|
on Game Theory |
| By: | Giuseppe De Marco (University of Napoli Parthenope and CSEF and Università degli Studi di Napoli Federico II); Maria Romaniello (University of Campania Luigi Vanvitelli.); Alba Roviello (Department of Economics and Statistics, University of Napoli Federico II.) |
| Abstract: | This paper examines how guilt aversion affects the equilibria of symmetric 2×2 games with the same Nash equilibrium structure as the Hawk–Dove game: two asymmetric strict pure equilibria and one completely mixed-strategy equilibrium. We classify these generalized Hawk–Dove games into two subclasses, Type 1 and Type 2, based on players’ preferences over deviations toward symmetric profiles. We characterize best-reply correspondences and equilibria under guilt aversion, showing that outcomes are highly sensitive to guilt parameters. In Type 1 games, when guilt sensitivity exceeds a threshold, a new symmetric equilibrium emerges while the mixed-strategy equilibrium disappears. In Type 2 games, guilt aversion affects only the mixed equilibrium, leaving the two asymmetric equilibria unchanged. |
| Keywords: | Hawk-Dove games, equilibria, guilt aversion, psychological games, ambiguous beliefs. |
| JEL: | D81 |
| Date: | 2025–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:756 |
| By: | Andrea Attar; Eloisa Campioni; Thomas Mariotti; Alessandro Pavan |
| Abstract: | We study the design of market information in competing-mechanism games. We identify a new dimension, private disclosures, whereby the principals asymmetrically inform the agents of how their mechanisms operate. We show that private disclosures have two important effects. First, they can raise a principal's payoff guarantee against her competitors' threats. Second, they can support equilibrium outcomes and payoffs that cannot be supported with standard mechanisms. These results call for a novel approach to competing mechanisms, which we develop to identify a canonical game and a canonical class of equilibria, thereby establishing a new revelation principle for this class of environments. |
| Keywords: | incomplete information, competing mechanisms, private disclosures, revelation principle |
| JEL: | D82 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11991 |
| By: | Zíka, Vojtěch; Alfonso, Tomáš; Flegr, Jaroslav |
| Abstract: | In an incentivized laboratory experiment (N = 212), we tested whether a measure capturing both the difference between offers in the Ultimatum and Dictator Games and their distance from zero may be a better predictor of intrinsic altruism than the commonly used Dictator Game offer. Participants took part in a within-subjects, dual-role Dictator Game and Ultimatum Game, followed by a modified version of the Die-under-the-cup Task, in which they could cheat either to benefit themselves or a charity. The experimental games were followed by the Self-Reported Altruism Scale and additional short surveys. The main results showed that although our measure outperformed the Dictator Game offer in predicting altruism, neither was significantly associated with task- or survey-based altruism. Perhaps the most interesting result emerged from the exploratory analysis: the Ultimatum–Dictator Gap—the difference between offers in the two games, and part of our proposed measure—appears to be the strongest predictor of survey-measured altruism. It also positively correlates with the time taken to make an Ultimatum Game offer (suggesting lower cognitive load when gauging the social norm) and with dishonesty. In contrast, it is negatively correlated with political orientation, with economically right-leaning participants showing a larger gap than left-leaning ones. This study offers preliminary support for the idea that integrating Dictator and Ultimatum Game offers—whether as a single gap or a more nuanced measure—may better capture altruistic tendencies than relying on the Dictator Game alone. Nonetheless, further research is needed to confirm and extend these findings. |
| Date: | 2025–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:bwz6m_v1 |
| By: | Shiang-Hung Hu; Po-Hsuan Lin; Thomas R. Palfrey; Joseph Tao-yi Wang; Yu-Hsiang Wang |
| Abstract: | We explore the twin questions of when and why the strategy method creates behavioral distortions in the elicitation of choices in laboratory studies of sequential games. While such distortions have been widely documented, the theoretical forces driving these distortions remain poorly understood. In this paper, we compare behavior in six optimally designed centipede games, implemented under three different choice elicitation methods: the direct response method, the reduced strategy method and the full strategy method. These methods elicit behavioral strategies, reduced strategies, and complete strategies, respectively. We find significant behavioral differences across these elicitation methods -- differences that cannot be explained by standard game theory, but are consistent with the predictions of the Dynamic Cognitive Hierarchy solution (Lin and Palfrey, 2024), combined with quantal responses. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.06425 |
| By: | Rinel Foguen Tchuendom; Dena Firoozi; Mich\`ele Breton |
| Abstract: | Quantilized mean-field game models involve quantiles of the population's distribution. We study a class of such games with a capacity for ranking games, where the performance of each agent is evaluated based on its terminal state relative to the population's $\alpha$-quantile value, $\alpha \in (0, 1)$. This evaluation criterion is designed to select the top $(1-\alpha)\%$ performing agents. We provide two formulations for this competition: a target-based formulation and a threshold-based formulation. In the former and latter formulations, to satisfy the selection condition, each agent aims for its terminal state to be \textit{exactly} equal and \textit{at least} equal to the population's $\alpha$-quantile value, respectively. For the target-based formulation, we obtain an analytic solution and demonstrate the $\epsilon$-Nash property for the asymptotic best-response strategies in the $N$-player game. Specifically, the quantilized mean-field consistency condition is expressed as a set of forward-backward ordinary differential equations, characterizing the $\alpha$-quantile value at equilibrium. For the threshold-based formulation, we obtain a semi-explicit solution and numerically solve the resulting quantilized mean-field consistency condition. Subsequently, we propose a new application in the context of early-stage venture investments, where a venture capital firm financially supports a group of start-up companies engaged in a competition over a finite time horizon, with the goal of selecting a percentage of top-ranking ones to receive the next round of funding at the end of the time horizon. We present the results and interpretations of numerical experiments for both formulations discussed in this context and show that the target-based formulation provides a very good approximation for the threshold-based formulation. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.00853 |
| By: | Justus Preusser |
| Abstract: | This paper studies a market in which a patient long-lived seller offers prices to short-lived buyers. A hidden state determines whether the buyer's common value exceeds the seller's reservation value, and all players only have noisy signals. If the seller has commitment power, the seller waits for a buyer with the most favorable signal to arrive, and else exits the market. Using techniques for monotone decision problems, this waiting strategy is shown to be optimal for learning whether trade is efficient. Due to the interplay between the seller's and the buyers' information, the seller's decision to exit may be non-monotonic in the seller's information, and prices may be non-monotonic over time. Without commitment power, there is an equilibrium in which the seller also waits for a buyer with the most favorable signal, but the seller exits at inefficient times. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.06132 |
| By: | Bernhard Ganglmair; Julian Klix; Dongsoo Shin |
| Abstract: | Many business relationships rely on loose arrangements and relational dynamics in early interactions, only to solidify their alliances through contractual committments later. Using a repeated-games framework with a finite horizon, we show how such a hybrid-contracting strategy can both extend the duration of a cooperative business relationship (intensive margin) and expand the set of environments in which cooperation can be achieved (extensive margin). We model the contractual commitment part of hybrid contracting as a smooth-landing contract that restricts the action space only in the backend of the relationship. Such a flexible contract outperforms more rigid contractual arrangements because it does not crowd out early-stage cooperation, thereby complementing relational dynamics. Our results are robust to extensions that account for variations in contract costs and timing, and we show that optimal contract length trades off profitability with implementability. |
| Keywords: | contracts, hybrid contracting, incomplete contracts, relational contracts, repeated games, R&D, strategic alliances |
| JEL: | C73 D86 L14 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_695 |
| By: | Rémi Avignon; Claire Chambolle; Etienne Guigue; Hugo Molina |
| Abstract: | This article bridges monopoly, monopsony, and countervailing power theories to analyze their welfare implications in a vertical supply chain. We develop a bilateral monopoly model with bargaining that accommodates upstream monopsony and downstream monopoly power. In equilibrium, the ‘‘short-side rule'' applies: the quantity exchanged is determined by the firm willing to trade less. Welfare is maximized when each firm's bargaining power exactly countervails the other's market power. Otherwise, double marginalization arises in the form of double markdownization under excessive downstream bargaining power, or double markupization under excessive upstream bargaining power. We offer novel insights for price regulation and competition policy. |
| Keywords: | markups, markdowns, bargaining, countervailing buyer power, monopsony power, bilateral monopoly |
| JEL: | C78 D42 J42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12026 |
| By: | Yifan Huang; Dong Hao; Zhiyi Fan; Yuhang Guo; Bin Li |
| Abstract: | Reserve prices are widely used in practice. The problem of designing revenue-optimal auctions based on reserve price has drawn much attention in the auction design community. Although they have been extensively studied, most developments rely on the significant assumption that the target audience of the sale is directly reachable by the auctioneer, while a large portion of bidders in the economic network unaware of the sale are omitted. This work follows the diffusion auction design, which aims to extend the target audience of optimal auction theory to all entities in economic networks. We investigate the design of simple and provably near-optimal network auctions via reserve price. Using Bayesian approximation analysis, we provide a simple and explicit form of the reserve price function tailored to the most representative network auction. We aim to balance setting a sufficiently high reserve price to induce high revenue in a successful sale, and attracting more buyers from the network to increase the probability of a successful sale. This reserve price function preserves incentive compatibility for network auctions, allowing the seller to extract additional revenue beyond that achieved by the Myerson optimal auction. Specifically, if the seller has $\rho$ direct neighbours in a network of size $n$, this reserve price guarantees a $1-{1 \over \rho}$ approximation to the theoretical upper bound, i.e., the maximum possible revenue from any network of size $n$. This result holds for any size and any structure of the networked market. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.14470 |
| By: | Marina Agranov; S. Nageeb Ali; B. Douglas Bernheim; Thomas R. Palfrey |
| Abstract: | Strategic models of legislative bargaining predict that proposers can extract high shares of economic surplus by identifying and exploiting weak coalition partners. However, strength and weakness can be difficult to assess even with relatively simple bargaining protocols. We evaluate experimentally how strategic complexity affects the ability to identify weak coalition partners, and for the partners themselves to determine whether their positions are weak or strong. We find that, as strategic complexity progressively obscures bargaining strength, proposers migrate to egalitarianism, in significant part because non-proposers begin placing substantial weight on fairness. Greater analytic skill dampens but does not eliminate these patterns. |
| JEL: | C73 C92 D72 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34083 |
| By: | Francesca Barigozzi; Chiara Canta; Helmuth Cremer |
| Abstract: | This paper studies how firms’ ownership choices and workers’ intrinsic motivation jointly shape service quality and market outcomes in labor-intensive, mission-driven sectors. Two organizations first choose whether to operate as standard for-profit or as mission-oriented firms, and then compete in both the labor and the user markets. Mission-oriented firms have higher unit costs but attract better-motivated workers. Service quality is endogenously determined through the sorting of intrinsically motivated workers and depends on the firm's ownership type. We show that all market structures - standard, mission-oriented, or mixed - can arise in equilibrium, and that mixed structures can be Pareto superior by efficiently allocating the most motivated workers to the mission-oriented firm while preserving the cost advantage of the other firm. While equilibrium outcomes generally diverge from the social optimum due to externalities and lack of coordination, they are both driven by the trade-off between cost-efficiency and motivation. The model helps explain the coexistence of heterogeneous ownership structures observed in some sectors - such as the nursing homes sector - and identifies conditions under which such diversity is welfare-enhancing. |
| Keywords: | mission-driven sectors, mission-oriented firms, workers' motivation, endogenous market structure, welfare |
| JEL: | J21 L13 L31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12011 |
| By: | Khan, Abhimanyu; Peeters, Ronald |
| Abstract: | We characterize stable market structures under price-competition in differentiated markets when multiple cartels may form. Market structures without cartelisation are never stable and always involve multiple small cartels, and, but for one knife-edge case, only involves multiple small cartels. Combined with the result that the unique stable market structure under quantity-competition is also characterised by multiple small cartels, this underscores the importance of considering the possibility of multiple cartels in competition policy. Comparing stable market structures under price and quantity competition, we find that prices and profits are higher under price-competition whenever the market is sufficiently differentiated or sufficiently concentrated. |
| Keywords: | multiple cartels; stable cartels; price competition; differentiated markets |
| JEL: | C70 D43 L13 |
| Date: | 2025–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125199 |
| By: | Andrej Angelovski (Middlesex University Business School); Praveen Kujal (Economic Science Institute, Chapman University and Middlesex University Business School); Jose M. Ortiz (Zayed University) |
| Abstract: | We study how three widely discussed cues—source of income (merit vs luck), own performance, and information about others’ work status and performance—shape redistribution. Prior to the dictator game, all 306 dictators and most of the 306 recipients complete the same real-effort matrix task in an online experiment that would yield either $4 or $1 for the dictators. In the Performance treatment the dictator’s payoff is based on their performance; in Luck, it is assigned by a 50-50 draw. We find that: (i) Earned entitlement is prevalent for high-performing dictators: they keep more for themselves; (ii) Earned entitlement is conditional on performance or luck where high-performing dictators keep more when their high payoff is earned and give more when luck dictated the high payoff; (iii) Regarding recipients, deservingness arises from working and not performance. Dictators give around 20% more to anyone who worked, regardless of others’ performance. Taken together, the results show that dictators use own performance to justify keeping a larger share, yet apply a far coarser rule to others, i.e. they reward work and ignore relative performance. The findings refine the notion of earned entitlement and highlight asymmetric fairness criteria in redistributions. |
| Keywords: | Redistribution, Earned Entitlement, Deservingness, Luck, Performance. |
| JEL: | D31 D91 C91 D63 D64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:chu:wpaper:25-07 |
| By: | Zach Y. Brown; Alexander MacKay |
| Abstract: | We examine a model in which one firm uses a pricing algorithm that enables faster pricing and multi-period commitment. We characterize a coercive equilibrium in which the algorithmic firm maximizes its profits subject to the incentive compatibility constraint of its rival. By adopting an algorithm that enables faster pricing and (imperfect) commitment, a firm can unilaterally induce substantially higher equilibrium prices even when its rival maximizes short-run profits and cannot collude. The algorithmic firm can earn profits that exceed its share of collusive profits, and coercive equilibrium outcomes can be worse for consumers than collusive outcomes. In extensions, we incorporate simple learning by the rival, and we explore the implications for platform design. |
| JEL: | D43 L13 L40 L81 L86 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34070 |
| By: | Jean-Paul Chavas; Eleonora Matteazzi; Martina Menon; Federico Perali |
| Abstract: | We study intrahousehold behavior and investigate how family members negotiate to reach an agreement, recognizing that the negotiation process is relevant, though often costly. We focus not only on the efficient outcomes of the decision-making process, but also on the negotiation process. We propose an evolutionary bargaining approach that evaluates individual bargaining power as a function of the perceived cost of negotiation failure. The analysis extends the original Nash-Harsanyi cardinal representation to ordinal preferences and rationalizes agreements that may be inefficient. We show how bounded rationality generates a latent budget constraint that can be useful in modeling household behavior. The implications for efficiency and income distribution are discussed. We illustrate the usefulness of our theory in an empirical application. |
| Keywords: | Negotiation process, household efficiency, intrahousehold welfare, threat strategies. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cca:wchild:125 |
| By: | Bloch, Francis (Universite Paris 1 and Paris School of Economics); Dziubinsk, Marcin (Institute of Informatics, University of Warsaw); Dutta, Bhaskar (University of Warwick and Ashoka University) |
| Abstract: | A planner wants to select one agent out of n agents on the basis of a binary characteristic that is commonly known to all agents but is not observed by the planner. Any pair of agents can either be friends or enemies or impartials of each other. An individual's most preferred outcome is that she be selected. If she is not selected, then she would prefer that a friend be selected, and if neither she herself or a friend is selected, then she would prefer that an impartial agent be selected. Finally, her least preferred outcome is that an enemy be selected. The planner wants to design a dominant strategy incentive compatible mechanism in order to be able choose a desirable agent. We derive sufficient conditions for existence of efficient and DSIC mechanisms when the planner knows the bilateral relationships between agents. We also show that if the planner does not know the network these relationships, then there is no efficient and DSIC mechanism and we compare the relative efficiency of two second-best DSIC mechanisms. Finally, we obtain sharp characterization results when the network of friends and enemies satisfies structural balance. |
| Keywords: | Peer selection ; Network, Mechanism design without money ; Dominant strategy incentive compatibility |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1571 |
| By: | Christoph Carnehl; Anton Sobolev; Konrad Stahl; André Stenzel; Konrad O. Stahl |
| Abstract: | We study information design in a vertically differentiated market. Two firms offer products of ex-ante unknown qualities. A third party designs a system to publicly disclose information. More precise information guides consumers toward their preferred product but increases expected product differentiation, allowing firms to raise prices. Full disclosure of the product ranking alone suffices to maximize industry profits. Consumer surplus is maximized, however, whenever no information about the product ranking is disclosed, as the benefit of competitive pricing always dominates the loss from suboptimal choices. The provision of public information on product quality becomes questionable. |
| Keywords: | information design, vertical product differentiation, quality rankings, competition |
| JEL: | D43 D82 L13 L15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12038 |
| By: | Martyna Marczak (Department of Economics, Trinity College Dublin); Thomas Beissinger (Department of Economics, University of Hohenheim) |
| Abstract: | We develop a model that incorporates task-based production into a matching model with intrafirm wage bargaining. Unlike in existing task-based models, the representative firm derives the optimal task allocation as a function of capital and labor, rather than relative factor prices. Embedding this mechanism in a model with strategic employment choice, we show how the properties of task-level technology affect the extent of overhiring. |
| Keywords: | task approach; search and matching; Stole-Zwiebel bargaining; overhiring; wage bargaining; elasticity of complementarity |
| JEL: | J23 D24 E23 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:tcd:tcduee:tep0825 |