competition, sequential entry |
| JEL: | P0 |
| Date: | 2024–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-786 |
| By: | Minyu Shen; Feng Xiao; Weihua Gu; Hongbo Ye |
| Abstract: | When making route decisions, travelers may engage in a certain degree of reasoning about what the others will do in the upcoming day, rendering yesterday's shortest routes less attractive. This phenomenon was manifested in a recent virtual experiment that mimicked travelers' repeated daily trip-making process. Unfortunately, prevailing day-to-day traffic dynamical models failed to faithfully reproduce the collected flow evolution data therein. To this end, we propose a day-to-day traffic behavior modeling framework based on the Cognitive Hierarchy theory, in which travelers with different levels of strategic-reasoning capabilities form their own beliefs about lower-step travelers' capabilities when choosing their routes. Two widely-studied day-to-day models, the Network Tatonnement Process dynamic and the Logit dynamic, are extended into the framework and studied as examples. Calibration of the virtual experiment is performed using the extended Network Tatonnement Process dynamic, which fits the experimental data reasonably well. We show that the two extended dynamics have multiple equilibria, one of which is the classical user equilibrium. While analyzing global stability is intractable due to the presence of multiple equilibria, local stabilities near equilibria are developed analytically and verified by numerical experiments. General insights on how key parameters affect the stability of user equilibria are unveiled. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.11908 |
| By: | Jeanjean, François |
| Abstract: | The fast technical progress coupled with a fierce competition in telecommunication markets urge operators to invest year after year a huge amount of investment. However, the maturation and saturation of markets prevents them from reaping the benefits. While telecommunication infrastructure improves fastly, the revenues of telecommunication operators tend to stagnate. Content providers are taking advantage of increased network capacity to offer more content that they are able to monetize. It is therefore they who benefit from the increase in network capacities and not the operators who nevertheless financed it. This article develops a theoretical model which highlights this mechanism and corresponds perfectly to empirical observations. |
| Keywords: | Competition, Investment, Telecommunication Operators, Content Providers |
| JEL: | D25 L51 L86 L96 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:itsb24:302486 |