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on Game Theory |
| By: | Ian Gemp; Crystal Qian; Marc Lanctot; Kate Larson |
| Abstract: | Nash equilibrium serves as a fundamental mathematical tool in economics and game theory. However, it classically assumes knowledge of player utilities, whereas economics generally regards preferences as more fundamental. To leverage equilibrium analysis in strategic scenarios, one must first elicit numerical utilities consistent with player preferences, a delicate and time-consuming process. In this work, we forgo precise utilities and generalize the Nash equilibrium to a setting where we only assume a player is capable of providing an ordinal ranking of their actions within the context of other players' joint actions. The key technical challenge is to rethink the definition of a best-response. While the classical definition identifies actions maximizing expected payoff, we naturally look towards social choice theory for how to aggregate preferences to identify the most preferred actions. We define this generalized notion of a context-ordinal Nash equilibrium, establish its existence under mild conditions on aggregation methods, introduce notions of regularization, approximation, and regret, explore complexity for simple settings, and develop learning rules for computing such equilibria. In doing so, we provide a generalization of Nash equilibrium and demonstrate its direct applicability to elicited preferences in human experiments. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.07996 |
| By: | Francesc Dilmé |
| Abstract: | We study finite-player normal-form games with compact metric ac on spaces and bounded measurable payoffs. Our main theorem shows that every Nash equilibrium of such a game can be recovered as the limit, in the product weak topology, of Nash equilibria of finite games obtained by discre zing the ac on spaces and perturbing payoffs by a uniformly vanishing amount. The proof samples from the target equilibrium, uses concentra on inequali es to control weak convergence and incen ve constraints on a growing finite set, and then applies a payoff perturba on to convert the resul ng approximate equilibrium into an exact one. We also provide an example of a con nuous game with a Nash equilibrium that cannot be approximated through Nash equilibria of finite games without perturbing payoffs. |
| Keywords: | Infinite games, Nash equilibria, finite approxima ons |
| JEL: | C72 C62 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_744 |
| By: | Madjid Eshaghi Gordji; Mohamad Ali Berahman |
| Abstract: | Strategic competitions in the real world, from wars to geopolitical rivalries, often involve coalitions competing against rival groups. These contests are not simple interactions between unified entities, but multilayered processes in which coalitions face external competition while dealing with internal conflicts over resources and strategy. Existing game-theoretic models typically treat inter-coalition rivalry and intra-coalition competition separately. This paper introduces the Compound Coalition-Attrition Game (CCAG), a unified framework that integrates a war of attrition between coalitions with a simultaneous war of attrition within each coalition. In this model, the endurance of a coalition in external competition is determined by the strategic choices of its members, who compete internally for shares of the outcome. We prove the nonexistence of pure-strategy equilibria and characterize the unique mixed-strategy Nash equilibrium. The analysis reveals feedback effects: external competition intensifies internal conflict, while internal discord weakens external performance. A case study compares traditional commodity markets, including gold, copper, and silver, with cryptocurrency markets, including Bitcoin, Ethereum, and Solana, using data from 2018 to 2023 in a simulation framework. The results demonstrate applicability in industrial strategy, corporate decision-making, and geopolitical competition. The CCAG framework provides a tool for analysing complex strategic environments. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.02354 |
| By: | Simon Elgersma; Hassan Benchekroun; Gerard Cornelis van der Meijden; Cees A. Withagen |
| Abstract: | We characterize the time-consistent solution to the cartel-fringe model of exhaustible resource extraction when the cartel acts as a von Stackelberg leader and renewable substitutes exist. For this feedback von Stackelberg equilibrium (FBSE), we show for each combination of stocks which equilibrium sequence will prevail. The equilibrium outcomes for the FBSE differ significantly: it features either an initial phase of simultaneous supply by the cartel and fringe or an initial phase where the cartel is the sole supplier on the market. We furthermore compare the FBSE with the Nash Cournot and the open-loop von Stackelberg equilibria. |
| Keywords: | cartel-fringe, dynamic game, time-consistency, von Stackelberg equilibrium |
| JEL: | Q01 Q30 Q38 Q42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12648 |
| By: | Ruimeng Hu; Mike Ludkovski; Hezhong Zhang |
| Abstract: | We develop a stochastic game-theoretic model for intraday dispatch of grid-scale battery energy storage systems (BESSs). We assume that each BESS operator competitively manages her state-of-charge to maximize energy arbitrage revenues, driven by the endogenized electricity price that depends on the sum of the charging rates. We characterize the Nash equilibrium of the resulting finite-player linear-quadratic differential game with a shared stochastic driver, obtaining semi-explicit representations of equilibrium feedback controls and equilibrium prices both in the general heterogeneous and the simplified homogeneous BESS setting, via a system of Riccati equations. We then analyze competitive effects, including the marginal externality of additional BESS entering the market, the benefit of coordination and the corresponding market power of large operators, and supply effects from hybrid-type BESSs. We further study the asymptotic regime as the number of agents grows large. Our model provides a quantitative testbed to study the impact of decentralized BESS deployment on the grid and the resulting reduction in daily price spreads. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.01178 |
| By: | Paraskevas V. Lekeas; Giorgos Stamatopoulos |
| Abstract: | We revisit games in partition function form, i.e. cooperative games where the payoff of a coalition depends on the partition of the entire set of players. We assume that each coalition computes its worth having probabilistic beliefs over the coalitional behavior of the outsiders, i.e., it assigns various probability distributions over the set of partitions that the outsiders can form. These beliefs are not necessarily consistent with respect to the actual choices of the outsiders. We apply this framework to symmetric partition function form games characterized by either positive or negative externalities and we derive conditions on coalitional beliefs that guarantee the non-emptiness of the core of the induced games. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.01521 |
| By: | Paolo Pin |
| Abstract: | This paper studies how the possibility of strategic misreporting shapes endogenous communication networks. Agents observe noisy private signals about a common state, form costly communication links, exchange private messages with their neighbors, and then choose actions. Payoffs reward both accuracy and coordination with linked agents. A link is valuable because it gives access to information, but it is useful only if the induced local information structure makes truthful transmission incentive compatible. We show that clique components support truthful communication: within a clique, all members observe the same profile of local signals, choose the same posterior action, and therefore have no incentive to distort reports. With heterogeneous signal precisions and convex linking costs, the core selects assortative information clubs ordered by signal precision. These stable truthful networks need not be socially efficient. Because the informational value of precision is decreasing, concentrating high-precision agents in the same club may be privately stable but socially dominated by more mixed partitions. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.02776 |
| By: | Francesco Giordano |
| Abstract: | We study which outcomes are implementable by disclosing coarse statistics of a data-generating process rather than its full distribution. Players observe data whose joint distribution is only partially known: they know the expectations of finitely many random variables and form beliefs by maximum-entropy inference. We obtain two characterizations. When message spaces are unrestricted, implementable outcomes coincide with jointly coherent outcomes, expanding the set of correlated equilibria. With canonical mechanisms, implementability reduces to a single cross-entropy condition: the target outcome must lie on the cross-entropy level set of some correlated equilibrium that passes through that equilibrium itself. Examples and several classes of games illustrate the reach of the framework. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.07469 |
| By: | Paolo Pin; Roberto Rozzi |
| Abstract: | We study the emergence of conformity preferences in an environment in which agents choose effort under heterogeneous, possibly misspecified returns, and social interactions do not directly affect material payoffs. Some agents choose effort by trading off performance and conformity to expected peer behavior. We characterize subjective best responses. For any given beliefs, an optimal and unique level of peer pressure exists and is evolutionarily stable within groups of agents sharing the same misspecification. Such a level is zero for correctly specified agents and may be positive for misspecified ones. When the efficient level of peer pressure is interior, misspecified agents choose effort equal to their true return, resulting in an equilibrium behavior that is both self-confirming and Nash, allowing the persistence of misspecifications. Peer pressure need not generate long-run allocative distortions, but it creates a perceived value of social information. In equilibrium, this value depends only on misspecification, generating scope for informational rents. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.02756 |
| By: | Zhicheng Du; Yingkai Li; Boli Xu |
| Abstract: | A principal and $n\ge 2$ agents can launch a project if the principal proposes it and at least $k$ agents accept. Their individual payoffs from the project depend on an ex ante unknown state. The principal can conduct a test to learn about the state and then communicate her findings to the agents via cheap talk. This paper focuses on comparing two communication regimes: public and private messaging. We show that public messaging is weakly dominant: any outcome implementable under private messaging can also be implemented under public messaging. Moreover, in a canonical environment with linear payoffs, we characterize the principal's optimal test in each regime and show that public messaging can be strictly dominant if and only if there exist two agents who are the principal's conflicting allies. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.03621 |
| By: | Pablo Garcia Sanchez; Olivier Pierrard |
| Abstract: | Recent empirical evidence reveals an income gradient in support for climate action: individuals in wealthier countries are less willing to pay, as a percentage of their income, than those in poorer countries. What explains this gradient, and what does it imply for international cooperation to protect the Earth’s climate? We answer these questions using a heterogeneous-country integrated assessment model formulated as a mean field game and calibrated to historical economic and climate data. Poorer countries, facing higher marginal utility of consumption, cut consumption less to cushion the decline in capital accumulation caused by climate damages. As a result, they suffer larger relative losses from climate change over time and gain more from mitigation, making them more inclined to accept a global carbon tax. This gradient has stark implications for cooperation: even when a carbon tax large enough to contain temperature increases benefits most countries, the richest might oppose. Redistributing global carbon tax proceeds uniformly across countries or recycling them as green investment subsidies need not overcome this reluctance. |
| Keywords: | Neoclassical Growth Model; Mean Field Game; Climate Policy |
| JEL: | C61 H23 Q50 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp205 |
| By: | Paolo Panteghini |
| Abstract: | This paper shows that a static trade-off model generates a negative cross-sectional relationship between leverage and profitability once ex ante Nash bargaining over the perpetual debt coupon is introduced. The central mechanism works as follows: higher shareholder bargaining power lowers the negotiated coupon, which reduces leverage — the ratio of debt to equity — and shrinks the interest tax shield, thereby lowering firm value for fixed earnings before interest and taxes (EBIT) and raising the earnings yield. Heterogeneity in bargaining power across firms thus produces a negative co-movement between leverage and valuation-based profitability in the cross-section. A key implication concerns how this mechanism maps into accounting data. Under historical-cost measurement (GAAP), book assets do not respond to the bargaining environment, so the mechanism is attenuated in reported return on assets (ROA). Under fair-value-oriented measurement (IFRS), book assets track enterprise value more closely, making the negative relationship more visible in the data. This asymmetry has particular relevance for multinational groups operating across jurisdictions with heterogeneous accounting standards, where within-group comparisons of leverage and profitability may be systematically distorted by the coexistence of the two regimes. |
| Keywords: | capital structure, trade-off theory, Nash bargaining, leverage-profitability puzzle, creditor rights, accounting standards |
| JEL: | G32 G33 H25 K22 M41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12639 |
| By: | Holden, Stein T. (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Tione, Sarah (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Tilahun, Mesfin (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Katengeza, Samson (Centre for Land Tenure Studies, Norwegian University of Life Sciences) |
| Abstract: | Trust and trustworthiness are central to economic development and are frequently studied using behavioral experiments. A concern is that such evidence often relies on student samples, raising questions about external validity. While existing studies, largely from high income countries, suggest that students represent a lower bound on pro-social behavior, little is known about whether it generalizes to low-income country contexts. <p> This paper compares trust, trustworthiness, beliefs, and reciprocity norms between large representative samples of university students and rural adults in Malawi using incentivized trustgame experiments with consistent ingroup–outgroup framing. We show that, contrary to prevailing expectations, students exhibit higher levels of trust and trustworthiness than rural adults. While social distance plays a stronger role among rural adults in form of ingroup–outgroup differences in trustworthiness, such a difference was not found for trust. Surprisingly, we found stronger reciprocity norms and more optimistic beliefs about expected returns among students. <p> Analyzing beliefs and norms as mechanisms, we find that beliefs are associated with trust, while reciprocity norms are strongly related to trustworthiness. Strong norms enhance reciprocity behavior, and especially so in the student sample. <p> Overall, the results demonstrate that assumptions about student samples do not transfer straightforwardly across contexts. In low-income countries, students may not provide a lower bound on pro-social behavior. Social distance, reciprocity norms, and beliefs about the trustworthiness of others can strongly influence cooperation. The findings underscore the value of within-country comparisons for assessing external validity and have implications for the design and interpretation of experimental evidence in development research. |
| Keywords: | Trust game; University students; Rural subjects; External validity; Norms; Beliefs |
| JEL: | C92 D01 D64 O12 |
| Date: | 2026–05–14 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nlsclt:2026_003 |