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on Game Theory |
| By: | Schroeder, Andreas |
| Abstract: | The axiomatic requirements in Brandl and Brandt (2024) make it possible to define solution concepts that do not select the set of all Nash equilibria as claimed. More precisely, it is possible to construct solution concepts that fulfill the axiomatic requirements, but in certain games no equilibrium is selected at all, as a simple example shows. |
| Keywords: | Non-coporative Game Theory, Nash Equilinrium, Solution Concept |
| JEL: | C72 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123069 |
| By: | Guanxing Fu (Hong Kong Polytechnic University); Paul Hager (University of Vienna); Ulrich Horst (Humboldt University Berlin) |
| Abstract: | We consider both N-player and mean-field games of optimal portfolio liquidation in which the players are not allowed to change the direction of trading. Players with an initially short position of stocks are only allowed to buy while players with an initially long position are only allowed to sell the stock. Under suitable conditions on the model parameters we show that the games are equivalent to games of timing where the players need to determine the optimal times of market entry and exit. We identify the equilibrium entry and exit times and prove that equilibrium mean-trading rates can be characterized in terms of the solutions to a highly non-linear higher-order integral equation with endogenous terminal condition. We prove the existence of a unique solution to the integral equation from which we obtain the existence of a unique equilibrium both in the mean-field and the N-player game. |
| Keywords: | portfolio liquidation; mean-field game; Nash equilibrium; trading constraint; non-linear integral equations; |
| Date: | 2024–12–08 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:517 |
| By: | Margarita Gáfaro; César Mantilla |
| Abstract: | The design of mechanisms for sustainable irrigation water management requires a deep understanding of the value of water to local communities. We present results from a lab-in-the-field incentivized game that sheds light on irrigation water overvaluation patterns among small farmers in Colombia. In this game, two players divide a jointly endowed agricultural land plot, with some pieces having direct access to irrigation water. Although the induced cost of irrigation water in our game was one token, farmers paid between 2.1 and 3.5 times this amount. We generalize this result by presenting a general bargaining game that can be used to identify overvaluation in settings contexts where relevant use conflicts arise. **** RESUMEN: El diseño de mecanismos para la gestión sostenible del agua de riego requiere una comprensión profunda del valor del agua para las comunidades locales. En este trabajo presentamos los resultados de un juego incentivado de laboratorio en el campo que muestra patrones de sobrevaloración del agua de riego entre pequeños agricultores Colombia. En este juego dos participantes se dividen un terreno agrícola, heredado conjuntamente, en el que algunas parcelas tienen acceso directo al agua de riego. Aunque el costo inducido del agua en nuestro juego es de una ficha, los jugadores pagaron entre 2, 1 y 3, 5 veces esta cantidad. Proponemos un modelo de negociación que explica este resultado y que puede utilizarse para identificar sobrevaloración en entornos con conflictos de uso relevantes. |
| Keywords: | lab-in-the-field experiment, cooperative bargaining, irrigation water, non-cooperative bargaining, Nash bargaining, experimento de laboratorio en campo, negociación cooperativa, agua de riego, negociación no cooperativa, negociación de Nash |
| JEL: | C78 C90 Q51 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1293 |
| By: | Bouwhuis, Dirck (Tilburg University, Center For Economic Research); Hendrickx, Ruud (Tilburg University, Center For Economic Research); Herings, P.J.J. (Tilburg University, Center For Economic Research) |
| Keywords: | Non-cooperative bargaining; Bankruptcy problems; Subgame perfect equilibrium; Nash bargaining solution |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiucen:c8fb20e1-4ce9-4779-bacd-032df0108891 |
| By: | Daniela Glätzle-Rützler (University of Innsbruck); Matthias Sutter (Max Planck Institute for Research on Collective Goods, Bonn, University of Cologne, Germany, University of Innsbruck, Austria, IZA Bonn, Germany, and CESifo Munich); Claudia Zoller (Management Center Innsbruck) |
| Abstract: | Efficient coordination is a major source of efficiency gains. We study in an experimental coordination game with 718 children and teenagers, aged 9 to 18 years, the strategies played in pre-adulthood. We find no robust age effects in the aggregate, but see that smaller group sizes and larger incentives increase the likelihood of choosing the efficient strategy. Beliefs play an important role as well, as subjects are more likely to play the efficient strategy when they expect others to do so as well. Our results are robust to controlling for individual risk-, time-, and social preferences. |
| Keywords: | coordination game, age, group size, incentives, children, experiment |
| JEL: | C91 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:mpg:wpaper:2024_18 |
| By: | Swati Singla (Department of Economics, Delhi School of Economic); Vishruti Gupta (Department of Economics, Delhi School of Economic) |
| Abstract: | We examine duopoly competition between firms with asymmetric quality, wherein firms compete sequentially in quality and price. We find that the partial shareholding of the high-quality firm in revenue (or profit) of the low-quality firm softens the competition. The market share of the high-quality firm decreases as the percentage of the share in revenue (or profit) increases. Further, we find that the improvement in quality by high-quality firm is lesser than by low-quality firms. The price charged by the high-quality firm is higher than that of the low-quality firm as the high-quality firm continues to have the quality advantage. Comparing the two scenarios, revenue sharing is more desirable than profit sharing for firms, giving higher total profits.Consumers and social planner prefer profit sharing between the firms as it leads to a higher surplus. |
| Keywords: | Revenue share, Profit share, Vertical differentiation, Hoteling line. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cde:cdewps:353 |
| By: | Holmberg, Pär (Research Institute of Industrial Economics (IFN)) |
| Abstract: | The power exchange and the real-time markets used by the system operator differ in how system constraints are managed. This can result in regulatory arbitrage, which can increase consumer costs, increase the risk of power outages and distort investment incentives. This paper uses a game-theoretical approach to study these problems and proposes various measures to reduce them. For example, zones and grid tariffs can be adjusted. Moreover, regulations of real-time markets can improve, and transmission system operators can implement measures to increase the capacity of the existing grid. |
| Keywords: | Congestion management; Zonal pricing; Countertrading; Redispatch; Real-time market; Regulatory arbitrage; Inc-dec game |
| JEL: | C72 D47 L94 |
| Date: | 2024–12–03 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1512 |
| By: | Hayato Kato (Osaka University); Andreas Haufler (LMU Munich) |
| Abstract: | The Global Minimum Tax (GMT) is applied only to firms above a certain size threshold, permitting countries to set differential tax rates for small and large firms. We analyze tax competition among multiple tax havens and a non-haven country for heterogeneous multinationals to evaluate the effects of this partial coverage of GMT. Upon the introduction of a moderately low GMT rate, the havens commit to the single uniform GMT rate for all multinationals. However, gradual increases in the GMT rate induce the havens, and subsequently the non-haven, to adopt discriminatory, lower tax rates for small multinationals. Our calibration exercise shows that the implementation of a 15% GMT rate results in a regime where only the havens adopt split tax rates. Upon GMT introduction, welfare and tax revenues fall in the tax havens but rise in the non-haven, yielding a positive net gain worldwide. |
| Keywords: | global minimum tax; profit shifting; multinational firms; |
| JEL: | F23 H25 H87 |
| Date: | 2024–12–06 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:516 |
| By: | Jonas Werth (Ca’ Foscari University of Venice; BI Norwegian Business School); Alessia Russo (University of Padua; CEPR); Fabio Miessi Sanches (São Paulo School of Economics) |
| Abstract: | This paper develops a dynamic model of environmental treaty formation with heterogeneous countries that allows for entry, exit and country specific uncertainty on the benefits from other countries ratifying the treaty. Using a dataset comprising the cross-section of ratification dates of global environmental treaties for 1980-2020, we structurally estimate the model's parameters. The estimates inform about the existence of strategic complementarity or substitutability in the formation of environmental treaties, which occur when the relative benefits from cooperation increase or decrease after the inclusion of an additional country. Through counterfactual experiments, we illustrate how mechanisms fostering strategic complementarity can expedite the establishment of a grand coalition in support of environmental treaties and quantify associated welfare gains. |
| Keywords: | Dynamic Model Estimation, Heterogeneous Countries, International Environmental Agreement, Strategic Complementarity |
| JEL: | D86 F55 H87 Q54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2024:19 |
| By: | Laurent Bouton; Micael Castanheira De Moura; Allan Drazen |
| Abstract: | Popular and academic discussions have mostly concentrated on large donors, even though small donors are a major source of financing for political campaigns. We propose a theory of small donors with a key novelty: it centres on the interactions between small donors and the parties' fundraising strategy. In equilibrium, parties micro-target donors with a higher contribution potential (that is, richer and with more intense preferences) and increase their total fundraising effort in close races. The parties' strategic fundraising amplifies the effect of income on contributions, and leads to closeness, underdog and bandwagon effects. We then study the welfare effects of a number of common campaign finance laws. We find that, due to equilibrium effects, those tools may produce outcomes opposite to intended objectives. Finally, we identify a tax-and-subsidy scheme that mutes the effect of income while still allowing donors to voice the intensity of their support. |
| JEL: | D71 D70 H31 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/378528 |
| By: | Müge Süer (The Halle Institute for Economic Research (IWH)); Nicola Cerutti (Oasis Loss Modelling Framework Ltd.); Jana Friedrichsen (Kiel University); Gyula Seres (National University of Singapore, N.1 Institute for Health and Institute for Digital Medicine) |
| Abstract: | Women are often perceived as more compliant than men; however, the literature provides inconclusive evidence. Using a novel experimental design comprising two complementary experiments, we test this claim in online samples representative of the German adult population. The first experiment (N=1600) features a probabilistic social dilemma game (PDG) in which participants can increase their individual payoff at the expense of exposing themselves and their group to probabilistic losses. In two treatment conditions, they receive either a recommendation on socially optimal behavior or a recommendation and information on weakly non-compliant peer behavior. We find that the recommendation strongly affects behavior but more so for women than for men. However, information on the non-compliant behavior of others does not induce significantly different responses in men and women. In the second experiment (N=522), we elicit empirical and normative expectations about behavior in the PDG with a recommendation to study the role of norms in following it. While men and women are expected to hold similar normative beliefs, men are expected to follow the recommendation less often, suggesting that compliance is a female social norm. |
| Keywords: | gender; compliance; public good; social dilemma; risk-taking; social norms; |
| JEL: | J16 I12 D81 H41 |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:519 |
| By: | Marie Obidzinski (Université Paris Panthéon Assas, CRED, Paris, France); Yves Oytana (Université de Franche-Comté, CRESE, Besançon, France) |
| Abstract: | We characterize the socially optimal liability sharing rule in a situation where a manufacturer develops an artificial intelligence (AI) system that is then used by a human operator (or user). First, the manufacturer invests to increase the autonomy of the AI (i.e., the set of situations that the AI can handle without human intervention) and sets a selling price. The user then decides whether or not to buy the AI. Since the autonomy of the AI remains limited, the human operator must sometimes intervene even when the AI is in use. Our main assumptions relate to behavioral inattention. Behavioral inattention reduces the effectiveness of user intervention and increases the expected harm. Only some users are aware of their own attentional limits. Under the assumption that AI outperforms users, we show that policymakers may face a tradeoff when choosing how to allocate liability between the manufacturer and the user. Indeed, the manufacturer may underinvest in the autonomy of the AI. If this is the case, the policymaker can incentivize the latter to invest more by increasing his share of liability. On the other hand, increasing the liability of the manufacturer may come at the cost of slowing down the diffusion of AI technology. |
| Keywords: | K4 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:afd:wpaper:2406 |