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Games, Volume 4, Issue 1 (March 2013) – 8 articles , Pages 1-143

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580 KiB  
Article
Two Pricing Mechanisms in Sponsored Search Advertising
by Wei Yang, Youyi Feng and Baichun Xiao
Games 2013, 4(1), 125-143; https://doi.org/10.3390/g4010125 - 20 Mar 2013
Cited by 19 | Viewed by 5890
Abstract
Sponsored search advertising has grown rapidly since the last decade and is now a significant revenue source for search engines. To ameliorate revenues, search engines often set fixed or variable reserve price to in influence advertisers’ bidding. This paper studies and compares two [...] Read more.
Sponsored search advertising has grown rapidly since the last decade and is now a significant revenue source for search engines. To ameliorate revenues, search engines often set fixed or variable reserve price to in influence advertisers’ bidding. This paper studies and compares two pricing mechanisms: the generalized second-price auction (GSP) where the winner at the last ad position pays the larger value between the highest losing bid and reserve price, and the GSP with a posted reserve price (APR) where the winner at the last position pays the reserve price. We show that if advertisers’ per-click value has an increasing generalized failure rate, the search engine’s revenue rate is quasi-concave and hence there exists an optimal reserve price under both mechanisms. While the number of advertisers and the number of ad positions have no effect on the selection of reserve price in GSP, the optimal reserve price is affected by both factors in APR and it should be set higher than GSP. Full article
(This article belongs to the Special Issue Mechanism Design)
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300 KiB  
Article
Divorce Costs and Marital Dissolution in a One-to-One Matching Framework With Nontransferable Utilities
by Ismail Saglam
Games 2013, 4(1), 106-124; https://doi.org/10.3390/g4010106 - 20 Mar 2013
Cited by 19 | Viewed by 5205
Abstract
In this paper, we use a two-period one-to-one matching model with incomplete information to examine the effect of changes in divorce costs on marital dissolution. Each individual who has a nontransferable expected utility about the quality of each potential marriage decides whether to [...] Read more.
In this paper, we use a two-period one-to-one matching model with incomplete information to examine the effect of changes in divorce costs on marital dissolution. Each individual who has a nontransferable expected utility about the quality of each potential marriage decides whether to marry or to remain single at the beginning of the first period. Individuals married in the first period learn the qualities of their marriages at the beginning of the second period and then decide whether to stay married or to unilaterally divorce. We show that, for any society, there exist matching environments where the probability of the marital dissolution does not reduce divorce costs under gender-optimal matching rules. In such environments, an allocation effect of divorce costs with an ambiguous sign outweighs an incentive effect that is always negative. We also show that these results may also arise under stable matching rules that are not gender optimal. Full article
(This article belongs to the Special Issue Games and Matching Markets)
308 KiB  
Article
Group Size, Coordination, and the Effectiveness of Punishment in the Voluntary Contributions Mechanism: An Experimental Investigation
by Bin Xu, C. Bram Cadsby, Liangcong Fan and Fei Song
Games 2013, 4(1), 89-105; https://doi.org/10.3390/g4010089 - 19 Feb 2013
Cited by 10 | Viewed by 6303
Abstract
We examine the effectiveness of the individual-punishment mechanism in larger groups, comparing groups of four to groups of 40 participants. We find that the individual punishment mechanism is remarkably robust when the marginal per capita return (MPCR), i.e. the return to each participant [...] Read more.
We examine the effectiveness of the individual-punishment mechanism in larger groups, comparing groups of four to groups of 40 participants. We find that the individual punishment mechanism is remarkably robust when the marginal per capita return (MPCR), i.e. the return to each participant from each dollar that is contributed, is held constant. Moreover, the efficiency gains from the punishment mechanism are significantly higher in the 40-participant than in the four-participant treatment. This is true despite the coordination problems inherent in an institution relying on decentralized individual punishment decisions in the context of a larger group. It reflects increased per capita expenditures on punishment that offset the greater coordination difficulties in the larger group. However, if the marginal group return (MGR), i.e. the return to the entire group of participants, stays constant, resulting in an MPCR that shrinks with group size, no such offset occurs and punishment loses much but not all of its effectiveness at encouraging voluntary contributions to a public good. Efficiency is not significantly different from the small-group treatment. Full article
423 KiB  
Article
Hierarchical Bayesian Analysis of Biased Beliefs and Distributional Other-Regarding Preferences
by Ozan Aksoy and Jeroen Weesie
Games 2013, 4(1), 66-88; https://doi.org/10.3390/g4010066 - 19 Feb 2013
Cited by 4 | Viewed by 6096
Abstract
This study investigates the relationship between an actor’s beliefs about others’ other-regarding (social) preferences and her own other-regarding preferences, using an “avant-garde” hierarchical Bayesian method. We estimate two distributional other-regarding preference parameters, α and β, of actors using incentivized choice data in binary [...] Read more.
This study investigates the relationship between an actor’s beliefs about others’ other-regarding (social) preferences and her own other-regarding preferences, using an “avant-garde” hierarchical Bayesian method. We estimate two distributional other-regarding preference parameters, α and β, of actors using incentivized choice data in binary Dictator Games. Simultaneously, we estimate the distribution of actors’ beliefs about others α and β, conditional on actors’ own α and β, with incentivized belief elicitation. We demonstrate the benefits of the Bayesian method compared to it’s hierarchical frequentist counterparts. Results show a positive association between an actor’s own (α; β ) and her beliefs about average(α; β) in the population. The association between own preferences and the variance in beliefs about others’ preferences in the population, however, is curvilinear for α and insignificant for β. These results are partially consistent with the cone effect [1,2] which is described in detail below. Because in the Bayesian-Nash equilibrium concept, beliefs and own preferences are assumed to be independent, these results cast doubt on the application of the Bayesian-Nash equilibrium concept to experimental data. Full article
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261 KiB  
Article
Tacit Collusion under Fairness and Reciprocity
by Doruk İriş and Luís Santos-Pinto
Games 2013, 4(1), 50-65; https://doi.org/10.3390/g4010050 - 07 Feb 2013
Cited by 74 | Viewed by 5833
Abstract
This paper departs from the standard profit-maximizing model of firm behavior by assuming that firms are motivated in part by personal animosity–or respect–towards their competitors. A reciprocal firm responds to unkind behavior of rivals with unkind actions (negative reciprocity), while at the same [...] Read more.
This paper departs from the standard profit-maximizing model of firm behavior by assuming that firms are motivated in part by personal animosity–or respect–towards their competitors. A reciprocal firm responds to unkind behavior of rivals with unkind actions (negative reciprocity), while at the same time, it responds to kind behavior of rivals with kind actions (positive reciprocity). We find that collusion is easier to sustain when firms have a concern for reciprocity towards competing firms provided that they consider collusive prices to be kind and punishment prices to be unkind. Thus, reciprocity concerns among firms can have adverse welfare consequences for consumers. Full article
404 KiB  
Article
Nash Implementation in an Allocation Problem with Single-Dipped Preferences
by Ahmed Doghmi
Games 2013, 4(1), 38-49; https://doi.org/10.3390/g4010038 - 30 Jan 2013
Cited by 20 | Viewed by 5400
Abstract
In this paper, we study the Nash implementation in an allocation problem with single-dipped preferences. We show that, with at least three agents, Maskin monotonicity is necessary and sufficient for implementation. We examine the implementability of various social choice correspondences (SCCs) in this [...] Read more.
In this paper, we study the Nash implementation in an allocation problem with single-dipped preferences. We show that, with at least three agents, Maskin monotonicity is necessary and sufficient for implementation. We examine the implementability of various social choice correspondences (SCCs) in this environment, and prove that some well-known SCCs are Maskin monotonic ( but they do not satisfy no-veto power) and hence Nash implementable. Full article
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319 KiB  
Article
An Equilibrium Analysis of Knaster’s Fair Division Procedure
by Matt Van Essen
Games 2013, 4(1), 21-37; https://doi.org/10.3390/g4010021 - 18 Jan 2013
Cited by 46 | Viewed by 6966
Abstract
In an incomplete information setting, we analyze the sealed bid auction proposed by Knaster (cf. Steinhaus (1948)). This procedure was designed to efficiently and fairly allocate multiple indivisible items when participants report their valuations truthfully. In equilibrium, players do not follow truthful bidding [...] Read more.
In an incomplete information setting, we analyze the sealed bid auction proposed by Knaster (cf. Steinhaus (1948)). This procedure was designed to efficiently and fairly allocate multiple indivisible items when participants report their valuations truthfully. In equilibrium, players do not follow truthful bidding strategies. We find that, ex-post, the equilibrium allocation is still efficient but may not be fair. However, on average, participants receive the same outcome they would have received if everyone had reported truthfully—i.e., the mechanism is ex-ante fair. Full article
(This article belongs to the Special Issue Mechanism Design)
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1570 KiB  
Article
Evolutionary Exploration of the Finitely Repeated Prisoners’ Dilemma—The Effect of Out-of-Equilibrium Play
by Kristian Lindgren and Vilhelm Verendel
Games 2013, 4(1), 1-20; https://doi.org/10.3390/g4010001 - 04 Jan 2013
Cited by 5 | Viewed by 7019
Abstract
The finitely repeated Prisoners’ Dilemma is a good illustration of the discrepancy between the strategic behaviour suggested by a game-theoretic analysis and the behaviour often observed among human players, where cooperation is maintained through most of the game. A game-theoretic reasoning based on [...] Read more.
The finitely repeated Prisoners’ Dilemma is a good illustration of the discrepancy between the strategic behaviour suggested by a game-theoretic analysis and the behaviour often observed among human players, where cooperation is maintained through most of the game. A game-theoretic reasoning based on backward induction eliminates strategies step by step until defection from the first round is the only remaining choice, reflecting the Nash equilibrium of the game. We investigate the Nash equilibrium solution for two different sets of strategies in an evolutionary context, using replicator-mutation dynamics. The first set consists of conditional cooperators, up to a certain round, while the second set in addition to these contains two strategy types that react differently on the first round action: The ”Convincer” strategies insist with two rounds of initial cooperation, trying to establish more cooperative play in the game, while the ”Follower” strategies, although being first round defectors, have the capability to respond to an invite in the first round. For both of these strategy sets, iterated elimination of strategies shows that the only Nash equilibria are given by defection from the first round. We show that the evolutionary dynamics of the first set is always characterised by a stable fixed point, corresponding to the Nash equilibrium, if the mutation rate is sufficiently small (but still positive). The second strategy set is numerically investigated, and we find that there are regions of parameter space where fixed points become unstable and the dynamics exhibits cycles of different strategy compositions. The results indicate that, even in the limit of very small mutation rate, the replicator-mutation dynamics does not necessarily bring the system with Convincers and Followers to the fixed point corresponding to the Nash equilibrium of the game. We also perform a detailed analysis of how the evolutionary behaviour depends on payoffs, game length, and mutation rate. Full article
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