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on Game Theory |
| By: | Yu-Chin Hsu; Tong Li; Chu-An Liu; Hidenori Takahashi |
| Abstract: | This paper develops a unified framework for testing monotonicity of Bayesian Nash equilibrium strategies in unobserved types in games of incomplete information. We show that, under symmetric independent private types, monotonicity of differentiable equilibrium strategies is equivalent to monotonicity of a quasi-inverse strategy identified from observed actions. This allows the problem to be reformulated as testing a countable set of moment inequalities involving unconditional expectations. We propose a Cramer-von Mises-type statistic with bootstrap critical values. The method accommodates covariates and game heterogeneity. Monte Carlo simulations demonstrate finite-sample performance, and an application to procurement auctions illustrates cartel detection. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.06643 |
| By: | Monika Tomar; Takashi Tanaka |
| Abstract: | This paper introduces a class of continuous-time, finite-player stochastic general-sum differential games that admit solutions through an exact linear PDE system. We formulate a distribution planning game utilizing the cross-log-likelihood ratio to naturally model multi-agent spatial conflicts, such as congestion avoidance. By applying a generalized multivariate Cole-Hopf transformation, we decouple the associated non-linear Hamilton-Jacobi-Bellman (HJB) equations into a system of linear partial differential equations. This reduction enables the efficient, grid-free computation of feedback Nash equilibrium strategies via the Feynman-Kac path integral method, effectively overcoming the curse of dimensionality. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.07479 |
| By: | Denis Claude (LEDi - Laboratoire d'Economie de Dijon [Dijon] - UBE - Université Bourgogne Europe); 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: | This paper revisits Heinrich F. von Stackelberg's original description of leader-follower games under incomplete information, exploring how learning dynamics shape strategic interaction. The leader iteratively updates its conjecture about the follower's reaction function before choosing an activity level that maximizes its payoff. The follower, in turn, responds optimally to each activity level, revealing information that the leader uses to refine its conjecture. Assuming linear conjectures, a smooth updating process à la Jean-Marie and Tidball [2006], and quadratic payoff functions, we establish conditions under which the learning process converges asymptotically to a self-confirming steadystate. We characterize the resulting activity levels and payoffs in two canonical environments: a sequential partnership game and a sequential duopoly game with quantity competition. We then compare the learning outcomes to both the (complete information) Stackelberg and the cartel solution. In the process, we find conditions under which the lack of information and the resulting strategic ambiguity lead to higher joint payoffs, and under which usual intuitions about the first-mover advantage need qualifications. |
| Keywords: | Leader-follower game, incomplete information, conjectures |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05571970 |
| By: | Mathieu Martin; Linus Thierry Nana Noumi; Zéphirin Nganmeni; Ashley Piggins (CY Cergy Paris Université, THEMA) |
| Abstract: | In spatial voting games, the valence is traditionally modeled as a non-ideological attribute that is uniformly assigned to a candidate by all voters, independent of their policy preferences. In its original for-mulation, additive valence is assumed to be entirely detached from the candidate policy considerations. In this paper, we explore an alterna-tive framework in which additive valence interacts with the candidates' policy platforms. Each candidate possesses an individual valence level, but voters choose to recognize this valence only if the candidate is perceived as competent in defending their proposed policy. This perceived competence is assumed to be common knowledge among voters. The core objective of this study is to determine the conditions under which Nash equilibria arise in the context of electoral competition with policy-dependent additive valence. |
| Keywords: | Spatial voting, Electoral competition, Dual valence, Equilibrium |
| JEL: | D70 D71 D72 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2026-03 |
| By: | Prosanta Mandal; Arunava Patra; Sagar Chakraborty |
| Abstract: | Repeated interactions are ubiquitous and known to promote social behaviour. While research often focuses on cooperation in the Prisoner's Dilemma, experimental evidence suggests repeated interactions also foster fairness. This study addresses a gap in the literature by theoretically modelling the evolution of fairness within a repeated mini-ultimatum game. Specifically, we construct a repeated-game framework where offerers and accepters interact using reactive strategies. We then investigate whether fair reactive strategy pairs are resilient against unfair mutants in a two-species population. By analyzing short-term evolutionary stability via the concept of two-species evolutionary stable strategy, we identify a critical effective game length: below this value, fairness is promoted by offerers and accepters who comply with their partner's past actions. Above this critical value, fairness is maintained by `complier' offerers and fair accepters. We also show that specific reactive strategies effectively facilitate the emergence and sustenance of fairness in long-term mutation-selection dynamics. To this end, we develop a two-population stochastic dynamics model -- a generalization of classical adaptive dynamics -- that accounts for finite population sizes and non-local mutants in the reactive strategy space. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.03625 |
| By: | Zenou, Yves (Monash University) |
| Abstract: | This paper reviews the theoretical and empirical foundations of peer and network effects, aiming to bridge insights from both literatures. We first analyze the microfoundations of peer effects through linear–quadratic network games, linking equilibrium behavior to network centrality and highlighting the role of key players. Then, we examine the main identification challenges in linear-in-means models—reflection, correlated effects, and sorting—and show how introducing explicit network structures can help address them. We also review reduced-form strategies based on within-school cohort composition, exposure to peers’ shocks, random assignment, and exogenous variation in network links. Finally, we discuss how structural models of network formation and individual effort choices can resolve endogeneity concerns. The paper concludes with recent advances on non-linear and multiplex interactions, where individuals respond to specific peers and operate across multiple, interdependent layers. |
| Keywords: | social interactions, identification, network games, centrality, multiplex networks, non-linearities |
| JEL: | A14 C57 D85 Z13 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18501 |
| By: | Michel Le Breton (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements 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); Paul Castañeda Dower (Unknown); Gunes Gokmen (Unknown); Шломо Вебер (Unknown) |
| Abstract: | This paper examines the lasting impact of Cold War alignment on African economic development. To determine alignment and reduce the number of potential outcomes under consideration, we introduce a non-cooperative game of social interactions where each country chooses its bloc based on its predetermined bilateral similarities with other members of the bloc. We are able to use the celebrated MaxCut method to exactly identify the equilibrium partition. The alignment predicts UN General Assembly voting patterns during the Cold War but not after. We find that the alignment produces two clusters of development outcomes today that reflect the Cold War's ideological divide. Western-aligned African countries have greater inequality coupled with deeper financial penetration, while there is no difference in the level of income per capita between the two groups of countries. |
| Keywords: | Cold War, Political Alliances, Africa, Blocs, Development Clusters, Strong, Guerre froide, Alliances politiques, Afrique, Blocs, Pôles de développement, ,Nash Equilibrium, Landscape Theory., Equilibre de Nash fort, Théorie du paysage. |
| Date: | 2026–03–13 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05573607 |
| By: | Mathieu Martin; Linus Thierry Nana Noumi; Zéphirin Nganmeni; Ashley Piggins (CY Cergy Paris Université, THEMA) |
| Abstract: | A long-standing foundational problem in the spatial theory of politics is the generic emptiness of the majority core when there is more than one dimension in the policy space. This implies that, in general, we cannot predict where win-motivated candidates will locate in an electoral contest decided by majority rule. We assume that the candidates face some uncertainty: they observe each voter’s ideal point in the policy space but not their indifference surfaces. Given any proper spatial voting game, we first identify the set of imprudent positions in the space. If a candidate adopts an imprudent position, then there exists a position for their opponent that will defeat them for certain. We introduce a new concept, the prudent core, as the set of positionsthat are not imprudent in this sense. We show that the prudent core is always non-empty. With majority voting and an odd number of voters, the prudent core equals the dimension-by-dimension median. The prudent core equals the majority core whenever the latter is nonempty. |
| Keywords: | Spatial theory of politics, median voter theorem, prudent core, prudence |
| JEL: | D71 D72 D81 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2026-04 |
| By: | Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) |
| Abstract: | We conduct welfare analysis of an improvement in compatibility in a network goods market, where firms compete on price and research and development (R&D) activity. Using a Hotelling model, we explore the impact of compatibility on a firm's R&D activity and on producer surplus, consumer surplus, and social welfare. Focusing on the difference in the formation of consumer expectations for network sizes, i.e., rational and active expectations, we demonstrate the following. First, under rational (active) expectations, an improvement in compatibility reduces (does not affect) a firm's R&D activity, but increases (decreases) consumer surplus. However, except for perfect compatibility, although the level of R&D activity is greater under rational expectations than under active expectations, consumer surplus is smaller under rational expectations than under active expectations. Second, regardless of the difference in the formation of consumer expectations, an improvement in compatibility increases producer surplus and social welfare. In addition, producer surplus and social welfare are greater under rational expectations than under active expectations. Finally, we consider the implications of social optimality for perfect compatibility. |
| Keywords: | Network externality, compatibility, strategic R&D competition, Hotelling linear market, fulfilled expectation equilibrium, rational expectation, active expectation |
| JEL: | L13 L15 L31 L32 D43 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:310 |
| By: | Manuel Mueller-Frank; Minghao Pan; Omer Tamuz |
| Abstract: | The value of proof-of-work cryptocurrencies critically depends on miners having incentives to follow the protocol. However, the Bitcoin mining protocol proposed by Nakamoto (2008) and implemented in practice is well known not to constitute an equilibrium: Eyal and Sirer (2018) construct a profitable deviation called ``selfish mining'' which relies on strategically delaying disclosure of newly mined blocks rather than publishing them immediately. We propose inertial mining, a novel mining protocol. When miners follow inertial mining, they produce the outcome intended by Nakamoto, i.e., a single longest chain. But unlike the Bitcoin mining protocol, inertial mining constitutes an equilibrium (assuming no miner controls more than half of the mining power). Indeed, neither selfish mining nor any other deviation is profitable. Furthermore, inertial mining only changes miners' behavior in the event of off-path forks, and can be implemented in Bitcoin without any changes to its consensus mechanism or blockchain architecture. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.06092 |
| By: | Sergei Kichko (Department of Economics and Management, University of Trento and CESifo); Marco A. Marini (Department of Social and Economic Sciences, Sapienza University of Rome); Riccardo D. Saulle (Department of Economics and Management, University of Padova); Jacques-Francois Thisse (CORE-UCLouvain and CEPR) |
| Abstract: | This paper extends the CES model of monopolistic competition to the case where varieties are both horizontally and vertically differentiated. A distinctive feature of our model is the presence of a network externality, which operates through the number of varieties available at each quality level. Depending on the quality gap, there are corner equilibria in which consumers purchase only high-quality or low-quality varieties, or an interior equilibrium in which consumers are split between the two qualities. Unlike the CES model of monopolistic competition, the equilibrium is never efficient and the market may even select the outcome with the lowest surplus. |
| Keywords: | Monopolistic competition, vertical differentiation, horizontal differentiation |
| JEL: | D42 D43 L1 L12 L13 L41 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2026.11 |
| By: | Roberto Brunetti (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - Université Paris-Panthéon-Assas, Université Paris-Panthéon-Assas); Matthieu Pourieux (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This study leverages an online behavioural experiment to analyse whether politicians' decisions align with citizens' preferences and with citizens' decisions within the same decision environment. We recruited 760 local politicians and 655 non‐politicians in France to participate as policymakers in a taxation‐redistribution game. In the game, two policymakers compete to choose a flat tax rate for a group of citizens selected from the French general population. We manipulate (i) the information provided to policymakers about citizens' preferred tax rates, and (ii) the incentives associated with applying citizens' preferred tax rate. We also measure policymakers' beliefs regarding citizens' preferences. We observe that policymakers react positively to information, but they often deviate from it, which can be mostly explained by their beliefs. Incentivizing responsiveness has no impact on these results. This suggests that politicians trade off their own preferences about the policy outcome with an intrinsic motivation to implement citizens' preferences. Finally, we find that politicians believe that citizens want lower tax rates and are more confident in their beliefs than non‐politicians. Once beliefs are accounted for, we observe minor differences between the two samples. Our findings highlight the importance of politicians' beliefs and non‐financial motivations as determinants of their decisions. |
| Keywords: | representation, taxation-redistribution, politicians' behaviour, online experiment |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05577465 |
| By: | Hiroyuki Nishiyama (University of Hyogo); Mina Nakano (University of Hyogo); Manabu Furuta (Graduate School of Economics, Kobe University); Mizuki Tsuboi (University of Hyogo) |
| Abstract: | We examine how workers’ collective voice affects union and nonunion wages both theoretically and empirically. We develop a simple union model with a social insurance system and show that, due to two counteracting forces in bargaining, higher bargaining power raises both union and nonunion wages when ex-ante bargaining power is low but lowers them when it is sufficiently high. Using Japanese household-level data, we document an inverted U-shaped relationship between bargaining power and wages for both groups. Applying entropy balancing, we confirm that union wages are maximized at about 70 percent bargaining power, compared with 44 percent for nonunion wages. Given Japan’s current level of about 25 percent, stronger bargaining power and a rising societal willingness to improve working conditions are likely to benefit union members and also nonunion members once under union coverage. |
| Keywords: | Collective Voice; Union Wages; Nonunion Wages; Bargaining Power; Japan |
| JEL: | J31 J51 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2605 |
| By: | Toshiyuki Uemura (School of Economics, Kwansei Gakuin University) |
| Abstract: | This study theoretically and empirically examines competition among local governments in Japan's hometown tax donation system (Furusato Nozei) using a Hotelling-type model. This study makes four main contributions. First, it develops a simplified Hotelling-type model that incorporates household attachment to local governments in an economic space with donor households and multiple local governments, thereby capturing strategic competition over donation prices. Second, it analyzes the strategic behavior of local governments under the hometown tax donation system within the frameworks of Bertrand and Stackelberg competition. Third, it identifies the effects of policy parameters on equilibrium donation shares through comparative static analysis and verifies these results using numerical simulations. Fourth, using prefecture-level data, it conducts an empirical analysis based on a two-stage least squares (2SLS) method to address potential endogeneity of donation prices, confirming that the theoretical sign conditions of the donation share function are supported by the data. The results indicate that higher marginal costs reduce donation shares, while stronger brand strength of reciprocal gifts and greater household attachment increase donation shares, yielding important policy implications for the design of the hometown tax donation system. |
| Keywords: | hometown tax donation system, Hotelling-type model, donation prices, household attachment |
| JEL: | H71 H72 H77 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:308 |