Games

352 KiB

Open AccessArticle

Multidimensional Screening with Complementary Activities: Regulating a Monopolist with Unknown Cost and Unknown Preference for Empire Building

by Ana Pinto Borges, Didier Laussel and João Correia-da-Silva

Games 2013, 4(3), 532-560; https://doi.org/10.3390/g4030532 - 16 Sep 2013

Viewed by 6103

Abstract

We study the optimal regulation of a monopolist when intrinsic efficiency (intrinsic cost) and empire building tendency (marginal utility of output) are private information, but actual cost (the difference between intrinsic cost and effort level) is observable. This is a problem of multidimensional [...] Read more.

We study the optimal regulation of a monopolist when intrinsic efficiency (intrinsic cost) and empire building tendency (marginal utility of output) are private information, but actual cost (the difference between intrinsic cost and effort level) is observable. This is a problem of multidimensional screening with complementary activities. Results are not only driven by the prior probabilities of the four possible types, but also by the relative magnitude of the uncertainty along the two dimensions of private information. If the marginal utility of output varies much more (less) across managers than the intrinsic marginal cost, there is empire building (efficiency) dominance. In that case, an inefficient empire builder produces more (less) and at lower (higher) marginal cost than an efficient money-seeker. It is only when variabilities are similar that there may be the natural ranking of activities (empire builders produce more, while efficient managers produce at a lower cost). Full article

(This article belongs to the Special Issue Contract Theory)

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302 KiB

Open AccessArticle

Solution Concepts of Principal-Agent Models with Unawareness of Actions

by Ying-Ju Chen and Xiaojian Zhao

Games 2013, 4(3), 508-531; https://doi.org/10.3390/g4030508 - 30 Aug 2013

Cited by 5 | Viewed by 7395

Abstract

In numerous economic scenarios, contracting parties may not have a clear picture of all the relevant aspects. A contracting party may be unaware of what she and/or others are entitled to determine. Therefore, she may reject a contract that is too good to [...] Read more.

In numerous economic scenarios, contracting parties may not have a clear picture of all the relevant aspects. A contracting party may be unaware of what she and/or others are entitled to determine. Therefore, she may reject a contract that is too good to be true. Further, a contracting party may actively exert cognitive effort before signing a contract, so as to avoid being trapped into the contractual agreement ex post. In this paper, we propose a general framework to investigate these strategic interactions with unawareness, reasoning and cognition and intend to unify the solution concepts in the contracting context with unawareness. We build our conceptual framework upon the classical principal-agent relationship and compare the behaviors under various degrees of the unaware agent’s sophistication. Full article

(This article belongs to the Special Issue Contract Theory)

125 KiB

Open AccessShort Note

Speech Is Silver, Silence Is Golden

by Ola Andersson and Hakan J. Holm

Games 2013, 4(3), 497-507; https://doi.org/10.3390/g4030497 - 30 Aug 2013

Cited by 7 | Viewed by 8054

Abstract

This paper experimentally investigates free-riding behavior on communication cost in a coordination game and finds strong indications of such free-riding. Firstly, the subjects wait for others to send a message when communication is costly, which does not happen when communication is costless. Secondly, [...] Read more.

This paper experimentally investigates free-riding behavior on communication cost in a coordination game and finds strong indications of such free-riding. Firstly, the subjects wait for others to send a message when communication is costly, which does not happen when communication is costless. Secondly, the proportion of games where no communication or one-way communication takes place is much higher when communication is costly compared to when it is free. Full article

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839 KiB

Open AccessArticle

Contract and Game Theory: Basic Concepts for Settings with Finite Horizons

by Joel Watson

Games 2013, 4(3), 457-496; https://doi.org/10.3390/g4030457 - 21 Aug 2013

Cited by 14 | Viewed by 8335

Abstract

This paper examines a general model of contract in multi-period settings with both external and self-enforcement. In the model, players alternately engage in contract negotiation and take individual actions. A notion of contractual equilibrium, which combines a bargaining solution and individual incentive constraints, [...] Read more.

This paper examines a general model of contract in multi-period settings with both external and self-enforcement. In the model, players alternately engage in contract negotiation and take individual actions. A notion of contractual equilibrium, which combines a bargaining solution and individual incentive constraints, is proposed and analyzed. The modeling framework helps identify the relation between the manner in which players negotiate and the outcome of the long-term contractual relationship. In particular, the model shows the importance of accounting for the self-enforced component of contract in the negotiation process. Examples and guidance for applications are provided, along with existence results and a result on a monotone relation between “activeness of contracting” and contractual equilibrium values. Full article

(This article belongs to the Special Issue Contract Theory)

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462 KiB

Open AccessArticle

Noncontractible Investments and Reference Points

by Oliver Hart

Games 2013, 4(3), 437-456; https://doi.org/10.3390/g4030437 - 14 Aug 2013

Cited by 16 | Viewed by 8789

Abstract

We analyze noncontractible investments in a model with shading. A seller can make an investment that affects a buyer’s value. The parties have outside options that depend on asset ownership. When shading is not possible and there is no contract renegotiation, an optimum [...] Read more.

We analyze noncontractible investments in a model with shading. A seller can make an investment that affects a buyer’s value. The parties have outside options that depend on asset ownership. When shading is not possible and there is no contract renegotiation, an optimum can be achieved by giving the seller the right to make a take-it-or-leave-it offer. However, with shading, such a contract creates deadweight losses. We show that an optimal contract will limit the seller’s offers, and possibly create ex post inefficiency. Asset ownership can improve matters even if revelation mechanisms are allowed. Full article

(This article belongs to the Special Issue Contract Theory)

3884 KiB

Open AccessArticle

An Evolutionary Theory of Suicide

by Balázs Szentes and Caroline D. Thomas

Games 2013, 4(3), 426-436; https://doi.org/10.3390/g4030426 - 13 Aug 2013

Cited by 2 | Viewed by 7333

Abstract

We analyze a model in which individuals have hereditary reproductive types. The reproductive value of an individual is determined by her reproductive type and the amount of resources she can access. We introduce the possibility of suicide and assume it is also a [...] Read more.

We analyze a model in which individuals have hereditary reproductive types. The reproductive value of an individual is determined by her reproductive type and the amount of resources she can access. We introduce the possibility of suicide and assume it is also a genetic trait that interacts with the reproductive type of an individual. The main result of the paper is that populations where suicide is possible grow faster than other populations. Full article

(This article belongs to the Special Issue Advances in Evolutionary Game Theory and Applications)

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881 KiB

Open AccessArticle

Institutional Inertia and Institutional Change in an Expanding Normal-Form Game

by Torsten Heinrich and Henning Schwardt

Games 2013, 4(3), 398-425; https://doi.org/10.3390/g4030398 - 12 Aug 2013

Cited by 17 | Viewed by 7112

Abstract

We investigate aspects of institutional change in an evolutionary game-theoretic framework, in principle focusing on problems of coordination in groups when new solutions to a problem become available. In an evolutionary game with an underlying dilemma structure, we let a number of new [...] Read more.

We investigate aspects of institutional change in an evolutionary game-theoretic framework, in principle focusing on problems of coordination in groups when new solutions to a problem become available. In an evolutionary game with an underlying dilemma structure, we let a number of new strategies become gradually available to the agents. The dilemma structure of the situation is not changed by these. Older strategies offer a lesser payoff than newly available ones. The problem that agents have to solve for realizing improved results is, therefore, to coordinate on newly available strategies. Strategies are taken to represent institutions; the coordination on a new strategy by agents, hence, represents a change in the institutional framework of a group. The simulations we run show a stable pattern regarding such institutional changes. A number of institutions are found to coexist, with the specific number depending on the relation of payoffs achievable through the coordination of different strategies. Usually, the strategies leading to the highest possible payoff are not among these. This can be taken to reflect the heterogeneity of rules in larger groups, with different subgroups showing different behavior patterns. Full article

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556 KiB

Open AccessArticle

An Experimental Analysis of Asymmetric Power in Conflict Bargaining

by Katri Sieberg, David Clark, Charles A. Holt, Timothy Nordstrom and William Reed

Games 2013, 4(3), 375-397; https://doi.org/10.3390/g4030375 - 2 Aug 2013

Cited by 7 | Viewed by 10063

Abstract

Demands and concessions in a multi-stage bargaining process are shaped by the probabilities that each side will prevail in an impasse. Standard game-theoretic predictions are quite sharp: demands are pushed to the precipice with nothing left on the table, but there is no [...] Read more.

Demands and concessions in a multi-stage bargaining process are shaped by the probabilities that each side will prevail in an impasse. Standard game-theoretic predictions are quite sharp: demands are pushed to the precipice with nothing left on the table, but there is no conflict regardless of the degree of power asymmetry. Indeed, there is no delay in reaching an agreement that incorporates the (unrealized) costs of delay and conflict. A laboratory experiment has been used to investigate the effects of power asymmetries on conflict rates in a two-stage bargaining game that is (if necessary) followed by conflict with a random outcome. Observed demands at each stage are significantly correlated with power, as measured by the probability of winning in the event of disagreement. Demand patterns, however, are flatter than theoretical predictions, and conflict occurs in a significant proportion of the interactions, regardless of the degree of the power asymmetry. To address these deviations from the standard game-theoretic predictions, we also estimated a logit quantal response model, which generated the qualitative patterns that are observed in the data. This one-parameter generalization of the Nash equilibrium permits a deconstruction of the strategic incentives that cause demands to be less responsive to power asymmetries than Nash predictions. Full article

(This article belongs to the Special Issue Laboratory Experimental Testing of Political Science Models)

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271 KiB

Open AccessLetter

Reciprocity Effects in the Trust Game

by Alexander Smith

Games 2013, 4(3), 367-374; https://doi.org/10.3390/g4030367 - 31 Jul 2013

Cited by 2 | Viewed by 6248

Abstract

I use data from a previous experiment for classifying subjects based on their behavior in the trust game. Prior literature defines a “reciprocity effect” as the tendency for Second Movers to return proportions increasing in the amounts that they receive. In the data [...] Read more.

I use data from a previous experiment for classifying subjects based on their behavior in the trust game. Prior literature defines a “reciprocity effect” as the tendency for Second Movers to return proportions increasing in the amounts that they receive. In the data that I use, 31% of Second Movers show reciprocity effects, 31% are neutral, and 25% consistently free-ride, indicating that the aggregate reciprocity effect for the sample as a whole is attributable to a minority of the subjects. Full article

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494 KiB

Open AccessArticle

The Renegotiation-Proofness Principle and Costly Renegotiation

by James R. Brennan and Joel Watson

Games 2013, 4(3), 347-366; https://doi.org/10.3390/g4030347 - 25 Jul 2013

Cited by 6 | Viewed by 6457

Abstract

We study contracting and costly renegotiation in settings of complete, but unverifiable information, using the mechanism-design approach. We show how renegotiation activity is best modeled in the fundamentals of the mechanism-design framework, so that noncontractibility of renegotiation amounts to a constraint on the [...] Read more.

We study contracting and costly renegotiation in settings of complete, but unverifiable information, using the mechanism-design approach. We show how renegotiation activity is best modeled in the fundamentals of the mechanism-design framework, so that noncontractibility of renegotiation amounts to a constraint on the problem. We formalize and clarify the Renegotiation-Proofness Principle (RPP), which states that any state-contingent payoff vector that is implementable in an environment with renegotiation can also be implemented by a mechanism in which renegotiation does not occur in equilibrium. We observe that the RPP is not valid in some settings. However, we prove a general monotonicity result that confirms the RPP’s message about renegotiation opportunities having negative consequences. Our monotonicity theorem states that, as the costs of renegotiation increase, the set of implementable state-contingent payoffs becomes larger. Full article

(This article belongs to the Special Issue Contract Theory)

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309 KiB

Open AccessArticle

Repeated Play of Families of Games by Resource-Constrained Players

by Arina Nikandrova

Games 2013, 4(3), 339-346; https://doi.org/10.3390/g4030339 - 11 Jul 2013

Viewed by 5002

Abstract

This paper studies a repeated play of a family of games by resource-constrained players. To economize on reasoning resources, the family of games is partitioned into subsets of games which players do not distinguish. An example is constructed to show that when games [...] Read more.

This paper studies a repeated play of a family of games by resource-constrained players. To economize on reasoning resources, the family of games is partitioned into subsets of games which players do not distinguish. An example is constructed to show that when games are played a finite number of times, partitioning of the game set according to a coarse exogenously given partition might introduce new symmetric equilibrium payoffs which Pareto dominate best equilibrium outcomes with distinguished games. Moreover, these new equilibrium payoffs are also immune to evolutionary pressure at the partition selection stage. Full article

341 KiB

Open AccessArticle

Relative Concerns and Delays in Bargaining with Private Information

by Ana Mauleon and Vincent Vannetelbosch

Games 2013, 4(3), 329-338; https://doi.org/10.3390/g4030329 - 27 Jun 2013

Cited by 2 | Viewed by 5475

Abstract

We consider Rubinstein’s two-person alternating-offer bargaining model with two-sided incomplete information. We investigate the effects of one party having relative concerns about the bargaining outcome and the delay in reaching an agreement. We find that facing an opponent with stronger relative concerns only [...] Read more.

We consider Rubinstein’s two-person alternating-offer bargaining model with two-sided incomplete information. We investigate the effects of one party having relative concerns about the bargaining outcome and the delay in reaching an agreement. We find that facing an opponent with stronger relative concerns only hurts the bargainer when she is stronger than her opponent. In addition, we show that an increase of one party’s relative concerns will decrease the maximum delay in reaching an agreement. Full article

641 KiB

Open AccessArticle

The Hitchhiker’s Guide to Adaptive Dynamics

by Åke Brännström, Jacob Johansson and Niels Von Festenberg

Games 2013, 4(3), 304-328; https://doi.org/10.3390/g4030304 - 24 Jun 2013

Cited by 108 | Viewed by 18676

Abstract

Adaptive dynamics is a mathematical framework for studying evolution. It extends evolutionary game theory to account for more realistic ecological dynamics and it can incorporate both frequency- and density-dependent selection. This is a practical guide to adaptive dynamics that aims to illustrate how [...] Read more.

Adaptive dynamics is a mathematical framework for studying evolution. It extends evolutionary game theory to account for more realistic ecological dynamics and it can incorporate both frequency- and density-dependent selection. This is a practical guide to adaptive dynamics that aims to illustrate how the methodology can be applied to the study of specific systems. The theory is presented in detail for a single, monomorphic, asexually reproducing population. We explain the necessary terminology to understand the basic arguments in models based on adaptive dynamics, including invasion fitness, the selection gradient, pairwise invasibility plots (PIP), evolutionarily singular strategies, and the canonical equation. The presentation is supported with a worked-out example of evolution of arrival times in migratory birds. We show how the adaptive dynamics methodology can be extended to study evolution in polymorphic populations using trait evolution plots (TEPs). We give an overview of literature that generalises adaptive dynamics techniques to other scenarios, such as sexual, diploid populations, and spatially-structured populations. We conclude by discussing how adaptive dynamics relates to evolutionary game theory and how adaptive-dynamics techniques can be used in speciation research. Full article

(This article belongs to the Special Issue Advances in Evolutionary Game Theory and Applications)

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638 KiB

Open AccessArticle

The Effects of Entry in Bilateral Oligopoly

by Alex Dickson

Games 2013, 4(3), 283-303; https://doi.org/10.3390/g4030283 - 24 Jun 2013

Cited by 6 | Viewed by 5946

Abstract

The purpose of this paper is to study the effects of entry into the market for a single commodity in which both sellers and buyers are permitted to interact strategically. With the inclusion of an additional seller, the market is quasi-competitive: the price [...] Read more.

The purpose of this paper is to study the effects of entry into the market for a single commodity in which both sellers and buyers are permitted to interact strategically. With the inclusion of an additional seller, the market is quasi-competitive: the price falls and volume of trade increases, as expected. However, contrary to the conventional wisdom, existing sellers’ payoffs may increase. The conditions under which entry by new sellers raises the equilibrium payoffs of existing sellers are derived. These depend in an intuitive way on the elasticity of a strategic analog of demand and the market share of existing sellers, and encompass entirely standard economic environments. Similar results are derived relating to the entry of additional buyers and the effects of entry on both sides of the market are investigated. Full article

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Games, Volume 4, Issue 3 (September 2013) – 14 articles , Pages 283-560

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