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on Game Theory |
| By: | Adriana Alventosa (ERI-CES, Universitat de València); José Manuel Ordóñez-de-Haro (Departamento de Teoría e Historia Económica. Universidad de Málaga.); Javier Rodero Cosano (Smart Decision Lab, Departamento de Teoría e Historia Económica. Universidad de Málaga.) |
| Abstract: | This paper develops a dynamic discrete-time model of collusive behaviour in which firms can apply for leniency to reduce fines. We propose a sequential-move game inspired by the centipede game, capturing firms' incentives to be the first to self-report a cartel. The model examines cartel formation, stability, and recidivism, assuming that fines apply to the undiscovered record of collusion, not just current conduct. We find that when collusion is attractive but the leniency programme is not sufficiently generous, firms form a single cartel without self-reporting. However, when collusion is highly attractive and the leniency programme sufficiently generous, it can destabilize cartels but also foster recidivism: firms use leniency to ``clean the slate'' and restart collusion at a lower expected cost. This equilibrium behaviour may help explain the empirically observed prevalence of short-lived cartels and repeat offenders under existing leniency regimes. |
| Keywords: | Antitrust; Cartels; Recidivism; Leniency; Dynamic Games |
| JEL: | D43 K21 K42 L40 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:mal:wpaper:2025-2 |
| By: | Chevalier-Roignant, Benoît; Villeneuve, Stéphane; Delpech, Fabien; Grapotte, May-Line |
| Abstract: | There are many business situations in which investments by a supplier and a producer (“coinvest-ments") are both necessary for either of them to grasp a business opportunity. For instance, better quality tanks are needed to manufacture reliable hydrogen-powered vehicles. One of these two firms, typically the one facing a lower cost, may be more willing to invest, but the cautionary attitude of the other delays the coinvestment. We model supply-chain interactions in a classical tractable way to derive the firms’ net present values (NPVs) upon coinvestment and determine their Nash equilibrium investment (timing) strategies. Firms coinvest when the real options of the weaker firm is ‘deep in the money.’ These business situations are likely to be affected by evolving market circumstances, in particular due to changes in the demand dynamics or endogenous decision (by, say, the supplier) to conduct research and development (R&D). We investigate related model extensions, which confirm the robustness of our key result. |
| Date: | 2025–04–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130510 |
| By: | Sanyyam Khurana (Ashoka University) |
| Abstract: | In this paper, we consider resale in efficient auctions. The potential gains from trade arise from a delay in resale which reduces the bidders’ values. We consider two information states during resale: (a) complete information where all the bids are revealed and (b) incomplete information where no bids are revealed. Under complete information, we establish revenue equivalence between the first- and second-price auction for a family of trade rules where the market power is distributed between the reseller and buyer. We also show that, if all the market power lies with the reseller (resp., buyer), it is optimal (resp., not) to reveal information. |
| Keywords: | efficiency; information revelation; private value; resale; symmetry; time delay |
| Date: | 2024–10–14 |
| URL: | https://d.repec.org/n?u=RePEc:ash:wpaper:128 |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato; Wataru Tamura |
| Abstract: | We experimentally investigate exclusive-offer competition between two existing upstream firms. In theory, when upstream firms make exclusive offers to a downstream monopolist, both exclusion and non-exclusion can be equilibrium outcomes. By varying key parameters, we explore how bargaining power and product differentiation affect the likelihood of exclusion outcomes. We experimentally find that exclusion is more likely to be observed when the upstream firms have stronger bargaining power or when they produce more differentiated products; paradoxically, the higher upstream firms' profits from cooperatively offering unattractive exclusive contracts, the more likely they are to fall into intense exclusive-offer competition. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1281 |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Tibor Heumann (Pontificia Universidad Catolica de Chile); Stephen Morris (Dept. of Economics, MIT) |
| Abstract: | We analyze a nonlinear pricing model where the seller controls both product pricing (screening) and buyer information about their own values (persuasion). We prove that the optimal mechanism always consists of finitely many signals and items, even with a continuum of buyer values. The seller optimally pools buyer values and reduces product variety to minimize\ informational rents. We show that value pooling is optimal even for finite value distributions if their entropy exceeds a critical threshold. We also provide sufficient conditions under which the optimal menu restricts offering to a single item. |
| Keywords: | Nonlinear Pricing, Screening, Bayesian Persuasion, Finite Menu, Second-Degree Price Discrimination, Recommender System |
| JEL: | D44 D47 D83 D84 |
| Date: | 2025–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2338r3 |
| By: | Dirk Bergemann (Yale University); Marek Bojko (Yale University); Paul DŸtting (Google Research); Renato Paes Leme (Google Research); Haifeng Xu (University of Chicago and Google Research); Song Zuo (Google Research) |
| Abstract: | We study mechanism design when agents have private preferences and private information about a common payoff-relevant state. We show that standard message-driven mechanisms cannot implement socially efficient allocations when agents have multidimensional types, even under favorable conditions. To overcome this limitation, we propose data-driven mechanisms that leverage additional post-allocation information, modeled as an estimator of the payoff-relevant state. Our data-driven mechanisms extend the classic Vickrey-Clarke-Groves class. We show that they achieve exact implementation in posterior equilibrium when the state is either fully revealed or the utility is affine in an unbiased estimator. We also show that they achieve approximate implementation with a consistent estimator, converging to exact implementation as the estimator converges, and present bounds on the convergence rate. We demonstrate applications to digital advertising auctions and large language model (LLM)-based mechanisms, where user engagement naturally' reveals relevant information. |
| Date: | 2025–03–17 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2418r1 |
| By: | Behnaz Minooei Fard; Giovanni Di Bartolomeo; Willi Semmler |
| Abstract: | This study analyzes the dynamics of the global rare earth element (REE) market, with a focus on China's dominant role as the primary supplier, which is crucial for the energy transition and digitalization. Using a game-theoretic approach, the research examines a potential duopoly market structure that may emerge over time, as well as potential shifts in supply from China to other countries in this scenario. It considers China’s low marginal costs and factors like resource extraction and discoveries. Additionally, the study examines the strategic market interactions, the role of technological advancements, and policy support in shaping market outcomes. The methodology incorporates the assumption that agents have limited foresight and use a learned value function to strategically assess outcomes based on their own and others' actions while accounting for environmental constraints. |
| Keywords: | Rare earth elements; Game theory; Duopoly; Known reserves dynamics; Policy support; Relative scarcity; NMPC; Reinforcement learning |
| JEL: | C61 C7 Q3 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp260 |
| By: | Satyam Kumar Rai (Ashoka University); Suraj Shekhar (Ashoka University) |
| Abstract: | We model a society with two ethnic groups in which the state of the world is uncertain. Without new information, ethnic conflict is inevitable. If there is an informed agent who knows the state of the world and can communicate via private cheap talk messages, can she prevent conflict? We find that while a peace-loving informed agent is unable to prevent conflict as she cannot communicate credibly with either ethnicity, a more aggressive informed agent can communicate information to her own ethnicity, and therefore prevent conflict with positive probability. Furthermore, we show that if each ethnicity has their own informed agent, then both ethnic groups receive information but, under some conditions, there is an informative equilibrium in the environment with one informed agent which generates a higher probability of peace than any informative equilibrium with two informed agents. |
| Date: | 2025–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:ash:wpaper:143 |
| By: | Marta Ruiz-Delgado (Programa de Doctorado en Economía y Empresa, Universidad de Málaga); Adriana Alventosa (ERI-CES, Universitat de València); Miguel A. Meléndez-Jiménez (Departamento de Teoría e Historia Económica, Universidad de Málaga); Antonio J. Morales (Departamento de Teoría e Historia Económica, Universidad de Málaga) |
| Abstract: | We report on a laboratory experiment on team production when a principal decides, before contributions are made, how the team output will be allocated between himself and the team members. The allocation determines the marginal per capita rate of contributions. Despite free-riding being the dominant strategy, if workers perceive more generous allocations as a gift by the employer, reciprocity motives may increase contributions. We also explore the impact of communication on the employer's side. Our results show the presence of reciprocity, evidencing that the gift-exchange phenomenon is robust to team production. Regarding communication, we find that messages with a positive connotation significantly increase contributions to the common project. |
| Keywords: | public goods game, gift exchange game, communication, experiments |
| JEL: | C92 H41 D91 M52 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:mal:wpaper:2025-1 |
| By: | Müller, Lars (Center for Mathematical Economics, Bielefeld University); Karos, Dominik (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | This paper analyzes the welfare effects of private and unilateral disclosure of sensi- tive information in a sequential bargaining context. We consider a model where two sellers each propose a take-it-or-leave-it price for a homogeneous good to a single buyer. The buyer accepts or rejects the first seller’s offer before the second seller proposes her price. Crucially, the second seller might learn the first seller’s price and whether it was accepted, allowing her to update her belief about the buyer’s willingness to pay and optimize her pricing strategy. The welfare effects caused by this information exchange are evaluated under general conditions. We show that it benefits the buyer if a rejection is revealed but might harm him if an acceptance is revealed. Additionally, the information exchange improves the societal welfare by reducing inefficiencies and promoting additional trade. This paper strengthens the theoretical framework for assessing the welfare effects of information exchanges by offering new insights and providing tools to assess causality for alleged damages. |
| Keywords: | Information Exchange, Collusion, Unawareness |
| Date: | 2025–04–16 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:703 |
| By: | Dirk Bergemann (Yale University); Alessandro Bonatti (Massachusetts Institute of Technology); Nicholas Wu (Yale University) |
| Abstract: | In digital advertising, the allocation of sponsored search, sponsored product, or display advertisements is mediated by auctions. The generation of bids in these auctions for attention is increasingly supported by auto-bidding algorithms and platform-provided data. We analyze the equilibrium properties of a sequence of increasingly sophisticated auto-bidding algorithms. First, we consider the equilibrium bidding behavior of an individual advertiser who controls the auto bidding algorithm through the choice of their budget. Second, we examine the interaction when all bidders use budget-controlled bidding algorithms. Finally, we derive the bidding algorithm that maximizes the platformÕs revenue while ensuring all advertisers continue to participate. |
| Date: | 2025–03–02 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2429 |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato; Wataru Tamura |
| Abstract: | This study constructs a model of exclusive-offer competition between two existing upstream firms. Under exclusive-offer competition, the upstream firm's profit depends on the rival's exclusive offer. If the rival makes an exclusive offer acceptable for the downstream firm, the upstream firm is excluded unless it succeeds in exclusion. Consequently, the upper bound of exclusive offers becomes higher than when one of the upstream firms is a potential entrant that cannot make any exclusive offer. Thus, the exclusion of the existing upstream firm can be an equilibrium outcome even in the case where the potential entrant is never excluded. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1280 |
| By: | Fikru, Mahelet G (Missouri University of Science and Technology); Ahmed, Bruktawit (Missouri University of Science and Technology); Daher, Wassim |
| Abstract: | This study uses a two-stage game theoretic approach to derive and characterize optimal decarbonization policies, focusing on emission taxes and carbon capture and storage (CCS) subsidies. By maximizing a welfare function, the government first selects policy instruments, while carbon-intensive firms subsequently determine production levels and abatement efforts to maximize profit. The derived optimal policies are then analyzed through Monte Carlo simulations to assess their variability and sensitivity under different scenarios. Key findings are: (1) Emission tax and CCS subsidies are strategic substitutes where pollution damage governs this relationship, (2) The optimal policy mix could be a tax-only regime if carbon intensity exceeds a given threshold, otherwise the optimal policy mix either includes both instruments (if pollution damage is large enough) or is a subsidy-only regime (if pollution damage is not very large), (3) Optimal subsidies are relatively more variable than optimal emission taxes, and (4) Certainty in production and market parameters does not reduce optimal policy variability, but shifts the focus towards subsidies rather than taxes. These results highlight the need for flexible and adaptable decarbonization policies in dynamic markets with evolving technologies. |
| Date: | 2025–03–27 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:t2bzw_v1 |
| By: | Marcel Parent; Antoine Parent (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis, OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, IXXI - Institut Rhône-Alpin des systèmes complexes - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - INSA Lyon - Institut National des Sciences Appliquées de Lyon - Université de Lyon - INSA - Institut National des Sciences Appliquées - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Pierre-Charles Pradier (UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Laurent Gauthier (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis, IXXI - Institut Rhône-Alpin des systèmes complexes - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - INSA Lyon - Institut National des Sciences Appliquées de Lyon - Université de Lyon - INSA - Institut National des Sciences Appliquées - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes) |
| Abstract: | The canonical reading of Jaurès's L'Armée nouvelle presents this work as an outdated reflection on the establishment of a socialist society supervised by intermediary bodies whose military training would be a major asset. Our reading goes beyond this historically situated approach to Jaurès's book. We show that The New Army is not just a response to the General Staff, even less a "theorisation" of the transition to socialism, but that its aim is to rehabilitate the founding principles of democracy (ancient as well as modern), which rests on the constitution of an army of citizens: The "proletarian-soldier" of Jaurès is none other than the "farmer-soldier" of the ancient city and of Year 2 of the French Revolutionary calendar, transposed to the Industrial Age. Relying on a game-theoretical model, we highlight that this defence of democratic principles is backed by a discourse of the economics of war prevention in terms of self-protection. |
| Keywords: | Jean Jaurès, War, Socialism, Economics of prevention, Game theory |
| Date: | 2024–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-04425659 |