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on Game Theory |
| By: | Jurek Preker |
| Abstract: | We introduce a novel equilibrium concept that incorporates Knightian uncertainty into the cursed equilibrium (Eyster and Rabin, 2005). This concept is then applied to a two-player game in which agents can engage in trade or refuse to do so. While the Bayesian Nash equilibrium predicts that trade never happens, players do trade in a cursed equilibrium. The inclusion of uncertainty enhances this effect for cursed and uncertainty averse players. This contrasts general findings that uncertainty reduces trade but is consistent with behavior that has been observed in experiments. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.10663 |
| By: | Soumen Banerjee; Yi-Chun Chen; Yifei Sun |
| Abstract: | Implementation theory has made significant advances in characterizing which social choice functions can be implemented in Nash equilibrium, but these results typically assume sophisticated strategic reasoning by agents. However, evidence exists to show that agents frequently cannot perform such reasoning. In this paper, we present a finite mechanism which fully implements Maskin-monotonic social choice functions as the outcome of the unique correlated equilibrium of the induced game. Due to the results in Hart and MasColell (2000), this yields that even when agents use a simple adaptive heuristic like regret minimization rather than computing equilibrium strategies, the designer can expect to implement the SCF correctly. We demonstrate the mechanism's effectiveness through simulations in a bilateral trade environment, where agents using regret matching converge to the desired outcomes despite having no knowledge of others' preferences or the equilibrium structure. The mechanism does not use integer games or modulo games. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.03528 |
| By: | Xiaotie Deng; Ningyuan Li; Weian Li; Qi Qi |
| Abstract: | This paper investigates a two-stage game-theoretical model with multiple parallel rank-order contests. In this model, each contest designer sets up a contest and determines the prize structure within a fixed budget in the first stage. Contestants choose which contest to participate in and exert costly effort to compete against other participants in the second stage. First, we fully characterize the symmetric Bayesian Nash equilibrium in the subgame of contestants, accounting for both contest selection and effort exertion, under any given prize structures. Notably, we find that, regardless of whether contestants know the number of participants in their chosen contest, the equilibrium remains unchanged in expectation. Next, we analyze the designers' strategies under two types of objective functions based on effort and participation, respectively. For a broad range of effort-based objectives, we demonstrate that the winner-takes-all prize structure-optimal in the single-contest setting-remains a dominant strategy for all designers. For the participation objective, which maximizes the number of participants surpassing a skill threshold, we show that the optimal prize structure is always a simple contest. Furthermore, the equilibrium among designers is computationally tractable when they share a common threshold. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.08342 |
| By: | Jasmina Karabegovic (University of Graz, Austria) |
| Abstract: | This paper examines the role of international courts in international agreements, focusing on the WTO and its Dispute Settlement Body (DSB) in the Airbus-Boeing dispute. We model the court as an information provider in a repeated game setting with imperfect public monitoring. For patient governments (the players in this game), efficient agreements are self-enforcing, rendering the court redundant. When governments are less patient, only inefficient agreements are self-enforcing without courts. We provide equilibria in which access to a court enables governments to sustain (substantially) more efficient outcomes relative to the case without courts, regardless of how patient governments are. |
| Keywords: | Repeated games, imperfect public monitoring, international trade, dispute resolution |
| JEL: | C72 C73 D02 F13 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2025-05 |
| By: | Jasmina Karabegovic (University of Graz, Austria); Christoph Kuzmics (University of Graz, Austria) |
| Abstract: | International cooperation sometimes requires flexible agreements that permit temporary non-compliance in certain circumstances. Whether these circumstances occur is often only privately known by the non-complying partner. This paper analyzes how an international court that can only provide information without having any enforcement power can help sustain such flexible international agreements. We study this in a repeated game setting where the monitoring is public but imperfect. We find that for sufficiently patient governments there are in principle highly efficient self-enforcing agreements available. We then focus on the case of impatient governments and identify conditions under which an international court without enforcement power could indeed improve the efficiency of agreements. |
| Keywords: | Repeated games, imperfect public monitoring, international trade, dispute resolution |
| JEL: | C72 C73 D02 F13 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2025-04 |
| By: | Hana Krakovsk\'a; Rudolf Hanel |
| Abstract: | Asymmetric evolutionary games, such as the Ultimatum Game, provide keys to understanding the emergence of fairness in social species. Building on this framework, we explore the evolution of social value systems and the operational role that social status plays in hierarchically organised societies. Within the asymmetric Ultimatum Game paradigm, where "proposers" suggest terms for resource distribution, and "responders" accept or reject these terms, we examine the assignment of roles between players under a subjective social order. This order is grounded in an emergent status hierarchy based on observable player attributes (such as age and wealth). The underlying rules for constructing such a hierarchy stabilise over time by inheritance and family ties. Despite their subjective nature these (often sub-conscious) value systems have operative meaning in controlling access of individuals to resources and decision making. We demonstrate these effects using a simple but sufficiently complex model with dynamical population size and network structure, where division of resources (prey) is carried out according to the principles of the Ultimatum Game. We focus on the emerging proposer and responder thresholds under distinct social hierarchies and interaction networks and discuss them in relation to the extensive body of Ultimatum Game experiments conducted across a wide range of cultural contexts. We observe the emergence of diverse sharing norms, ranging from unfair to highly generous, alongside the development of various social norms. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.07060 |
| By: | Elena Panova (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); Thibault Laurent (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) |
| Abstract: | This paper examines how the structure of communication networks influences learning and social welfare when participants have different prior opinions and face uncertainty about an external state. We analyze a game in which players form links to exchange opinions on the state and reduce their uncertainty. The players hold imperfectly correlated subjective priors on the state. Therefore, their opinions transmit their private signals with frictions, termed interpretation noise. Network clustering facilitates learning by eliminating this interpretation noise. Therefore, the egalitarian efficient network is: a complete component if the interpretation noise is sufficiently high, and a flower otherwise. This network constitutes a Nash equilibrium. These findings establish a link between a key feature of social networks (clustering) and the quality of learning through network communication, offering a potential explanation for the prevalence of clustering in real-world social networks. |
| Keywords: | Network formation, Clustering, Differentiated priors |
| Date: | 2025–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05096724 |
| By: | Xu Wang; Samy Wu Fung; Levon Nurbekyan |
| Abstract: | We develop a simple yet efficient Lagrangian method for computing equilibrium prices in a mean-field game price-formation model. We prove that equilibrium prices are optimal in terms of a suitable criterion and derive a primal-dual gradient-based algorithm for computing them. One of the highlights of our computational framework is the efficient, simple, and flexible implementation of the algorithm using modern automatic differentiation techniques. Our implementation is modular and admits a seamless extension to high-dimensional settings with more complex dynamics, costs, and equilibrium conditions. Additionally, automatic differentiation enables a versatile algorithm that requires only coding the cost functions of agents. It automatically handles the gradients of the costs, thereby eliminating the need to manually form the adjoint equations. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.04169 |
| By: | Gagnie Pascal Yebarth (CNRS, EconomiX, Université Paris Nanterre, 92001 Nanterre) |
| Abstract: | This paper compares ad valorem and per-unit taxes in a bilateral market where all traders have market power. To do so, we use a simple prototype of strategic market games, namely bilateral oligopoly models, and show that ad valorem taxation welfare-dominates per-unit taxation under strategic bilateral trade. Moreover, ad valorem and per-unit taxes have qualitatively different effects on strategic equilibrium offers. |
| Keywords: | Ad valorem taxation, Noncooperative oligopoly, Per unit taxation, Welfare |
| Date: | 2025–03–30 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05066263 |
| By: | Echenique, Federico; Núñez, Matías |
| 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 and 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. (JEL C72, D11, D44, D71, D82) |
| Keywords: | Economics, Applied Economics, Economic Theory, Banking, finance and investment, Applied economics, Economic theory |
| Date: | 2025–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:econwp:qt5dw4g7k5 |
| By: | Lisa Heidelmeier; Marco Sahm |
| Abstract: | We investigate the impact of an environmental award in a Bertrand duopoly with green consumers considering a three-stage game. First, the regulator designs the environmental contest. Second, firms choose their green investments, and the winner of the contest is awarded. Third, firms compete in prices, and consumption takes place. We illustrate that the award not only incentivizes green investments and may thus reduce environmental externalities. As consumers perceive the product of the awarded firm to be of superior quality, it also gives rise to vertical product differentiation. This induces market power, and thus anti-competitive effects: Rents shift from consumers to producers, and consumer surplus may decrease, particularly if marginal investment costs in green technologies are high compared to the strength of environmental damage. |
| Keywords: | Bertrand competition, contests, environmental award, green consumer, product differentiation |
| JEL: | D43 H23 L13 L51 Q52 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11879 |
| By: | Christophe Bravard (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes); Jacques Durieu (CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes); Sudipta Sarangi (Virginia Tech [Blacksburg]); Corinne Touati (Centre Inria de l'Université Grenoble Alpes - Inria - Institut National de Recherche en Informatique et en Automatique) |
| Abstract: | We study influence competition between two players: a designer who can shape the pattern of interaction between a set of agents and influence them, and an adversary who can counter-influence these agents. Creating the network and influencing agents are both costly activities for the two players. The final opinion and the vote of the agents depend on how the two players influence them as well as the opinion of their neighbors. Agent votes determine the payoffs of the two players and to win the designer must obtain the vote of all the agents. We begin by assuming that the designer has the better influence technology, and subsequently relax this assumption. We find that optimal strategies depend on the different costs incurred by the players, as well as who has the advantage in influence technology. We also study what happens when links between agents can arise randomly with a known exogenous probability, taking away some of the designer's control over the network. We provide conditions under which the results of the benchmark model are preserved. Next, we modify two additional assumptions: (1) requiring the designer to only secure a majority of the votes, and (2) allowing the agents interact for several rounds before casting the final vote. In both cases, the designer needs fewer resources to win the game. |
| Abstract: | Nous étudions la compétition d'influence entre deux joueurs : un concepteur qui peut façonner le modèle d'interaction entre un ensemble d'agents et les influencer, et un adversaire qui peut contre-influencer ces agents. La création du réseau et l'influence des agents sont des activités coûteuses pour les deux joueurs. L'opinion finale et le vote des agents dépendent de la manière dont les deux joueurs les influencent ainsi que de l'opinion de leurs voisins. Les votes des agents déterminent les gains des deux joueurs et, pour gagner, le concepteur doit obtenir le vote de tous les agents. Nous commençons par supposer que le concepteur dispose de la meilleure technologie d'influence, puis nous assouplissons cette hypothèse. Nous montrons que les stratégies optimales dépendent des différents coûts encourus par les joueurs, ainsi que de l'identité de l'agent qui a la meilleure technologie d'influence. Nous étudions également ce qui se passe lorsque les liens entre les agents peuvent apparaître de manière aléatoire avec une probabilité exogène connue, ce qui enlève au concepteur une partie de son contrôle sur le réseau. Nous fournissons des conditions sous lesquelles les résultats du modèle de référence sont préservés. Ensuite, nous modifions deux hypothèses supplémentaires hypothèses supplémentaires : (1) exiger que le concepteur n'obtienne qu'une majorité des votes, et (2) permettre aux agents d'interagir pendant plusieurs tours avant de procéder au vote final. Dans les deux cas, le concepteur a besoin de moins de ressources pour gagner le jeu. |
| Keywords: | Network design, Opinion dynamics, Influence networks |
| Date: | 2024–07–23 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04733885 |
| By: | Shunsuke Matsuno (Columbia Business School, Columbia University, U.S.A. and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN) |
| Abstract: | Some organizations are characterized by a conformity culture, where followers are expected to conform to the leadership's behavior. In contrast, other organizations exhibit an anticonformity culture. What drives the variation in conformity culture across organizations? This paper develops a model of leadership and (anti)conformity culture in organizations with dispersed information. The optimal culture trades off coordination gains against informational losses. I show that with strategic complementarity, conformity is optimal; whereas with strategic substitutability, anticonformity is optimal. By showing how culture coordinates agents in organizations with dispersed knowledge–much like the price system coordinates agents in decentralized markets (Hayek, 1945)–I contribute to the theory of organizations centered on corporate culture (Kreps, 1990). Comparative statics of optimal culture sheds light on the origins of cultural variation across organizations from an informational perspective. |
| Keywords: | Leadership; Corporate culture; Conformity; Coordination games |
| JEL: | D23 D82 M14 M21 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2025-15 |
| By: | Simshauser, P.; Shellshear, E. |
| Abstract: | Renewable Energy Zones (REZ) and the associated transmission network infrastructure are an important policy development in Australia’s transitioning electricity market. REZs form the basis upon which to expand the renewable hosting capacity of the National Electricity Market (NEM) at scale, while simultaneously minimising the footprint of infrastructure – noting community, cultural heritage and environmental (i.e. biodiversity) sensitivities. In the NEM’s Queensland region, REZs are developed outside the regulatory framework as non-regulated or ‘merchant’ assets, with connecting generators paying user charges. Early REZs involved a small number of committed generators connecting to, and fully subscribing, the REZ asset. Under such conditions, cost allocation is straight forward. But when a geographically dispersed coalition of generators seek to connect over different timeframes and with longer distances involved – the cost allocation task and the tractability of merchant REZ commitment rises in complexity. Since merchant REZs are a novel concept, there is no historic practice to draw from. In this article, we identify the optimal coalition of connecting generators and rely on Shapley’s (1951) seminal work to devise a fair and efficient set of user charges, albeit in the context of renewable power project development. We also examine how to deal with transient idle capacity through structured financing and regulatory policy. |
| Keywords: | Renewable Energy Zones, Renewables, Battery Storage, Shapely Value |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2025–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2524 |