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on Game Theory |
| By: | Xinnian Kazusa Pan |
| Abstract: | This paper establishes the equivalence between synchronous and asynchronous coordination mechanisms in dynamic games with strategic complementarities and common interests. Synchronous coordination, characterized by simultaneous commitments, and asynchronous coordination, defined by sequential action timing, are both prevalent in economic contexts such as crowdfunding and fund management. We introduce Monotone Subgame Perfect Nash Equilibrium, MSPNE, to analyze least favorable equilibrium outcomes. We provide a recursive characterization for synchronous coordination and a graph-theoretic representation for asynchronous coordination, demonstrating their equivalence in terms of the greatest implementable outcome. Our results show that the structure of commitment, whether simultaneous or sequential, does not affect the achievable welfare outcome under certain conditions. Additionally, we discuss computational aspects, highlighting the general NP-Hardness of the problem but identifying a significant class of games that are computationally tractable. These findings offer valuable insights for the optimal design of coordination mechanisms. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.01879 |
| By: | Enxian Chen Bin Wu Hanping Xu |
| Abstract: | This paper studies the equilibrium properties of the ``obvious strategy profile'' in large finite-player games. Each player in such a strategy profile simply adopts a randomized strategy as she would have used in a symmetric equilibrium of an idealized large game. We show that, under a continuity assumption, (i) obvious strategy profiles constitute a convergent sequence of approximate symmetric equilibria as the number of players tends to infinity, and (ii) realizations of such strategy profiles also form a convergent sequence of (pure strategy) approximate equilibria with probability approaching one. Our findings offer a solution that is easily implemented without coordination issues and is asymptotically optimal for players in large finite games. Additionally, we present a convergence result for approximate symmetric equilibria. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.22144 |
| By: | David Ryz\'ak; Martin \v{C}ern\'y |
| Abstract: | This paper studies the stochastic setting in cooperative games and suggests a solution concept based on second order stochastic dominance (SSD), which is often applied to robustly model risk averse behaviour of players in different economic and game theoretic models as it enables to model not specified levels of risk aversion among players. The main result of the paper connects this solution concept, \emph{SSD-core}, in case of uniform distribution of the game to cores of two deterministic cooperative games. Interestingly, balancedness of both of these games and convexity of one of these implies non-emptiness of the SSD-core. The opposite implication does not, in general, hold and leads to questions about intersections of cores of two games and their relations. Finally, we present an application of the SSD-core to the multiple newsvendors problem, where we provide a characterization of risk averse behaviour of players with an interpretation in terms of the model. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.19002 |
| By: | Gerrit Bauch; Manuel Foerster |
| Abstract: | We conceptualize the communication of narratives as a cheap-talk game under model uncertainty. The sender has private information about the true data generating process of publicly observable data. The receiver is uncertain about how to interpret the data, but aware of the sender's incentives to strategically provide interpretations ("narratives") in her favor. We consider a general class of decision rules under ambiguity resolving the receiver's ignorance of the true data generating process, including maximum likelihood expected utility. The set of equilibria is characterized by a positive integer $N$: there is an equilibrium that induces $n$ different actions for each $1\leq n \leq N$. The diverting power of the sender is weaker than with a na\"ive receiver being unaware of the sender's incentives. Surprisingly, the receiver sometimes prefers to be na\"ive. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.23259 |
| By: | Guanyi Wang |
| Abstract: | Many policy problems involve designing individualized treatment allocation rules to maximize the equilibrium social welfare of interacting agents. Focusing on large-scale simultaneous decision games with strategic complementarities, we develop a method to estimate an optimal treatment allocation rule that is robust to the presence of multiple equilibria. Our approach remains agnostic about changes in the equilibrium selection mechanism under counterfactual policies, and we provide a closed-form expression for the boundary of the set-identified equilibrium outcomes. To address the incompleteness that arises when an equilibrium selection mechanism is not specified, we use the maximin welfare criterion to select a policy, and implement this policy using a greedy algorithm. We establish a performance guarantee for our method by deriving a welfare regret bound, which accounts for sampling uncertainty and the use of the greedy algorithm. We demonstrate our method with an application to the microfinance dataset of Banerjee et al. (2013). |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.20860 |
| By: | Pietro Battiston; Simona Gamba; Sharon G. Harrison |
| Abstract: | We run an experiment where subjects play a standard repeated two player public good game looking at the effect of being matched to a subject with different endowment — and keeping fixed the overall distribution of endowments. Unlike most of the existing literature, all subjects are aware of the existing heterogeneity in endowments, regardless of whether they are assigned to a financially homogeneous or heterogeneous group. Moreover, since in modern societies financial heterogeneity typically correlates with many other forms of heterogeneity, including habits, tastes and membership in given social groups, we look at how financial heterogeneity interacts with in–group vs. out–group feeling, using randomly formed groups. While neither economic integration nor group membership alone significantly affects overall contributions, and hence welfare, the two strongly interact: being matched to a partner with a different endowment and from the other group results in particularly low contributions. Similarly, being matched to a partner who is from the other group and has low endowment results in particularly low contributions. |
| Keywords: | public good game, economic segregation, in-group effect, laboratory experiment |
| JEL: | H41 C92 D31 |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:pie:dsedps:2024/318 |
| By: | Jan-Henrik Steg |
| Abstract: | This paper studies oligopolistic irreversible investment with closed-loop strategies. These permit fully dynamic interactions that result in much richer strategic behavior than previous studies with open-loop strategies allow. The tradeoff between preemption incentives and the option value of waiting becomes distinctly visible. Strategies that depend on present capital stocks enable credible reactions that deter from excessive preemption and support positive option values in equilibrium. Simpler strategies lead into a "preemption trap" with perfectly competitive outcome and zero net present values. To obtain these results, a novel concept of Markov perfect equilibrium is developed that copes with optimal investment taking the form of singular control. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.17673 |
| By: | Christian Ewerhart |
| Abstract: | It is shown that the two-player Tullock contest admits precisely one equilibrium in randomized strategies. |
| Keywords: | Tullock contest, mixed equilibrium, sequence spaces, Cauchy matrices, Dirichlet series |
| JEL: | C72 D72 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:457 |
| By: | Yushi Hamaguchi; Alex S. L. Tse |
| Abstract: | We introduce an infinite-horizon, continuous-time portfolio selection problem faced by an agent with periodic S-shaped preference and present bias. The inclusion of a quasi-hyperbolic discount function leads to time-inconsistency and we characterize the optimal portfolio for a pre-committing, naive and sophisticated agent respectively. In the more theoretically challenging problem with a sophisticated agent, the time-consistent planning strategy can be formulated as an equilibrium to a static mean field game. Interestingly, present bias and naivety do not necessarily result in less desirable risk taking behaviors, while agent's sophistication may lead to excessive leverage (underinvestement) in the bad (good) states of the world. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.18240 |
| By: | L. Becchetti; I.M. Buso; L. Corazzini; V. Pelligra |
| Abstract: | Drawing from the psychological literature, we define generativity as the preference for the empowering impact of an agent's actions on others' prosociality. We experimentally test its role in determining subjects' choices and welfare by using several variants of the dictator game that either increase the number of direct recipients, implement a generative scenario in which the dictator gives money to a direct intermediate recipient who, in turn, has the opportunity to pass a fraction of this amount to an indirect final beneficiary, or provide the dictator with the option to choose between participating in a standard one-recipient dictator game and entering the generative scenario. Consistent with the concept of generativity, we find that the amount given by the dictator increases with the number of recipients, regardless of whether they benefit directly or indirectly (through the intervention of an intermediate recipient) from the transfer. We also show that the dictator strongly prefers to self-select into the generative scenario, and in this setting, gives an amount that positively depends on how much one expects the intermediate recipient to pass to the indirect final beneficiary. However, we also document a tendency for the intermediate recipient to deliberately embezzle part of the dictator's giving, passing on less than expected by the initial donor, which generates negative effects on the welfare of the indirect final beneficiary. |
| Keywords: | generativity;extended dictator game;Laboratory Experiment |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:cns:cnscwp:202423 |
| By: | Ryoto Ando; Kei Kimura; Taiki Todo; Makoto Yokoo |
| Abstract: | Diffusion mechanism design, which investigate how to incentivise agents to invite as many colleagues to a multi-agent decision making as possible, is a new research paradigm at the intersection between microeconomics and computer science. In this paper we extend traditional facility location games into the model of diffusion mechanism design. Our objective is to completely understand to what extent of anonymity/voter-relevance we can achieve, along with strategy-proofness and Pareto efficiency when voters strategically invite collegues. We define a series of anonymity properties applicable to the diffusion mechanism design model, as well as parameterized voter-relevance properties for guaranteeing reasonably-fair decision making. We obtained two impossibility theorems and two existence theorems, which partially answer the question we have raised in the beginning of the paper |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.05574 |
| By: | Andrea Galeotti; Benjamin Golub; Sanjeev Goyal; Eduard Talam\`as; Omer Tamuz |
| Abstract: | A large differentiated oligopoly yields inefficient market equilibria. An authority with imprecise information about the primitives of the market aims to design tax/subsidy interventions that increase efficiency robustly, i.e., with high probability. We identify a condition on demand that guarantees the existence of such interventions, and we show how to construct them using noisy estimates of demand complementarities and substitutabilities across products. The analysis works by deriving a novel description of the incidence of market interventions in terms of spectral statistics of a Slutsky matrix. Our notion of recoverable structure ensures that parts of the spectrum that are useful for the design of interventions are statistically recoverable from noisy demand estimates. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.03026 |
| By: | Yang, Dianyi |
| Abstract: | Since 2022, central bank losses have been prevalent in advanced economies due to previous quantitative easing and recent inflationary pressures. This paper focuses on the unique case of the United Kingdom, where the government promised in advance to cover any central bank losses arising from quantitative easing. This promise is known as the indemnity. A game-theoretical model is proposed to explain the causes and effects of such indemnity. The model's predictions about the indemnity's effect on central bank profitability are empirically examined. Using the novel Dynamic Multilevel Latent Factor Model (DM-LFM), the indemnity is found to have significantly boosted the Bank of England's profits in the deflationary environment after 2008, but exacerbated its losses under the recent inflationary pressure since 2022. The theoretical model suggests the pronounced effects are due to the Bank of England's high sensitivity to losses and the UK government's moderate fiscal liberalism. Therefore, the British experience should not be generalised. Nevertheless, the theoretical and empirical lessons can inform policy-makers about future institutional designs concerning the fiscal-monetary interactions and the public finance-price stability trade-off. |
| Date: | 2024–08–20 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:wz75m |