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on Game Theory |
| By: | Georgalos, Konstantinos; Gonçalves, Ricardo; Ray, Indrajit; SenGupta, Sonali |
| Abstract: | This paper reports results from a laboratory experiment on a continuous Japanese-English auction in a common-value 'wallet game'. The main objective is to test whether bidders follow the equilibrium bidding strategy predicted by theory. We find systematic deviations from equilibrium behaviour: instead of bidding according to the Nash equilibrium, subjects appear to rely on expected value (EV) bidding. As a consequence, observed auction prices are higher than the theoretical benchmark, and the winner's curse occurs in a substantial fraction of auctions. We analyse bidding behaviour in detail and discuss the implications of our findings. |
| Keywords: | Japanese-English auction (JEA), Wallet game, Continuous bids, Winner’s curse, Expected value bidding |
| JEL: | C72 C91 C92 D63 D83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qmsrps:202601 |
| By: | Jingmin Huang; Yang Sun; Fanqi Xu; Wei Zhao |
| Abstract: | This paper investigates the decentralized provision of public goods in directed networks. We establish a correspondence between kernels in graph theory and specialized equilibria in which players either contribute a fixed threshold amount or free-ride entirely. Leveraging this relationship, we derive sufficient conditions for the existence and uniqueness of specialized equilibria in deterministic networks and prove that specialized equilibria exist almost surely in large random networks. We further demonstrate that enhancing network reciprocity weakly expands the set of specialized equilibria without destroying existing ones. Moreover, we propose an iterative elimination algorithm that simplifies the network while preserving equilibrium properties. Finally, we show that a Nash equilibrium is stable only if it is specialized, thereby providing dynamic justification for our focus on this equilibrium class. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23193 |
| By: | Raouf Boucekkine (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Giorgio Fabbri (Univ. Grenoble Alpes, CNRS, INRA, Grenoble INP, GAEL, Grenoble, France); Salvatore Federico (Dipartimento di Matematica, Universit`a di Bologna, Bologna, Italy); Fausto Gozzi (Dipartimento di Economia e Finanza, Libera Universit`a Internazionale degli Studi Sociali “Guido Carli”, Rome, Italy); Ted Loch-Temzelides (Rice University, Houston, USA); Cristiano Ricci (Universita di Pisa, Italy) |
| Abstract: | In order to investigate strategic interactions between a “global north” and a “global south” we introduce a two-country extension of the model in Golosov et al. (2014). We consider different transfers between the two regions, including transfers that can improve the abatement technology. Our model can accommodate several kinds of heterogeneity, including in preferences, time discount rates, and damages resulting from the stock of accumulated GHG. We solve for both planner’s solutions and non-cooperative equilibria. We then calibrate our model in order to study quantitative differences between these solutions and to quantitatively explore the role of heterogeneity and Knightian uncertainty. We characterize emissions, damages, consumption, transfers, and welfare by computing the Nash equilibria of the associated dynamic game. We then compare these to efficiency benchmarks. Further, we investigate how (deep) uncertainty affects climate outcomes. We develop a general model for the study of optimal control and differential games that are linear-in-state, which we term the Integral Transformation Method (ITM), which encompasses several existing models as special cases. |
| Keywords: | Integral Transformation Method, Analytical integrated assessment model, differential game, climate policy, robust control |
| JEL: | C7 Q5 Q54 D62 H23 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2534 |
| By: | Michalis Drouvelis; Nobuyuki Hanaki; Yuta Shimodaira |
| Abstract: | Extending the power-to-take game, we explore the impact of two forces that may shape retaliation. In our 2x2 design, i) in addition to taking, proposers can give part of their endowment to responders, and ii) in addition to destroying their own endowment in retaliation, responders can destroy the proposers’ endowment. Although these additional options lead responders to retaliate more severely, they do not significantly influence proposers’ behavior. Only when proposers can give and responders can concurrently destroy proposers’ endowments do proposers take significantly less from the responders. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1262r |
| By: | Ilona Cserh\'ati; \'Eva Gyurkovics; Tibor Tak\'acs |
| Abstract: | To model the interaction of fiscal and monetary policy, a novel discrete-time, uncertain, infinite time horizon, dynamic game model is developed, where the uncertainties of expectations are modeled by unknown nonlinear but quadratically constrained deterministic functions. Cost-guaranteeing Nash strategies are defined for fiscal and monetary policy as two players. The model is suitable for comparative analysis of the development paths of catching-up economies. Specifically, we evaluate nine possible development paths for the Hungarian economy, where each path is characterised by a proxy for the debt-to-GDP ratio. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.15723 |
| By: | Michele Fabi; Viraj Nadkarni; Leonardo Leone; Matheus X. V. Ferreira |
| Abstract: | We develop an axiomatic theory for Automated Market Makers (AMMs) in local energy sharing markets and analyze the Markov Perfect Equilibrium of the resulting economy with a Mean-Field Game. In this game, heterogeneous prosumers solve a Bellman equation to optimize energy consumption, storage, and exchanges. Our axioms identify a class of mechanisms with linear, Lipschitz continuous payment functions, where prices decrease with the aggregate supply-to-demand ratio of energy. We prove that implementing batch execution and concentrated liquidity allows standard design conditions from decentralized finance-quasi-concavity, monotonicity, and homotheticity-to construct AMMs that satisfy our axioms. The resulting AMMs are budget-balanced and achieve ex-ante efficiency, contrasting with the strategy-proof, expost optimal VCG mechanism. Since the AMM implements a Potential Game, we solve its equilibrium by first computing the social planner's optimum and then decentralizing the allocation. Numerical experiments using data from the Paris administrative region suggest that the prosumer community can achieve gains from trade up to 40% relative to the grid-only benchmark. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.24432 |
| By: | Masaaki Fujii |
| Abstract: | Financial firms and institutional investors are routinely evaluated based on their performance relative to their peers. These relative performance concerns significantly influence risk-taking behavior and market dynamics. While the literature studying Nash equilibrium under such relative performance competitions is extensive, its effect on asset price formation remains largely unexplored. This paper investigates mean-field equilibrium price formation of a single risky stock in a discrete-time market where agents exhibit exponential utility and relative performance concerns. Unlike existing literature that typically treats asset prices as exogenous, we impose a market-clearing condition to determine the price dynamics endogenously within a relative performance equilibrium. Using a binomial tree framework, we establish the existence and uniqueness of the market-clearing mean-field equilibrium in both single- and multi-population settings. Finally, we provide illustrative numerical examples demonstrating the equilibrium price distributions and agents' optimal position sizes. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.21621 |
| By: | Johannes H\"orner; Paula Onuchic |
| Abstract: | We study a reputational cheap-talk environment in which a judge, who is privately and imperfectly informed about a state, must choose between two speakers of unknown reliability. Exactly one speaker is an expert who perfectly observes the state, while the other is a quack with no information. Both speakers seek to be selected, while the judge wishes to identify the expert. We show that, quite generally, there is an equilibrium in which the expert is honest, yet the judge favors more extreme signals. This bias toward extremism does not induce exaggeration by the expert, but instead sustains truthful communication. The quack strategically mimics the expert's speech, and sometimes panders to the judge's prior. We show that learning in this environment exhibits an ``information begets information'' property: judges with more precise private information are more likely to identify the expert and learn the true state, implying that exposure to competing sources of uncertain reliability may amplify informational inequality across audiences. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.00653 |
| By: | Luca Corazzini; Christopher Cotton (Queen's University); Enrico Longo (Unviersity of Venice) |
| Abstract: | Collective efforts often rely on high-capacity “stars†—star employees, lead investors, or major donors—whose participation disproportionately determines success. Is it better to engage them early to set direction, or later to ensure completion? We investigate this strategic design problem experimentally, where collective success requires coordination on both direction and effort. We find that sequential engagement significantly outperforms simultaneous action, following a clear heuristic: stars should lead when the broader team is disorganized (to focus attention) but anchor when the team is already organized (to resolve effort failure). Regardless of when star engagement occurs, groups tend to support the majority’s preferred action when it is clear. Disorganized groups, in contrast, look to the preferences of the star for guidance. Finally, groups converge towards more equitable outcomes than equilibria imply, with the star taking on a disproportionate, but not excessive, share of costs. The timing that maximizes success also maximizes the payoffs of both the star and majority members, suggesting that managers can focus on effectiveness, relying on cooperative norms to prevent excessive free-riding and ensure fairness. |
| Keywords: | Collective Action, Teamwork, Collaboration, Star Performer, Crowdfunding, Charitable Giving, Leadership, Organizational Design |
| JEL: | C92 D23 D71 H41 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:qed:wpaper:1542 |
| By: | Giampaolo Bonomi |
| Abstract: | We study how open disagreement influences team performance in a dynamic production game. Team members can hold different priors about the productivity of the available production technologies. Initial beliefs are common knowledge and updated based on observed production outcomes. We show that when only one technology is available, a player works harder early on when her coworkers are initially more pessimistic about the technology's productivity. Holding average team optimism constant, this force implies that a team's expected output increases in the degree of disagreement of its members. A manager with the task of forming two-member teams from a large workforce maximizes total expected output by matching coworkers' beliefs in a negative assortative way. When alternative, equally good, production technologies are available, a disagreeing team outperforms any like-minded team in terms of average output and team members' welfare. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22736 |
| By: | Tingting Ding; Steven F. Lehrer |
| Abstract: | We conduct a series of laboratory experiments that implement the Daley and Green (2020) model to examine whether the gradual, exogenous revelation of sellers’ private information influences the occurrence of trades in a bilateral bargaining setting with a static lemon condition. We find that while information does not increase efficiency, it reduces the likelihood that buyers incur losses when trading with low-quality sellers. Anticipating that additional signals will arrive, buyers hesitate to finalize deals immediately and exhibit a “waiting for news” effect, making sizable offer adjustments only when sufficient positive signals have accumulated. In contrast, informed sellers are less sensitive to news but appear to wait for the offer that they deem acceptable. |
| JEL: | C70 C92 D82 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34543 |
| By: | Youichiro Higashi; Kemal Ozbek; Norio Takeoka |
| Abstract: | In this paper, we study axiomatic foundations of Bayesian persuasion, where a principal (i.e., sender) delegates the task of choice making after informing a biased agent (i.e., receiver) about the payoff relevant uncertain state (see, e.g., Kamenica and Gentzkow (2011)). Our characterizations involve novel models of Bayesian persuasion, where the principal can steer the agent's bias after acquiring costly information. Importantly, we provide an elicitation method using only observable menu-choice data of the principal, which shows how to construct the principal's subjective costs of acquiring information even when he anticipates managing the agent's bias. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23409 |
| By: | Anthropelos, Michail; Kardaras, Constantinos |
| Abstract: | We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders strategically trade against their price impacts. We prove existence and uniqueness of a corresponding equilibrium, and provide an efficient algorithm to numerically obtain the equilibrium prices and allocations given market's inputs. We find that restrictions may increase the market's welfare if traders have different views regarding the covariance matrix of securities returns. The latter heterogeneity regarding covariance matrix disagreement is essential in modelling; for instance, when traders agree on the covariance matrix, restricting participation in some securities for some traders leaves equilibrium prices unaltered in the unrestricted securities, a certainly undesirable model effect. |
| Keywords: | thin markets; restricted participation; constrained participation; price impact; risk sharing; Nash equilibrium; heterogeneous beliefs; disagreement on second moments; welfare |
| JEL: | J1 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:121058 |