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on Game Theory |
| By: | Comola, Margherita (Paris School of Economics); Rusinowska, Agnieszka (Paris School of Economics); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | We experimentally investigate how players with opposing views compete for influence through strategic targeting in networks. We varied the network structure, the relative influence of the opponent, and the heterogeneity of the nodes' initial opinions. Although most players adopted a best-response strategy based on their relative influence, we also observed behaviors deviating from this strategy, such as the tendency to target central nodes and avoid nodes targeted by the opponent. Targeting is also affected by affinity and opposition biases, the strength of which depends on the distribution of initial opinions. |
| Keywords: | network, influence, targeting, competition, laboratory experiment |
| JEL: | C91 D85 D91 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17315 |
| By: | Chen, Frederick (Wake Forest University, Economics Department); He, Haosen (University of California, Berkeley); Yu, Chu A.(Alex) (Wake Forest University, Economics Department) |
| Abstract: | We formulate and numerically solve a game-theoretic model of rational agents' self-protective actions in an epidemic game with information delay. We then compare our model simulation results with data collected from real human players in an online experiment conducted by Chen et al (2013). We find that, compared with game-theoretic agents, human players receive poorer endgame outcomes due to a lack of synchronization in their self-protective actions. In addition, human players' decisions are dependent on their infection history, and they are less responsive to changes in disease prevalence compared to game-theoretic agents. Our results suggest that human players in the epidemic game differ substantially from fully rational, forward-looking, strategic agents in terms of both player outcomes and decision-making mechanisms. |
| Keywords: | Game theory; Dynamic game; Economic epidemiology; Mathematical epidemiology; Epidemics; Information delay; Coninuous-state dynamic programming; Numerical simulation |
| JEL: | C63 C73 I12 |
| Date: | 2024–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:ris:wfuewp:0119 |
| By: | Masashi Sekine |
| Abstract: | This paper studies an asset pricing model in a partially observable market with a large number of heterogeneous agents using the mean field game theory. In this model, we assume that investors can only observe stock prices and must infer the risk premium from these observations when determining trading strategies. We characterize the equilibrium risk premium in such a market through a solution to the mean field backward stochastic differential equation (BSDE). Specifically, the solution to the mean field BSDE can be expressed semi-analytically by employing an exponential quadratic Gaussian framework. We then construct the risk premium process, which cannot be observed directly by investors, endogenously using the Kalman-Bucy filtering theory. In addition, we include a simple numerical simulation to visualize the dynamics of our market model. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.01352 |
| By: | Joseph Feffer |
| Abstract: | This paper studies a simplicity notion in a mechanism design setting in which agents do not necessarily share a common prior. I develop a model in which agents participate in a prior-free game of (coarse) information acquisition followed by an auction. After acquiring information, the agents have uncertainty about the environment in which they play and about their opponents' higher-order beliefs. A mechanism admits a coarse beliefs equilibrium if agents can play best responses even with this uncertainty. Focusing on multidimensional scoring auctions, I fully characterize a property that allows an auction format to admit coarse beliefs equilibria. The main result classifies auctions into two sets: those in which agents learn relatively little about their setting versus those in which they must fully learn a type distribution to form equilibrium strategies. I then find a simple, primitive condition on the auction's rules to distinguish between these two classes. I then use the condition to categorize real-world scoring auctions by their strategic simplicity. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.06150 |
| By: | Emir Kamenica (University of Chicago); Xiao Lin (University of Pennsylvania) |
| Abstract: | When does a Sender, in a Sender-Receiver game, strictly value commitment? In a setting with finite actions and finite states, we establish that, generically, Sender values commitment if and only if he values randomization. In other words, commitment has no value if and only if a partitional experiment is optimal under commitment. Moreover, if Sender’s preferred cheap-talk equilibrium necessarily involves randomization, then Sender values commitment. We also ask: how often (i.e., for what share of preference profiles) does commitment have no value? For any prior, any independent, atomless distribution of preferences, and any state space: if there are |A| actions, the likelihood that commitment has no value is at least 1 |A||A| . As the number of states grows large, this likelihood converges precisely to 1 |A||A| . |
| Keywords: | Bayesian persuasion; cheap talk |
| JEL: | D80 D83 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:24-033 |
| By: | Tao Lin; Ce Li |
| Abstract: | Classical information design models (e.g., Bayesian persuasion and cheap talk) require players to have perfect knowledge of the prior distribution of the state of the world. Our paper studies repeated persuasion problems in which the information designer does not know the prior. The information designer learns to design signaling schemes from repeated interactions with the receiver. We design learning algorithms for the information designer to achieve no regret compared to using the optimal signaling scheme with known prior, under two models of the receiver's decision-making. (1) The first model assumes that the receiver knows the prior and can perform posterior update and best respond to signals. In this model, we design a learning algorithm for the information designer with $O(\log T)$ regret in the general case, and another algorithm with $\Theta(\log \log T)$ regret in the case where the receiver has only two actions. (2) The second model assumes that the receiver does not know the prior and employs a no-regret learning algorithm to take actions. We show that the information designer can achieve regret $O(\sqrt{\mathrm{rReg}(T) T})$, where $\mathrm{rReg}(T)=o(T)$ is an upper bound on the receiver's learning regret. Our work thus provides a learning foundation for the problem of information design with unknown prior. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.05533 |
| By: | Federica Carannante (Princeton University); Marco Pagnozzi (Università di Napoli Federico II and CSEF); Elia Sartori (CSEF) |
| Abstract: | We study the interim seller’s revenue — the expected revenue conditional on the valuation of one bidder — in a class of sealed-bid auctions that are ex-ante equivalent by the Revenue Equivalence Theorem. Interim revenue differences across auction formats depend on the expected transfer of a generic bidder conditional on a competitor’s valuation. The first-price auction yields higher (lower) interim revenue than the second-price auction if the valuation is below (above) a threshold. At the lowest possible valuation, the first-price auction also yields the highest interim revenue among all standard auctions. By contrast, at high valuations the first-price auction yields the lowest interim revenue, while the last-pay auction — an atypical mechanism where only the lowest bidder pays — allows the seller to extract arbitrarily large revenues. |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:728 |
| By: | Xiaoyu Cheng; Peter Klibanoff; Sujoy Mukerji; Ludovic Renou |
| Abstract: | This paper explores whether and to what extent ambiguous communication can be beneficial to the sender in a persuasion problem, when the receiver (and possibly the sender) is ambiguity averse. We provide a concavification-like characterization of the sender's optimal ambiguous communication. The characterization highlights the necessity of using a collection of experiments that form a splitting of an obedient experiment, that is, whose recommendations are incentive compatible for the receiver. At least some of the experiments in the collection must be Pareto-ranked in the sense that both the sender and receiver agree on their payoff ranking. The existence of a binary such Pareto-ranked splitting is necessary for ambiguous communication to benefit the sender, and, if an optimal Bayesian persuasion experiment can be split in this way, this is sufficient for an ambiguity-neutral sender as well as the receiver to benefit. We show such gains are impossible when the receiver has only two actions available. Such gains persist even when the sender is ambiguity averse, as long as not too much more so than the receiver and not infinitely averse. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.05504 |
| By: | Banzhaf, H. Spencer; Liu, Yaqin |
| Abstract: | The “tragedy of the commons” describes a variety of social dilemmas where total economic sur- plus is produced jointly from collective behavior and where individuals can strategically manipu- late their share of the surplus. Recent research has shown that it is possible to test nonparametri- cally whether observed behavioral data are consistent with the canonical average return game, in which players share joint output in proportion to their inputs. We show that these tests extend to a much broader range of games, including equal-sharing of joint output, weighted averages of equal-sharing and proportionate sharing, and the average cost game, in which players share joint costs in proportion to the service provided them. |
| Keywords: | Agribusiness, Teaching/Communication/Extension/Profession |
| URL: | https://d.repec.org/n?u=RePEc:ags:nccewp:347604 |
| By: | Erkut, Hande; Reuben, Ernesto |
| JEL: | D23 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302367 |
| By: | Tizié Bene (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Yann Bramoullé (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Frédéric Deroïan (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We study how altruism networks affect the demand for formal insurance. Agents with CARA utilities are connected through a network of altruistic relationships. Incomes are subject to a common shock and to a large individual shock, generating heterogeneous damages. Agents can buy formal insurance to cover the common shock, up to a coverage cap. We find that ex-post altruistic transfers induce interdependence in ex-ante formal insurance decisions. We characterize the Nash equilibria of the insurance game and show that agents act as if they are trying to maximize the expected utility of a representative agent with average damages. Altruism thus tends to increase demand of low-damage agents and to decrease demand of high-damage agents. Its aggregate impact depends on the interplay between demand homogenization, the zero lower bound and the coverage cap. We find that aggregate demand is higher with altruism than without altruism at low prices and lower at high prices. Nash equilibria are constrained Pareto efficient. |
| Keywords: | Formal insurance, Informal transfers, Altruism networks |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04717990 |
| By: | Fallucchi, Francesco; Marietta Leina, Andrea; Silva, Rui; Turocy, Theodore L. |
| Abstract: | Gill and Prowse (2023) study response times using a repeated p-beauty contest (p = 0.7). Looking at between-subject variation in response times, they found that subjects who think for longer, on average, win more rounds and choose lower numbers. When comparing average response times and level-k behavior, they observed that higher k types think for longer. In general, we are able to reproduce their findings, despite a minor coding error and some missing information. We test the robustness of their results by comparing average and median response times and choices, separating the sample into quick and slow respondents, including additional controls, and different estimation parameters. We do not find differences between choices between slow and quick respondents, somewhat contradicting their conclusions. Moreover, most subjects played faster as the game was repeated. The remaining results are robust to the inclusion of cohort effects and different parameter specifications in their regressions. |
| Keywords: | beauty contest, response times, level-k, strategic complexity |
| JEL: | C71 C92 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:170 |
| By: | Zhu Mingxi; Song Michelle |
| Abstract: | Bidding is a key element of search advertising, but the variation in bidders' valuations and strategies is often overlooked. Disclosing bid information helps uncover this heterogeneity and enables platforms to tailor their disclosure policies to meet objectives like increasing consumer surplus or platform revenue. We analyzed data from a platform that provided bid recommendations based on historical bids. Our findings reveal that advertisers vary significantly in their strategies: some follow the platform's recommendations, while others create their own bids, deviating from the provided information. This highlights the need for customized information disclosure policies in online ad marketplaces. We developed an equilibrium model for Generalized Second Price (GSP) auctions, showing that adhering to bid recommendations with positive probability is suboptimal. We categorized advertisers as bid-adhering or bid-constructing and developed a structural model for self-bidding to identify private valuations. This model allowed for a counterfactual analysis of the impact of different levels of information disclosure. Both theoretical and empirical results suggest that moderate increases in disclosure improve platform revenue and market efficiency. Understanding bidder diversity is crucial for platforms, which can design more effective disclosure policies to address varying bidder needs and achieve their goals through costless information sharing. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.05535 |
| By: | Meisner, Vincent; Pillath, Pascal |
| JEL: | D82 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302417 |
| By: | C. Lanier Benkard; Przemyslaw Jeziorski; Gabriel Weintraub |
| Abstract: | This paper presents a new approach to modeling transitional dynamics in dynamic models of imperfect competition, a crucial yet often neglected aspect of empirical models in industrial organization that seek to understand market responses to policy and environmental changes. We introduce Nonstationary Oblivious Equilibrium (NOE), a computationally efficient equilibrium concept based on a mean-field approximation designed to model short- and medium-run market dynamics. Addressing potential limitations of NOE in more concentrated markets or under aggregate shocks, we propose a variant, NOE with Re-solving (RNOE). RNOE modifies firms' strategies by re-computing NOE as industry states get realized; an iterative process inspired by real-world industry practice that has behavioral appeal. We show the potential of NOE and RNOE by applying them to an empirical setting of technology adoption and to two classic dynamic oligopoly models, demonstrating that, in a wide variety of settings of empirical interest, they generate equilibrium behavior that is close to Markov perfect equilibrium in both the short and long runs. |
| JEL: | D43 L0 L13 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33045 |
| By: | Yongchan Kwon; Sokbae Lee; Guillaume A. Pouliot |
| Abstract: | We propose a variant of the Shapley value, the group Shapley value, to interpret counterfactual simulations in structural economic models by quantifying the importance of different components. Our framework compares two sets of parameters, partitioned into multiple groups, and applying group Shapley value decomposition yields unique additive contributions to the changes between these sets. The relative contributions sum to one, enabling us to generate an importance table that is as easily interpretable as a regression table. The group Shapley value can be characterized as the solution to a constrained weighted least squares problem. Using this property, we develop robust decomposition methods to address scenarios where inputs for the group Shapley value are missing. We first apply our methodology to a simple Roy model and then illustrate its usefulness by revisiting two published papers. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.06875 |
| By: | Aadityan Ganesh; Clayton Thomas; S. Matthew Weinberg |
| Abstract: | Transaction Fee Mechanism Design studies auctions run by untrusted miners for transaction inclusion in a blockchain. Under previously-considered desiderata, an auction is considered `good' if, informally-speaking, each party (i.e., the miner, the users, and coalitions of both miners and users) has no incentive to deviate from the fixed and pre-determined protocol. In this paper, we propose a novel desideratum for transaction fee mechanisms. We say that a TFM is off-chain influence proof when the miner cannot achieve additional revenue by running a separate auction off-chain. While the previously-highlighted EIP-1559 is the gold-standard according to prior desiderata, we show that it does not satisfy off-chain influence proofness. Intuitively, this holds because a Bayesian revenue-maximizing miner can strictly increase profits by persuasively threatening to censor any bids that do not transfer a tip directly to the miner off-chain. On the other hand, we reconsider the Cryptographic (multi-party computation assisted) Second Price Auction mechanism, which is technically not `simple for miners' according to previous desiderata (since miners may wish to set a reserve by fabricating bids). We show that, in a slightly different model where the miner is allowed to set the reserve directly, this auction satisfies simplicity for users and miners, and off-chain influence proofness. Finally, we prove a strong impossibility result: no mechanism satisfies all previously-considered properties along with off-chain influence proofness, even with unlimited supply, and even after soliciting input from the miner. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.07566 |
| By: | Langinier, Corinne (University of Alberta, Department of Economics); Ray Chaudhuri, Amrita (University of Winnipeg) |
| Abstract: | When the antitrust authority has imperfect information about firms' costs, we show that all firms (including firms not participating in a merger) can influence the antitrust authority's merger decision by manipulating pre-merger quantities. As long as the antitrust authority engages in Bayesian updating, we find that there exists a clear relationship between the level of synergy generated by a given merger and the type of error in the merger decision that is more likely to occur. The larger the level of merger-induced synergy, the greater the likelihood of a Type II error whereby a consumer surplus-decreasing merger is allowed. The smaller the level of synergy, the greater the likelihood of a Type I error whereby a consumer surplus increasing merger is rejected. |
| Keywords: | Horizontal mergers; Asymmetric information; Competition policy; Cournot competition |
| JEL: | L13 L40 L41 |
| Date: | 2024–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:2024_009 |
| By: | Vasily Gusev (National Research University Higher School of Economics); Iakov Zhukov (National Research University Higher School of Economics) |
| Abstract: | This paper investigates two approaches to determining the leader of a coalition partition: the individual and the collective. In the first approach, each coalition in the partition chooses a representative, and then the leader is chosen from among all the representatives. In the second approach, the leading coalition in the partition is chosen, and then the leader from among members of that coalition is chosen. The leader and the leading coalition are chosen with a certain probability, which is guided by the weight rule or the ranking rule. Both approaches can be encountered in contests, sports competitions, and political elections. The paper delivers results on the existence of Nash-stable partitions depending on the approach and the probability of determining the leader. Cases where the number of coalitions in the partition is fixed and arbitrary are studied. The existence of an equilibrium in weakly dominant strategies is proved for the collective approach and the weight rule, and the necessary and sufficient conditions for a Nash-stable partition to exist were found for the ranking rule. The sufficient conditions for a Nash-stable partition to exist were found for the individual approach and the corresponding probabilistic rules |
| Keywords: | coalitionformation, leaderproblem, Nashstability |
| JEL: | Z |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:hig:wpaper:268/ec/2024 |
| By: | Eugen Dimant; Fabio Galeotti; Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We investigate how individuals select sources of information about peers' behavior and normative views, and the influence of this social information on individual behavior and both empirical and normative expectations. This is explored through two experiments (N=1, 945; N=2, 414) using a lying game, with and without known political identification. Our findings reveal a self-serving bias in the selection of information sources, with a preference for lenient sources (i.e., those presenting more tolerant empirical or normative information about lying), particularly when these sources align with an individual's political identity. We observe that being exposed to information that suggests lying is more socially acceptable increases lying behavior. Additionally, while people's normative expectations are not swayed by observing their peers' actions, these expectations are influenced by information about what peers believe is the right thing to do, underscoring the role of normative information in shaping social norms. |
| Keywords: | Social norms, Information acquisition, Peer effects, Group identity, Lying, Experiment |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04740082 |
| By: | Langinier, Corinne (University of Alberta, Department of Economics); Ray Chaudhuri, Amrita (University of Winnipeg) |
| Abstract: | We analyze the impact of patent policies and emission taxes on green innovation. We allow for strategic interactions of firms in a duopolistic market in the presence of green conscious consumers. We identify a paradoxical effect of increasing emission taxes beyond a certain threshold which results in an increase in emissions. Decreasing patenting costs mitigates this paradox, while the impact of tightening patentability requirements is more complex. Moreover, we show that the greater the proportion of green-conscious consumers, the less likely firms are to license a green patent, which results in higher emissions levels. With green consumers, the lowest emissions occur for an intermediate range of taxes for which licensing does occur. Finally, we find that while tax increases lead to a switch from overinvestment to underinvestment in the absence of green conscious consumers, they have the reverse effect in their presence. |
| Keywords: | Patent; Green Innovation; Pollution |
| JEL: | L13 O34 Q50 |
| Date: | 2024–10–10 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:2024_007 |
| By: | Kessing, Sebastian |
| JEL: | H41 D60 Q54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302336 |