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Games, Volume 10, Issue 4 (December 2019) – 14 articles

Cover Story (view full-size image): Identifying the root cause of a conflict can be difficult. This is especially true because of the complex way in which information processing can impact beliefs of potential adversaries. We develop and analyze a model of repeated interaction to illustrate how conflict can result when rational agents endogenously process information and update beliefs. When an agent chooses to not initiate an opportunistic attack in a given period, this reveals information to his adversary. Over time, beliefs about the true state of the world converge. Depending upon model specifics, an agent may initiate an attack after an arbitrarily long period of tranquility. When this occurs, it is as if conflict has suddenly arisen without any apparent cause or impetus. Recognizing that conflicts may be initiated due to such information processing is important for both academics and practitioners alike. View [...] Read more.
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Open AccessArticle
The Positive Impact of Task Familiarity, Risk Propensity, and Need For Cognition on Observed Timing Decisions in a Security Game
Games 2019, 10(4), 49; https://doi.org/10.3390/g10040049 - 16 Dec 2019
Viewed by 2706
Abstract
This paper addresses the role of personality characteristics in decisions on the timing of an action, such as in the context of security and safety choices. Examples of such decisions include when to check log files for intruders and when to monitor financial [...] Read more.
This paper addresses the role of personality characteristics in decisions on the timing of an action, such as in the context of security and safety choices. Examples of such decisions include when to check log files for intruders and when to monitor financial accounts for fraud or errors. Two behavioral studies (n = 461) are conducted. Individual risk propensity and need for cognition are obtained via scales. The task is a game against an opaque computer opponent in which participants make decisions about the timing of actions in response to an unknown external risk factor. The task is not payoff-neutral w.r.t. risk. Difficulty is varied through the availability of explicitly given or decision-critical information, which is observable visually (Study 1) or in temporal memory (Study 2). Across this problem space, we find that risk propensity is not generally a hindrance in timing tasks. Participants of average risk propensity generally benefit from a high need for cognition, particularly when externalized memory is available, as in Study 1. In the more difficult temporal-estimation task, need for cognition was associated with increased payoffs from task experience. In both tasks, higher risk propensity in participants was associated with increased improvements in payoffs from task experience. Full article
(This article belongs to the Special Issue Game Theory for Security)
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Open AccessArticle
A Game Theoretic Model of Adversaries and Media Manipulation
Games 2019, 10(4), 48; https://doi.org/10.3390/g10040048 - 02 Dec 2019
Viewed by 2520
Abstract
A model is developed for two players exerting media manipulation efforts to support each of two actors who interact controversially. Early evidence may support one actor, while the full evidence emerging later may support the other actor. Exerting effort when the full evidence [...] Read more.
A model is developed for two players exerting media manipulation efforts to support each of two actors who interact controversially. Early evidence may support one actor, while the full evidence emerging later may support the other actor. Exerting effort when the full evidence exceeds (falls short off) the early evidence is rewarded (punished) with lower (higher) unit effort cost. Properties and simulations are presented to illustrate the players’ strategic challenges when altering eight model parameters, i.e., a player’s unit effort cost, stake in the interaction, proportionality parameter scaling the strength of reward or punishment, time discount parameter, early evidence, full evidence, contest intensity, and evidence ratio intensity. Realizing the logic of the model may aid understanding on how to handle the difference between early and full evidence of controversies, in which players have an ideological stake. Full article
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Open AccessArticle
Stable International Environmental Agreements: Large Coalitions that Achieve Little
Games 2019, 10(4), 47; https://doi.org/10.3390/g10040047 - 08 Nov 2019
Cited by 1 | Viewed by 2668
Abstract
A standard result of coalition formation games is that stable coalitions are very small if the coalition plays Nash vis-à-vis the rest of the world and if abatement costs are quadratic. It has been shown that larger coalitions and even the grand coalition [...] Read more.
A standard result of coalition formation games is that stable coalitions are very small if the coalition plays Nash vis-à-vis the rest of the world and if abatement costs are quadratic. It has been shown that larger coalitions and even the grand coalition are possible if the marginal abatement cost is concave. The paper confirms this result, but shows that abatement activities by large coalitions smaller than the grand coalition can be very small. This can be ‘repaired’ only by assuming that the marginal abatement cost curve changes its curvature extremely once the stable coalition has been reached. Full article
(This article belongs to the Special Issue Game Theoretic Models in Natural Resource Economics)
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Open AccessArticle
Gaming the System: An Investigation of Small Business Owners’ Attitudes to Tax Avoidance, Tax Planning, and Tax Evasion
Games 2019, 10(4), 46; https://doi.org/10.3390/g10040046 - 08 Nov 2019
Cited by 1 | Viewed by 3399
Abstract
To a large extent, the body of research that looks at individuals’ compliance with the law focuses on the dichotomy between compliance as rule-following and noncompliance as rule-breaking. However, a fascinating case of noncompliance is that where individuals selectively follow existing rules in [...] Read more.
To a large extent, the body of research that looks at individuals’ compliance with the law focuses on the dichotomy between compliance as rule-following and noncompliance as rule-breaking. However, a fascinating case of noncompliance is that where individuals selectively follow existing rules in order to circumvent the legal principle, this behaviour has been termed ‘creative compliance.’ In the current study, we investigated the psychological underpinnings of ‘creative compliance’ by assessing the attitudes of tax avoidance (significant minimisation of tax liability perceived to be legal) and tax evasion (illegal tax minimisation) of 330 owners of small businesses. We found that tax avoidance and tax evasion were perceived as qualitatively distinct by respondents and that they were predicted by different factors. While both tax avoidance and tax evasion were associated with weak personal norms to contribute to the tax system, tax avoidance was associated with a perception that the tax system is unfair, and that tax law has ‘loopholes’ that can be exploited, while tax evasion was predicted by the perception that evasion is a trivial crime. Overall, we provide insight into the under-investigated behaviour of ‘creative compliance’ and propose future research directions. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
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Open AccessArticle
Response Times and Tax Compliance
Games 2019, 10(4), 45; https://doi.org/10.3390/g10040045 - 04 Nov 2019
Viewed by 2684
Abstract
Inspired by the work of Rubinstein, this study revisits data from a previous lab experiment to explore the relation between response times and tax compliance and understand the potential non-linearity between them by classifying decisions and individuals into compliance types. We find that [...] Read more.
Inspired by the work of Rubinstein, this study revisits data from a previous lab experiment to explore the relation between response times and tax compliance and understand the potential non-linearity between them by classifying decisions and individuals into compliance types. We find that individuals’ decision response time is related to their compliance decisions. Full-non compliant individuals (those who did not declare any earned income) have shorter response times than those who fully or partially complied. Full-compliant individuals also tend to declare income faster than partially compliant subjects. Such results are robust throughout time and when controlling for contextual characteristics of experimental design. We find non-linearity via an inverted U-shape function that reaches its maximum declaration time around a compliance rate of 60%, even after controlling for contextual experimental design factors. In addition, we observe a non-linear relation between cognitive skills, response time, and tax compliance. Participants with relatively high cognitive skills and very low or very high tax compliance level have low response times, while subjects with relatively lower cognitive skills tend to report higher decision times for higher compliance levels. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
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Open AccessArticle
Formation of Stable and Efficient Social Storage Cloud
Games 2019, 10(4), 44; https://doi.org/10.3390/g10040044 - 01 Nov 2019
Viewed by 2646
Abstract
In this paper, we study the formation of endogenous social storage cloud in a dynamic setting, where rational agents build their data backup connections strategically. We propose a degree-distance-based utility model, which is a combination of benefit and cost functions. The benefit function [...] Read more.
In this paper, we study the formation of endogenous social storage cloud in a dynamic setting, where rational agents build their data backup connections strategically. We propose a degree-distance-based utility model, which is a combination of benefit and cost functions. The benefit function of an agent captures the expected benefit that the agent obtains by placing its data on others’ storage devices, given the prevailing data loss rate in the network. The cost function of an agent captures the cost that the agent incurs to maintain links in the network. With this utility function, we analyze what network is likely to evolve when agents themselves decide with whom they want to form links and with whom they do not. Further, we analyze which networks are pairwise stable and efficient. We show that for the proposed utility function, there always exists a pairwise stable network, which is also efficient. We show that all pairwise stable networks are efficient, and hence, the price of anarchy is the best that is possible. We also study the effect of link addition and deletion between a pair of agents on their, and others’, closeness and storage availability. Full article
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Open AccessArticle
Can Behavioral “Nudges” Improve Compliance? The Case of Colombia Social Protection Contributions
Games 2019, 10(4), 43; https://doi.org/10.3390/g10040043 - 29 Oct 2019
Viewed by 2668
Abstract
The Government of Colombia imposes a variety of taxes that must be paid by individual wage earners, called in their entirety “social protection contributions”. Since 2007 individual payments have been collected using an on-line mechanism. In order to improve compliance, the Government used [...] Read more.
The Government of Colombia imposes a variety of taxes that must be paid by individual wage earners, called in their entirety “social protection contributions”. Since 2007 individual payments have been collected using an on-line mechanism. In order to improve compliance, the Government used a controlled field experiment in which various “pop-up messages” were sent to individuals when making their on-line payments, as behavioral “nudges”. We examine the impact of these nudges on individual reporting behavior. We find mixed evidence that these messages increased compliance rates relative to a control group that received a so-called “neutral” message. However, we also demonstrate that the use as the control group of individuals receiving a so-called “neutral” message creates considerable bias; that is, the receipt of any message of any type clearly influences behavior. Instead, we show that the appropriate control group should be individuals who receive no message at all. When this control group is used, we find that self-employed individuals generally increase their contributions; individuals who are making declarations on behalf of all employees in their company are less likely to respond to messages in a systematic way. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
Open AccessArticle
Taxation with Mobile High-Income Agents: Experimental Evidence on Tax Compliance and Equity Perceptions
Games 2019, 10(4), 42; https://doi.org/10.3390/g10040042 - 11 Oct 2019
Viewed by 2773
Abstract
In a laboratory experiment on tax compliance, we model a situation in which high-income taxpayers can leave a tax system that finances a public good. We compare low-income taxpayers’ compliance decisions and equity perceptions across treatments in which they are informed or not [...] Read more.
In a laboratory experiment on tax compliance, we model a situation in which high-income taxpayers can leave a tax system that finances a public good. We compare low-income taxpayers’ compliance decisions and equity perceptions across treatments in which they are informed or not informed about the mobility option of high-income taxpayers. This allows us to test if low-income taxpayers regard the mobility option as a rationale for implementing a regressive tax schedule. To investigate if a potential ‘justification effect’ of the mobility option depends on the causes of income heterogeneity, we also varied whether income was allocated based on relative performance in a prior ability task or at random. Interestingly, although the performance-based allocation itself was judged to be fairer, we observed higher compliance under the random allocation mechanism. However, compliance and equity perceptions did not significantly differ by the information treatment variation, regardless of the source of income inequality. The results indicate that the threat of losing high-income taxpayers’ contributions does not lead low-income taxpayers to view the regressive tax schedule more favorably. This suggests that taking the differential mobility options as given and altering tax schedules accordingly may not be perceived as an adequate policy response. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
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Open AccessArticle
On the Collective Choice among Models of Social Protection: An Experimental Study
Games 2019, 10(4), 41; https://doi.org/10.3390/g10040041 - 11 Oct 2019
Viewed by 2472
Abstract
A real-effort experiment is conducted in order to detect preferences for one out of three different models of the Welfare State characterized by different tax-and-transfer schemes. We reproduce a small society in the lab where: Subjects are grouped in three stylized classes (the [...] Read more.
A real-effort experiment is conducted in order to detect preferences for one out of three different models of the Welfare State characterized by different tax-and-transfer schemes. We reproduce a small society in the lab where: Subjects are grouped in three stylized classes (the rich, the middle class and the poor) on the basis of their performance in a real-effort activity; income and risk are assigned according to the class; tax revenue is spent to refund unlucky people and to provide a public good. Experimental subjects must choose (both under and without a veil of ignorance concerning their position in the society created in the lab) among (a) a baseline proportional scheme, where the State is neutral with respect to risk heterogeneity; (b) an actuarially fair scheme where low ability and low earnings subjects bear full individual responsibility for risk exposure and (c) a progressive scheme where mutual risk insurance spreads risk across all subjects such that low ability and low earnings individuals are compensated. Our most relevant finding is that preference is motivated less by a justice principle and more by self-interested considerations on the expectations surrounding one’s own position in the society. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
Open AccessArticle
A Bayesian Method for Characterizing Population Heterogeneity
Games 2019, 10(4), 40; https://doi.org/10.3390/g10040040 - 09 Oct 2019
Viewed by 2568
Abstract
A stylized fact from laboratory experiments is that there is much heterogeneity in human behavior. We present and demonstrate a computationally practical non-parametric Bayesian method for characterizing this heterogeneity. In addition, we define the concept of behaviorally distinguishable parameter vectors, and use the [...] Read more.
A stylized fact from laboratory experiments is that there is much heterogeneity in human behavior. We present and demonstrate a computationally practical non-parametric Bayesian method for characterizing this heterogeneity. In addition, we define the concept of behaviorally distinguishable parameter vectors, and use the Bayesian posterior to say what proportion of the population lies in meaningful regions. These methods are then demonstrated using laboratory data on lottery choices and the rank-dependent expected utility model. In contrast to other analyses, we find that 79% of the subject population is not behaviorally distinguishable from the ordinary expected utility model. Full article
(This article belongs to the Special Issue The Empirics of Behaviour under Risk and Ambiguity)
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Open AccessArticle
Conflict without an Apparent Cause
Games 2019, 10(4), 39; https://doi.org/10.3390/g10040039 - 02 Oct 2019
Viewed by 2836
Abstract
A game-theoretic model of repeated interaction between two potential adversaries is analyzed to illustrate how conflict could possibly arise from rational decision-makers endogenously processing information, without any exogenous changes to the fundamentals of the environment. This occurs as a result of a convergence [...] Read more.
A game-theoretic model of repeated interaction between two potential adversaries is analyzed to illustrate how conflict could possibly arise from rational decision-makers endogenously processing information, without any exogenous changes to the fundamentals of the environment. This occurs as a result of a convergence of beliefs about the true state of the world by the two players. During each period, each adversary must decide to either stage an attack or not. Conflict ensues if either player chooses to initiate an attack. Choosing to not stage an attack in a given period reveals information to the player’s rival. Thus, over time, beliefs about the true state of the world converge. Depending upon the true state of the world, we can ultimately have either of the two adversaries initiating an attack (either with or without regret) after an arbitrarily long period of tranquility. When this happens, it is as if conflict has suddenly arisen without any apparent cause or impetus. Alternatively (again, depending upon the true state of the world), we could possibly have beliefs converge to a point where neither adversary wants to initiate conflict. Full article
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Open AccessArticle
Learning (Not) to Evade Taxes
Games 2019, 10(4), 38; https://doi.org/10.3390/g10040038 - 29 Sep 2019
Viewed by 2588
Abstract
In this paper, lab experiments on tax compliance were theoretically investigated with dynamic and stochastic methods. It is well known from experimental games that learning allows a better understanding of participants’ behavior. However, it has not been explicitly applied so far in the [...] Read more.
In this paper, lab experiments on tax compliance were theoretically investigated with dynamic and stochastic methods. It is well known from experimental games that learning allows a better understanding of participants’ behavior. However, it has not been explicitly applied so far in the theoretical analysis of tax compliance experiments. In this paper, it was shown that two decision-making processes may be distinguished: a discrete process in which all options are regarded and an all-or-nothing process in which either the respective tax is paid fully or not at all. The corresponding variant of the learning model was either a stochastic or a deterministic one, with the stochastic version as the more general model. In the additional empirical part of the paper, it was shown that tax payments decline in trend over the rounds of the considered experiment. This negative trend was interpreted as a learning effect, in accordance with the stochastic version of the theoretical model. However, the alternative interpretation that the observed behavior was driven by a tiring effect cannot be completely excluded. Full article
(This article belongs to the Special Issue Empirical Tax Research and Application)
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Open AccessArticle
A Game-Free Microfoundation of Mutual Optimism
Games 2019, 10(4), 37; https://doi.org/10.3390/g10040037 - 27 Sep 2019
Cited by 1 | Viewed by 2818
Abstract
One of the most widely accepted explanations for why wars occur despite its Pareto-suboptimality is mutual optimism: if both sides expect to gain a lot by fighting, war becomes inevitable. The literature on mutual optimism typically assumes mutually optimistic beliefs and shows that, [...] Read more.
One of the most widely accepted explanations for why wars occur despite its Pareto-suboptimality is mutual optimism: if both sides expect to gain a lot by fighting, war becomes inevitable. The literature on mutual optimism typically assumes mutually optimistic beliefs and shows that, under such an assumption, war may occur despite its Pareto-suboptimality. In a war–peace model, we show that, if players neglect the correlation between other players’ actions and their types—a well-established concept in economics—then players’ expected payoffs from war increase relative to conventional informational sophistication predictions, hence providing a microfoundation of mutual optimism. Full article
Open AccessArticle
Emotion and Knowledge in Decision Making under Uncertainty
Games 2019, 10(4), 36; https://doi.org/10.3390/g10040036 - 27 Sep 2019
Viewed by 2721
Abstract
This paper presents four incentivised experiments analysing jointly the separate role of immediate integral emotions and knowledge in individual decision making under ambiguity. Reactions to a natural source of uncertainty (i.e., forthcoming real-world election results) were measured using both computed decision weights derived [...] Read more.
This paper presents four incentivised experiments analysing jointly the separate role of immediate integral emotions and knowledge in individual decision making under ambiguity. Reactions to a natural source of uncertainty (i.e., forthcoming real-world election results) were measured using both computed decision weights derived from individual choices and judgmental probabilities determined from the subjects’ estimated likelihood of election outcomes. This study used self-reports to measure emotions aroused by the prospective election victory of a party/coalition of parties, and both self-assessed and actual competence to measure knowledge of politics. This paper found evidence of both preference for ambiguity in the gain domain and of likelihood insensitivity, namely the tendency to overweight unlikely events and to underweight likely events. This paper also shows that a superior knowledge of politics was associated with a preference for ambiguity (i.e., the elevation of the decision weighting function for gains). Both stronger positive emotions and superior knowledge generally have asymmetric effects on likelihood insensitivity (i.e., the curvature of the decision weighting function), each being associated separately with higher overweighting of unlikely election outcomes. Full article
(This article belongs to the Special Issue The Empirics of Behaviour under Risk and Ambiguity)
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