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on Game Theory |
| By: | Mauleon, Ana (Université catholique de Louvain, LIDAM/CORE, Belgium); Nanumyan, Mariam (Bielefeld University); Vannetelbosch, Vincent (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | We study a network game on a fixed multi-layer network of two types of relationships. The social interactions in the first layer carries a pressure to conform with the social norm within the layer. The second layer provides additional strategic complementarities from players’ interaction. Players are endowed with personal ideal efforts and are heterogeneous in their ideal efforts and productivity. Each player repeatedly chooses her effort level in the network game and updates her ideal effort based on the new effort choice. Each player suffers disutility when her effort differs from her neighbors’ efforts or is inconsistent with her ideal effort. We find the pure Nash equilibrium of the game in each period and provide conditions for the convergence of efforts and ideals to a steady state. Furthermore, we provide conditions for emerging long-run consensus about ideals in groups of players and the entire network. |
| Keywords: | Multi-layer networks ; network games ; personal norms ; social norms ; strategic complementarities |
| JEL: | A14 C72 D85 |
| Date: | 2024–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:cor:louvco:2024023 |
| By: | Davide Bosco; Mario Gilli; Andrea Sorrentino |
| Abstract: | In this paper we introduce incomplete information à la global games into a max-min two-group contest with binary actions and we characterize the set of equilibria. Depending on whether the complete information assumption is relaxed on the value of the prize or on the cost of providing effort, we obtain different results in terms of equilibrium selection: in the first case, there exist both an equilibrium in (monotonic) switching strategies and an equilibrium robust to incomplete information in the sense of Kajii and Morris [1997], in which no player exerts effort in both groups, whereas in the second one there exists a unique equilibrium in (monotonic) switching-strategies. |
| Keywords: | Group contests, incomplete information, global games. |
| JEL: | D74 D71 C72 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:545 |
| By: | Mayuko Nakamaru (School of Environment and Society, Institute of Science Tokyo, JAPAN); Takaaki Ohkawauchi (College of Humanities and Sciences, Nihon University, JAPAN); Rei Okawa (School of Engineering, Tokyo Institute of Technology, JAPAN); Koki Oikawa (School of Social Sciences, Waseda University, JAPAN); Yuto Otani (School of Engineering, Tokyo Institute of Technology, JAPAN); Hiroo Sasaki (Professor Emeritus, Waseda University, JAPAN); Junyi Shen (Research Institute for Economics and Business Administration, Kobe University, JAPAN); Koichi Takase (Faculty of Commerce, Waseda University, JAPAN); Hirofumi Yamamura (Faculty of Business Administration, Komazawa University, Japan); Takehiko Yamato (School of Engineering, Institute of Science Tokyo, JAPAN) |
| Abstract: | This paper studies two types of facility maintenance games in the laboratory, in a cross-cultural experiment conducted in Tokyo and Guam. One is called the one-person maintenance game, in which only one player makes maintenance investment decisions for a privately owned facility, and the other is called the two-person maintenance game, in which two players make maintenance investment decisions for a shared public facility without communication. Both games are characterized by the fact that the durability of the facility depends on each player's decision of costly investment in its maintenance, and that the facility can be enjoyed as long as it is available, i.e., the probability that the game will end or continue depends on each player's decision of costly investment in its maintenance. Our main results are that first, most subjects chose to invest in each experimental round of both games. At the beginning of the two games, the percentage of subjects who are willing to invest is significantly higher among the Tokyo subjects than among the Guam subjects. However, as the game proceeds, the difference in this percentage between the two groups becomes statistically insignificant. Second, in either the one-person game, the two-person game or both, subjective factors (i.e., risk and time preferences) and/or objective factors (i.e., the durability of the facility) play important roles in influencing the investment behaviors of either the Guam subjects, the Tokyo subjects or both. Third, there is a significant difference in the investment ratio between the one-person and two-person games among the Tokyo subjects, but not among the Guam subjects. Finally, we also investigate the factors affecting different behaviors between the two games. The results indicate the possibility of conditional cooperative behavior among the Guam subjects and the possibility of free rider behavior among the Tokyo subjects in the two-person game. |
| Keywords: | Maintenance games; Public good; Free rider; Risk preference; Time preference; Inter-regional comparison |
| JEL: | C71 C72 C91 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2024-35 |
| By: | Muhammed Ceesay; Nicola Doni; Domenico Menicucci |
| Abstract: | We examine a two-bidder auction setting in which the distributions for the bidders’ valuations are asymmetric over a support consisting of three elements. For the first price auction we derive the unique Bayes Nash Equilibrium in closed form, which allows to obtain more precise results with respect to the classical results in the literature on how asymmetries affect equilibrium bidding. Then we compare the revenue in the first price auction with the revenue in the second price auction. The latter is often superior to the former and we determine precisely, given a distribution for the value of the weak bidder, when a distribution for the value of the strong bidder exists such that the first price auction is superior to the second auction. For two particular asymmetries, shift and stretch, we show that in our setting the results are quite different from the results which are well-known in the literature. |
| Keywords: | Asymmetric auctions, First price auction, Second price auction, Revenue ranking |
| JEL: | D44 D82 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_20.rdf |
| By: | Ilan Adler; Martin Bullinger; Vijay V. Vazirani |
| Abstract: | The equivalence between von Neumann's Minimax Theorem for zero-sum games and the LP Duality Theorem connects cornerstone problems of the two fields of game theory and optimization, respectively, and has been the subject of intense scrutiny for seven decades. Yet, as observed in this paper, the proof of the difficult direction of this equivalence is unsatisfactory: It does not assign distinct roles to the two players of the game, as is natural from the definition of a zero-sum game. In retrospect, a partial resolution to this predicament was provided in another brilliant paper of von Neumann (1953), which reduced the assignment problem to zero-sum games. However, the underlying LP is highly specialized; all entries of its objective function vector are strictly positive and all entries of the constraint matrix and right hand side vector are equal to one. We generalize von Neumann's result along two directions, each allowing negative entries in certain parts of the LP. Our reductions make explicit the roles of the two players of the reduced game, namely their maximin strategies are to play optimal solutions to the primal and dual LPs. Furthermore, unlike previous reductions, the value of the reduced game reveals the value of the given LP. Our generalizations encompass several basic economic scenarios. We end by discussing evidence that von Neumann possessed an understanding of the notion of polynomial-time solvability. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.10767 |
| By: | Xinyu Li |
| Abstract: | This paper explores how ad platforms can utilize Bayesian persuasion within blockchain-based auction systems to strategically influence advertiser behavior despite increased transparency. By integrating game-theoretic models with machine learning techniques and the principles of blockchain technology, we analyze the role of strategic information disclosure in ad auctions. Our findings demonstrate that even in environments with inherent transparency, ad platforms can design signals to affect advertisers' beliefs and bidding strategies. A detailed case study illustrates how machine learning can predict advertiser responses to different signals, leading to optimized signaling strategies that increase expected revenue. The study contributes to the literature by extending Bayesian persuasion models to transparent systems and providing practical insights for auction design in the digital advertising industry. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.07392 |
| By: | Gunnthorsdottir, Anna; Thorsteinsson, Palmar |
| Abstract: | Social stratification, segregation and inequity invite concerns about fairness and social harmony. Our game-theoretic and experimental results indicate that they can also be detrimental to productivity, efficiency, and welfare. Class is defined by players’ resources, incentives to make a public contribution, and social mobility. We discuss the model’s real-world applications, and ways to increase efficiency and welfare through increased equity, mobility, or competition. We also describe how the model can be adapted to represent and experimentally test different class structures, the interaction between demographic characteristics and class, and the effectiveness of policies that modify incentives. We experimentally test a two-class model. The poorer L-class are socially mobile: for them, effort is linked to social positioning and earnings akin to what is often referred to as a Middle-Class mindset. The productive L-players support a relatively efficient equilibrium that encompasses both classes. Upper-class H-players, notwithstanding their guaranteed privilege and superior resources, are relatively unproductive and display behavior akin to class-consciousness by contributing only what is necessary to remain above the L-class. The experimental results confirm that humans respond swiftly to incentives associated with their material status and economic opportunities and suggest that policies aimed at increasing welfare through incentive modification can be successful. |
| Keywords: | Inequality, social class, game theory, experiment, welfare |
| JEL: | C72 C91 D63 I3 I38 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122275 |
| By: | Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) |
| Abstract: | Using the framework of a Hotelling linear market, we consider the impact of network connectivity (horizontal interoperability) between network goods on strategic R&D competition and profits. We first demonstrate that in the case of a fully covered (mature) market, as network connectivity increases, R&D activities decrease, but profits increase. Then, relaxing the assumption of market coverage, we demonstrate that in the case of a partially covered and uncovered (immature) market, as network connectivity increases, R&D activities at first decrease, and then increase given strong network externalities. Otherwise, the R&D activities monotonically increase. However, regardless of the strength of the network externalities, profits increase. Regarding quantity competition in the immature market, we obtain the same results in the case of price competition. We also consider the implication of network connectivity for market competitiveness. |
| Keywords: | innovation, Network externality, Connectivity, interoperability, R&D competition, Hotelling linear market, Fulfilled expectations, Lerner index |
| JEL: | L13 L15 L31 L32 D43 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:280 |
| By: | Hanwei Huang; Kalina Manova; Oscar Perelló; Frank Pisch; Kalina B. Manova |
| Abstract: | We study the role of firm heterogeneity and imperfect competition for global production networks and the gains from trade. We develop a quantifiable trade model with two-sided firm heterogeneity, matching frictions, and oligopolistic competition upstream. More productive buyers endogenously match with more suppliers, thereby inducing tougher competition among them to enjoy lower input costs and superior performance. Transaction-level customs data confirms that downstream French and Chilean firms import higher values and quantities at lower prices as upstream Chinese markets become more competitive over time, with stronger responses by larger firms. Moreover, suppliers charge more diversified buyers lower mark-ups. Counterfactual analysis indicates that entry upstream benefits high-productivity buyers, while lower matching or trade costs benefit all buyers, with the biggest boost to mid-productivity buyers. All three shocks generate sizeable welfare gains, especially under package reforms. Global production networks thus mediate bigger effects and cross-border spillovers from industrial and trade policies. |
| Keywords: | production networks, global value chains, matching frictions, imperfect competition, gains from trade |
| JEL: | D24 F10 F12 F14 L11 L22 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11302 |