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on Game Theory |
| By: | Bergantiños, Gustavo; Moreno-Ternero, Juan D. |
| Abstract: | We study the problem of sharing the revenue from broadcasting sport events, among participating players. We provide direct, axiomatic and game-theoretical foundations for two focal rules: the equal-split rule and concede-and-divide. The former allocates the revenues generated from broadcasting each game equally among the participating players in the game. The latter concedes players in each game the revenues generated by their respective fans and divides equally the residual. We also provide an application studying the case of sharing the revenue from broadcasting games in La Liga, the Spanish Football League. We show that hybrid schemes, combining our rules with lower bounds and performance measures, yield close outcomes to the current allocation being implemented by the Spanish National Professional Football League Association. |
| Keywords: | resource allocation, broadcasting, sport events, concede-and-divide, Shapley value. |
| JEL: | C72 |
| Date: | 2018–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94311&r=all |
| By: | Walsh, A. M. |
| Abstract: | A set of agents is connected by two distinct networks, with each network describing access to a different local public good. Agents choose which networks to invest in, and neighbouring agents' investments in the same good are strategic substitutes, as are an agent's two investment choices. There are always equilibria where any investing agent bears all local investment costs and others free-ride. When investment in one good reduces marginal benefit from investment in the other, agents free-riding in one good may invest more profitably in the other, and equilibrium payoffs are more evenly distributed. This need not reduce aggregate payoff. |
| Keywords: | Multi-layer networks, network games, public goods |
| JEL: | D85 C72 H41 |
| Date: | 2019–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1954&r=all |
| By: | Gary Charness; Francesco Feri; Miguel A. Meléndez-Jiménez; Matthias Sutter |
| Abstract: | The effectiveness of social interaction depends strongly on an ability to coordinate actions efficiently. In large networks, such coordination may be very difficult to achieve and may depend on the communication technology and the network structure. We examine how pre-play communication and clustering within networks affect coordination in a challenging experimental game on eight-person networks. Free-form chat is enormously effective in achieving the non-equilibrium efficient outcome in our game, but restricted communication (where subjects can only indicate their intended action) is almost entirely ineffective. We can rationalize this result with a novel model about the credibility of cheap-talk messages. This credibility is much larger with freeform message communication than with restricted communication. We are the first to model this credibility and show, both theoretically and experimentally, an interaction effect of network structure and communication technologies. We also provide a model of message diffusion, which indeed predicts that diffusion will be more rapid without clustering and is consistent with our data. |
| Keywords: | networks, clustering, communication, credibility, cheap talk, experiment |
| JEL: | C71 C91 D03 D85 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7659&r=all |
| By: | Jelnov, Artyom (Ariel University); Jelnov, Pavel (Leibniz University of Hannover) |
| Abstract: | In this article, we empirically study the survival of the ruling party in parliamentary democracies using a hazard rate model. We define survival of a crisis as being successful in a critical vote in the parliament. We develop a general probabilistic model of political crises and test it empirically. We find that during crises, parties in the parliament are likely to vote independently of each other. Thus, we receive as an empirical result what the previous voting power literature assumed. |
| Keywords: | voting power, coalitions, cabinet duration, Shapley-Shubik index, Rae index |
| JEL: | D72 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12354&r=all |
| By: | Soeiro, Renato; Adrego Pinto, Alberto |
| Abstract: | We show that in a duopoly with homogeneous consumers, if these are negatively influenceable by each other behavior (e.g. congestion/ snob/ Veblen/ network effects), a pure price equilibrium with positive profits for both firms exists. Furthermore, even in the case products are undifferentiated, an equilibrium where firms charge different (positive) prices and have different profits exists. Thus, when firms engage in uniform price competition, heterogeneity, and in particular non-atomicity in the distribution of preferences, is neither a necessary condition to ensure existence, nor to achieve asymmetries. We further show that in the case products are differentiated, social differentiation overcomes the effect of standard differentiation in creating price asymmetries. |
| Keywords: | Social influence; Bertrand duopoly; Bertrand competition; network effects; product differentiation; homogeneous products; pure price equilibrium; linear demand. |
| JEL: | C72 D00 D01 D03 D40 D43 L00 L13 |
| Date: | 2019–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94271&r=all |
| By: | Nicola Doni; Domenico Menicucci |
| Abstract: | Gentry, Li, Lu (2017) (GLL henceforth) study an auction model with endogenous entry in which, before the entry decision, each bidder observes a private signal; a higher signal implies a better distribution for the bidder's valuation. GLL claim that the optimal reserve price is greater than the seller's value for the object on sale and that the optimal entry fee is positive. We prove that these claims are incorrect: The seller may want to subsidize entry to stimulate competition in the auction (through a negative entry fee or through a reserve price below the seller's value), or to provide appropriate entry incentives if a suitable reserve price is effective at maximizing total surplus and at extracting bidders' rents. We provide conditions under which the claims in GLL hold true. |
| Keywords: | Auctions; Endogenous Entry; Reserve price; Entry fee. |
| JEL: | D44 D82 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2019_18.rdf&r=all |
| By: | Luís Sá; Luigi Siciliani; Odd Rune Straume |
| Abstract: | We develop a dynamic model of hospital competition where (i) waiting times increase if demand exceeds supply; (ii) patients choose a hospital based in part on waiting times; and (iii) hospitals incur waiting time penalties. We show that, whereas policies based on penalties will lead to lower waiting times, policies that promote patient choice will instead lead to higher waiting times. These results are robust to different game-theoretic solution concepts, designs of the hospital penalty structure, and patient utility specifications. Furthermore, waiting time penalties are likely to be more effective in reducing waiting times if they are designed with a linear penalty structure, but the counterproductive effect of patient choice policies is smaller when penalties are convex. These conclusions are partly derived by calibration of our model based on waiting times and elasticities observed in the English NHS for a common treatment (cataract surgery). |
| Keywords: | hospital competition, waiting times, patient choice, differential games |
| JEL: | C73 H42 I11 I18 L42 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7661&r=all |
| By: | Kotowski, Maciej (Harvard Kennedy School) |
| Abstract: | Consider a first-price, sealed-bid auction with interdependent valuations and private budget constraints. Private budget constraints introduce subtle strategic tradeoffs with first-order consequences for equilibrium bidding. In a pure-strategy, symmetric equilibrium, agents may adopt discontinuous bidding strategies resulting in a stratification of competition along the budget dimension. In an asymmetric setting, equilibria in “nondecreasing†strategies exist, albeit in a qualified sense. Private budgets introduce significant confounds for the interpretation of bidding data due to their interaction with risk preferences and their countervailing strategic implications. |
| JEL: | D44 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp19-021&r=all |
| By: | Federico Innocenti; Domenico Menicucci |
| Abstract: | This paper examines competition in an oligopoly with multiproduct firms when some firms bundle but other firms sell their products separately, whereas the existing literature on competitive bundling focuses on the extreme cases of competition among bundles or among individual products. Our analysis reveals each firm’s individual incentive to bundle, and allows to study a two-stage game in which first each firm chooses its pricing strategy (bundling or independent pricing), then price competition occurs given the price regime each firm has selected at stage one. When firms are ex ante symmetric, we find that bundling is weakly dominated by independent pricing. In a setting in which a firm’s products have higher quality than its rivals’ products, individual incentives to bundle emerge (eventually for all firms) if the quality difference is large. |
| Keywords: | Oligopoly, Pure bundling, Independent Pricing, Competitive bundling |
| JEL: | D43 L13 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2019_16.rdf&r=all |
| By: | Paul Belleflamme; Martin Peitz |
| Abstract: | We consider two-sided platforms with the feature that some users on one or both sides of the market lack information about the price charged to participants on the other side of the market. With positive cross-group external effects, such lack of price information makes demand less elastic. A monopoly platform does not benefit from opaqueness and optimally reveals price information. By contrast, in a two-sided singlehoming duopoly, platforms benefit from opaqueness and, thus, do not have an incentive to disclose price information. In competitive bottleneck markets, results are more nuanced: if one side is fully informed (for exogenous reasons), platforms may decide to inform users on the other side either fully, partially or not at all, depending on the strength of cross-group external effects and the degree of horizontal differentiation. |
| Keywords: | price transparency, two-sided markets, competitive bottleneck, platform competition, price information, strategic disclosure |
| JEL: | D43 L12 L13 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_99&r=all |
| By: | Dütting, Paul; Fischer, Felix; Parkes, David C. |
| Abstract: | Ideally, the properties of an economic mechanism should hold in a robust way across multiple equilibria and under varying assumptions regarding the information available to participants. Focusing on the design of robust position auctions, we seek mechanisms that possess an efficient equilibrium and guarantee high revenue in every efficient equilibrium, under complete and incomplete information. A generalized first-price auction that is expressive in the sense of allowing multidimensional bids turns out to be the only standard design able to achieve this goal, even when valuations are one dimensional. The equilibria under complete information are obtained via Bernheim and Whinston’s profit target strategies, those under incomplete information via an appropriate generalization thereof. Particularly interesting from a technical perspective is the incomplete information case, where the standard technique for establishing equilibrium existence due to Myerson is generalized to a setting in which the bid space has higher dimension than the valuation space. |
| Keywords: | simplicity-expressiveness tradeoffs; generalized first-price auction; profit-target strategies |
| JEL: | J1 |
| Date: | 2019–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:85877&r=all |
| By: | Heiko Karle; Martin Peitz; Markus Reisinger |
| Abstract: | For many products, platforms enable sellers to transact with buyers. We show that the competitive conditions among sellers shape the market structure in plat form industries. If product market competition is tough, sellers avoid competitors by joining different platforms. This allows platforms to sustain high fees and ex plains why, for example, in some online markets, several homogeneous platforms segment the market. Instead, if product market competition is soft, agglomeration on a single platform emerges, and platforms fight for the dominant position. These insights give rise to novel predictions. For instance, market concentration and fees are negatively correlated in platform industries, which inverts the standard logic of competition. |
| Keywords: | intermediation, two-sided markets, market structure, price competition, endogenous segmentation |
| JEL: | L13 D43 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_101&r=all |
| By: | Hassan Benchekroun; Amrita Ray Chaudhuri; Dina Tasneem |
| Abstract: | We consider a common-pool renewable resource differential game. We show that within this dynamic oligopolistic framework, free trade may lead to a lower discounted sum of consumer surplus and of social welfare than autarky. Trade restrictions may be supported based on both resource conservation and effciency motives. A priori, this fi nding is not straightforward; a move from Autarky to Free Trade causes industry output to first increase and then decrease over time. While producers are shown to be always worse off under free trade than under autarky, consumers are better off in the short run and worse off in the long run. We determine the conditions under which the long-run effects outweigh the short-run effects of trade, leading to a decrease in the discounted sum of not only consumer surplus, but also social welfare. |
| URL: | http://d.repec.org/n?u=RePEc:win:winwop:2019-01&r=all |
| By: | Stark, Oded (University of Bonn); Budzinski, Wiktor (University of Warsaw); Kosiorowski, Grzegorz (Cracow University of Economics) |
| Abstract: | We use queuing-related behavior as an instrument for assessing the social appeal of alternative cultural norms. Specifically, we study the behavior of rational and sophisticated individuals who stand in a given queue waiting to be served, and who, in order to speed up the process, consider switching to another queue. We look at two regimes that govern the possible order in which the individuals stand should they switch to the other queue: a regime in which cultural convention, social norms, and basic notions of fairness require that the order in the initial queue is preserved, and a regime without such cultural inhibitions, in which case the order in the other queue is random, with each configuration or sequence being equally likely. We seek to find out whether in these two regimes the aggregate of the behaviors of self-interested individuals adds up to the social optimum defined as the shortest possible total waiting time. To do this, we draw on a Nash Equilibrium setting. We find that in the case of the preserved order, the equilibrium outcomes are always socially optimal. However, in the case of the random order, unless the number of individuals is small, the equilibrium outcomes are not socially optimal. |
| Keywords: | decision processes, queuing, Nash Equilibrium, social customs, social welfare |
| JEL: | C72 D60 Z13 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12361&r=all |
| By: | Benchekroun, H.; Ray Chaudhuri, A. (Tilburg University, Center For Economic Research); Tasneem, Dina |
| Abstract: | We consider a common-pool renewable resource differential game. We show that within this dynamic oligopolistic framework, free trade may lead to a lower discounted sum of consumer surplus and of social welfare than autarky. Trade restrictions may be supported based on both resource conservation and efficiency motives. A priori, this fi…nding is not straightforward; a move from Autarky to Free Trade causes industry output to fi…rst increase and then decrease over time. While producers are shown to be always worse off under free trade than under autarky, consumers are better off in the short run and worse o¤ in the long run. We determine the conditions under which the long-run effects outweigh the short-run effects of trade, leading to a decrease in the discounted sum of not only consumer surplus, but also social welfare. |
| Keywords: | renewable resources; international trade; fisheries; common property |
| JEL: | F10 Q20 Q22 Q27 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:41c456ca-4ff9-470d-a93b-40d648459ddb&r=all |
| By: | Bergantiños, Gustavo; Moreno-Ternero, Juan D. |
| Abstract: | We consider the problem of sharing the revenues from broadcasting sport league events, introduced by Bergantiños and Moreno-Ternero (2019). We characterize a family of rules compromising between two focal and somewhat polar rules: the equal-split rule and concede-and-divide. The characterization only makes use of three basic axioms: equal treatment of equals, additivity and maximum aspirations. We also show further interesting features of the family: (i) if we allow teams to vote for any rule within the family, then a majority voting equilibrium exists; (ii) the rules within the family yield outcomes that are fully ranked according to the Lorenz dominance criterion; (iii) the family provides rationale for existing schemes in real-life situations. |
| Keywords: | resource allocation, broadcasting, sport events, concede-and-divide, equal-split. |
| JEL: | C71 |
| Date: | 2019–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94310&r=all |
| By: | Seres, G. (Tilburg University, Center For Economic Research); Pigon, Adam |
| Abstract: | Procuring authorities frequently use screening in order to mitigate risky bids. This study estimates the effect of bid screening and litigation on entry and bidding using a unique data set on highway construction procurement auctions in Poland. The market exhibits a screening method that ex post selects eligible offers. We demonstrate with an empirical model that this method disproportionately affects small firms and creates a barrier to entry. Our results suggest that screening increases bids by two channels. First, it directly inflates bids as well as decreasing entry. Second, in a competitive market, lower entry also inflates bids and prices. |
| Keywords: | procurement; auctions; market design; litigation |
| JEL: | H57 D44 L5 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:3314c398-ea79-4f74-96f4-8cad82f8efa8&r=all |
| By: | de Pinto, Marco (IAAEU, University of Trier); Goerke, Laszlo (IAAEU, University of Trier) |
| Abstract: | In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises. |
| Keywords: | oligopoly, efficiency wages, excessive entry, welfare |
| JEL: | D43 J31 L13 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12351&r=all |
| By: | Creane, Anthony |
| Abstract: | In his textbook Tirole (1988, pp. 291-294) presents a model of advertising with Hotelling duopolists. It has been inferred (e.g., Bagwell, 2007) that in the competitive equilibrium derived, there can be socially too little advertising. It is shown that given the assumptions in Tirole (1988), there cannot be socially too little advertising for this equilibrium. |
| Keywords: | informative advertising, existence, welfare |
| JEL: | D83 L13 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94572&r=all |
| By: | Kimhi, Ayal; Hanuka-Taflia, Nirit |
| Abstract: | We examine the drivers of the convergence of the hourly wage distributions of males and females in Israel between 1995 and 2008. Israel is an interesting case study in this respect, since it experienced declining wage inequality in recent decades, as opposed to most developed countries. We found convergence of both average wages and wage inequality. In particular, average wages increased faster for females than for males, while wage inequality declined faster for males than for females. We decomposed these distributional changes into the contributions of worker and job attributes, the returns on these attributes and residuals using a Shapley approach applied to counterfactual simulated wage distributions. We found that most of the increase in male wages was due to the increased wage gaps in favor of specific occupations and industries, while female wages increased mostly due to the increase in the returns to experience. The decline in wage inequality was driven mostly by changes in attributes, the decline in the returns to education, and the catching-up of immigrant workers, and each of these components was stronger for males than for females. We conclude that the convergence of the male and female wage distributions was due to both changes in the supply of labor, especially among females, and changes in the demand for labor leading to changes in the returns to various skills. |
| Keywords: | Financial Economics, Labor and Human Capital |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ags:huaedp:290057&r=all |