Complete Information Game Research Articles

Rational behavior under correlated uncertainty

In complete information games, Dekel and Fudenberg (1990) and Börgers (1994) have proposed the solution concept S∞W (one round of elimination of weakly dominated strategies followed by iterated elimination of strongly dominated strategies), motivating it by a characterization in terms of “approximate common certainty” of admissibility. We examine the validity of this characterization of S∞W in an incomplete information setting. We argue that in Bayesian games with a nontrivial state space, the characterization is very sensitive to the way in which uncertainty in the form of approximate common certainty of admissibility is taken to interact with the uncertainty already captured by players' beliefs about the states of nature: We show that S∞W corresponds to approximate common certainty of admissibility when this is not allowed to coincide with any changes to players' beliefs about states. If approximate common certainty of admissibility is accompanied by vanishingly small perturbations to beliefs, then S∞W is a (generally strict) subset of the predicted behavior, which we characterize in terms of a generalization of Hu's (2007) perfect p-rationalizable set.

Identification of complete information games

This paper establishes sufficient conditions for point identification of the utility functions in generalized complete information game models. These models allow generalized interaction structures and generalized behavioral assumptions. The generalized interaction structures allow that the dependence of an agent’s utility function on the other agents’ actions can itself depend on characteristics of the agents, including an endogenous network of connections among the agents. The generalized behavioral assumptions relax the solution concept from Nash equilibrium play to weaker solution concepts like rationalizability. The results allow a non-parametric specification of the unobservables.

The killing game: A theory of non-democratic succession

The winner of a battle for a throne can either execute or spare the loser; if the loser is spared, he contends the throne in the next period. Executing the losing contender gives the winner a chance to rule uncontested for a while, but then his life is at risk if he loses to some future contender who might be, in equilibrium, too frightened to spare him. The trade-off is analyzed within a dynamic complete information game, with, potentially, an infinite number of long-term players. In an equilibrium, decisions to execute predecessors depend on the predecessors’ history of executions. With a dynastic rule in place, incentives to kill the predecessor are much higher than in non-hereditary dictatorships. The historical illustration for our analysis contains a discussion of post-World War II politics of execution of deposed leaders and detailed discussion of non-hereditary military dictatorships in Venezuela in 1830–1964, which witnessed dozens of comebacks and no single political execution.

Combinatorial approach to inference in partially identified incomplete structural models

We propose a computationally feasible inference method in finite games of complete information. Galichon and Henry, 2011 and Beresteanu, Molchanov, and Molinari, 2011 show that the empirical content in such models is characterized by a collection of moment inequalities whose number increases exponentially with the number of discrete outcomes. We propose an equivalent characterization based on classical combinatorial optimization methods that allows the construction of confidence regions with an efficient bootstrap procedure that runs in linear computing time. The method can be applied to the empirical analysis of cooperative and noncooperative games, instrumental variable models of discrete choice, and revealed preference analysis. We propose an application to the determinants of long term elderly care choices. Incomplete structural models multiple equilibria partial identification sharp bounds confidence regions max‐flow–min‐cut functional quantile bootstrap elderly care C13 C72

Identification of Solution Concepts for Discrete Games

Empirical analyses of discrete games rely on behavioral as- sumptions that are crucial not just for estimation, but also for the validity of counterfactual exercises and policy implications. We find conditions for a general class of complete-information games under which it is possible to identify whether the behavior of economic agents satisfies some of these assumptions. Our results allow us to identify whether and how often firms in an entry game play Nash equilibria, and which equilibria are more likely to be selected.

Information and Small Group Effectiveness in Large Quasilinear Economies

In large quasilinear economies, we provide sufficient conditions to establish the nonemptiness of several versions of approximate interim cores with endogenous communication. This is done by proving nonemptiness of approximate ex post cores satisfying incentive compatibility. When the number of agents with private information remains finite, the main argument relies on an adaptation of the small group effectiveness condition, previously proposed for games of complete information. The result goes through when all agents are informationally small.

How to Enhance Employee Voice Behavior Based on Game Theory

With the need of enterprise competition and development, the importance of the employee voice behavior is becoming increasingly apparent. Therefore, people pay more and more attention to employee voice behavior in the field of organization behavior. From the perspective of game theory, this paper has established a static game of complete information and analyzed the strategy selection between enterprise and the employee. Meanwhile, we take appropriate measures in order to achieve win-win development of enterprises and employees.

Strategic Maritime Container Transport Design in Oligopolistic Markets

This paper considers the maritime container assignment problem in a market setting with two competing firms. Given a series of known, exogenous demands for service between pairs of ports, each company is free to design a liner service network serving a subset of the ports and demand, subject to the size of their fleets and the potential for profit. The model is designed as a three-stage complete information game: in the first stage, the firms simultaneously invest in their fleet; in the second stage, they individually design their networks and solve the route assignment problem with respect to the transport demand they expect to serve, given the fleet determined in the first stage; in the final stage, the firms compete in terms of freight rates on each origin-destination movement. The game is solved by backward induction. Numerical solutions are provided to characterize the equilibria of the game.

STRUCTURAL ESTIMATION OF SEQUENTIAL GAMES OF COMPLETE INFORMATION

In models of strategic interaction, there may be important order of entry effects if one player can credibly commit to an action (e.g., entry) before other players. If one estimates a simultaneous‐move model, then the move‐order effects will be confounded with the payoffs. This article considers nonparametric identification and simulation‐based estimation of sequential games of complete information. Relative to simultaneous‐move games, these models avoid the problem of multiple equilibria and require fewer payoff normalizations. We apply the estimator in several Monte Carlo experiments and to study entry‐order effects using data from the airline industry. (JEL C57, C15, L93)

Alternating-Offer Bargaining with a Global Games Information Structure

This paper studies frequent-offer limits of perfect Bayesian equilibria in the alternating-offer bilateral bargaining model with private correlated values. The correlation of values is modeled via the global games information structure: values depend on the unobserved quality of the object and idiosyncratic factors. For any level of correlation we construct a punishing path that exhibits the Coasian dynamics and enables to sustain a variety of outcomes even when the correlation of values is almost perfect. We characterize the Pareto frontier of frequent-offer PBE limits as the correlation approaches perfect and show that such limits exhibit no delay, but the surplus split generally differs from that in the complete-information game. We also construct frequent-offer PBE limits that exhibit trade delays even when the correlation of values is close to perfect. Our findings highlight the role of public information for bargaining delays.

Financing SMEs in Vlora City, Albania: between Game Theory and Lack of Information

The SMEs (small and medium-sized enterprises) play a crucial economical role, especially in transition economies. However, the financing problem affects the SMEs’ development. Information asymmetry between banks and enterprises is the main reason for the SMEs’ gaining funds so hard; the banks do not know the operating conditions and credit situation of SMEs. The study focuses on the analyses of the game of (in) complete information and financing growth strategies of SMEs in the city of Vlora to face with challenges of a sustainable development and a competitive market.

Adaptive Quantization for Distributed Estimation in Energy-Harvesting Wireless Sensor Networks: A Game-Theoretic Approach

The problem of distributed estimation in energy-harvesting wireless sensor networks (EH-WSNs) is studied. In general, the energy state of an energy-harvesting sensor varies dramatically. Existing efforts mainly concentrate on the problem of distributed estimation for battery-powered WSNs, ignoring the crucial issue of energy harvesting. Therefore, the unpredictable energy harvesting, the energy storage device, and energy consumption are modeled in a unified way to jointly address the energy harvesting and distributed estimation problem. In this paper, combining with the classical adaptive distributed estimation scheme, the problem of parameter estimation in EH-WSNs is formulated as a game of complete and perfect information. Each player decides its strategy according to the others' energy states and actions. The subgame perfect equilibrium (SPE) is derived by backward induction. Simulation results show that the proposed SPE makes full use of the harvested energy and improves the estimation performance.

Game theory and engineering applications [testing ourselves

Game theory is summarized in a tutorial. Static and dynamic games of complete information are discussed. Canonical games, such as the prisoners dilemma, the battle of the sexes, and matching pennies are presented. Game theoretic engineering applications are reviewed for some war-game scenarios.

NETWORK STRUCTURE IN A LINK FORMATION GAME: AN EXPERIMENTAL STUDY

In this article, we use an experiment to evaluate the performance of alternative refinements in a Myersonian link formation game with a supermodular payoff function. Our results show that a non‐cooperative refinement, the global games (GG) approach, outperforms alternative cooperative refinements (strong Nash equilibrium, coalition‐proof Nash equilibrium, and pairwise stable Nash equilibrium) in explaining the observed experimental behavior in the static game of complete information with three players. The results are robust to some comparative statics and the GG approach shows a high predictive power under incomplete information. However, under repeated interaction or with a greater number of players, the GG approach loses predictive power, but so do the cooperative refinements. The results illustrate the importance of coordination failure in practice and the need to design mechanisms to reduce this effect in practical decision‐making problems. (JEL C70, C92, D20, D44, D82)

Endogenous market power in an emissions trading scheme with auctioning

This paper contributes to the literature on market power in emissions permits markets, modeling an emissions trading scheme in which polluters differ with respect to their marginal abatement costs at the business-as-usual emissions. The polluters play a two-stage static complete information game in which their market power arises endogenously from their characteristics. In the first stage all polluters bid in an auction for the distribution of the fixed supply of permits issued by the regulator, and in the second stage they trade these permits in a secondary market. For compliance, they can also engage in abatement activity at a quadratic cost. Under the assumptions of the model, in equilibrium all polluters are successful in the auction. In the secondary market the low-cost emitters are net sellers and the high-cost emitters are net buyers. Moreover, the high-cost emitters are worse off as a result of the strategic behavior. In addition, the secondary market price is unambiguously above the auction clearing price. I find that the aggregate compliance cost when polluters act strategically increases in the heterogeneity of their marginal abatement costs at the business-as-usual emissions, but there exists a threshold of the fixed supply of permits above which strategic behavior is compliance cost-saving for the polluters. Finally, for a low enough variance of the marginal abatement cost at the business-as-usual emissions, strategic behavior is compliance cost-saving for the polluters, regardless of the level of the available supply of permits.

Can quantum entanglement implement classical correlated equilibria?

We ask whether players of a classical game can partition a pure quantum state to implement classical correlated equilibrium distributions. The main contribution of this work is an impossibility result: we provide an example of a classical correlated equilibrium that cannot be securely implemented without useful information leaking outside the system. We study the model where players of a classical complete information game initially share an entangled pure quantum state. Players may perform arbitrary local operations on their subsystems, but no direct communication (either quantum or classical) is allowed. We explain why, for the purpose of implementing classical correlated equilibria, it is desirable to restrict the initial state to be pure and to restrict communication. In this framework, we define the concept of pure quantum correlated equilibrium (PQCE) and show that in a normal form game, any outcome distribution implementable by a PQCE can also be implemented by a classical correlated equilibrium (CE), but that the converse is false. We extend our analysis to extensive form games, and compare the power of PQCE to extensive form classical correlated equilibria (EFCE) and immediate-revelation extensive form correlated equilibria (IR-EFCE).

The New Battle of the Sexes: A 2 X 2 Model of Female Alienation

We examine a simple game in which males and females have different preferences over sex and children, and gender-biased asymmetric strategies. We attempt to characterize the fundamental tradeoffs in a static game of complete information. We find that plausible differences in preferences can account for observed time-trends in the so-called happiness gender gap, following the introduction of a single technology which may prevent conception and yields no dis-utility to men. The model suggests that men may have benefitted more than women from the introduction of the Pill, and raises the question of whether alternative forms of family planning might better equalize the relative positions of men and women in sexual partnerships. These findings have particular relevance for feminist critiques of the sexual revolution.

Optimal Strategies for Multiple Participants in Electricity Markets

This letter presents the solution framework for calculating multi-participant Nash equilibria in a transmission-constrained electricity market. The proposed framework, which is generally applicable to various gaming conditions in electricity markets, is used here for non-cooperative complete information game between market participants with discrete bidding strategies. The example in this letter shows the effectiveness of the proposed framework in finding the Nash equilibrium.

Characterising equilibrium selection in global games with strategic complementarities

Abstract Global games are widely used to predict behaviour in games with strategic complementarities and multiple equilibria. We establish two results on the global game selection. First, we show that, for any supermodular complete information game, the global game selection is independent of the payoff functions chosen for the gameʼs global game embedding. Second, we give a simple sufficient criterion to derive the selection and establish noise independence in many-action games by decomposing them into games with smaller action sets, to which we may often apply simple criteria. We also report in which small games noise independence may be established by counting the number of players or actions.

Bounded memory and permanent reputations

A recent result in repeated incomplete information games is that after an arbitrarily long history, any equilibrium of the continuation game must be an equilibrium of the complete information game. This result implies that reputation is a short-run phenomenon. We study a particular class of reputation games and show that bounded memory may lead to permanent reputations. In fact, for a particular range of parameters, a bounded memory player may never be able to learn anything at all.