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on Game Theory |
| By: | Anwar, Chowdhury Mohammad Sakib; Georgalos, Konstantinos; SenGupta, Sonali |
| Abstract: | Gallice and Monzón (2019) present a natural environment that sustains full cooperation in one-shot social dilemmas among a finite number of self-interested agents. They demonstrate that in a sequential public goods game, where agents lack knowledge of their position in the sequence but can observe some predecessors' actions, full contribution emerges in equilibrium due to agents' incentive to induce potential successors to follow suit. Furthermore, they show that this principle extends to a number of social dilemmas, with the prominent example that of the prisoner's dilemma. In this study, we experimentally test the theoretical predictions of this model in a multi-player prisoner's dilemma environment, where subjects are not aware of their position in the sequence and receive only partial information on past cooperating actions. We test the predictions of the model, and through rigorous structural econometric analysis, we test the descriptive capacity of the model against alternative behavioural strategies, such as conditional cooperation, altruistic play and free-riding behaviour. We find that the majority resorts to free-riding behaviour, around 30% is classified as Gallice and Monzón (2019) types, followed by those with social preference considerations and the unconditional altruists. |
| Keywords: | Position uncertainty, Conditional cooperation, Social dilemma, Social preferences, Experiment, Finite mixture models |
| JEL: | C91 D64 H41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qmsrps:202504 |
| By: | Gretschko, Vitali; Simon, Jasmina |
| Abstract: | We examine a setting of independent private value auctions where bidders can covertly acquire gradual information about their valuations. We demonstrate that a dynamic pivot mechanism implements the rst-best information acquisition and allocation rule. We apply our results to a commonly used model of auctions with information acquisition. The bidders are symmetric and information acquisition costs are moderate. Our analysis shows that the Dutch auction achieves near-eciency. That is, the welfare loss is bounded by the information acquisition cost of a single bidder. In contrast, the English auction may result in greater welfare losses. |
| Keywords: | Information acquisition, dynamic auctions, dynamic pivot mechanism |
| JEL: | D44 D82 D83 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312569 |
| By: | Eléonore Dodivers (Université Côte d'Azur, CNRS, GREDEG, France); Ismaël Rafaï (Toulouse School of Economics, Toulouse School of Management) |
| Abstract: | This paper investigates Artificial intelligence Large Language Models (AI-LLM) social preferences’ in Dictator Games. Brookins and Debacker (2024, Economics Bulletin) previously observed a tendency of ChatGPT-3.5 to give away half its endowment in a standard Dictator Game and interpreted this as an expression of fairness. We replicate their experiment and introduce a multiplicative factor on donations which varies the efficiency of the transfer. Varying transfer efficiency disentangles three donation explanations (inequality aversion, altruism, or focal point). Our results show that ChatGPT-3.5 donations should be interpreted as a focal point rather than the expression of fairness. In contrast, a more advanced version (ChatGPT-4o) made decisions that are better explained by altruistic motives than inequality aversion. Our study highlights the necessity to explore the parameter space, when designing experiments to study AI-LLM preferences. |
| Keywords: | Artificial Intelligence, Large Language Models, Dictator Games, Experimental Economics, Social Preferences |
| JEL: | D90 O33 C02 C91 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-09 |
| By: | Evsyukova, Yulia; Innocenti, Federico; Lomys, Niccolò |
| Abstract: | We study how framing interplays with information design. Whereas Sender conceives all contingencies separately, Receiver cannot initially distinguish among some of them, i.e., has a coarse frame. To influence Receiver's behavior, Sender first decides whether to refine Receiver's frame and then designs an information structure for the chosen frame. Sender faces a trade-off between keeping Receiver under the coarse frame - thus concealing part of the information structure - and re-framing - hence inducing Receiver to revise preferences and prior beliefs after telling apart initially indistinguishable contingencies. Sender benefits from re-framing if this enhances persuasion possibilities or makes persuasion unnecessary. Compared to classical information design, Receiver's frame becomes more critical than preferences and prior beliefs in shaping the optimal information structure. Although a coarse worldview may open the doors to Receiver's exploitation, re-framing can harm Receiver in practice, thus questioning the scope of disclosure policies. |
| Keywords: | Framing, Information Design, Disclosure Policies |
| JEL: | D1 D8 D9 G2 G4 M3 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312572 |
| By: | Dirk Bergemann (Yale University); Kevin Breuer; Peter Cramton (Max Planck Institute for Research on Collective Goods and University of Maryland); Jack Hirsch (Harvard University); Yero S. Ndiaye (University of Cologne and Max Planck Institute for Research on Collective Goods); Axel Ockenfels (University of Cologne and Max Planck Institute for Research on Collective Goods) |
| Abstract: | A soft-floor auction asks bidders to accept an opening price to participate in an ascending auction. If no bidder accepts, lower bids are considered using first-price rules. Soft floors are common despite being irrelevant with standard assumptions. When bidders regret losing, soft-floor auctions are more efficient and profitable than standard optimal auctions. Revenue increases as bidders are inclined to accept the opening price to compete in a regret-free ascending auction. Efficiency is improved since having a soft floor allows for a lower hard reserve price, reducing the frequency of no sale. Theory and experiment confirm these motivations from practice. |
| Date: | 2025–04–14 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2438 |
| By: | Catherine Bobtcheff (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Raphaël Levy (HEC Paris - Ecole des Hautes Etudes Commerciales); Thomas Mariotti (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Two players receiving independent signals on a risky project with common value compete to be the rst to innovate. We characterize the equilibrium of this preemption game as the publicity of signals varies. Private signals create a winner's curse:investing rst implies that the rival has abstained from investing, possibly because he has privately received adverse information about the project. Since players want to gather more evidence in support of the project as a compensation, they invest later when signals are more likely to be private. Because of preemption, the NPV of investment is zero at equilibrium regardless of the publicity of signals. However, for a conservative planner who cares about avoiding unprotable investments, this implies that investment arises too early at equilibrium, and such a planner then prefers signals to be private. This provides a rationale against the mandatory disclosure of negative results in science, notably when competition is severe. Our results suggest that policy interventions should primarily tackle winner-takes-all competition, and regulate transparency only once competition is suciently mild. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:hal-04965752 |
| By: | Michelle Garfinkel (University of California-Irvine); Constantinos Syropoulos (School of Economics, Drexel University) |
| Abstract: | We consider a dynamic setting where two countries with competing claims to a resource/asset first arm and then choose whether to resolve their dispute through war or peacefully through settlement. War precludes international trade and can be destructive, but also locks gains and eliminates arming costs in the future. By contrast, a peaceful resolution, possibly supported by arming, avoids destruction and allows for mutually advantageous trade; yet future settlements must be renegotiated under the threat of war. We characterize the conditions under which peace is stable and show that, depending on war’s destructiveness, time preferences, and the distribution of resource endowments, greater gains from trade can pacify international tensions, but possibly only for more uneven endowment distributions. |
| Keywords: | Interstate war, Armed peace, Unarmed peace, Security policies, Gains from trade, Shadow of the future |
| JEL: | C72 C78 D30 D70 D74 F10 F51 F60 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202511 |
| By: | Berlingieri, Francesco; Kovacic, Matija; Stepanova, Elena |
| Abstract: | Using a large-scale incentivized trust game experiment conducted across all 27 EU member states, we find that sexual minorities exhibit greater prosocial behaviour toward another vulnerable group but not toward an unknown counterpart, compared to heterosexual individuals. The observed effects are both relationship- and context-specific. Specifically, bisexual individuals and those identifying with a sexual orientation other than lesbian, gay, or heterosexual demonstrate higher trusting behaviour toward counterparts who frequently experience loneliness. This effect is not attributable to higher expectations of return, differences in risk preferences, or the individual's own loneliness status. Furthermore, we find evidence that this relationship-specific prosocial behaviour among sexual minorities is more pronounced in countries with lower levels of LGBTIQ+ rights protection, suggesting that it is heightened in contexts where minorities face a greater risk of exclusion or discrimination. We do not find statistically significant differences in overall trustworthiness across sexual orientations. However, the results offer some evidence that bisexual individuals are more trustworthy than heterosexual trustees when they feel a strong connection to their counterpart. |
| Keywords: | Trust game, pro-sociality, LGBTIQ+, loneliness |
| JEL: | C91 C71 D64 J15 H80 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1582 |
| By: | Barrett, Scott |
| Abstract: | I model the ocean as an array of lines set within a two-dimensional frame and show how the exclusive economic zone (EEZ) emerged as an equilibrium in customary international law. I find that custom codifies the efficient Nash equilibrium of enclosure for nearshore fisheries. For highly migratory and offshore fisheries, enclosure is inefficient, and customary law supports a more efficient " free sea” regime. The model also identifies the trigger for changes in property rights and the reason choice of a particular limit, like the current 200-mile zone, is arbitrary. In an asymmetric, regional sea, I find that the scope of the EEZ is determined by the relative power of coastal and distant water states, and need not be efficient. Finally, I find that proposals to nationalize the seas or ban fishing on the high seas are neither efficient nor supportable as equilibria in customary law. |
| Keywords: | closure of high seas; customary international law; exclusive economic zone; ocean fisheries |
| JEL: | F50 K33 Q22 |
| Date: | 2024–05–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125568 |
| By: | Caspari, Gian |
| Abstract: | We study the problem of distributing subsidies in a market that includes both marginal individuals in need of assistance and infra-marginal individuals who would purchase the subsidized product without additional incentives. We propose the use of a wait time auction, where individuals bid the amount of time they are willing to wait in exchange for a specified subsidy amount. This design enables more direct targeting of marginal individuals, thereby enhancing the overall effectiveness of the subsidy program. Furthermore, screening is costless in equilibrium as no wait times are imposed, and practical robustness against deviations from equilibrium behavior can be ensured by implementing a maximum allowable bid. |
| Keywords: | Subsidies, Market Design, Auctions |
| JEL: | D47 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:313007 |
| By: | Columbus, Simon; Feld, Lars P.; Kasper, Matthias; Rablen, Matthew D. |
| Abstract: | This study investigates how institutional rules and fairness in enforcement affect cooperation and compliance in heterogenous groups. In a preregistered online experiment (n = 1, 254), we vary both the existence of a rule governing contributions to a public good as well as whether enforcement of the rule is biased against some players. We find that merely stating a rule has a stronger effect on behaviour than rule enforcement. Specifically, institutional rules promote cooperation by strengthening personal and social norms, which in turn sustains contributions over time. In contrast, in the absence of a rule, norms are weaker and contributions decline. Fair rule enforcement reduces free-riding and increases compliance, but it also crowds out full cooperation. Finally, we find no evidence that biased rule enforcement erodes norms, reduces cooperation, or diminishes rule compliance. Our findings highlight the crucial role of institutional rules in strengthening norms and sustaining cooperation in heterogeneous groups, even in the absence of enforcement or when rule enforcement is biased. |
| Keywords: | public goods, rule compliance, rule enforcement, social norms |
| JEL: | H41 C72 C91 C92 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:aluord:315749 |
| By: | De Monte, Enrico; Koebel, Bertrand M. |
| Abstract: | This paper characterizes the short- and long-run Cournot equilibrium with heterogeneous firms and stochastic technological change. In our model, firms have different technologies with heterogeneous fixed and variable costs and various degrees of markups. In a framework with homogeneous firms, Mankiw and Whinston (1986) show that the long-run Cournot equilibrium may be inefficient due to too many entries. We extend their result to the case of heterogeneous firms and show that higher industrial concentration of production is welfare improving. Using administrative data for French manufacturing firms, we estimate a wide degree of unobserved heterogeneity in both fixed and variable costs, and find a negative correlation between both. Our simulation results show that markups surprisingly only induce slight inefficiencies in the allocation of output, implying that it is almost compatible with welfare maximisation. Instead, firms' choice to employ heterogeneous and often inefficient technologies turns out to harm more substantially welfare and aggregate output. |
| Keywords: | cost function, fixed cost, marginal cost, returns to scale, technological change, misallocation, markups, nonlinear least squares, panel data |
| JEL: | C33 L11 L60 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312579 |
| By: | Pedro Lima (University of Coimbra, CeBER and Faculty of Economics); Tiago Neves Sequeira (University of Coimbra, CeBER and Faculty of Economics); Óscar Afonso (CEF-UP, CEFAGE-UBI and Faculty of Economics of University of Porto) |
| Abstract: | We analyze the effects of lobbying on growth and inequality in a novel directed technical change model, where firms producing different technologies can engage in either demand-seeking lobbying-aimed at increasing demand or rent-seeking lobbying-focused on extracting economic rents. Demand-seeking lobbying promotes economic growth and, when goods are gross substitutes, also increases inequality. In contrast, rent-seeking lobbying has the opposite effects. We also develop a microfounded theoretical game that models generalized lobbying decisions. In this framework, firms from different sectors can either compete or collaborate in their lobbying efforts. The model reveals that lobbying incentives are stronger when fixed costs are low and when shared sources of lobbying efficiency outweigh sector-specific ones. Given our results, it is essential for policy to distinguish between rent-seeking and demand-seeking lobbying practices, and to design targeted incentives for each in order to effectively influence growth and inequality. |
| Keywords: | Lobbying; economic growth; wage inequality |
| JEL: | J31 P16 O30 O41 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:gmf:papers:2025-01 |
| By: | Hans Gersbach |
| Abstract: | “Pendular Voting” presents a novel two-stage voting procedure: A randomly chosen citizen group votes on a proposal replacing the status quo. Depending on the outcome, a “counterproposal” ensues, that is closer to/further away from the status quo than the original proposal. All citizens vote pairwise on the status quo, initial proposal, and counterproposal (majority voting), the counterproposal being the default outcome in case of cyclical collective preferences. We analyze the process on a one-dimensional policy space, allowing for uncertainty about preference distribution. Manipulation may only occur in the first stage, without impacting the final outcome. Pendular Voting can engineer outcomes closer to the median voter’s preferences than standard procedures, even with selfish agenda setters. |
| Keywords: | democracy, manipulation, information sharing, referendum. |
| JEL: | C72 D70 D72 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11783 |
| By: | Tomohiro ARA; Arghya GHOSH; Hodaka MORITA; Hiroshi MUKUNOKI |
| Abstract: | Firms often form a cross-border alliance by partially owning the equity. When and why do firms have cross-border partial equity ownership (PEO)? Under which conditions should a government give approval for firms to form such PEO? To address the questions, this paper develops an international oligopoly model where one foreign firm forms cross-border PEO with one home firm. PEO helps firms adjust production by avoiding trade costs but decreases market competition inducing a rival firm to take aggressive actions. We find that when cost differences between cross-border alliance firms are moderate, they choose PEO in order to shift the output between them most effectively while alleviating a rival firm's aggressive actions. However, a government should ban this PEO from the viewpoint of welfare, since the negative effect of weakened competition dominates the positive effect of output shifting: only when cost differences are large, should a government approve cross-border PEO. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25026 |
| By: | Arnemann, Laura |
| Abstract: | This paper contributes to the ongoing discourse on the taxation of top-income earners by empirically investigating the impact of tax policy changes on pay without performance. Using data on executive compensation in the United States, I compare the sensitivity of executive compensation to performance shocks beyond the executives control before and after a change in the federal and state tax rate. Performance shocks beyond the executives control are measured using exogenous export demand shocks. I find that the effect of taxes on pay without performance depends on the type of tax levied. Specifically, state tax hikes increase the sensitivity of executive compensation to performance shocks exogenous to executive effort. Conversely, changes in federal tax rates have a negative but statistically insignificant effect on pay without performance. Pay without performance changes most in response to state tax hikes for executives with greater mobility. Based on a Nash bargaining model, I outline that these heterogeneous findings can be explained by the importance of outside options for the pass-through of exogenous profit shocks to executive earnings. Firms need to increase compensation more in response to exogenous performance shocks after a state tax hike to retain the executive. |
| Keywords: | Tax Incidence, Rent-Sharing, Executive Compensation |
| JEL: | H22 H24 M12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:313009 |