Table of Contents

An Abstract Model of Historical Processes

Michael Poulshock, Drexel University Thomas R. Kline School of Law

Patent Licensing and Bargaining with Innovative Complements and Substitutes

Daniel F. Spulber, Northwestern University - Kellogg School of Management

Testing the Quantal Response Hypothesis

Emerson Melo, Indiana University Bloomington
Kirill Pogorelskiy, University of Warwick - Department of Economics
Matthew Shum, California Institute of Technology

How Language Affects Decision-Making in Social Interactions and Decision Biases?

King King Li, City University of Hong Kong (CityUHK) - Department of Economics & Finance

Will S(He) Sabotage Me? Team-Dynamic Effects of Compensation Schemes

Sudesh Mujumdar, University of Southern Indiana
Curtis R. Price, University of Southern Indiana - School of Business
Randa Doleh, Mead Johnson Nutrition - Global Marketing


GAME THEORY & BARGAINING THEORY eJOURNAL

"An Abstract Model of Historical Processes" Free Download
Drexel University Thomas R. Kline School of Law Research Paper No. 2016-W-03

MICHAEL POULSHOCK, Drexel University Thomas R. Kline School of Law
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A game theoretic model is presented which attempts to simulate, at a very abstract level, power struggles in the social world. In the model, agents can benefit or harm each other, to varying degrees and with differing levels of influence. The agents play a dynamic, noncooperative, perfect information game where the goal is to maximize payoffs based on positional utility and intertemporal preference, while being constrained by social inertia. Agents use the power they have in order to get more of it, both in an absolute and relative sense. More research is needed to assess the model’s empirical validity.

"Patent Licensing and Bargaining with Innovative Complements and Substitutes" Free Download
Northwestern Law & Econ Research Paper No. 16-12

DANIEL F. SPULBER, Northwestern University - Kellogg School of Management
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Inventors and producers bargain over royalties to license multiple patented inventions. In the first stage of the bargaining game, inventors offer licenses to producers and producers demand licenses. In the second stage of the game, inventors and producers engage in bilateral bargaining over licensing royalties. The analysis shows that there is a unique weakly dominant strategy equilibrium in license offers. The main result is that this bargaining procedure maximizes the joint profits of inventors and producers. Licensing royalties are less than bundled monopoly royalties. The efficiency of the bargaining outcome contrasts with the inefficiency of patent royalties in the Cournot model. The analysis explores the implications of the main results for antitrust policy concerns including Standard Essential Patent holdup, royalty stacking, patent thickets, the tragedy of the anticommons, and justification for patent pools. The discussion also considers how imperfect intellectual property rights affect bargaining over royalties.

"Testing the Quantal Response Hypothesis" Free Download

EMERSON MELO, Indiana University Bloomington
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KIRILL POGORELSKIY, University of Warwick - Department of Economics
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MATTHEW SHUM, California Institute of Technology
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This paper develops a formal test for consistency of players' behavior in a series of games with the quantal response equilibrium (QRE). The test exploits a characterization of the equilibrium choice probabilities in a QRE as the gradient of a convex function, which thus satisfies the cyclic monotonicity inequalities. Our testing procedure utilizes recent econometric results for moment inequality models. We assess our test using lab experimental data from a series of generalized matching pennies games. We reject the QRE hypothesis in the pooled data, but it cannot be rejected in the individual data for over half of the subjects.

"How Language Affects Decision-Making in Social Interactions and Decision Biases?" Free Download

KING KING LI, City University of Hong Kong (CityUHK) - Department of Economics & Finance
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This paper investigates how communication in a particular language affects decision-making in social interactions and risk preferences. We test two competing hypotheses: the cognitive accessibility hypothesis and the expectation-based hypothesis. The cognitive accessibility hypothesis argues that communication in a particular language will activate the underlying cultural frame and affect behavior. The expectation-based hypothesis argues that different languages will induce different expectations regarding the choices of others and affect behavior. We test these two hypotheses using an extensive range of behaviors in a set of incentivized experiments with bilingual subjects in Chinese and English. We found that the subjects are more prosocial in the strategic interaction games (trust games) when the experiments are conducted in Chinese. However, no treatment effects are observed in the individual choice games on social preference. The results suggest that both hypotheses are rejected. The results are more compatible with the idea that individuals exhibit familiarity bias when communicating in a familiar language.

"Will S(He) Sabotage Me? Team-Dynamic Effects of Compensation Schemes" Free Download

SUDESH MUJUMDAR, University of Southern Indiana
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CURTIS R. PRICE, University of Southern Indiana - School of Business
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RANDA DOLEH, Mead Johnson Nutrition - Global Marketing
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This paper contributes theoretically and empirically to understanding the nature of interdependence among team-members under different schemes of compensating team-members. Theoretically, the device of a Proportional compensation scheme is designed to uncover the innate nature of interdependence. Empirically, data from an Experiment reveal that: 1) Assistance is the innate nature of interdependence; 2) Sabotage is the preferred mode of interdependence under the Bonus scheme, and assistance under the Egalitarian scheme; 3) Females engage in sabotage at a significantly higher rate in the Egalitarian scheme - which is actually designed to incentive assistance – and to a lesser degree in the Proportional scheme compared to males; and 4) Incentivizing assistance does not pay off.

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This eJournal distributes working and accepted paper abstracts of empirical and theoretical papers on game theory, defined as the study of the strategic interaction among rational agents in competitive and cooperative environments, and bargaining theory, defined as a situation in which two or more players have a common interest to co-operate, but have conflicting interests over exactly how to co-operate. The topics in this eJournal include all of the subjects in Section C7 of the JEL classification system.

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