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on Game Theory |
| By: | Promit K. Chaudhuri; Sudipta Sarangi; Hector Tzavellas |
| Abstract: | We consider an incomplete information network game in which agents' information is restricted only to the identity of their immediate neighbors. Agents form beliefs about the adjacency pattern of others and play a linear-quadratic effort game to maximize interim payoffs. We establish the existence and uniqueness of Bayesian-Nash equilibria in pure strategies. In this equilibrium agents use local information, i.e., knowledge of their direct connections to make inferences about the complementarity strength of their actions with those of other agents which is given by their updated beliefs regarding the number of walks they have in the network. Our model clearly demonstrates how asymmetric information based on network position and the identity of agents affect strategic behavior in such network games. We also characterize agent behavior in equilibria under different forms of ex-ante prior beliefs such as uniform priors over the set of all networks, Erdos-Reyni network generation, and homophilic linkage. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.03124&r=gth |
| By: | Fulin Guo |
| Abstract: | This paper explores the potential of using Generative Pre-trained Transformer (GPT)-based agents as participants in strategic game experiments. Specifically, I focus on the finitely repeated ultimatum and prisoner's dilemma games, two well-studied games in economics. I develop prompts to enable GPT agents to understand the game rules and play the games. The results indicate that, given well-crafted prompts, GPT can generate realistic outcomes and exhibit behavior consistent with human behavior in certain important aspects, such as positive relationship between acceptance rates and offered amounts in the ultimatum game and positive cooperation rates in the prisoner's dilemma game. Some differences between the behavior of GPT and humans are observed in aspects like the evolution of choices over rounds. I also study two treatments in which the GPT agents are prompted to either have social preferences or not. The treatment effects are evident in both games. This preliminary exploration indicates that GPT agents can exhibit realistic performance in simple strategic games and shows the potential of using GPT as a valuable tool in social science research. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.05516&r=gth |
| By: | de Vos, Wout (Tilburg University, Center For Economic Research); Borm, Peter (Tilburg University, Center For Economic Research); Hamers, Herbert (Tilburg University, Center For Economic Research) |
| Keywords: | Opinion dynamics; networks; influence; targeting; Nash equilibria |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:6d555d3d-5f45-42e7-8b71-c96026f17bdc&r=gth |
| By: | Sumit Goel; Amit Goyal |
| Abstract: | We consider two-player contests with the possibility of ties and study the effect of different tie-breaking rules on effort. For ratio-form and difference-form contests that admit pure-strategy Nash equilibrium, we find that the effort of both players is monotone decreasing in the probability that ties are broken in favor of the stronger player. Thus, the effort-maximizing tie-breaking rule commits to breaking ties in favor of the weaker agent. With symmetric agents, we find that the equilibrium is generally symmetric and independent of the tie-breaking rule. We also study the design of random tie-breaking rules that are unbiased ex-ante and identify sufficient conditions under which breaking ties before the contest actually leads to greater expected effort than the more commonly observed practice of breaking ties after the contest. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.13866&r=gth |
| By: | Timo Goeschl; ; Alice Soldà (-) |
| Abstract: | Pledges feature in international climate cooperation since the 2015 Paris Agreement. We explore how differences in pledgers’ trustworthiness affect outcomes in a social dilemma that parallels climate change. In an online experiment, two participants interact with a randomly matched third player in a repeat maintenance game with a pledge stage. Treatments vary whether participants are matched with a player that is more or less trustworthy as revealed by behavior in a promise-keeping game; and whether they observe that trustworthiness. We find that participants knowingly matched with more trustworthy players cooperate more than participants matched with less trustworthy players (knowingly or unknowingly), but also more than participants unknowingly matched with more trustworthy players. In contrast, participants knowingly matched with less trustworthy players do not co-operate less than participants who are unknowingly so. Our findings suggest that the use of pledges, as per the Paris Agreement, can leverage the power of trustworthiness to enhance cooperation. |
| Keywords: | Social dilemmas; cooperation; pre-play communication; credibility;pledges; group formation |
| JEL: | C72 C92 D83 D91 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:23/1070&r=gth |
| By: | Raphael Boleslavsky; Mehdi Shadmehr |
| Abstract: | We study the canonical signaling game, endowing the sender with commitment power. We provide a geometric characterization of the sender's attainable payoffs, described by the topological join of the graphs of the sender's interim payoff functions associated with different sender actions. We compare the sender's payoffs in this setting with two benchmarks. In the first, in addition to committing to her actions, the sender can commit to provide the receiver with additional information. In the second, the sender can only commit to release information, but cannot commit to her actions. We illustrate our results with applications to job market signaling, communication with lying costs, and disclosure. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.00777&r=gth |
| By: | Jeongbin Kim; Wooyoung Lim; Sebastian Schweighofer-Kodritsch |
| Abstract: | We provide causal evidence that patience is a significant source of bargaining power. Generalizing the Rubinstein (1982) bargaining model to arbitrarily non-stationary discounting, we first show that dynamic consistency across bargaining rounds is sufficient for a unique equilibrium, which we characterize. We then experimentally implement a version of this game where bargaining delay is negligible (frequent offers, so dynamic consistency holds by design), while payoff delay is significant (a week or month per round of disagreement, with or without front-end delay). Our treatments induce different time preferences between subjects by randomly assigning individuals different public payoff delay profiles. The leading treatment allows to test for a general patience advantage, predicted independent of the shape of discounting, and it receives strong behavioral support. Additional treatments show that this advantage hinges on the availability of immediate payoffs and reject exponential discounting in favor of present-biased discounting. |
| Keywords: | Alternating-Offers Bargaining, Time Preferences, Present Bias, Laboratory Experiments |
| JEL: | C78 C91 D03 |
| Date: | 2023–05–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdp:dpaper:0015&r=gth |
| By: | Valeria Fanghella (EESC-GEM Grenoble Ecole de Management); Lisette Ibanez (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier); John Thøgersen (Aarhus University [Aarhus]) |
| Abstract: | Prosocial behavior is important for a well-functioning society, but many people try to avoid situations where they could act prosocially. This paper studies the avoidance of a prosocial request, how it is affected by social pressure, and whether request avoidance and social pressure generate spillover effects on following prosocial behaviors. To this aim, we conduct an incentivized online experiment (N=1400), where participants play two consecutive dictator games with a charity. In the first game, we vary the type of game and information provided in a 2 x 2 between-subject design: (i) standard dictator game or dictator game with costly opt-out; (ii) with or without social information (mean donation in a previous session). The second game is a standard dictator game for all and aims to capture spillover effects from the first decision. We find that the opt-out option leads to significantly lower donations, especially when social information is present (but this effect is not statistically significant). The negative effect of the opt-out option spills over to the second donation decision. We also observe a negative spillover effect after a standard dictator game. Social information reduces donations in a standard dictator game, but also allows to mitigate the negative spillover effect from the first to the second behavior. |
| Keywords: | prosocial behavior, opt-out option, social information, spillover, charitable giving, selfimage |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:gemwpa:hal-04093001&r=gth |
| By: | Paolo Galeazzi; Johannes Marti |
| Abstract: | Following the decision-theoretic approach to game theory, we extend the analysis of Epstein & Wang and of Di Tillio from hierarchies of preference relations to hierarchies of choice functions. We then construct the universal choice structure containing all these choice hierarchies, and show how the universal preference structure of Di Tillio is embedded in it. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.11575&r=gth |
| By: | Jiarui Gan; Minbiao Han; Jibang Wu; Haifeng Xu |
| Abstract: | This paper provides a systematic study of the robust Stackelberg equilibrium (RSE), which naturally generalizes the widely adopted solution concept of the strong Stackelberg equilibrium (SSE). The RSE accounts for any possible up-to-$\delta$ suboptimal follower responses in Stackelberg games and is adopted to improve the robustness of the leader's strategy. While a few variants of robust Stackelberg equilibrium have been considered in previous literature, the RSE solution concept we consider is importantly different -- in some sense, it relaxes previously studied robust Stackelberg strategies and is applicable to much broader sources of uncertainties. We provide a thorough investigation of several fundamental properties of RSE, including its utility guarantees, algorithmics, and learnability. We first show that the RSE we defined always exists and thus is well-defined. Then we characterize how the leader's utility in RSE changes with the robustness level considered. On the algorithmic side, we show that, in sharp contrast to the tractability of computing an SSE, it is NP-hard to obtain a fully polynomial approximation scheme (FPTAS) for any constant robustness level. Nevertheless, we develop a quasi-polynomial approximation scheme (QPTAS) for RSE. Finally, we examine the learnability of the RSE in a natural learning scenario, where both players' utilities are not known in advance, and provide almost tight sample complexity results on learning the RSE. As a corollary of this result, we also obtain an algorithm for learning SSE, which strictly improves a key result of Bai et al. in terms of both utility guarantee and computational efficiency. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.14990&r=gth |
| By: | Edoardo Gallo; Joseph Lee; Yohanes Eko Riyanto; Erwin Wong |
| Abstract: | Social networks can sustain cooperation by amplifying the consequences of a single defection through a cascade of relationship losses. Building on Jackson et al. (2012), we introduce a novel robustness notion to characterize low cognitive complexity (LCC) networks - a subset of equilibrium networks that imposes a minimal cognitive burden to calculate and comprehend the consequences of defection. We test our theory in a laboratory experiment and find that cooperation is higher in equilibrium than in non-equilibrium networks. Within equilibrium networks, LCC networks exhibit higher levels of cooperation than non-LCC networks. Learning is essential for the emergence of equilibrium play. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.01209&r=gth |
| By: | Yichuan Lou |
| Abstract: | A sender seeks to persuade a receiver by presenting evidence obtained through a sequence of private experiments. The sender has complete flexibility in his choice of experiments, contingent on the private experimentation history. The sender can disclose each experiment outcome credibly, but cannot prove whether he has disclosed everything. By requiring `continuous disclosure', I first show that the private sequential experimentation problem can be reformulated into a static one, in which the sender chooses a single signal to learn about the state. Using this observation, I derive necessary conditions for a signal to be chosen in equilibrium, and then identify the set of beliefs induced by such signals. Finally, I characterize sender-optimal signals from the concavification of his value function constrained to this set. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.04231&r=gth |
| By: | Aslihan Akdeniz (University of Amsterdam); Christopher Graser (University of Amsterdam); Matthijs van Veelen (University of Amsterdam) |
| Abstract: | Alger and Weibull (2013) ask the question whether a combination of assortative matching and incomplete information leads to the evolution of moral or altruistic preferences. Their central result states that Homo Hamiltonenis – a type that has moral preferences with a morality parameter equal to the level of assortment – is evolutionarily stable, while preferences that lead to different behaviour are unstable. Together with their claim that altruistic and moral preferences differ sharply, this suggests that moral preferences tend to beat altruistic ones in evolutionary competition. We show that this is not true. First of all, we show that there is a loophole in the definition of evolutionary stability, allowing for Homo Hamiltonensis to satisfy the definition when the set of equilibria is empty, and their equilibrium behaviour is not determined. If we try to close this loophole, by allowing for mixing, or by allowing for asymmetric equilibria, we find that there are two options. With the first approach, the differences in behaviour between Homo Hamiltonensis and regular altruists can be substantial, but as soon as the difference appears, Homo Hamiltonensis can be invaded, and regular altruists win in direct competition. With the second way of allowing for mixing, or coordination on asymmetric equilibria, Homo Hamiltonensis cannot be invaded, but then the difference in behaviour all but disappears, as all equilibria between Homo Hamiltonensis are also equilibria between regular altruists. Classification-JEL: |
| Keywords: | Altruism, morality, evolution, assortment, incomplete information. |
| Date: | 2023–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20230025&r=gth |
| By: | Olivier Compte (Paris School of Economics) |
| Abstract: | In dynamic environments, Q-learning is an adaptative rule that provides an estimate (a Q-value) of the continuation value associated with each alternative. A naive policy consists in always choosing the alternative with highest Q-value. We consider a family of Q-based policy rules that may systematically favor some alternatives over others, for example rules that incorporate a leniency bias that favors cooperation. In the spirit of Compte and Postlewaite [2018], we look for equilibrium biases (or Qb-equilibria) within this family of Q-based rules. We examine classic games under various monitoring technologies. |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2304.12647&r=gth |
| By: | Taipov Mikhail (Department of Economics, Lomonosov Moscow State University) |
| Abstract: | Net Neutrality imposes many restrictions on the work of Internet service providers, which can significantly affect their profits and the welfare of other economic agents in the ISP market. This article analyzes the following rules established by the Net Neutrality: “zero price” rule and the prohibition of exclusive deals between ISPs and content providers. To study the implications of Net Neutrality, a game-theoretic model of the ISP market is being created, the unique feature of which is that content providers are divided into two following types: one large content provider that creates a large cross-network effect for consumers and is able to strike exclusive deals with ISPs in the absence of Net Neutrality; and many small content providers that create a small crossnetwork effect and aren’t able to influence the prices set by ISPs. This model allowed me to draw the following conclusions about the effects of Net Neutrality: Net Neutrality increases the profits of Internet service providers and reduces the profits of a large content provider; increases the total social welfare if a large content provider joins both ISPs in the absence of Net Neutrality. The impact of net neutrality on consumer surplus and profits of small content providers depends on the exclusivity of a large content provider in the absence of net neutrality. |
| Keywords: | net Neutrality, content providers, exclusivity, platforms, social welfare |
| JEL: | C65 C79 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:upa:wpaper:0054&r=gth |
| By: | Tatiana Daddario; Richard P. McLean; Andrew Postlewaite |
| Abstract: | In this paper, we take a mechanism design approach to optimal assignment problems with asymmetrically informed buyers. In addition, the surplus generated by an assignment of a buyer to a seller may be adversely affected by externalities generated by other assignments. The problem is complicated by several factors. Buyers know their own valuations and externality costs but do not know this same information for other buyers. Buyers also receive private signals correlated with the state and, consequently, the implementation problem exhibits interdependent valuations. This precludes a naive application of the VCG mechanism and to overcome this interdependency problem, we construct a two-stage mechanism. In the first stage, we exploit correlation in the firms signals about the state to induce truthful reporting of observed signals. Given that buyers are honest in stage 1, we then use a VCG-like mechanism in stage 2 that induces honest reporting of valuation and externality functions. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.01477&r=gth |
| By: | Anil K. Jain |
| Abstract: | We analyze relational contracts between a lender and borrower when borrower cash flows are not contractible and the costs of intermediation vary over time. Because lenders provide repayment incentives to borrowers through the continuation value of the lending relationship, borrowers will condition loan repayment on the likelihood of receiving loans in the future. Therefore, the borrower's beliefs about the lender's future liquidity and profitability become an important component of the borrower's repayment decision. Consequently, the possibility of high lending costs in the future weakens repayment incentives and can cause the borrower to strategically default in some states and an inefficient under-provision of credit. We characterize the optimal relational contract and discuss the application of our model to the case of microfinance and trade credit. |
| Keywords: | trade credit; dynamic incentives; relationship lending; microfinance; repeated games |
| JEL: | O16 G33 G21 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1364&r=gth |
| By: | Foarta, Dana (Stanford U); Morelli, Massimo (Bocconi U and IGIER, Bocconi) |
| Abstract: | Legislative and regulatory reforms often contain various forms of complexity--multiple contingencies, exemptions and alike. Complexity may be desirable if it better satisfies the needs of political constituencies, and if these benefits are higher than the potential increase in administrative costs. Both benefits and costs are better understood by a reform drafter than by the other players involved in the reform process. This asymmetric information on the costs and benefits of complexity creates incentives for inefficiently complex policies. We show that reform drafters use complexity to pander to persuade their political principals to adopt reforms, when the latter are less informed about the costs consequences of the proposed complexity. Nevertheless, institutional contexts where reform drafters are overseen by political principals are not always leading to greater complexity than in systems without overseers, as long as the drafters face informational constraints regarding the costs and benefits of complexity. |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:4068&r=gth |
| By: | Claire Borsenberger (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Helmuth Cremer (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Denis Joram (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-Marie Lozachmeur (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Estelle Malavolti (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Date: | 2023–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04088352&r=gth |