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on Game Theory |
| By: | Matt Van Essen (Department of Economics, University of Tennessee) |
| Abstract: | We introduce a unifying stability concept to cooperative game theorythe equity equilibrium. A central authority selects an outcome of the game to enforce and evaluates its stability using a collection of functions called a complaint system.These complaints are used to identify the grievances against and the concessions to each player. Equity equilibrium occurs when an individually rational payo¤ con guration balances the grievances and concessions of each player. We establish the existence of equity equilibrium for any valid complaint system and under any coalition structure. Next, we show that equity equilibrium under speci c complaint systems characterizes the kernel, the Shapley value, and the generalized Nash bargaining solution of a cooperative game. We show how simplicial algorithms can be employed for computing any type of equity equilibrium. This approach is illustrated with an example from the Tennessee Valley Authority. |
| Keywords: | Cooperative Games, Equity Equilibrium, Kernel, Shapley Value, Computation of Cooperative Solutions |
| JEL: | C92 D82 D9 H41 Q51 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:ten:wpaper:2024-04 |
| By: | Yohan Pelosse (Humanities and Social Sciences, Swansea University) |
| Abstract: | This paper explores some sufficient conditions for the existence and uniqueness of a pure-strategy Nash equilibrium (PSNE) in a class of finite dimensional convex games which do not admit a global strictly concave potential function a la Neyman (1997) and fails the global ’diagonal strict concavity’ conditions of Rosen (1965). We show that applying a ’mixture’ of these well-known regularity conditions inside and across the ’local games’ played within and between some (disjoint) subsets of players (’coalitions) guarantee the existence and uniqueness of a PSNEwhen the game is linearly aggregative inside the coalitions. This PSNE is also the unique correlated equilibriumof the ’partitioned’ strategic game played across the coalitions. When the partitioned game is quasi-aggregative and exhibits ’strategic complementarities’, we obtain the existence of a unique PSNE which has the additional property to be coalition-proof across the coalitions of players. This result suggests the existence of a rich class of games which may admit these ’decentralized coalition-proof ’Nash equilibria as a weakened version of the coalition-proof Nash equilibriumof Bernheim et al. (1987). |
| JEL: | C72 C92 D83 |
| Date: | 2024–12–13 |
| URL: | https://d.repec.org/n?u=RePEc:swn:wpaper:2024-09 |
| By: | Tanzir Rahman Khan; Bradley J. Ruffle |
| Abstract: | We introduce a new variant of the Public Goods Game (PGG), building on and com bining the frameworks of Fischbacher et al. (2001) and Cheung (2014). We demonstrate that the widely used player categorizations based on players’ responses to others’ average contribution– such as conditional cooperators, free-riders, and hump-shaped cooperators– fail to fully capture players’ conditioning tendencies. Specifically, players are sensitive to the different distributions of contributions that can arise from a given mean, which leads to a re-categorization of players based on distributions compared to their categorization based solely on averages. Furthermore, we elicit beliefs about the most likely distribution of contributions underlying each mean. We find that providing incentives for correct guesses does not improve accuracy. Moreover, cooperators and free-riders hold widely divergent distributional beliefs. |
| Keywords: | experimental economics; public goods game; conditional cooperation; belief elicitation |
| JEL: | C72 C91 H41 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2024-12 |
| By: | Galit Askenazi-Golan; Domenico Mergoni Cecchelli; Edward Plumb |
| Abstract: | We explore the behaviour emerging from learning agents repeatedly interacting strategically for a wide range of learning dynamics that includes projected gradient, replicator and log-barrier dynamics. Going beyond the better-understood classes of potential games and zero-sum games, we consider the setting of a general repeated game with finite recall, for different forms of monitoring. We obtain a Folk Theorem-like result and characterise the set of payoff vectors that can be obtained by these dynamics, discovering a wide range of possibilities for the emergence of algorithmic collusion. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.12725 |
| By: | Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) |
| Abstract: | Introducing network externalities into a Hotelling linear market model, we consider the profit ranking of Bertrand and Cournot equilibria, the problem of endogenous choice of strategic variables, and welfare efficiency. In particular, focusing on network connectivity (horizontal interoperability) between network products, we demonstrate the following results: (i) firms earn higher (lower) profits under Bertrand competition rather than under Cournot competition if network connectivity is sufficiently large (small); (ii) firms choose price (quantity) contracts if network connectivity is sufficiently large (small); (iii) social efficiency is achieved under Bertrand competition if network connectivity is sufficiently large. |
| Keywords: | Hotelling linear market model, Bertrand competition, Cournot competition, network connectivity, fulfilled expectations, rational expectations |
| JEL: | D43 L13 L15 L22 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:283 |
| By: | Dylan Laplace Mermoud |
| Abstract: | This paper provides formulae and algorithms to compute the projection onto the core of a preimputation outside it. The core of a game is described using an exponential number of linear constraints, and we cannot know beforehand which are redundant or defining the polytope. We apply these new results to market games, a class of games in which every game has a nonempty core. Given an initial state of the game represented by a preimputation, it is not guaranteed that the state of the game evolves toward the core following the dynamics induced by the domination relations. Our results identify and compute the most efficient side payment that acts on a given state of the game and yields its closest core allocation. Using this side payment, we propose a way to evaluate the failure of a market to reach a state of the economy belonging to the core, and we propose a new solution concept consisting of preimputations that minimizes this failure. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.11810 |
| By: | Daniela Glätzle-Rützler; Matthias Sutter; Claudia Zoller |
| Abstract: | Efficient coordination is a major source of efficiency gains. We study in an experimental coordination game with 718 children and teenagers, aged 9 to 18 years, the strategies played in pre-adulthood. We find no robust age effects in the aggregate, but see that smaller group sizes and larger incentives increase the likelihood of choosing the efficient strategy. Beliefs play an important role as well, as subjects are more likely to play the efficient strategy when they expect others to do so as well. Our results are robust to controlling for individual risk-, time-, and social preferences. |
| Keywords: | coordination game, age, group size, incentives, children, experiment |
| JEL: | C91 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:inn:wpaper:2024-11 |
| By: | Gilberto Tadeu Lima; Jaylson Jair da Silveira |
| Abstract: | There is mounting evidence of persistent capture or drainage of government budgetary resources through unlawful means by individuals in the rest of the economy. This paper develops a formal analytical framework in which such persistence arises as a stable evolutionary equilibrium configuration. Also in keeping with the empirical evidence, this evolutionary equilibrium is characterized by behavioral heterogeneity across decision makers who periodically choose whether or not to engage in illegal activities of capture of government resources. A key implication is that the macrodynamics of the capital stock in per capita terms and the per capita income are crucially affected by the frequency of capturing behavior in the economy in a complex way. |
| Keywords: | Economic growth; Solow-Swan model; evolutionary games |
| JEL: | C73 E13 |
| Date: | 2024–12–03 |
| URL: | https://d.repec.org/n?u=RePEc:spa:wpaper:2024wpecon29 |
| By: | Encarnacion Algaba; Eric Remila; Philippe Solal |
| Abstract: | This paper introduces the class of cooperative games with generalized coalition configuration. This new class of games corresponds to cooperative games with coalition configuration and restricted cooperation. A coalition configuration is a collection of coalitions covering the agent set. The restriction of cooperation between agents is represented by a set system on each element of the coalition configuration. A coalition profile is a list of feasible coalitions, one for each element of the coalition configuration. A coalition profile function associates a worth with each coalition profile. Based on this framework, we define and axiomatically characterize marginal values whose coefficients induce a unitary flow on the product digraph obtained from these set systems. Next, we propose a two-step procedure, inspired by Owen's procedure, to construct flow methods as above. Then, we show that the associated flow is decomposable into two flows. Finally, we use two axioms to characterize the flows that can be decomposed in this way, and hence the flow methods constructed using our procedure. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.13684 |
| By: | Barron, Kai; Stüber, Robert; van Veldhuizen, Roel |
| Abstract: | An extensive literature documents that people are willing to sacrifice personal material gain to adhere to a moral motive. However, less is known about the psychological mechanisms that operate when two moral motives come into conflict. We hypothesize that individuals adhere to the moral motive that aligns with their self-interest. We test this hypothesis using experiments that induce a conflict between two of the most-studied moral motives: fairness and truth-telling. Consistent with our hypothesis and across experiments, our results show that individuals do prefer to adhere to the moral motive that is more aligned with their self-interest. |
| Keywords: | Moral dilemmas, Dictator game, Lying game, Motives, Motivated reasoning |
| JEL: | C91 D01 D63 D90 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wzbeoc:306849 |
| By: | Teddy Mekonnen; Bobak Pakzad-Hurson |
| Abstract: | An agent engages in sequential search. He does not directly observe the quality of the goods he samples, but he can purchase signals designed by profit maximizing principal(s). We formulate the principal-agent relationship as a repeated contracting problem within a stopping game and characterize the set of equilibrium payoffs. We show that when the agent's search cost falls below a given threshold, competition does not impact how much surplus is generated in equilibrium nor how the surplus is divided. In contrast, competition benefits the agent at the expense of total surplus when the search cost exceeds that threshold. Our results challenge the view that monopoly decreases market efficiency, and moreover, suggest that it generates the highest value of information for the agent. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.11183 |
| By: | Laura Doval; Ran Eilat; Tianhao Liu; Yangfan Zhou |
| Abstract: | An analyst observes the frequency with which a decision maker (DM) takes actions, but does not observe the frequency of actions conditional on the payoff-relevant state. We ask when can the analyst rationalize the DM's choices as if the DM first learns something about the state before taking action. We provide a support function characterization of the triples of utility functions, prior beliefs, and (marginal) distributions over actions such that the DM's action distribution is consistent with information given the agent's prior and utility function. Assumptions on the cardinality of the state space and the utility function allow us to refine this characterization, obtaining a sharp system of finitely many inequalities the utility function, prior, and action distribution must satisfy. We apply our characterization to study comparative statics and ring-network games, and to identify conditions under which a data set is consistent with a public information structure in first-order Bayesian persuasion games. We characterize the set of distributions over posterior beliefs that are consistent with the DM's choices. Assuming the first-order approach applies, we extend our results to settings with a continuum of actions and/or states.% |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.13293 |
| By: | Ying Xue Li; Burkhard C. Schipper (Department of Economics, University of California Davis) |
| Abstract: | When bidders bid on complex objects, they might be unaware of characteristics effecting their valuations. We assume that each buyer's valuation is a sum of independent random variables, one for each characteristic. When a bidder is unaware of a characteristic, he omits the random variable from the sum. We study the seller's decision to raise bidders' awareness of characteristics before a second-price auction with entry fees. Optimal entry fees capture an additional unawareness rent due to unaware bidders misperceiving their probability of winning and the price to be paid upon winning. When raising a bidder's individual awareness of a characteristic with positive expected value, the seller faces a trade-off between positive effects on the expected first order statistic and unawareness rents of remaining unaware bidders on one hand and the loss of the unawareness rent from the newly aware bidder on the other. We present characterization results on raising public awareness together with no versus full information. We discuss the winner's curse due to unawareness of characteristics. |
| Keywords: | Unawareness, disclosure, optimal second-price auctions with independent private values, winner's curse, entry fees |
| JEL: | C72 D44 D83 |
| Date: | 2024–12–16 |
| URL: | https://d.repec.org/n?u=RePEc:cda:wpaper:365 |
| By: | Zerong Chen |
| Abstract: | Evolutionary Finance explores the "survival and extinction" questions of investment strategies (portfolio rules) in the market selection process. It studies the stochastic dynamics of ?nancial markets, where asset prices are determined endogenously by short-run equilibrium between supply and demand, which is formed each period as a result of the interaction of strategies employed by competing market participants. This paper focuses on "short-lived" risky securities that are traded at the beginning of each period and yield payo¤s at the end of it (which live only one period), with the cycle then repeating. We review some key models developed in this area, which address the following problems in order: 1) introducing the central results that we are primarily interested in under substantially more general assumptions; 2) exploring the Nash equilibrium properties of survival strategies and the single survivor problem within the framework of independent and identically distributed states of the world and fixed-mix portfolio rules; 3) extending the discussion on the single survivor problem to a considerably broader scope, emphasizing its Markovian nature; 4) including a risk-free asset into the market; 5) allowing for short-selling in the market. The two main results of these studies are: i) the existence of survival strategies that can be expressed by explicit formulas, i.e., Kelly's rule of "betting one's beliefs"; and, ii) the asymptotic uniqueness (within a speci?c class of strategies called basic) of such survival strategies. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:man:sespap:2402 |
| By: | Elena Stepanova (European Commission, Joint Research Centre (JRC), Ispra, Italy); Marius Alt (European Commission, Joint Research Centre (JRC), Ispra, Italy); Astrid Hopfensitz (emlyon business school, CNRS, Université Lumière Lyon 2, Université Jean Monnet Saint-Etienne, GATE, 69007, Lyon, France) |
| Abstract: | Trust behavior and being trusted are influenced by a multitude of individual and situational factors. Loneliness is a factor that has recently been hypothesized to be related to trust. Societies and governments are increasingly concerned with the rise of loneliness, and a negative impact on trust might add an additional social cost of loneliness. To evaluate the economic risk of loneliness, we present results from a large, incentivized trust experiment conducted with more than 27000 respondents. Our study allows us to investigate (i) the relationship between self-reported loneliness and behavior in an incentivized trust situation and (ii) the impact of knowing about the loneliness status of others on behavior. Contrary to what the literature hypothesized, we observe no negative correlation between self-reported loneliness and trust in the trust game: lonely individuals are more trusting than individuals who are not lonely. Higher trust by lonely individuals cannot be attributed to more optimistic beliefs of returns but seems to reflect a larger willingness of the lonely to take the social risk associated with trusting in the trust game. We further observe that being informed that an interaction partner is lonely leads to a beneficial treatment of the lonely. Individuals known to be lonely are significantly more likely to be trusted, and they benefit from their partners acting more trustworthy. Behavior that cannot be attributed to strategic concerns. We conclude that loneliness should not be considered as a deteriorator of social capital but as an emotional state that organizations should acknowledge to enable individuals to reconnect to others. |
| Keywords: | loneliness, trust, experiment, trust game |
| JEL: | C90 D91 N34 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2420 |
| By: | Armin Schmutzler |
| Abstract: | This paper provides a simple unified discrete-choice framework for analyzing differentiated duopolies. This framework nests models of horizontal and vertical differentiation, including standard textbook models (Hotelling and Shaked-Sutton). Contrary to these models, it also applies to economic environments where horizontal differentiation coincides with positive correlation of product valuations across consumers, and environments where vertical differentiation coincides with negative correlation. The paper provides an equilibrium characterization that is applicable independently of the type of differentiation and the sign of the valuation correlation. |
| Keywords: | Duopoly, differentiated products, price competition |
| JEL: | D43 L13 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:461 |
| By: | Pau Pujolas; Jack Rossbach |
| Abstract: | Trade imbalances significantly alter the welfare implications of tariffs. Using an illustrative model, we show that trade deficits enhance a country's ability to alter its terms of trade, and thereby benefit from tariffs. Greater trade deficits imply higher optimal, or welfare maximizing, tariffs. We compute optimal unilateral and Nash equilibrium tariffs between the United States and China $\unicode{x2014}$ the countries with the largest bilateral trade imbalance $\unicode{x2014}$ using a multi-region, multi-sector applied general equilibrium model with service sectors and input-output linkages, a computationally complex task. Free trade benefits both countries compared to a trade war. Relative to existing tariff rates, however, the United States gains from a trade war with China $\unicode{x2014}$ a result that hinges on their bilateral trade imbalance. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.15092 |
| By: | Federico Echenique (UC Berkeley); Matías Núñez (CREST, CNRS, Ecole Polytechnique, ENSAE) |
| Abstract: | We describe a sequential mechanism that fully implements the set of efficient outcomes in environments with quasi-linear utilities. The mechanism asks agents to take turns in defining prices for each outcome, with a final player choosing an outcome for all: Price & Choose. The choice triggers a sequence of payments, from each agent to the preceding agent. We present several extensions. First, payoff inequalities may be reduced by endogenizing the order of play. Second, our results extend to a model without quasi-linear utility, to a setting with an outside option, robustness to max-min behavior and caps on prices. |
| Keywords: | Efficiency, Subgame-perfect implementation, Mechanism, Prices. |
| JEL: | D71 D72 |
| Date: | 2024–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:crs:wpaper:2024-15 |
| By: | Konuray Mutluer |
| Abstract: | I examine the factors that determine whether a grassroots social movement reaches the necessary size to achieve its goal. I study a collective action problem where identical individuals who value the common goal sequentially decide whether to join the movement. The model has two key ingredients: (i) The movement is facing a freeriding problem (i.e., while individuals want the movement to succeed, they would rather have others bear the cost of participation) and (ii) The necessary number of members to achieve success is ex-ante unknown but it can be revealed as the movement grows in size. The central insight is that an increase in cost of participation, such as harsher and more likely punishment for members of the movement, can lead to a drastic surge in membership. |
| Keywords: | Social movements, repression, free-riding, threshold uncertainty, dynamic games |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cer:papers:wp791 |
| By: | Till Fladung; Anna Saile |
| Abstract: | During the energy crisis in 2022, electricity prices in Germany soared to unprecedented levels. To explore the drivers of the high electricity prices, we develop an electricity dispatch model that simulates hourly equilibrium prices under the assumption of perfect competition. We then extend this model to account for firms exercising market power. By comparing the outcomes of the perfect competition and Cournot competition models with actual market data, we demonstrate that market power may contributed to higher prices during the crisis, elevating them beyond what rising input costs alone would justify. |
| Keywords: | Energy Economics, Market Power, Energy Crisis, Electricity Prices, Cournot Competition |
| JEL: | Q41 Q43 L13 D43 L94 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ifowps:_414 |
| By: | Martin Dufwenberg (Department of Economics, University of Arizona); Katja Goerlitz (University of Applied Labour Studies); Christina Gravert (Department of Economics, University of Copenhagen) |
| Abstract: | Peer evaluation tournaments are common in academia, the arts, and corporate environments. They make use of the expert knowledge that academics or team members have in assessing their peers performance. However, rampant opportunities for cheating may throw a wrench in the process unless, somehow, players have a preference for honest reporting. Building on Dufwenberg and Dufwenbergs (2018) theory of perceived cheating aversion, we develop a multi-player model in which players balance the utility of winning against the disutility of being identified as a cheater. We derive a set of predictions, and test these in a controlled laboratory experiment. |
| Keywords: | psychological game, cheating, tournaments, laboratory experiment |
| JEL: | C91 |
| Date: | 2024–12–13 |
| URL: | https://d.repec.org/n?u=RePEc:kud:kucebi:2420 |
| By: | Makoto WATANABE; Yu Awaya; Hiroki Fukai |
| Abstract: | We compare Transparency and Privacy in credit markets. A long-lived borrower, who has a risky investment opportunity, seeks loans from a sequence of short-lived lenders. Under Transparency, all the information about the past investment outcomes is shared among the future lenders, which helps the lenders learn the borrowers type. In contrast, no information is shared under Privacy. We first show that under both Transparency and Privacy, the iterated elimination of dominated strategies leaves unique outcomes. We then show that trade stops earlier under Transparency than under Privacy. A higher social welfare is achieved under Privacy than under Transparency. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cnn:wpaper:24-022e |