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on Game Theory |
| By: | Amil Camilo Moore; Rosemarie Nagel; Fabrizio Germano |
| Abstract: | We study similarity in the complete set of one-shot 2×2 games with payoffs from {1, 2, 3, 4} without replacement. Similarity is defined geometrically via a neighborhood structure on games and continuity of behavior, and is applied to both theoretical rules (e.g., Nash equilibrium, level-k reasoning) and experimental data. This produces a partition of the games into (theoretical or empirical) similarity classes. We run a large-scale experiment in which each subject plays all 78 games within our class without feedback. We find that empirically inferred similarity classes diverge sharply from those predicted by Nash equilibrium and dominance reasoning. Instead, the empirical similarity classes align closely with the theoretical classes of a level-k variant, with deviations reflecting fairness and efficiency concerns. At the individual level, subjects' play can be classified according to primary and secondary rules, conforming with either level-k variant (0 ≤ k ≤ 5) or a fairness and efficiency-based heuristic. The main insights extend to strategic settings beyond our 2 × 2 games. |
| Keywords: | equity and efficiency, experiments, level-k reasoning, similarity of games, topology of games |
| JEL: | C52 C70 C72 C81 C90 C93 D91 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1571 |
| By: | Aditya Kuvalekar; Anna Sanktjohanser |
| Abstract: | We analyze a reputational bargaining game in which a central player negotiates simultaneously with two peripheral players. Each player is either rational or a commitment type who never concedes and insists on a fixed share, and concessions are publicly observed. The central player's type is global, so actions in one dispute update beliefs in the other and generate reputational spillovers. The game admits a unique equilibrium, enabling a sharp comparison with the bilateral benchmark of Abreu and Gul (2000). Spillovers are payoff-relevant if and only if a peripheral is uniquely the most reputable player initially. In that case, spillovers overturn the bilateral prediction that toughness pays: the central player is never strictly better off and can be strictly worse off; the strongest peripheral loses; and the weakest peripheral can benefit, especially when the center's higher-stakes dispute is with the other peripheral. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.08616 |
| By: | Marc Deschamps (Université Marie et Louis Pasteur); Dongshuang Hou (Department of Applied Mathematics, Northwestern Polytechnical University); Aymeric Lardon (Université Jean Monnet Saint-Étienne, CNRS, Université Lyon 2, GATE Lyon Saint-Étienne); Christian Trudeau (Department of Economics, University of Windsor) |
| Abstract: | We consider a homogeneous Cournot oligopoly where the inverse demand function is obtained by the utility maximization of a representative consumer, and firms may operate at different marginal costs. Assuming that some firms make a cartel while others remain independent, we introduce three new classes of TU-games, referred to as welfare TU-games, each corresponding to consumer surplus, total profit, and total welfare, respectively. Our results show that the games associated with consumer surplus and total welfare are monotonically decreasing and concave, highlighting a snowball effect of cartel formation on these two welfare measures. In contrast, the game associated with total profit is never superadditive, but it is monotonically increasing and concave when the number of firms is sufficiently small. Furthermore, we apply allocation methods, including the Shapley value and the serial method, to determine ex ante fair fines that firms must pay for participating in the cartel, allowing to differentiate fines both on the order of arrival in the cartel and on the technologies of the firms. For instance, in certain scenarios, some inefficient firms may receive lower fines for joining the cartel due to cost synergies. |
| Keywords: | Cournot competition; Cartel; Welfare; Shapley value; Antitrust. |
| JEL: | C71 D43 K21 L40 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:wis:wpaper:2601 |
| By: | Frank Huettner |
| Abstract: | For networks with externalities, where each component's worth may depend on the full network structure, balanced contributions and fairness lead to distinct component-efficient allocation rules. We characterize the unique component-efficient allocation rule satisfying balanced contributions -- the BCE rule. Existence is the main challenge: balanced contributions must hold on every edge, but the construction uses only spanning-tree edges. A cycle-sum identity bridges this gap by reducing balanced contributions on non-tree edges to relations in proper subnetworks. The BCE rule coincides with the Myerson value for TU games and with its generalization by Jackson--Wolinsky for network games without externalities, it recovers the externality-free value on the complete network, and -- unlike the fairness-based FCE rule -- it does not reduce to a graph-free formula applied to the graph-restricted game. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.13794 |
| By: | S. Nageeb Ali; Ce Liu |
| Abstract: | We show that in Greenberg (1989)'s coalitional repeated game situation, every nondiscriminating Conservative Stable Standard of Behavior is a subset of the set of Perfect Coalitional Equilibrium (Ali and Liu 2026) paths. Moreover, the set of Perfect Coalitional Equilibrium paths itself is a nondiscriminating Conservative Stable Standard of Behavior. The set of Perfect Coalitional Equilibrium paths is therefore the maximal nondiscriminating Conservative Stable Standard of Behavior. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.09460 |
| By: | Hideo Konishi (Boston College); Ryo Tsukamoto (Boston College) |
| Abstract: | In recent years, lumpy technological innovations have occurred with increasing frequency, affecting workers’ wages in ways that depend on their skills and abilities. This paper proposes a framework to evaluate which types of workers gain or lose during the interim period following the introduction of a major technological innovation. Using a cooperative game-theoretic approach, we develop a model of large labor markets with finitely many types of atomless workers and a finite set of available technologies, each described by a pair consisting of a labor input vector and an output value. The equilibrium wage structure is characterized by the f-core (the coalition structure core with finite membership coalitions as in Kaneko and Wooders (1986) of an atomless transferable utility game generated by the model. The generically unique equilibrium wage rates can be computed efficiently, as the f-core allocation maximizes total production value. Within this framework, we analyze how the equilibrium wage structure for heterogeneous worker types changes when a new technology becomes available. We show that, under mild conditions, the introduction of a relevant and efficient technology almost always disadvantages at least one type of labor, while benefiting another. However, when there are more than two labor types, identifying which types gain and which lose is generally nontrivial. We also show that if the population of a given worker type increases, holding available technologies fixed, the wage rate for that type weakly decreases. |
| Keywords: | technological innovation, wage structure, f-core, large game, activity analysis |
| JEL: | C71 D33 J31 |
| Date: | 2026–04–06 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1109 |
| By: | Nigar Hashimzade; Haoran Sun |
| Abstract: | Industrial policy has returned to the centre of economic governance, particularly in the high-tech sectors where positive network externalities in demand make market dominance self-reinforcing. This paper studies the welfare effects of an industrial policy targeting a sector with network externalities in a two-country model with strategic trade and R&D investment. We show how the welfare consequences of this policy are determined by the interaction between the strength of the externality, the type of R&D, and the degree of product differentiation between the home and the imported goods. When externalities are weak or the goods are close substitutes, the business-stealing effect produces a race to the bottom that dissipates more surplus than it creates. Under sufficiently strong externalities and weak substitutability or complementarity of the goods, industrial policy competition can make both countries simultaneously better off compared to the laissez-faire outcome because of the mutual business-enhancement effect. The case is stronger for the product innovation than for the process innovation, as the former directly affects the demand and triggers a stronger network effect than the latter which operates indirectly through the supply. Thus, network externalities create an opportunity for win-win industrial policies, but its realisation depends on the market structure and the nature of innovation. |
| Keywords: | industrial policy, network externalities, R&D subsidies, strategic trade, Cournot competition |
| JEL: | F13 H25 L13 O38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12592 |
| By: | Kaminski, Alen |
| Abstract: | This paper extends the K-coefficient model of systemic crisis, introduced in Anatomy of Chaos: A Theoretical Framework for Forecasting the Morphology of Post-Crisis Regime, by integrating a game-theoretic layer that addresses a question the baseline model cannot answer: why do systems under comparable structural pressure follow divergent transitional paths? The K-coefficient, defined as the ratio of the Structural Stress Index (SSI) to the Structural Resilience Index (SRI), identifies the zone of critical pressure with empirically demonstrated consistency. However, it does not explain why systems with similar K values produce outcomes ranging from rapid regime change to protracted civil war to regime survival without significant concessions. The paper proposes that this divergence is explained by coordination dynamics, formalized through the framework of global games (Morris and Shin, 1998, 2003). Five coordination variables are introduced: R (expected cost of uncoordinated action), C (network connectivity), EFI (Equilibrium Fragility Index = K × C/R), T (coordination threshold), and K_eff (effective K-coefficient = K × (1 + C/R)). The model defines two Nash equilibria — NE1 (inaction) and NE2 (action) — and specifies the conditions under which a stochastic trigger, functioning as a public signal, initiates the transition between them. The formal apparatus is applied to three case studies. The USSR and the Eastern Bloc (1989–1991) demonstrate cascading R decline: each successive regime collapse reduced the expected cost of action in neighboring systems. The Arab Spring (2010–2011) demonstrates heterogeneity of outcomes under a single cascading signal: six systems with K values in the range of 2.10 to 2.86 produced six distinct outcomes, with variation corresponding to differences in EFI. Ukraine (2013–2014) demonstrates non-cascading transition and the repression paradox: the regime escalated coercive force, but in a high-C environment each act of repression functioned as a public signal that reduced R rather than raising it. An extended sample of twenty-two additional cases confirms three empirical patterns: high K combined with high EFI produces rapid transition; high K combined with low EFI produces protracted conflict or regime survival; and moderate K produces indeterminate outcomes regardless of EFI. The paper acknowledges significant limitations: retrospective assignment of variable values, absence of inter-coder reliability, and the absence of a blind predictive test. Five directions for future research are identified, with the blind predictive test designated as the first priority. |
| Date: | 2026–04–04 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:wxbvq_v1 |
| By: | Wilfried Youmbi Fotso; Xun Chen |
| Abstract: | We study Bayesian persuasion when information design is delegated to an intermediary who privately chooses the experiment subject to convex costs and would be incentivized by the principal via outcome-dependent transfers. We provide a sharp characterization of first-best implementability: implementing the first-best requires local affine alignment between the principal's and intermediary's reduced-form payoff indices on the posteriors induced by the target experiment, while a stronger global alignment condition guarantees implementability. Outside the global alignment condition, moral hazard typically prevents first-best implementation. We then characterize the second best: the principal's problem admits a virtual Bayesian persuasion representation in which the objective is distorted by a shadow cost proportional to the intermediary's valuation of posteriors. Under entropy costs, moral hazard compresses posterior dispersion relative to the first-best benchmark. In two-state environments with a binary-action receiver, the optimal second-best experiment has a tractable two-posterior form with explicit formulas for posterior endpoints and mixing weights, and the optimal transfer schedule is characterized in closed form as a triangular system in the shadow price, transfer gap, and participation constraint. A numerical example quantifies the compression: moral hazard reduces posterior spread by approximately 28 percent relative to first best under the baseline parameterization. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.10006 |