We study reputation for toughness in finitely repeated contests. Players are rational (payoff-maximizing), or "tough" (always exerting an exogenous high "tough effort"). In the unique symmetric equilibrium, a rational player has strictly positive payoff only if she is monopolizing reputation. In a reputational oligopoly, a fierce war of attrition to become the reputational monopolist may yield overdissipation. In a reputational monopolist, overdissipation never happens and the monopolist mixes between a non-tough effort to cash in on her reputation today and the tough effort to boost her reputation. In our main application, criminal groups build reputation for toughness in illegal markets
{"title":"Reputation for Toughness","authors":"Marco Serena, S. Barbieri","doi":"10.2139/ssrn.3935770","DOIUrl":"https://doi.org/10.2139/ssrn.3935770","url":null,"abstract":"We study reputation for toughness in finitely repeated contests. Players are rational (payoff-maximizing), or \"tough\" (always exerting an exogenous high \"tough effort\"). In the unique symmetric equilibrium, a rational player has strictly positive payoff only if she is monopolizing reputation. In a reputational oligopoly, a fierce war of attrition to become the reputational monopolist may yield overdissipation. In a reputational monopolist, overdissipation never happens and the monopolist mixes between a non-tough effort to cash in on her reputation today and the tough effort to boost her reputation. In our main application, criminal groups build reputation for toughness in illegal markets","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123913684","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study contests as an example of winner-take-all competition with linearly ordered large strategy space. We study a model in which each player optimizes the probability of winning above some subjective threshold. The environment we consider is that of limited information where agents play the game repeatedly and know their own efforts and outcomes. Players learn through reinforcement. Predictions are derived based on the model dynamics and asymptotic analysis. The model is able to predict individual behavior regularities found in experimental data and track the behavior at aggregate level with reasonable accuracy.
{"title":"Reinforcement Learning in Contests","authors":"V. Chaudhary","doi":"10.2139/ssrn.3920906","DOIUrl":"https://doi.org/10.2139/ssrn.3920906","url":null,"abstract":"We study contests as an example of winner-take-all competition with linearly ordered large strategy space. We study a model in which each player optimizes the probability of winning above some subjective threshold. The environment we consider is that of limited information where agents play the game repeatedly and know their own efforts and outcomes. Players learn through reinforcement. Predictions are derived based on the model dynamics and asymptotic analysis. The model is able to predict individual behavior regularities found in experimental data and track the behavior at aggregate level with reasonable accuracy.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130277848","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study how an organization should dynamically screen an agent of uncertain loyalty whom it suspects of committing damaging acts of undermining. The organization controls the stakes of the relationship, while the agent strategically times undermining, which can occur repeatedly and is detected only stochastically. The optimal commitment stakes policy exhibits both discreteness and gradualism, with distinct “untrusted” and “trusted” phases featuring gradually rising stakes during the untrusted phase and a discrete gap in stakes between phases. This policy is also the equilibrium outcome when the organization cannot commit, and the agent’s equilibrium undermining policy exhibits variable, non-monotonic intensity.
{"title":"Under Suspicion: Trust Dynamics with Secret Undermining","authors":"Aaron M. Kolb, Erik Madsen","doi":"10.2139/ssrn.3327880","DOIUrl":"https://doi.org/10.2139/ssrn.3327880","url":null,"abstract":"\u0000 We study how an organization should dynamically screen an agent of uncertain loyalty whom it suspects of committing damaging acts of undermining. The organization controls the stakes of the relationship, while the agent strategically times undermining, which can occur repeatedly and is detected only stochastically. The optimal commitment stakes policy exhibits both discreteness and gradualism, with distinct “untrusted” and “trusted” phases featuring gradually rising stakes during the untrusted phase and a discrete gap in stakes between phases. This policy is also the equilibrium outcome when the organization cannot commit, and the agent’s equilibrium undermining policy exhibits variable, non-monotonic intensity.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124531363","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-30DOI: 10.15587/2706-5448.2021.230370
S. Voitko, O. Trofymenko
The object of research is the implementation of the principles of Industry 4.0, in particular game theory and blockchain, for the development of energy. One of the obstacles to development is the problem of energy supply in modern economic conditions in terms of achieving sustainable development goals. In the course of the research, a systematic approach to the critical analysis of scientific sources of information related to the development of the energy sector, in particular renewable energy, was used. The scientific result of the systemic interaction of distributed generating devices with «smart» consumers using the principles of Industry 4.0 has been obtained. These principles make it possible to increase the level of efficiency of the power system, to reduce the total cost of operating the power system. And also to reduce power losses, improve network performance while reducing CO2 emissions and negative impact on the environment. The possibility of implementing the provisions of Industry 4.0 as a prerequisite for an economical supply of energy is given. The research methodology is proposed based on a critical analysis of the sphere of economics and management in the energy sector in the period 2011–2021. The possibility of using the Vehicle-to-Grid concept based on Industry 4.0 as a component of the energy system is considered. Due to this, a method for managing the sale of electricity is proposed, based on game theory, and taking into account the autonomous response to demand and the interaction of distributed generation in smart power distribution systems using non-cooperative games. The authors have identified the possibilities of energy blockchain technology in terms of efficient energy supply and transformation of commercial relations in the energy market. Focuses on blockchain for energy as part of ensuring energy sustainability, providing opportunities for the development of renewable energy sources. A list of breakthrough energy technologies for the last 5 years has been highlighted with the aim of their implementation to improve the levels of quality and safety of human life. In particular, according to the Massachusetts Institute of Technology, there are 7 technologies out of 50 investigated, directly related to energy, moreover, the overwhelming majority of these technologies are related to renewable energy.
{"title":"Development of Methodological Foundations for the Development of Energy in Industry 4.0 in Part of Game Theory and Blockchain","authors":"S. Voitko, O. Trofymenko","doi":"10.15587/2706-5448.2021.230370","DOIUrl":"https://doi.org/10.15587/2706-5448.2021.230370","url":null,"abstract":"The object of research is the implementation of the principles of Industry 4.0, in particular game theory and blockchain, for the development of energy. One of the obstacles to development is the problem of energy supply in modern economic conditions in terms of achieving sustainable development goals. In the course of the research, a systematic approach to the critical analysis of scientific sources of information related to the development of the energy sector, in particular renewable energy, was used. The scientific result of the systemic interaction of distributed generating devices with «smart» consumers using the principles of Industry 4.0 has been obtained. These principles make it possible to increase the level of efficiency of the power system, to reduce the total cost of operating the power system. And also to reduce power losses, improve network performance while reducing CO2 emissions and negative impact on the environment. The possibility of implementing the provisions of Industry 4.0 as a prerequisite for an economical supply of energy is given. The research methodology is proposed based on a critical analysis of the sphere of economics and management in the energy sector in the period 2011–2021. The possibility of using the Vehicle-to-Grid concept based on Industry 4.0 as a component of the energy system is considered. Due to this, a method for managing the sale of electricity is proposed, based on game theory, and taking into account the autonomous response to demand and the interaction of distributed generation in smart power distribution systems using non-cooperative games. The authors have identified the possibilities of energy blockchain technology in terms of efficient energy supply and transformation of commercial relations in the energy market. Focuses on blockchain for energy as part of ensuring energy sustainability, providing opportunities for the development of renewable energy sources. A list of breakthrough energy technologies for the last 5 years has been highlighted with the aim of their implementation to improve the levels of quality and safety of human life. In particular, according to the Massachusetts Institute of Technology, there are 7 technologies out of 50 investigated, directly related to energy, moreover, the overwhelming majority of these technologies are related to renewable energy.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129929736","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract In this paper, we study N -player Colonel Blotto games with incomplete information about battlefield valuations. Such games arise in job markets, research and development, electoral competition, security analysis, and conflict resolution. For M ≥ N + 1 battlefields, we identify a Bayes-Nash equilibrium in which the resource allocation to a given battlefield is strictly monotone in the valuation of that battlefield. We also explore extensions such as heterogeneous budgets, the case M ≤ N , full-support type distributions, and network games.
{"title":"A Class of N-Player Colonel Blotto Games with Multidimensional Private Information","authors":"Christian Ewerhart, D. Kovenock","doi":"10.2139/ssrn.3487546","DOIUrl":"https://doi.org/10.2139/ssrn.3487546","url":null,"abstract":"Abstract In this paper, we study N -player Colonel Blotto games with incomplete information about battlefield valuations. Such games arise in job markets, research and development, electoral competition, security analysis, and conflict resolution. For M ≥ N + 1 battlefields, we identify a Bayes-Nash equilibrium in which the resource allocation to a given battlefield is strictly monotone in the valuation of that battlefield. We also explore extensions such as heterogeneous budgets, the case M ≤ N , full-support type distributions, and network games.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128410431","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops a framework for estimating Quantal Response Equilibrium models from experimental data using Bayesian techniques. Bayesian techniques offer some advantages over the more commonly-used maximum likelihood approach: (i) the accuracy of the posterior simulation is limited by (increasingly plentiful) computational resources, both in hardware and software, rather than the validity of an asymptotic assumption that may not be reasonable with typical experimental sample sizes; (ii) Bayesian hierarchical models are a useful way to organize heterogeneity in one's data; and (iii) Bayesian inference allows us to test whether Quantal Response Equilibrium better organizes data than does (say) Nash equilibrium or purely random behavior, without rigging the test in favor of one of these by calling it the null hypothesis.
As Quantal Response Equilibrium is a non-linear model, I also discuss some issues with choosing appropriate priors. Namely, choosing a very flat prior for the choice precision parameter implies a prior on choice probabilities with too much mass near Nash equilibrium and/or random choice. I propose a prior calibration process which seeks to avoid this problem by targeting the implied prior distribution of equilibrium choice probabilities.
{"title":"Bayesian Inference for Quantal Response Equilibrium in Normal-Form Games","authors":"J. Bland","doi":"10.2139/ssrn.3748586","DOIUrl":"https://doi.org/10.2139/ssrn.3748586","url":null,"abstract":"This paper develops a framework for estimating Quantal Response Equilibrium models from experimental data using Bayesian techniques. Bayesian techniques offer some advantages over the more commonly-used maximum likelihood approach: (i) the accuracy of the posterior simulation is limited by (increasingly plentiful) computational resources, both in hardware and software, rather than the validity of an asymptotic assumption that may not be reasonable with typical experimental sample sizes; (ii) Bayesian hierarchical models are a useful way to organize heterogeneity in one's data; and (iii) Bayesian inference allows us to test whether Quantal Response Equilibrium better organizes data than does (say) Nash equilibrium or purely random behavior, without rigging the test in favor of one of these by calling it the null hypothesis.<br><br>As Quantal Response Equilibrium is a non-linear model, I also discuss some issues with choosing appropriate priors. Namely, choosing a very flat prior for the choice precision parameter implies a prior on choice probabilities with too much mass near Nash equilibrium and/or random choice. I propose a prior calibration process which seeks to avoid this problem by targeting the implied prior distribution of equilibrium choice probabilities.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"112 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116196298","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper considers a tax evasion game where the tax authority intends to prevent income under-reporting within a network of heterogeneous taxpayers who are engaged in social interactions and exchange information. I propose a two-step game-theoretic optimal audit strategy from the point of view of the tax authority, which consists of a credible threat-to-audit message followed by a network-based audit policy. Subsequently, the tax authority targets taxpayers in function of their individual productivity and their position inside the network, triggering a series of spillover effects which eventually maximize the mean perceived subjective probability of being audited among all taxpayers. Moreover, the optimal audit strategy is robust to expected and non-expected utility theories, and it is invariant for any taxpayer utility function. Additionally, computer simulations determined that the proposed enforcement regime is robust to an ample range of parameter specifications and settings.
{"title":"Optimal Audit Policies With Heterogeneous Agents","authors":"Fernando Garcia Alvarado","doi":"10.2139/ssrn.3780610","DOIUrl":"https://doi.org/10.2139/ssrn.3780610","url":null,"abstract":"This paper considers a tax evasion game where the tax authority intends to prevent income under-reporting within a network of heterogeneous taxpayers who are engaged in social interactions and exchange information. I propose a two-step game-theoretic optimal audit strategy from the point of view of the tax authority, which consists of a credible threat-to-audit message followed by a network-based audit policy. Subsequently, the tax authority targets taxpayers in function of their individual productivity and their position inside the network, triggering a series of spillover effects which eventually maximize the mean perceived subjective probability of being audited among all taxpayers. Moreover, the optimal audit strategy is robust to expected and non-expected utility theories, and it is invariant for any taxpayer utility function. Additionally, computer simulations determined that the proposed enforcement regime is robust to an ample range of parameter specifications and settings.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117131319","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
S. Borkotokey, Dhrubajit Choudhury, Rajnish Kumar, S. Sarangi
In cooperative games with transferable utilities, the Shapley value is an extreme case of marginalism while the Equal Division rule is an extreme case of egalitarianism. The Shapley value does not assign anything to the non-productive players and the Equal Division rule does not concern itself to the relative efficiency of the players in generating a resource. However, in real life situations neither of them is a good fit for the fair distribution of resources as the society is neither devoid of solidarity nor it can be indifferent to rewarding the relatively more productive players. Thus a trade-off between these two extreme cases has caught attention from many researchers. In this paper, we obtain a new value for cooperative games with transferable utilities that adopts egalitarianism in smaller coalitions on one hand and on the other hand takes care of the players' marginal productivity in sufficiently large coalitions. Our value is identical with the Shapley value on one extreme and the Equal Division rule on the other extreme. We provide four characterizations of the value using variants of standard axioms in the literature. We also provide a mechanism that implements our value in sub-game perfect Nash equilibrium.
{"title":"Consolidating Marginalism and Egalitarianism: A New Value for Transferable Utility Games","authors":"S. Borkotokey, Dhrubajit Choudhury, Rajnish Kumar, S. Sarangi","doi":"10.2139/ssrn.3729927","DOIUrl":"https://doi.org/10.2139/ssrn.3729927","url":null,"abstract":"In cooperative games with transferable utilities, the Shapley value is an extreme case of marginalism while the Equal Division rule is an extreme case of egalitarianism. The Shapley value does not assign anything to the non-productive players and the Equal Division rule does not concern itself to the relative efficiency of the players in generating a resource. However, in real life situations neither of them is a good fit for the fair distribution of resources as the society is neither devoid of solidarity nor it can be indifferent to rewarding the relatively more productive players. Thus a trade-off between these two extreme cases has caught attention from many researchers. In this paper, we obtain a new value for cooperative games with transferable utilities that adopts egalitarianism in smaller coalitions on one hand and on the other hand takes care of the players' marginal productivity in sufficiently large coalitions. Our value is identical with the Shapley value on one extreme and the Equal Division rule on the other extreme. We provide four characterizations of the value using variants of standard axioms in the literature. We also provide a mechanism that implements our value in sub-game perfect Nash equilibrium.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129779761","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Two partners contribute to a common project over time. The value of the project is determined by their aggregate effort and a common productivity parameter about which each partner is privately informed. At each instant, the two partners observe a noisy public signal of total effort. An equilibrium of this game is Markov if agents’ effort choices depend only on the beliefs about the value of the project and calendar time. We characterize the linear Markov equilibrium as the solution to a nonlinear boundary value problem. Equilibrium is unique if agents are symmetric. The equilibrium features a mutual encouragement effect, as agents exaggerate their effort to signal their private information, which counteracts free-riding incentives. If the project lasts sufficiently long, the diffused information structure approximates the first-best in terms of welfare. If instead of distributed private information, one agent has all the information about the productivity parameter, the excessive signalling effect is accentuated. As a result, the centralized information structure can yield output levels above the first best.
{"title":"Efficiency in Repeated Partnerships","authors":"Doruk Cetemen","doi":"10.2139/ssrn.3724923","DOIUrl":"https://doi.org/10.2139/ssrn.3724923","url":null,"abstract":"Two partners contribute to a common project over time. The value of the project is determined by their aggregate effort and a common productivity parameter about which each partner is privately informed. At each instant, the two partners observe a noisy public signal of total effort. An equilibrium of this game is Markov if agents’ effort choices depend only on the beliefs about the value of the project and calendar time. We characterize the linear Markov equilibrium as the solution to a nonlinear boundary value problem. Equilibrium is unique if agents are symmetric. The equilibrium features a mutual encouragement effect, as agents exaggerate their effort to signal their private information, which counteracts free-riding incentives. If the project lasts sufficiently long, the diffused information structure approximates the first-best in terms of welfare. If instead of distributed private information, one agent has all the information about the productivity parameter, the excessive signalling effect is accentuated. As a result, the centralized information structure can yield output levels above the first best.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131515036","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We present a novel theoretical mechanism that explains the capacity for non-enforceable communication about future actions to improve efficiency. We explore a two-player partnership game where, before choosing a level of effort to exert on a joint project, each player makes a cheap talk promise to their partner about their own future effort. We allow agents to incur a psychological cost of reneging on their promises. We demonstrate a strong tendency for evolutionary processes to select agents who incur intermediate costs of reneging, and show that these intermediate costs induce second-best optimal outcomes.
{"title":"Promises and Endogenous Reneging Costs","authors":"Yuval Heller, D. Sturrock","doi":"10.2139/ssrn.2958759","DOIUrl":"https://doi.org/10.2139/ssrn.2958759","url":null,"abstract":"We present a novel theoretical mechanism that explains the capacity for non-enforceable communication about future actions to improve efficiency. We explore a two-player partnership game where, before choosing a level of effort to exert on a joint project, each player makes a cheap talk promise to their partner about their own future effort. We allow agents to incur a psychological cost of reneging on their promises. We demonstrate a strong tendency for evolutionary processes to select agents who incur intermediate costs of reneging, and show that these intermediate costs induce second-best optimal outcomes.","PeriodicalId":373527,"journal":{"name":"PSN: Game Theory (Topic)","volume":"299 3","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132119588","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}