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on Game Theory |
| By: | Victor Aguirregabiria; Erhao Xie |
| Abstract: | This paper studies the identification of players' preferences and beliefs in empirical applications of discrete choice games using experimental data. The experiment comprises a set of games with similar features (e.g., two-player coordination games) where each game has different values for the players' monetary payoffs. Each game can be interpreted as an experimental treatment group. The researcher assigns randomly subjects to play these games and observes the outcome of the game as described by the vector of players' actions. Data from this experiment can be described in terms of the empirical distribution of players' actions conditional on the treatment group. The researcher is interested in the nonparametric identification of players' preferences (utility function of money) and players' beliefs about the expected behavior of other players, without imposing restrictions such as unbiased or rational beliefs or a particular functional form for the utility of money. We show that the hypothesis of unbiased/rational beliefs is testable and propose a test of this null hypothesis. We apply our method to two sets of experiments conducted by Goeree and Holt (2001) and Heinemann, Nagel and Ockenfels (2009). Our empirical results suggest that in the matching pennies game, a player is able to correctly predict other player's behavior. In the public good coordination game, our test can reject the null hypothesis of unbiased beliefs when the payoff of the non-cooperative action is relatively low. |
| Keywords: | Testing biased beliefs; Multiple equilibria; Strategic uncertainty; Coordination game |
| JEL: | C57 C72 |
| Date: | 2016–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-560&r=gth |
| By: | Sang-Chul Suh (Department of Economics, University of Windsor); Yuntong Wang (Department of Economics, University of Windsor) |
| Abstract: | We consider a pollution permit sharing problem in which a ?nite number of countries, each identi?ed by a unique technology that transforms the pollution permits into an output, share a given amount of permits. We de?ne a Pollution Permit Sharing (PPS) game that assigns to each coalition of countries the maximal value of output they can generate collectively with their technologies and permits available to them. We show that the game is totally balanced. We also show that, for the well-known Cap and Trade (CAT) mechanism, namely the competitive equilibrium allocation which generates an efficient allocation of the permits, its corresponding (net) output distribution is in the core of the PPS game. We consider two other coalitional games whose de?nitions depend on the availability of either the total permits or the technologies. The Aspiration Upper Bound with given Permits (AUBP) game assigns to each coalition the maximal value they can generate by using the technologies available from all countries, but only with the permits available to the coalition. And the Aspiration Upper Bound with given Technologies (AUBT) game assigns to each coalition the maximal value they can generate using only the technolo-gies available to the coalition with the permits available from all countries. We show that the core of the AUBP game is nonempty. More importantly, we show that the competitive equilibrium allocation violates the above two aspiration upper bound restrictions. Finally, we suggest the Shapley value as one of the possible alternative solutions to the permit sharing problem. |
| Keywords: | Pollution Permits; Cap and Trade; Cooperative Games; Aspiration Upper Bounds. |
| JEL: | C71 D60 Q20 |
| Date: | 2016–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1604&r=gth |
| By: | Katsev, Ilya; Arin Aguirre, Francisco Javier |
| Abstract: | We introduce and analyze a new solution concept for TU games:The Surplus Distributor Prekernel. Like the prekermel, the new solu- tion is based on the an alternative motion of complaint of one player against other with respect to an allocation. The SD-prekernel contains the SD-prenucleolus and they coincide in the class of convex games. This result allows us to prove that in bankruptcy problems the SD-prekernel and the Minimal Overlapping rule select the same allocation. |
| Keywords: | TU, prekernel, games, prenucleolus |
| JEL: | C72 C71 |
| Date: | 2016–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:ehu:ikerla:18238&r=gth |
| By: | Yuntong Wang (Department of Economics, University of Windsor) |
| Abstract: | This paper takes an axiomatic approach to the revenue sharing problem for an airline alliance network. We propose a simple sharing rule that allocates the revenue of each ?ight equally among the carriers of the ?ight. We show that it is the only rule satisfying the axioms of Separability, the Null Airline Property, and Equal Treatment of Equals. We show that the rule coincides with the Shapley value of the game associated with the problem. We provide two extensions of the rule, allowing it to depend on the lengths or the capacities of the ?ight legs. We also consider the maximum revenue problem for the airline alliance. We propose a simple Integer Linear Programming model. We examine its Owen set. Lastly, we provide an algorithm to compute both the optimal solution and the revenue sharing solution given by the simple sharing rule for the maximum revenue problem. |
| Keywords: | Revenue sharing; Airline alliance; Network. |
| JEL: | C71 D70 |
| Date: | 2016–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1605&r=gth |
| By: | Alexandre Skoda (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We consider restricted games on weighted communication graphs associated with minimum partitions. We replace in the classical definition of Myerson's graph-restricted game the connected components of any subgraph by the sub-components corresponding to a minimum partition. This minimum partition P min is induced by the deletion of the minimum weight edges. We provide necessary conditions on the graph edge-weights to have inheritance of convexity from the underlying game to the restricted game associated with P min. Then we establish that these conditions are also sufficient for a weaker condition, called F-convexity, obtained by restriction of convexity to connected subsets. Moreover we show that Myerson's game associated to a given graph G can be obtained as a particular case of the P min-restricted game for a specific weighted graph G ′. Then we prove that G is cycle-complete if and only if a specific condition on adjacent cycles is satisfied on G ′ . |
| Keywords: | restricted game,partitions,communication networks,cooperative game |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-01305005&r=gth |
| By: | Llorente-Saguer, Aniol; Sheremeta, Roman; Szech, Nora |
| Abstract: | A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the “discouragement effect.” Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer’s revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning. |
| Keywords: | all-pay auction, rent-seeking, bid-caps, tie-breaks, contest design |
| JEL: | C72 C91 D72 |
| Date: | 2016–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:71202&r=gth |
| By: | Srivastava, Vatsalya (Tilburg University, TILEC) |
| Abstract: | When players face uncertainty in choosing actions, undesirable outcomes cannot be avoided. Accidental defections caused by uncertainty, that does not depend on the level of care, require a mechanism to reconcile the players. This paper shows the existence of a perfect sorry equilibrium in a game of imperfect public monitoring. In the sorry equilibrium, costly apology is self-imposed in case of accidental defections, making private information public and allowing cooperation to resume. Cost of the apology required to sustain this equilibrium is calculated, the efficiency characteristics of the equilibrium evaluated and outcomes compared to those from other bilateral social governance mechanisms and formal legal systems. It is argued that with the possibility of accidental defections, other social mechanisms have limitations, while formal legal systems can generate perverse incentives. Therefore, apologies can serve as a useful economic governance institution. |
| Keywords: | apology; sorry; imperfect public monitoring; uncertainty; social norms; economics governance; Legal institutions; incentives |
| JEL: | D80 K40 K41 K42 D02 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutil:5925920e-05c6-4ae0-8e76-d7dc5cc314a6&r=gth |
| By: | Karpov, Alexander |
| Abstract: | This paper provides evolutionary game theoretic model of plagiarism. The paper finds the relationship between author effort, publication value, and the frequency of plagiarism. There are two types of equilibria. Plagiarist-free equilibria are neutrally stable. The only evolutionary stable state is characterized by a positive share of plagiarists. |
| Keywords: | plagiarism, replication dynamics |
| JEL: | C73 I23 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:70976&r=gth |
| By: | Cuicui Chen; Richard J. Zeckhauser |
| Abstract: | A central authority, possessing tax and expenditure responsibilities, can readily provide an efficient level of a public good. Climate change mitigation lacks a central authority. Thus, voluntary arrangements must replace coercive arrangements; significant under-provision must be expected. Potential contributors have strong incentives to free ride or ride cheaply. The players – the many nations of the world – are quite disparate. They thus frame negotiations from their own standpoints, making stalemate likely. Moreover, the focal-point solution where contributions are proportional to benefits clashes with the disproportionate cheap-riding incentives of little players. Our proposed solution, the Cheap-Riding Efficient Equilibrium (CREE), defines the relative contributions of players of differing size (or preference intensity) to reflect cheap riding incentives, yet still achieves Pareto optimality. CREE establishes the Alliance/Nash Equilibrium as a base point. From that point it proceeds to the Pareto frontier by applying the principles of the Lindahl Equilibrium (a focal point) or the Nash Bargaining Solution (a standard approach). We test the Alliance Equilibrium model using nations' Intended Nationally Determined Contributions at the Paris Climate Change Conference. As hypothesized, larger nations made much larger pledges in proportion to their Gross National Incomes. We apply our theory to examine the Nordhaus Climate Club proposal. |
| JEL: | C72 F53 H87 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22240&r=gth |
| By: | Maria Cubel (Universitat de Barcelona); Santiago Sanchez-Pages (Universitat de Barcelona) |
| Abstract: | Recent literature has emphasized that individuals display varying levels of strategic reasoning. This paper presents ten years worth of experimental data from two countries exploring the existence and endogeneity of gender differences in strategic sophistication. We report results from two experimental studies employing the beauty contest game, one from the classroom and one from the laboratory. We observe robust and signi?cant gender differences in strategic sophistication in favour of men in zero-stake situations. These differences disappear when a monetary prize is awarded. We also ?find that depth of strategic reasoning varies with gender priming. Females display signi?cantly higher levels of strategic sophistication than males when gender is made salient. This effect of gender priming is driven by females who believe women are superior in the game. |
| Keywords: | guessing game, strategic sophistication, gender, stereotype threat,beliefs. |
| JEL: | C72 C91 D81 J16 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:338web&r=gth |