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on Game Theory |
| By: | Marie Laclau (HEC Paris - Ecole des Hautes Etudes Commerciales, CNRS - Centre National de la Recherche Scientifique); Ludovic Renou (QMUL - Queen Mary University of London); Xavier Venel (LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma]) |
| Abstract: | We consider sender-receiver games, where the sender and the receiver are two distant nodes in a communication network. We show that if the network has two disjoint paths of communication between the sender and the receiver, then we can replicate all equilibrium outcomes not only of the direct communication game (i.e., when the sender and the receiver communicate directly with each other) but also of the mediated game (i.e., when the sender and the receiver communicate with the help of a mediator). |
| Keywords: | Cheap talk, direct, mediated, communication, protocol, network |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04836057 |
| By: | Hung Truong |
| Abstract: | Is gender identity binary or nonbinary? My analysis shows that while both are possible, the latter is a more attracting equilibrium under an adaptive learning perspective. I frame the gender identity problem as a modified \textit{battle of the sexes} game, where individuals define their gender identity under pairwise matching motives. From a baseline game-theoretical standpoint, I demonstrate that the binary-only world and the nonbinary-only world are both Nash equilibria in the stage game and are locally stable in the infinitely repeated game. Thus, any state of gender identity could theoretically persist. I then adopt a genetic learning algorithm as an equilibrium selection criterion to investigate evolutionary dynamics further and provide a rationale for the transition from binary to nonbinary gender identity. Specifically, in a binary-origin world, divergence occurs as individuals identifying as nonbinary gender evolve to become the majority due to their higher flexibility in matching outcomes. My framework captures how adaptive learning drives identity evolution, offering a parsimonious tool to analyze how diversity and exclusivity emerge in varying economic environments. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.10959 |
| By: | Dirk Bergemann; Marek Bojko; Paul D\"utting; Renato Paes Leme; Haifeng Xu; Song Zuo |
| Abstract: | We study mechanism design when agents hold private information about both their preferences and a common payoff-relevant state. We show that standard message-driven mechanisms cannot implement socially efficient allocations when agents have multidimensional types, even under favorable conditions. To overcome this limitation, we propose data-driven mechanisms that leverage additional post-allocation information, modeled as an estimator of the payoff-relevant state. Our data-driven mechanisms extend the classic Vickrey-Clarke-Groves class. We show that they achieve exact implementation in posterior equilibrium when the state is either fully revealed or the utility is linear in an unbiased estimator. We also show that they achieve approximate implementation with a consistent estimator, converging to exact implementation as the estimator converges, and present bounds on the convergence rate. We demonstrate applications to digital advertising auctions and large language model (LLM)-based mechanisms, where user engagement naturally reveals relevant information. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.16132 |
| By: | Xuchen Wu; Sebastian Jaimungal |
| Abstract: | We study partial information Nash equilibrium between a broker and an informed trader. In this model, the informed trader, who possesses knowledge of a trading signal, trades multiple assets with the broker in a dealer market. Simultaneously, the broker trades these assets in a lit exchange where their actions impact the asset prices. The broker, however, only observes aggregate prices and cannot distinguish between underlying trends and volatility. Both the broker and the informed trader aim to maximize their penalized expected wealth. Using convex analysis, we characterize the Nash equilibrium and demonstrate its existence and uniqueness. Furthermore, we establish that this equilibrium corresponds to the solution of a nonstandard system of forward-backward stochastic differential equations. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.17712 |
| By: | Müge Süer; Nicola Cerutti; Jana Friedrichsen; Gyula Seres |
| Abstract: | Women are often perceived as more compliant than men; however, the literature provides inconclusive evidence. Using a novel experimental design comprising two complementary experiments, we test this claim in online samples representative of the German adult population. The first experiment (N=1600) features a probabilistic social dilemma game (PDG) in which participants can increase their individual payoff at the expense of exposing themselves and their group to probabilistic losses. In two treatment conditions, they receive either a recommendation on socially optimal behavior or a recommendation and information on weakly non-compliant peer behavior. We find that the recommendation strongly affects behavior but more so for women than for men. However, information on the non-compliant behavior of others does not induce significantly different responses in men and women. In the second experiment (N=522), we elicit empirical and normative expectations about behavior in the PDG with a recommendation to study the role of norms in following it. While men and women are expected to hold similar normative beliefs, men are expected to follow the recommendation less often, suggesting that compliance is a female social norm. |
| Keywords: | compliance, public good, social dilemma, gender, risk-taking, social norms |
| JEL: | J16 I12 D81 H41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11593 |
| By: | Yoram Halevy; Johannes C. Hoelzemann; Terri Kneeland |
| Abstract: | In the leading model of bounded rationality in games, each player best-responds to their belief that the other players reason to some finite level. This paper investigates a novel behavior that could reveal if the player’s belief lies outside the iterative reasoning model. This encompasses a situation where a player believes that their opponent can reason to a higher level than they do. We propose an identification strategy for such behavior, and evaluate it experimentally. |
| Keywords: | Bounded rationality, higher-order rationality, level-k, cognitive-hierarchy, game theory, equilibrium, rationalizability, preference elicitation, lab experiment |
| JEL: | C72 C92 D91 |
| Date: | 2025–01–13 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-789 |
| By: | Lucas Pahl; Carlos Pimienta |
| Abstract: | We prove the 2-player, generic extensive-form case of the conjecture of Govindan and Wilson (1997a, b) and Hauk and Hurkens (2002) stating that an equilibrium component is essential in every equivalent game if and only if the index of the component is nonzero. This provides an index-theoretic characterization of the concept of hyperstable components of equilibria in generic extensive-form games, first formulated by Kohlberg and Mertens (1986). We also illustrate how to compute hyperstable equilibria in multiple economically relevant examples and show how the predictions of hyperstability compare with other solution concepts. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.18449 |
| By: | Yaroslav Rosokha; Xinxin Lyu; Denis Tverskoi; Sergey Gavrilets |
| Abstract: | We theoretically and experimentally study an indefinite dynamic game intended to capture two main aspects of the political process – elections in which opposing factions compete by spending resources and policy-making in which those same factions are required to cooperate for the successful legislature. The main theoretical result is that limits on spending in the election contest increase cooperation. On the experimental side, we first test and confirm theoretical predictions and then explore whether such limits could arise endogenously. We find that a majority of subjects are successful in establishing a consensus on low limits, leading to higher cooperation and welfare. |
| Keywords: | Political Economy, Endogenous Institutions, Dynamic Games, Cooperation, Coordination, Contest, Experiments |
| JEL: | C73 C92 D91 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:pur:prukra:1352 |
| By: | Yiwen Chen (Shandong Agricultural University, CN); Nora paulus (DEM, Université du Luxembourg, LU); Weihua Ruan (Purdue University Northwest, US); Benteng Zou (DEM, Université du Luxembourg) |
| Abstract: | The global transition to renewable energy technologies has significantly increased the demand for critical minerals, underscoring the need for strategies to mitigate supply chain vulnerabilities. This paper examines the dynamics between exporting and importing countries in the critical minerals market, with a focus on recycling and substitution as alternative solutions. We develop a dynamic game model to analyze the investments of the importing country in recycling and the development of backstop substitutions, while considering the optimal supply strategies of the exporting country. Our study simultaneously investigates the optimal rates of recycling and substitution within a Markovian subgame-perfect Nash equilibrium framework. This paper explores regime-switching conditions across four distinct modes: exclusive reliance on non-renewable resources, recycling readiness, substitution readiness, and the coexistence of recycling and substitution. Key contributions include deriving regime-switching conditions through impulse control, determining optimal supply strategies under different market modes, characterizing explicit mode-switching criteria, and identifying the emergence of multiple Nash equilibria in the presence of recycling. These findings offer valuable insights into reducing dependence on critical minerals, promoting sustainable resource management, and fostering resilient supply chains. |
| Keywords: | critical minerals, recycling, substitution, differential game, impulse control. |
| JEL: | Q34 C61 D4 L72 L12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:luc:wpaper:25-04 |
| By: | Aslihan Asil; Paulo Ramos; Amanda Starc; Thomas G. Wollmann |
| Abstract: | A rollup is a series of acquisitions through which a financial sponsor consolidates ownership. Increasingly, this strategy is shaping economically important markets, but historically, it has escaped antitrust enforcement. We study this phenomenon in the anesthesia industry, site of the first rollup-based antitrust case in US history. First, we identify 18 other rollups that are observationally similar to the litigated ones. Next, we show that rollups consolidate ownership and that prices rise sharply as competing practices are acquired. Last, we estimate a structural bargaining model and simulate counterfactual equilibria under remedies that courts are likely to consider. |
| JEL: | I11 L1 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33217 |
| By: | Guohui Guan; Zongxia Liang; Yi Xia |
| Abstract: | This paper investigates robust stochastic differential games among insurers under model uncertainty and stochastic volatility. The surplus processes of ambiguity-averse insurers (AAIs) are characterized by drifted Brownian motion with both common and idiosyncratic insurance risks. To mitigate these risks, AAIs can purchase proportional reinsurance. Besides, AAIs allocate their wealth in a financial market consisting of cash, and a stock characterized by the 4/2 stochastic volatility model. AAIs compete with each other based on relative performance with the mean-variance criterion under the worst-case scenario. This paper formulates a robust time-consistent mean-field game in a non-linear system. The AAIs seek robust, time-consistent response strategies to achieve Nash equilibrium strategies in the game. We introduce $n$-dimensional extended Hamilton-Jacobi-Bellman-Isaacs (HJBI) equations and corresponding verification theorems under compatible conditions. Semi-closed forms of the robust $n$-insurer equilibrium and mean-field equilibrium are derived, relying on coupled Riccati equations. Suitable conditions are presented to ensure the existence and uniqueness of the coupled Riccati equation as well as the integrability in the verification theorem. As the number of AAIs increases, the results in the $n$-insurer game converge to those in the mean-field game. Numerical examples are provided to illustrate economic behaviors in the games, highlighting the herd effect of competition on the AAIs. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.09171 |
| By: | Jeanne Hagenbach (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research, WZB - Wissenschaftszentrum Berlin für Sozialforschung); Charlotte Saucet (UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We experimentally study how individuals read strategically transmitted information when they have preferences over what they will learn. Subjects play disclosure games in which Receivers should interpret messages skeptically. We vary whether the state that Senders communicate about is ego-relevant or neutral for Receivers, and whether skeptical beliefs are aligned or not with what Receivers prefer believing. Compared to neutral settings, skepticism is significantly lower when it is self-threatening, and not enhanced when it is self-serving. These results shed light on a new channel that individuals can use to protect their beliefs in communication situations: they exercise skepticism in a motivated way, that is, in a way that depends on the desirability of the conclusions that skeptical inferences lead to. We propose two behavioural models that can generate motivated skepticism. In one model, the Receiver freely manipulates his beliefs after having made skeptical inferences. In the other, the Receiver reasons about evidence in steps and the depth of his reasoning is motivated. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04821601 |
| By: | Pär Holmberg |
| Keywords: | Congestion management, zonal pricing, countertrading, redispatch, real-time market, regulatory arbitrage, inc-dec game |
| JEL: | C72 D47 L94 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2501 |
| By: | Siyuan He |
| Abstract: | The competitive pressures in China's primary and secondary education system have persisted despite decades of policy interventions aimed at reducing academic burdens and alleviating parental anxiety. This paper develops a game-theoretic model to analyze the strategic interactions among families in this system, revealing how competition escalates into a socially irrational "education arms race." Through equilibrium analysis and simulations, the study demonstrates the inherent trade-offs between education equity and social welfare, alongside the policy failures arising from biased social cognition. The model is further extended using Spence's signaling framework to explore the inefficiencies of the current system and propose policy solutions that address these issues. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.10974 |
| By: | Guohui Guan; Zongxia Liang; Yi Xia |
| Abstract: | This paper studies the robust reinsurance and investment games for competitive insurers. Model uncertainty is characterized by a class of equivalent probability measures. Each insurer is concerned with relative performance under the worst-case scenario. Insurers' surplus processes are approximated by drifted Brownian motion with common and idiosyncratic insurance risks. The insurers can purchase proportional reinsurance to divide the insurance risk with the reinsurance premium calculated by the variance principle. We consider an incomplete market driven by the 4/2 stochastic volatility mode. This paper formulates the robust mean-field game for a non-linear system originating from the variance principle and the 4/2 model. For the case of an exponential utility function, we derive closed-form solutions for the $n$-insurer game and the corresponding mean-field game. We show that relative concerns lead to new hedging terms in the investment and reinsurance strategies. Model uncertainty can significantly change the insurers' hedging demands. The hedging demands in the investment-reinsurance strategies exhibit highly non-linear dependence with the insurers' competitive coefficients, risk aversion and ambiguity aversion coefficients. Finally, numerical results demonstrate the herd effect of competition. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.09157 |
| By: | Pawel Krolikowski; Andrew H. McCallum |
| Abstract: | We study uniform tariffs in a general equilibrium dynamic model with search frictions between heterogeneous exporting producers and importing retailers. We analytically characterize unilateral import tariffs that maximize domestic welfare. Search frictions lower these tariffs because of market thickness effects, which reinforce aggregate production nonconvexities. A calibration using 2016 U.S. and Chinese data suggests that optimal U.S. unilateral and Nash equilibrium tariffs with baseline search frictions are 10 ppt. below those in a model with reduced search frictions. Changes in welfare in response to changes in tariffs are smaller in the model with baseline search frictions than in the model with reduced frictions. In the Nash equilibrium with baseline search frictions, U.S. (Chinese) tariffs are 17 (8) ppt. higher and welfare is 0.1 (0.9) percent lower relative to 2016 tariff levels. |
| Keywords: | optimal tariffs; trade policy; efficiency; search; welfare; social planner |
| JEL: | C78 D62 D83 F12 F13 |
| Date: | 2025–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:99459 |
| By: | Priyanka Sharma; Edward J. Oughton; Aleksan Shanoyan |
| Abstract: | This paper provides the first incentive analysis of open radio access networks (ORAN) using game theory. We assess strategic interactions between telecom supply chain stakeholders: mobile network operators (MNOs), network infrastructure suppliers (NIS), and original equipment manufacturers (OEMs) across three procurement scenarios: (i) Traditional, (ii) Predatory as monolithic radio access networks (MRAN), and (iii) DirectOEM as ORAN. We use random forest and gradient boosting models to evaluate the optimal margins across urban, suburban, and rural U.S. regions. Results suggest that ORAN deployment consistently demonstrates higher net present value (NPV) of profits in urban and suburban regions, outperforming the traditional procurement strategy by 11% to 31%. However, rural areas present lower NPVs across all scenarios, with significant variability at the county level. This analysis offers actionable insights for telecom investment strategies, bridging technical innovation with economic outcomes and addressing strategic supply chain dynamics through a game-theoretic lens. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.18346 |
| By: | Jianfei Xu; Rui Zhang; Junhui Fan |
| Abstract: | The study takes the social media industry as its research subject and examines the impact of scientific innovation capabilities on profit distribution within the value chain of the social media industry. It proposes a specific solution to the profit distribution problem using an improved Shapley value method. Additionally, the AHP (Analytic Hierarchy Process) is employed to evaluate the profit distribution model, allowing the improved Shapley value method to better address the issue of profit allocation within the value chain of the social media industry. This approach ensures that each member receives a fair share of the profits, fostering strong cooperative relationships among members. Moreover, it compensates for the shortcomings of the traditional Shapley value method in addressing such problems to a certain extent. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.18130 |
| By: | Rene van den Brink (Vrije Universiteit Amsterdam and Tinbergen Institute); Dinko Dimitrov (Saarland University); Agnieszka Rusinowska (Centre d'Economie de la Sorbonne, CNRS) |
| Abstract: | Simple games in partition function form are used to model voting situations where a coalition being winning or losing might depend on the way players outside that coalition organize themselves. Such a game is called a plurality voting game if in every partition there is at least one winning coalition. In the present paper, we introduce a power index for this class of voting games and provide an axiomatic characterization. This power index is based on equal weight for every partition, equal weight for every winning coalition in a partition, and equal weight for each player in a winning coalition. Since some of the axioms we develop are conditioned on the power impact of losing coalitions becoming winning in a partition, our characterization heavily depends on a new result showing the existence of such elementary transitions between plurality voting games in terms of single embedded winning coalitions. The axioms restrict then the impact of such elementary transitions on the power of different types of players. |
| Keywords: | axiomatization; power index; plurality game; winning coalition |
| JEL: | C71 D62 D72 |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240076 |
| By: | Itai Arieli; Yakov Babichenko; Dima Shaiderman; Xianwen Shi |
| Abstract: | We propose a dynamic persuasion model of product adoption, where an impatient, long-lived sender commits to a dynamic disclosure policy to persuade a sequence of short-lived receivers to adopt a new product. The sender privately observes a sequence of signals, one per period, about the product quality, and therefore the sequence of her posteriors forms a discrete-time martingale. The disclosure policy specifies ex ante how the sender's information will be revealed to the receivers in each period. We introduce a new concept called ``Blackwell-preserving kernels'' and show that if the sender's belief martingale possesses these kernels, the family of optimal strategies for the sender takes an interval form; namely, in every period, the set of martingale realizations in which adoption occurs is an interval. Utilizing this, we prove that if the sender is sufficiently impatient, then under a random walk martingale, the optimal policy is fully transparent up to the moment of adoption; namely, the sender reveals all the information she privately holds in every period. |
| Keywords: | Dynamic Information Design, Bayesian Persuasion, Learning |
| JEL: | D83 D82 |
| Date: | 2025–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-791 |
| By: | Yike Wang; Jinzhen Liu; Alain Bensoussan; Ka-Fai Cedric Yiu; Jiaqin Wei |
| Abstract: | In this paper, we focus on a class of time-inconsistent stochastic control problems, where the objective function includes the mean and several higher-order central moments of the terminal value of state. To tackle the time-inconsistency, we seek both the closed-loop and the open-loop Nash equilibrium controls as time-consistent solutions. We establish a partial differential equation (PDE) system for deriving a closed-loop Nash equilibrium control, which does not include the equilibrium value function and is different from the extended Hamilton-Jacobi-Bellman (HJB) equations as in Bj\"ork et al. (Finance Stoch. 21: 331-360, 2017). We show that our PDE system is equivalent to the extended HJB equations that seems difficult to be solved for our higher-order moment problems. In deriving an open-loop Nash equilibrium control, due to the non-separable higher-order moments in the objective function, we make some moment estimates in addition to the standard perturbation argument for developing a maximum principle. Then, the problem is reduced to solving a flow of forward-backward stochastic differential equations. In particular, we investigate linear controlled dynamics and some objective functions affine in the mean. The closed-loop and the open-loop Nash equilibrium controls are identical, which are independent of the state value, random path and the preference on the odd-order central moments. By sending the highest order of central moments to infinity, we obtain the time-consistent solutions to some control problems whose objective functions include some penalty functions for deviation. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.13521 |
| By: | Bård Harstad |
| Abstract: | A simple dynamic game is used for analyzing international environmental problems and climate agreements. Different countries are, over time, emitting as well as investing in green technology. In this framework, we can analyze the business-as-usual outcome, short vs. long term agreements, self-enforcing agreements, participation, compliance, alternative designs, and the development from the Kyoto Protocol to the Paris Agreement. The text should be accessible to students at any level. |
| JEL: | C72 F53 H87 Q2 Q5 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33161 |
| By: | Anna Gunnthorsdottir; Palmar Thorsteinsson |
| 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. |
| JEL: | Z13 Z18 C72 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:ice:wpaper:wp98 |
| By: | Jeroen Hinloopen (Netherlands Bureau for Economic Policy Analysis and Tinbergen Institute); Stephen Martin (Purdue University); Sander Onderstal (University of Amsterdam and Tinbergen Institute); Leonard Treuren (KU Leuven) |
| Abstract: | Antitrust laws prohibit private firms to coordinate their market behavior, yet many types of interfirm cooperation are legal. Using laboratory experiments, we study spillovers from legal cooperation in one market to non-competitive prices in a different market. Our theoretical framework predicts that such cooperation spillovers are most likely to occur for intermediate levels of competition. Our experimental findings support this theoretical prediction. In addition, our experimental results show that repeated interaction and communication about prices in a market are not necessary to achieve non-competitive prices in that market, as long as subjects can form binding agreements in a different market. Results from additional treatments suggest that commitment and multimarket contact are necessary for cooperation spillovers to emerge. |
| Keywords: | Cartel; Communication; Cooperation spillovers; Antitrust; Experiment |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240078 |
| By: | Wade Hann-Caruthers; Minghao Pan; Omer Tamuz |
| Abstract: | We consider a group of agents who can each take an irreversible costly action whose payoff depends on an unknown state. Agents learn about the state from private signals, as well as from past actions of their social network neighbors, which creates an incentive to postpone taking the action. We show that outcomes depend on network structure: on networks with a linear structure patient agents do not converge to the first-best action, while on regular directed tree networks they do. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.07061 |
| By: | Jakub Bielawski; {\L}ukasz Cholewa; Fryderyk Falniowski |
| Abstract: | Precise description of population game dynamics introduced by revision protocols - an economic model describing the agent's propensity to switch to a better-performing strategy - is of importance in economics and social sciences in general. In this setting innovation or imitation of others is the force which drives the evolution of the economic system. As the continuous-time game dynamics is relatively well understood, the same cannot be said about revision driven dynamics in the discrete time. We investigate the behavior of agents in a $2\times 2$ anti-coordination game with symmetric random matching and a unique mixed Nash equilibrium. In continuous time the Nash equilibrium is attracting and induces a global evolutionary stable state. We show that in the discrete time one can construct (either innovative or imitative) revision protocol and choose a level of the time step, under which the game dynamics is Li-Yorke chaotic, inducing complex and unpredictable behavior of the system, precluding stable predictions of equilibrium. Moreover, we reveal that this unpredictability is encoded into any imitative revision protocol. Furthermore, we show that for any such game there exists a perturbed pairwise proportional imitation protocol introducing chaotic behavior of the agents for sufficiently large time step. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.06037 |
| By: | Tiziano De Angelis; Caio C\'esar Graciani Rodrigues; Peter Tankov |
| Abstract: | We study a problem of optimal irreversible investment and emission reduction formulated as a nonzero-sum dynamic game between an investor with environmental preferences and a firm. The game is set in continuous time on an infinite-time horizon. The firm generates profits with a stochastic dynamics and may spend part of its revenues towards emission reduction (e.g., renovating the infrastructure). The firm's objective is to maximize the discounted expectation of a function of its profits. The investor participates in the profits and may decide to invest to support the firm's production capacity. The investor uses a profit function which accounts for both financial and environmental factors. Nash equilibria of the game are obtained via a system of variational inequalities. We formulate a general verification theorem for this system in a diffusive setup and construct an explicit solution in the zero-noise limit. Our explicit results and numerical approximations show that both the investor's and the firm's optimal actions are triggered by moving boundaries that increase with the total amount of emission abatement. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.00986 |
| By: | Luca Colombo (ESC [Rennes] - ESC Rennes School of Business); Paola Labrecciosa; Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We take a novel approach based on differential games to the study of criminal networks. We extend the static crime network game (Ballester et al., 2006, 2010) to a dynamic setting where criminal activities negatively impact the accumulation of total wealth in the economy. We derive a Markov Feedback Equilibrium and show that, unlike in the static crime network game, the vector of equilibrium crime rates is not necessarily proportional to the vector of Bonacich centralities. Next, we conduct a comparative dynamic analysis with respect to the network size, the network density, and the marginal expected punishment, finding results in contrast with those arising in the static crime network game. We also shed light on a novel issue in the network theory literature, i.e., the existence of a voracity effect. Finally, we study the problem of identifying the optimal target in the population of criminals when the planner's objective is to minimize aggregate crime at each point in time. Our analysis shows that the key player in the dynamic and the static setting may differ, and that the key player in the dynamic setting may change over time. |
| Keywords: | Differential games, Markov equilibrium, Criminal networks, Bonacich centrality, Key player |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04850675 |
| By: | Guillaume Bataille (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, AMU - Aix Marseille Université, CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper derives closed‐form solutions for a strategic , simultaneous harvesting in a predator–prey system. Using a parametric constraint, it establishes the existence and uniqueness of a linear feedback‐Nash equilibrium involving two specialized fleets and allows for continuous time results for a class of payoffs that have constant elasticity of the marginal utility. These results contribute to the scarce literature on analytically tractable predator–prey models with endogenous harvesting. A discussion based on industry size effects is provided to highlight the role played by biological versus strategic interactions in the multispecies context. Recommendations for Resource Managers This model presents a thorough examination of the economic inefficiencies inherent in the exploitation dynamics of two interdependent species, elucidating the complex interplay between ecological interactions and economic outcomes. The size of the fishing industries constitutes a significant variable that must be integrated into the formulation of pertinent policy recommendations. This constitutes an advancement towards a more time‐consistent approach to Ecosystem‐Based Fishery Management (EBFM). |
| Keywords: | common‐pool resource, dynamic games, fisheries, predator–preyrelationship |
| Date: | 2024–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04793204 |
| By: | Francisco Cabo (IMUVA - Instituto de Investigación en Matemáticas - UVa - Universidad de Valladolid [Valladolid]); Alain Jean-Marie (NEO - Network Engineering and Operations - CRISAM - Inria Sophia Antipolis - Méditerranée - Inria - Institut National de Recherche en Informatique et en Automatique, UM - Université de Montpellier); Mabel Tidball (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier) |
| Abstract: | The literature featuring game–theoretical models aimed at explaining the effect of the status concerns on the voluntary provision of a public good is generally focused on snob agents, driven by a desire for exclusiveness. However, the social context literature highlights that status concerns can give rise to a desire, in some individuals to be different from the "common herd, " and in some others to conform with other people. We analyze a two‐player public good game under two different settings: The standard case with two positional players (PP s ), versus the case in which the positional player faces a conformist player (PC). Giving entrance to conformism has two main implications. Strong status concerns by both players can lead to a virtuous cycle in which the conformist player wishes to imitate the contributing behavior of the positional player, and the latter wishes to increase contribution to distinguish herself from the former. Then, the contribution to the public good can be higher than in the case with only snob agents. This higher contribution can increase social welfare, but only if endowments are not too large and the status concern of the positional player is not excessively high. |
| Keywords: | Positional agent, Public Good, Social context, Static and dynamic game, Conformist agent, Inertia |
| Date: | 2024–03–17 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04754332 |
| By: | Joshua S. Gans |
| Abstract: | This is a paper in the ``economists ruin everything'' field. It considers whether Catch-22 situations can persist as an equilibrium phenomenon. Rather than being an arbitrary rule or a set of self-serving beliefs, the focus is on the preferences of Gatekeepers who choose to create such situations in the first place. The base game-theoretic model is of a Catch-22 situation inspired by Heller's famous paradox. We consider a Requester who may be Sane or Insane and a Gatekeeper who must decide whether to grant the Requester's desired outcome or force them into a less desirable one. This is modelled as a game in which the Requester chooses whether to send a request signal before the Gatekeeper decides. We solve for the conditions under which a Catch-22 situation persists as an equilibrium and its efficiency properties. It is demonstrated that Catch-22 situations can arise, but they reflect an efficient response on the part of a Gatekeeper facing asymmetric information. An application to labour markets is also considered |
| JEL: | C72 D82 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33304 |
| By: | Yaroslav Rosokha; Xinxin Lyu; Denis Tverskoi; Sergey Gavrilets |
| Abstract: | We study cooperation among individuals and groups facing a dynamic social dilemma in which the benefits of cooperation are divided according to political power obtained in a contest. The main theoretical and experimental results focus on the role of the incumbency advantage. Specifically, an incumbency advantage in the political contest leads to a rapid breakdown of cooperation in the social dilemma. In addition, we investigate whether groups behave differently than individuals and provide simulations based on the individual evolutionary learning model of Arifovic and Ledyard (2012) to shed light on the difference observed in the experiment. |
| Keywords: | Dynamic Games, Cooperation, Coordination, Contest, Experiments, Group Decision Making |
| JEL: | C73 C92 D91 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:pur:prukra:1350 |