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We introduce risk-averse bidders in a security-bid auction to analyze how the security design affects bidders’ equilibrium behavior and, as a result, the revenue and efficiency of the auction. We show that steeper securities provide more insurance because they allow bidders to smooth payoffs across realizations. Such insurance levels the playing field for more-risk-averse bidders, inducing them to bid more aggressively. As a consequence, the auction’s allocative efficiency weakly increases when the seller switches from a flatter to a steeper security. Furthermore, we prove that when bidders are homogeneously and sufficiently risk averse, the only security that guarantees Pareto efficiency is the steepest, that is, a call option. We also determine the relationship between the security design and the auction format. In particular, we show that for convex and superconvex families of securities, the first-price auction yields higher expected revenues, provided a technical condition, whereas for subconvex families, the second price yields higher expected revenues, provided that bidders are moderately risk averse. Finally, we show that steeper securities also attract higher entry from an ex ante perspective, when entry is costly, and discuss the effects that the presence of risk aversion has on informal auctions. This paper was accepted by Gustavo Manso, finance.

A mixed strategy, a strategy of unpredictable actions, is applicable to business, politics, and sports. Playing mixed strategies, however, poses a challenge, as the game theory involves calculating probabilities and executing random actions. I test i.i.d. hypotheses of the mixed strategy Nash equilibrium with the simplest experiments in which student participants play zero-sum games in multiple iterations and possibly figure out the optimal mixed strategy (equilibrium) through the games. My results confirm that most players behave differently from the Nash equilibrium prediction for the simplest 2x2 zero-sum game (matching-pennies) and 3x3 zero-sum game (e.g., the rock-paper-scissors game). The results indicate the need to further develop theoretical models that explain a non-Nash equilibrium behavior.

To derive a kinetic model for dry reforming of methanol, the experimental investigations were accomplished at vast working conditions (i.e., temperature: 500 °C–900 °C and CO2/CH3OH ratio (C/M) of 1–2.5) on Cr-Mo-Mn/SiO2 catalyst. The kinetic model developed based on the Langmuir–Hinshelwood (LH) approach and mechanism contained three reversible reactions on three types of active sites. The results of the statistical analysis presented that kinetic model parameters were statistically significant. The error of the suggested kinetic model was 9.87% using equation state (EoS) of Soave–Redlich–Kwong on the basis of modified Huron–Vidal mixing rule (SRK/MHV2) applied to evaluate vapor–liquid equilibrium behavior. The highest precision in predicting the experimental data by the suggested kinetic model was assigned to methanol conversion. The outcomes presented the high temperature is suitable for higher CO yield, methanol and CO2 conversions. An augmentation in carbon dioxide percentage of the inlet feed led to enhance in CO yield, methanol and CO2 conversions, while H2 yield was decreased.

This paper studies a decentralized college admissions game with single application motivated by college admissions in many countries such as Japan, Russia, South Korea and United States. Students sequentially apply to colleges, one application for each student, and commit to attend whenever they are admitted. We introduce a natural equilibrium refinement and describe the equilibrium behavior. It is a simple strategy that consists of running the well-known student-proposing deferred acceptance algorithm (DA) for modified preferences. Students and colleges are divided along the outcome of DA. Students find the outcome of every equilibrium at least as good as the outcome of DA, and colleges find the outcome of DA at least as good as the outcome of every equilibrium.

I study a repeated game in which a patient player (e.g., a seller) wants to win the trust of some myopic opponents (e.g., buyers) but can strictly benefit from betraying them. Her benefit from betrayal is strictly positive and is her persistent private information. I characterize every type of patient player's highest equilibrium payoff. Her persistent private information affects this payoff only through the lowest benefit in the support of her opponents' prior belief. I also show that in every equilibrium which is optimal for the patient player, her on-path behavior is nonstationary, and her long-run action frequencies are pinned down for all except two types. Conceptually, my payoff-type approach incorporates a realistic concern that no type of reputation-building player is immune to reneging temptations. Compared to commitment-type models, the incentive constraints for all types of patient player lead to a sharp characterization of her highest attainable payoff and novel predictions on her behaviors.

We study the equilibrium behavior in a multicommodity selfish routing game with uncertain users, where each user over- or underestimates their congestion costs by a multiplicative factor. Surprisingly, we find that uncertainties in different directions have qualitatively distinct impacts on equilibria. Namely, contrary to the usual notion that uncertainty increases inefficiencies, network congestion decreases when users overestimate their costs. On the other hand, underestimation of costs leads to increased congestion. We apply these results to urban transportation networks, where drivers have different estimates about the cost of congestion. In light of the dynamic pricing policies aimed at tackling congestion, our results indicate that users' perception of these prices can significantly impact the policy's efficacy, and “caution in the face of uncertainty” leads to favorable network conditions.

This paper responds to Hemmer's (2020) critique of Lambert's (1984) paper on income smoothing. Lambert develops and analyzes a two-period agency model in which he shows income smoothing, defined as the second-period action being a decreasing function of the first-period outcome, is part of the equilibrium. Hemmer claims Lambert's analysis contains errors, and that income smoothing does not occur in the model for the reasons Lambert claims. Here, I confirm the Lambert results, show why Hemmer's results appear different than mine, and make clearer the economic forces behind why income smoothing occurs.

In a market rush, the fear of future adverse price movements causes traders to trade before they become well informed, reducing the informational efficiency of the market. I derive theoretical conditions under which market rushes are equilibrium behavior and study how well these conditions organize trading behavior in a laboratory implementation of the model. Market rushes, including both panics and frenzies, occur more frequently when predicted by theory. However, subjects use commonly discussed, momentum-like strategies that lead to informational losses not predicted by theory, suggesting that these strategies may exacerbate both the occurrence and consequences of panics and frenzies. (JEL C91, D83, G14, G41)

We evaluate standard assumptions in the estimation of dynamic oligopoly models with laboratory data. Using an entry/exit game, we estimate structural parameters under the assumption that the data are generated by a Markov-perfect equilibrium and subsequently predict counterfactual behavior. If behavior was collusive, however, the assumption would be violated and one would mispredict counterfactuals. The laboratory allows us to compare predicted behavior to true counterfactuals implemented as treatments. Our main finding is that prediction errors due to collusion are modest in size. We also document a different deviation from equilibrium behavior (inertia) that can lead to large prediction errors.

In this paper I revisit the issue of real income smoothing in the setting used by Lambert (1984). I demonstrate that the particular effect identified in his paper is actually an error: under his assumptions, there is no input-driven equilibrium income smoothing of the type he suggests. There are, however, several other drivers of equilibrium behavior ignored in that paper. In this paper, I identify those and, for the particular model structure, show that when all effects are considered together, there is little support for the suggestion that second-best earnings generally are being smoothed through the equilibrium behavior.

This article investigates the customers’ equilibrium behavior and socially optimal threshold strategy for the fluid model with two types of parallel customers and an unreliable server. The two type...

We develop a graphical, non-analytical version of the two-person beauty contest game to study the developmental trajectory of instinctive behavior and learning from kindergarten to adulthood. These are captured by observing behavior when the game is played in two consecutive trials. We find that equilibrium behavior in the first trial increases significantly between 5 and 10 years of age (from 17.9% to 61.4%) and stabilizes afterwards. Children of all ages learn to play the equilibrium, especially when they observe an equilibrium choice by the rival. Our younger children are the weakest learners mainly because they are less frequently paired with rivals who play at equilibrium. Finally, the choice process data suggests that participants who play at equilibrium in the second trial are also performing fewer steps before reaching a decision, indicating that they are less hesitant about their strategy.

We experimentally examine repeated prisoner's dilemma with random termination, in which monitoring is imperfect and private. Our estimation indicates that a significant proportion of the subjects follows generous tit-for-tat strategies, which are stochastic extensions of tit-for-tat. However, the observed retaliating policies are inconsistent with the generous tit-for-tat equilibrium behavior. Showing inconsistent behavior, subjects with low accuracy do not tend to retaliate more than those with high accuracy. Furthermore, subjects with low accuracy tend to retaliate considerably with lesser strength than that predicted by the equilibrium theory, while subjects with high accuracy tend to retaliate with more strength than that predicted by the equilibrium theory, or with strength almost equivalent to it.

We present a model of a discriminatory price auction in which a large bidder competes against many small bidders, followed by a post‐auction resale stage in which the large bidder is endogenously determined to be a buyer or a seller. We extend results on first‐price auctions with resale to this setting and use these results to give a tractable characterization of equilibrium behavior. We use this characterization to study the policy of capping the amount that may be won by large bidders in the auction, a policy that has received little attention in the auction literature. Our analysis shows that the trade‐offs involved when adjusting these quantity caps can be understood in terms familiar to students of asymmetric first‐price single‐unit auctions. Furthermore, whether one seeks to maximize welfare or revenue can have contradictory implications for the choice of cap.

We study Wardrop equilibrium in a transportation system with profit-maximizing firms and heterogeneous commuters. Standard commuters minimize the sum of monetary costs and equilibrium travel time in their route choice, while "oblivious" commuters choose the route with minimal idle time. Three possible scenarios can arise in equilibrium: A pooling scenario where all commuters make the same transport choice; A separating scenario where different types of commuters make different transport choices; A partial pooling scenario where some standard commuters make the same transport choice as the oblivious commuters. We characterize the equilibrium existence condition, derive equilibrium flows, prices and firms' profits in each scenario, and conduct comparative analyses on parameters representing route conditions and heterogeneity of commuters, respectively. The framework nests the standard model in which all commuters are standard as a special case, and also allows for the case in which all commuters are oblivious as the other extreme. Our study shows how the presence of behavioral commuters under different route conditions affects equilibrium behavior of commuters and firms, as well a the equilibrium outcome of the transportation system.

This paper focuses on the influences of minimum quality standards (MQS) on entry decisions for two firms located in different countries. More precisely, when each firm sells its product only in its domestic market, there is no restriction on its product’s quality. However, when choosing to enter its foreign market, the quality is required to be no less than a specified MQS. A multi-stage game is established to examine the effects of such MQS on firms’ strategic choices of entry into their respective foreign markets. It shows that strategic choices cause the emergence of heterogeneous equilibria in which both firms make different entry decisions and thus produce products with distinct qualities provided that the MQS lies in an intermediate range. If the MQS is relatively low, both firms are willing to enter their respective foreign markets so that they coexist in each market. A relatively high MQS induces each firm to stay only in its domestic market. Furthermore, firms never have more incentive to open a new foreign market compared to the socially efficient configuration. Compared to strong competition, weak competition causes that the equilibrium behavior privately by firms is too far from the allocation that is efficient for society.

In this paper, we consider a sequence of multi-prize all-pay auctions, where low-performing players are eliminated along the way. We provide sufficient conditions such that equilibrium behavior is unaffected by the prospects of winning prizes in later rounds. When these conditions are not met, we identify a novel externality effect and derive equilibria in a model with two rounds. We compare our results to knockout tournaments in which players are partitioned into subcontests in each round.

We study Colonel Blotto games with sequential battles and a majoritarian objective. For a large class of contest success functions, the equilibrium is unique and characterized by an even split: Each battle that is reached before one of the players wins a majority of battles is allocated the same amount of resources from the player's overall budget. As a consequence, a player's chance of winning any particular battle is independent of the battlefield and of the number of victories and losses the player has accumulated in prior battles. This result is in stark contrast to equilibrium behavior in sequential contests that do not involve either fixed budgets or a majoritarian objective. We also consider the equilibrium choice of an overall budget. For many contest success functions, if the sequence of battles is long enough the payoff structure in this extended game resembles an all-pay auction without noise.

We explore the impact of private information in sealed-bid first-price auctions. For a given symmetric and arbitrarily correlated prior distribution over values, we characterize the impact that the structure of private information has on bidding behavior, and the sharing of surplus between the seller and the bidder. Our results provide lower bounds and upper bounds for bids and revenues across all information structures. Our work has implications for the identification of value distributions from data on winning bids and for the informationally robust comparison of alternative bidding mechanisms.

We study the long-range asymptotic behavior for an out-of-equilibrium countable one-dimensional system of Brownian particles interacting through their rank-dependent drifts. Focusing on the semi-infinite case, where only the leftmost particle gets a constant drift to the right, we derive and solve the corresponding one- sided Stefan (free-boundary) equations. Via this solution we explicitly determine the limiting particle-density profile as well as the asymptotic trajectory of the leftmost particle. While doing so we further establish stochastic domination and convergence to equilibrium results for the vector of relative spacings among the leading particles.

Cells must operate far from equilibrium, utilizing and dissipating energy continuously to maintain their organization and to avoid stasis and death. However, they must also avoid unnecessary waste of energy. Recent studies have revealed that molecular machines are extremely efficient thermodynamically compared with their macroscopic counterparts. However, the principles governing the efficient out-of-equilibrium operation of molecular machines remain a mystery. A theoretical framework has been recently formulated in which a generalized friction coefficient quantifies the energetic efficiency in nonequilibrium processes. Moreover, it posits that, to minimize energy dissipation, external control should drive the system along the reaction coordinate with a speed inversely proportional to the square root of that friction coefficient. Here, we demonstrate the utility of this theory for designing and understanding energetically efficient nonequilibrium processes through the unfolding and folding of single DNA hairpins.

This paper conducts a further analysis concerning equilibrium selection in a widely-studied nonlinear Cournot duopoly game, where each firm is capable to forecast its rival's output in the near future through a straightforward extrapolative foresight technology. Compared with the prior related work in which just one firm can implement such technology, this newly developed adjustment mechanism is endowed with more rationality in the sense that there appear more intelligent firms. It turns out this more rational adjustment mechanism does lead to more convergence to asymmetric equilibrium behavior for a weak foresight ability. Our finding shows that some undesirable complex behavior such as fluctuations and divergent trajectories can be inhibited by increasing the number of such rational firms.

Thermodynamic assessments of the pseudo-binary and -ternary systems formed by B2O3 with Na2O, Al2O3, and SiO2 were conducted according to the CALPHAD methodology. The compound energy formalism and two-sublattice partially ionic liquid models were used to thermodynamically represent the solid solutions malinkoite and mullite and the liquid phase of each system, respectively. A comprehensive literature review of available phase equilibria and thermodynamic experimental data as well as a detailed discussion of the modeling approaches implemented to optimize each system is provided. Assessment results are then presented and discussed, and the future path forward is outlined. The addition of B2O3 to the Na2O-Al2O3-SiO2 system contributes to the development of a thermodynamic database that will ultimately predict the equilibrium behavior of nepheline formation in high-level radioactive waste glass.

Evidence from psychology and marketing suggests that those who make a “precise” first offer in bargaining get a better deal than those who make a “round” first offer. We report on a series of experiments designed to test for and improve our understanding of the “precise first offer” (PFO) effect in bargaining and whether it likely reflects rational optimizing or equilibrium behavior. Our experiment varies whether decisions are incentivized and whether the PFO effect can emerge as an equilibrium of a cheap-talk signaling game. We find evidence of a PFO effect when subjects read a vignette and make unincentivized individual decisions. When monetary incentives are added to the vignette, we still find the PFO effect, but it is not robust. In a bilateral bargaining situation with a cheap-talk equilibrium, we can not find the PFO effect, which is inconsistent with the equilibrium predictions. Moreover, the PFO effect reemerges in a setting in which initial offers are generated by a random device and thus provides a strong refutation of the signaling model. Our evidence suggests that optimizing and equilibrium accounts of the PFO effect are inadequate. Understanding initial offers as reference points, which subtly change perceptions about the kinds of acceptable counteroffers, provides a plausible account of a new finding on which prior explanations are silent: precise offers induce more precise counteroffers.

Recent corporate governance scandals have been attributed to a lack of board independence because of the influence CEOs have over their boards. However, CEOs can also affect board efficacy without compromising its independence by strategically choosing directors. We offer a theoretical framework to examine how CEOs can strategically choose director characteristics (such as expertise and skill set) to influence the inner workings of the board. We examine how director expertise affects the board's equilibrium voting strategies and show that some “passivity” on the part of directors can in fact be desirable equilibrium behavior. More importantly, we show that managers can strategically appoint independent outside directors to influence board voting in their favor. Surprisingly, contrary to what we might expect, we find that opportunistic (principled) managers may not always appoint the least (most) able directors to the board. We also examine whether CEOs would prefer a “captured” board (i.e., an insider-dominated board) and show that the value of director input (i.e., the board's advising role) and the financial markets can discourage CEOs from pursuing such appointments.

Contradirectional incentives formalize situations in which participants have an incentive to move in the direction opposite to other participants. Payoff functions with a combination of decreasing differences, submodularity, dual single crossing property, and quasisubmodularity capture these incentives. Games with strategic substitutes are lattice games in which each player has an incentive to move in the direction opposite to their opponents. Distinctive features of these games imply new patterns for individual and equilibrium behavior. The theory identifies principles governing behavior in these cases and a diversity of examples highlights applications of these principles.

Codirectional incentives formalize situations in which participants have an incentive to move in the same direction as other participants. Payoff functions with a combination of increasing differences, supermodularity, single crossing property, and quasisupermodularity capture these incentives. Games with strategic complements are lattice games in which each player has an incentive to move in the same direction as their opponents. Special features of these games imply particular patterns for individual and equilibrium behavior. The theory identifies principles governing behavior in these cases and a diversity of examples highlight applications of these principles.

A laboratory study was conducted to evaluate the behavioral diversity of partitioning, interfacial, and conservative tracers in water-saturated subsurface systems where NAPLs were entrapped. Existing theoretical assumptions and computational methods, which rely on instantaneous equilibrium partitioning, were employed to test their validity and relative error when applied to complexly distributed NAPLs, such as the pooled occurrence. Results show assumption of reversible equilibrium behavior may lead to gross underestimation of NAPL amount and incorrect prediction of NAPL distribution.

International audience; We analyze the robustness of equilibria in sequential games when there is almost common certainty of payoffs. We show that a generic extensive-form game may have no robust equilibrium behavior, but has at least one robust equilibrium outcome, which is induced by a proper equilibrium in its normal-form representation. Therefore, backward induction leads to a unique robust outcome in a generic perfect-information game. We also discuss close relation between robustness to incomplete information and strategic stability. Finally, we present the implications of our results for the robustness of subgame-perfect implementation.

The absorption of medium-chain fatty acids (MCFA) depends on the solubility of these components in the gastric fluid. Parameters such as the total MCFA concentration, carboxyl ionization level, and carbon chain length affect the solubility of these molecules. Moreover, the enzymatic lipolysis of solubilized triacylglycerol (TAG) molecules may depend on the carbon chain length of the fatty acids (FAs) components and their positions on the glycerol backbone. This present study aimed at investigating the effect of electrolyte usually formed during the gastric digestion phase on the solubility of MCFA, and evaluating the influence of the FA carbon chain length on the lipolysis rate during the in vitro digestion simulation. The results obtained here showed that the increasing of electrolyte concentrations tend to decrease the mutual solubility of systems composed by the caproic and caprylic fatty acids + sodium chloride, sodium bicarbonate, and potassium chloride solutions. We also observed that a conventional version of the thermodynamic UNIQUAC model was able to correlate the liquid-liquid phase behavior of the electrolyte solutions. Regarding the in vitro digestion simulation, the experimental data indicated that the action of the pancreatic enzyme occurred preferentially in TAG molecules comprised of short and medium-chain fatty acids.

We consider an outpatient clinic with strategic patients. Based on the level of available information, patients either take an appointment and wait until the appointment day or they select walk-in and eliminate the indirect waiting cost. Those patients who prefer walking-in face the risk of not receiving service if there are more walk-in patients than the available slots for walk-ins. Patients make their decision by taking other patients' choice into consideration. Considering the equilibrium behavior of patients, the clinic should determine the optimal number of slots reserved for walk-ins. We conduct our analysis under two different levels of information: un-observable (patients know expected waiting time only) and observable (patients know their exact waiting time). In each case, we investigate the optimal capacity reserved for advanced patients that minimizes the expected daily cost for the society, considering strategic customer case and comparing it to the centralized decision maker case. We show that for the un-observable case either all-appointment or all walk-in policy is optimal, while for the observable case no such structure exists. We also analyze value of information and coordination via numerical examples and show that providing waiting time information is most valuable for hybrid systems sharing capacity between walk-ins and advanced patients. We also show that not accounting for strategic behavior may lead to sub-optimal capacity allocation policy and increase costs.

This conference presentation reports on results of an experiment that illustrates costs and benefits of liquidity regulation. These costs and benefits may come out of interbank market equilibrium behavior.

© 2020 The Econometric Society We consider a large class of social learning models in which a group of agents face uncertainty regarding a state of the world, share the same utility function, observe private signals, and interact in a general dynamic setting. We introduce social learning equilibria, a static equilibrium concept that abstracts away from the details of the given extensive form, but nevertheless captures the corresponding asymptotic equilibrium behavior. We establish general conditions for agreement, herding, and information aggregation in equilibrium, highlighting a connection between agreement and information aggregation.

It is common for a supplier to sell products to multiple retailers. In this paper, we investigate the equilibrium behavior of a decentralized supply chain with multiple retailers facing a random price-dependent demand in the additive form. Here, we consider two kinds of demand functions: the distribution of the demand depends only on the retailer’s own retail price (noncompeting retailers) and not only on his own retail price but also on that of the other retailers (competing retailers). We present appropriate wholesale price, buy-back, and lost-sales cost-sharing contracts to coordinate the total supply chain, so that when all the retailers adopt their equilibrium response, the supply chain system coordination is also achieved. Furthermore, the coalition formation among retailers is also analyzed. We find that with buy-back and lost-sales cost-sharing contracts and linear price-dependent demand function, retailers always prefer being in the grand coalition to forming any other coalition.

We introduce a new family of mechanisms for one-sided matching markets, denoted pick-an-object (PAO) mechanisms. When implementing an allocation rule via PAO, agents are asked to pick an object from individualized menus. These choices may be rejected later on, and these agents are presented with new menus. When the procedure ends, agents are assigned the last object they picked. We characterize the allocation rules that can be sequentialized by PAO mechanisms, as well as the ones that can be implemented in a robust truthful equilibrium. We justify the use of PAO as opposed to direct mechanisms by showing that its equilibrium behavior is closely related to the one in obviously strategy-proof (OSP) mechanisms, but includes commonly used rules, such as Gale-Shapley DA and Top Trading Cycles, which are not OSP-implementable. We run laboratory experiments comparing truthful behavior when using PAO, OSP, and direct mechanisms to implement different rules. These indicate that individuals are more likely to behave in line with the theoretical prediction under PAO and OSP implementations than their direct counterparts.

Counterfeiting has been a pervasive threat to the security of supply chains. With the development of cyber technologies, traditional supply chains move their logistics to the cyberspace for better efficiency. However, counterfeiting threats still exist and may even cause worse consequences. It is imperative to find mitigating strategies to combat counterfeiting in the cyber supply chain. In this paper, we establish a games-in-games framework to capture the interactions of counterfeiting activities in the cyber supply chain. Specifically, the sellers in the cyber supply chain play a Stackelberg game with consumers, while sellers compete with each other by playing a Nash game. All sellers and consumers aim to maximize their utilities. We design algorithms to find the best response of all participants and analyze the equilibrium of the supply chain system. Finally, we use case studies to demonstrate the equilibrium behavior and propose effective anti-counterfeit strategies.

We investigate the equilibrium behavior for agents with cumulative prospect theory preferences in rent-seeking contests. Characterizing the equilibrium effort levels we present results on the existence of equilibrium and total rent dissipation. (C) 2018 Elsevier B.V. All rights reserved.

We consider control of a disease spreading on a network. The current state of the disease sets up a network game between healthy and sick individuals in contact in which healthy individuals would like to avoid contracting the disease from their sick contacts while sick individuals would like to reduce their chance of transmitting the disease to their healthy contacts. Individuals take preemptive measures according to an equilibrium of the network game. We assume individuals reach an equilibrium solution via an iterative learning process. The preemptive measures taken stochastically determine the next state of the disease. Our goal is to induce equilibrium behavior that minimizes the chance of disease spread by finding and controlling a limited number of influential individuals during the iterative learning process. We provide a greedy algorithm that selects individuals based on their ability to cause cascades of desired behavior change given the current state of the disease and the learning dynamics. The selection policy is dependent on the disease state, contact network structure, and utility of individuals. Numerical experiments demonstrate the efficacy of the proposed method compared to network centrality metricbased isolation of individuals.