Table of Contents

A Strategic Model of Magical Thinking: Axioms and Analysis

Philipp Sadowski, Duke University - Department of Economics
Brendan Daley, Duke University

International Institutions and the Rise of Asia

Peter Drysdale, Australian National University (ANU) - Crawford School of Economics and Government
Sebastien Willis, Australian National University (ANU)

Correlation and Unmediated Communication in Repeated Games with Imperfect Monitoring

Heng Liu, University of Rochester - Department of Economics

Autogenerator-Based Modelling Framework for Development of Strategic Games Simulations: Rational Pigs Game Extended

Robert Fabac, University of Zagreb - Faculty of Organization and Informatics
Danijel Radošević, University of Zagreb - Faculty of Organization and Informatics, Laboratory for Generative Programming and Machine Learning
Ivan Magdalenić, University of Zagreb - Faculty of Organization and Informatics

On Bayesian Persuasion with Multiple Senders

Fei Li, University of North Carolina (UNC) at Chapel Hill
Peter Norman, University of North Carolina (UNC) at Chapel Hill

The Emergence of Altruistic Behaviour in Conflictual Situations

Valerio Capraro, University of Southampton


GAME THEORY & BARGAINING THEORY eJOURNAL

"A Strategic Model of Magical Thinking: Axioms and Analysis" Free Download
Economic Research Initiatives at Duke (ERID) Working Paper No. 173

PHILIPP SADOWSKI, Duke University - Department of Economics
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BRENDAN DALEY, Duke University
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This paper seeks to make two contributions. First, we propose and analyze a tractable model of strategic play in which players behave as if their expectations about their opponents' behavior vary with their own choices. We refer to this nonstandard updating as magical thinking. The model provides a unified view of documented behavior in a range of often-studied games, such as the Prisoners' Dilemma, the Battle of the Sexes, Hawk-Dove, and the Stag Hunt. Second, we provide axioms applied to the behavior of the collection of players in symmetric 2x2 games, and a representation theorem that establishes these axioms to be the precise behavioral content of the model. We thereby suggest a novel way to import the axiomatic methodology of individual decision theory to strategic settings and demonstrate the benefits of this approach.

In the model, the degree to which players exhibit magical thinking is heterogeneous in the population and is captured by players' types. All players perceive types to be i.i.d. draws from a common distribution. We show that the model's parameters, namely these individual types and the commonly perceived distribution, can be (essentially) identified from behavior in games, allowing for tractable comparative statics. Finally, the model generates novel predictions across games. For example, the ability of a collection of players to coordinate on Pareto superior Nash equilibria in coordination games is positively correlated with their degree of cooperation in Prisoners' Dilemma games.

"International Institutions and the Rise of Asia" Free Download
Asia and the Pacific Policy Studies (APPS), Vol. 1, No. 3, pp. 455-469

PETER DRYSDALE, Australian National University (ANU) - Crawford School of Economics and Government
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SEBASTIEN WILLIS, Australian National University (ANU)
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This article applies a game-theoretical analysis of institutions to the international institutional architecture, of which the G20 is treated as a central element. The article argues that international institutions such as the World Trade Organization or the International Monetary Fund are best understood as mechanisms for coordinating and supporting equilibria in repeated games played among policy-makers in the world's largest economies. The growth of the emerging economies, particularly in Asia, has altered these games, and there is no guarantee, with these new entrants and new issues that have emerged, that the old equilibrium strategies are still viable. The G20, it is argued, is best understood as an attempt to respond to this change and coordinate play on a new set of globally welfare-enhancing equilibria in these games.

"Correlation and Unmediated Communication in Repeated Games with Imperfect Monitoring" Free Download

HENG LIU, University of Rochester - Department of Economics
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This paper studies n-player undiscounted repeated games with imperfect monitoring. We prove that all uniform communication equilibrium payoffs of a repeated game can be obtained as Nash equilibrium payoffs of the game extended by unmediated cheap talk. We also show that all uniform communication equilibrium payoffs of a repeated game can be reached as Nash equilibrium payoffs of the game extended by a pre-play correlation device and a cheap-talk procedure that only involves public messages; furthermore, in the case of imperfect public and deterministic signals, no cheap talk is conducted on the equilibrium-path.

"Autogenerator-Based Modelling Framework for Development of Strategic Games Simulations: Rational Pigs Game Extended" Free Download
The Scientific World Journal, Hindawi, Article ID 158679, August 2014

ROBERT FABAC, University of Zagreb - Faculty of Organization and Informatics
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DANIJEL RADOŠEVIĆ, University of Zagreb - Faculty of Organization and Informatics, Laboratory for Generative Programming and Machine Learning
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IVAN MAGDALENIĆ, University of Zagreb - Faculty of Organization and Informatics
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When considering strategic games from the conceptual perspective that focuses on the questions of participants’ decision-making rationality, the very issues of modelling and simulation are rarely discussed. The well-known Rational Pigs matrix game has been relatively intensively analyzed in terms of reassessment of the logic of two players involved in asymmetric situations as gluttons that differ significantly by their attributes.This paper presents a successful attempt of using Autogenerator for creating the framework of the game, including the predefined scenarios and corresponding payoffs. Autogenerator offers flexibility concerning the specification of game parameters, which consist of variations in the number of simultaneous players and their features and game objects and their attributes as well as some general game characteristics. In the proposed approach the model of autogenerator was upgraded so as to enable program specification updates. For the purpose of treatment of more complex strategic scenarios, we created the Rational Pigs Game Extended (RPGE), in which the introduction of a third glutton entails significant structural changes. In addition, due to the existence of particular attributes of the new player, “the tramp,? one equilibrium point from the original game is destabilized which has an influence on the decision-making of rational players.

"On Bayesian Persuasion with Multiple Senders" Free Download

FEI LI, University of North Carolina (UNC) at Chapel Hill
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PETER NORMAN, University of North Carolina (UNC) at Chapel Hill
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In a multi-sender Bayesian persuasion game, Gentzkow and Kamenica (2012) show that increasing the number of senders cannot decrease the amount of information revealed. They assume: (i) senders reveal information simultaneously, (ii) senders' information can be arbitrarily correlated, and (iii) senders cannot play mixed strategies. This paper shows that these conditions are not only sufficient but also necessary to obtain Gentzkow and Kamenica (2012)'s result. In sequential persuasion games, the order of moves matters, and we prove that adding a player as a first mover and keeping the order of moves fixed for the other players cannot result in a less informative equilibrium.

"The Emergence of Altruistic Behaviour in Conflictual Situations" Free Download

VALERIO CAPRARO, University of Southampton
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Situations where people have to decide between hurting themselves or another person are at the core of many individual and global conflicts. Yet little is known about how humans behave when facing these situations in the lab. In Studies 1 and 2 we report an experiment where participants were asked to either take a certain amount of money from another anonymous person or to donate it. While \emph{all} economic models, including inequity aversion, welfare maximisation, and regret minimisation, predict the selfish outcome, about 25% of our subjects acted altruistically. Adding a free way-out, that is the possibility of avoiding the conflict and exit the game at zero cost, led about 70% of the subjects to choose it. However, this positive effect of the way out on conflict resolution vanished for ways out with a small cost. Across all way-out conditions, females were found significantly more likely than males to avoid the conflict by choosing the way out. Quantitatively similar results were found in Study 3, where subjects faced a three-person conflict in which they had to decide between hurting themselves or either of two anonymous people: about 25% of the subjects sacrificed themselves in the no-way-out condition while the majority of them took the way-out in the free-way-out condition. Again, females were highly more likely than males to avoid the conflict by taking the way out. These results challenge all best-known economic models and suggest that females might be more suitable than males in handling human conflicts.

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