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Reciprocity Effects in the Trust Game

Author(s): Alexander Smith
Journal: Games
Publisher:
Abstract
| Pages: 367-374
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.

An Experimental Analysis of Asymmetric Power in Conflict Bargaining

Author(s):Katri Sieberg -- David Clark -- Charles A. Holt -- Timothy Nordstrom -- William Reed
Journal: Games
Publisher:
Abstract
| Pages: 375-397
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.

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

Author(s):Torsten Heinrich -- Henning Schwardt
Journal: Games
Publisher:
Abstract
| Pages: 398-425
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.

An Evolutionary Theory of Suicide

Author(s):Balázs Szentes -- Caroline D. Thomas
Journal: Games
Publisher:
Abstract
| Pages: 426-436
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.

Noncontractible Investments and Reference Points

Author(s):Oliver Hart
Journal: Games
Publisher:
Abstract
| Pages: 437-456
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.

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

Author(s):Joel Watson
Journal: Games
Publisher:
Abstract
| Pages: 457-496
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.

Speech Is Silver, Silence Is Golden

Author(s):Ola Andersson -- Hakan J. Holm
Journal: Games
Publisher:
Abstract
| Pages: 497-507
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.

Solution Concepts of Principal-Agent Models with Unawareness of Actions

Author(s):Ying-Ju Chen -- Xiaojian Zhao
Journal: Games
Publisher:
Abstract
| Pages: 508-531
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.

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

Author(s):Ana Pinto Borges -- Didier Laussel -- João Correia-da-Silva
Journal: Games
Publisher:
Abstract
| Pages: 532-560
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).
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