DOCSLIB.ORG

Count to Ten First

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Count to Ten First COUNT TO TEN FIRST ON PUNISHMENT AND THE HOT -COLD EFFECT by Cora Hollander, 10215115 // second version: October 28, 2013 MSc Behavioral Economics and Game Theory // Supervisor: prof. dr. F.A.A.M. van Winden “When angry, count to ten before you speak. If very angry, count to one hundred.” Thomas Jefferson 1. INTRODUCTION “When you are upset, count to ten before you react.” This piece of folk wisdom captures the idea that how we react in the heat of a debate or dispute might not be the reaction that we prefer when we are in a more thoughtful state. Moreover, the heated reaction may be costly to oneself and something that we later regret. Does this advice contains a truth? Do you behave differently when you would 'count to ten first'? This is not only a relevant question in social life, but for economists as well. Each economic transaction takes place in a relationship between two or more parties, for example an employer and an employee or a customer and a supplier. Trust is a vital element of such a relationship. In the absence of complete contract enforcement, parties rely on each other to stick to their part of the deal. When trust is violated, there often exists the opportunity for retaliation or punishment. This can take many forms. Think for example of a misled customer that starts to spread negative rumors about a certain supplier, or of an employer leaving bad references about a former employee. Retaliating behavior often destroys wealth, meaning that both (or even more) parties suffer from it. However, its existence is not all bad. The threat of punishment can help deter exploitative behavior. Understanding when and why people punish, helps to explain this inefficient behavior and may help designing mechanisms that prevent it or enforce its power toward stimulate cooperation. This study investigates one particular feature of punishment, that is the timing of the punishment decision. Provided that there occurs no new information during the delay, there seems to be no reason why a difference in timing influences the decision. This point of view disregards the impact of the emotional state the decision maker is in. Emotions, or more generally visceral factors, are known for Count to ten first page 1 of 37 their ability to override deliberative reasoning and have shown to be very influential in decision making (Zajonc, 1984; Damasio, 1994; LeDoux, 1996; Loewenstein, 1996). When in a state of high emotional intensity or 'hot' state, people often act in ways they themselves view as against their self-interest. When in a less intense or 'cold' state, it is hard to imagine how one would behave in hot state and vice versa. This phenomenon has been dubbed the 'hot-cold empathy gap' and is thought to be particularly present for negative emotions (Loewenstein, 2000). The motivation for punishment rises from a negative experience, when people feel that someone misbehaved. This can come with feelings of disappointment, anger or wrath and therefore induce the urge to punish even when this is costly to oneself. When the flood of emotions has waned, so may the urge to punish. Investigating that suggestion is the focus of this study. I aim to answer the question: Does costly punishment occur less frequently when a time lag is imposed on the punishment decision? To answer this question properly we have to establish first that people engage in a trust relationship, second that violation of trust gives a distinct emotional response, and third that this emotional response is a decisive factor in the consideration of punishment. In order to study this, I conducted a behavioral laboratory experiment. How trust and its violation are exactly measured will be explained in Section 2 (p. 4-5). To reflect on the impact of emotions, I need a situation in which people can feel angry or disappointed about another persons behavior and subsequently have the option to act on these feelings in a costly manner. The trust game or investment game (Kreps, 1990; Berg et al. 1995) is a very useful vehicle to realize this. The game allows for engaging in a relationship of trust, and the violation of this trust. The main outline of the game applied in this study is as follows (see Section 3 for more details). Two players are anonymously coupled in a pair. One of them – called the Investor – is endowed with an amount of money and has to decide how much to transfer to the other participant – called the Trustee. The transferred amount is multiplied by three. The Trustee then has to decide how much to transfer back to the Investor. A variant of the game adds a third stage in which the Investor has the possibility to punish the Trustee by giving up some of its own money in order to reduce the other person's earnings. When the decision to punish has to be made directly after observing the Trustee's transfer, the reaction to this transfer and the decision to punish almost coincide. In other words, when contemplating punishment the Investor is still in the emotional hot state that might arise from observing its counterpart's choice. In the control condition, the game is played exactly as just described. In the treatment Count to ten first page 2 of 37 condition, participants perform a intermediate task before Investors have the opportunity to punish. This task consists of three reasoning questions and takes approximately five minutes. Its main purpose is to cause a small delay between observing the outcome of the mutual transfers and the punishment decision. Specifically, the intermediate task serves to make time for any emotions to ware off and bring the Investors in a cold state before they decide on punishment. If punishment occurs significantly less often in the treatment condition, the folk wisdom to count to ten first indeed contains a truth. This study is a pilot study, which means that there are limited resources available in terms of location, money and time. I will discuss the consequences of these practical restrictions in Section 7. I originally planned to collect 48 observations (48 people in 24 pairs playing the game twice). If Trustees would send back zero about half the time (as is common), there would occur ten situations per treatment that are likely to provoke punishment. This is still a very small sample, but could be enough to offer an indication on the hypothesized treatment effect. While performing the sessions, I noticed that Trustees almost always choose the equal split, leaving no motivation for punishment. Since it was clear that in this pattern I would never observe enough punishment situations to be able to do statistical testing, I terminated the experiment. Hence the amount of data collected is not sufficient to answer the research question. To answer the question whether there is a difference in frequency of punishment between treatments, a first requirement is that punishment is observed at all. I observed zero instances of punishment, so I cannot tell whether there is a systematic difference between the control and treatment condition. The presentation of the results will therefore focus more on how the observed behavior can be explained rather than delivering an answer to the research question. The remainder of this paper is organized as follows. Section 2 presents an overview of the existing literature on trust games, punishments, and hot-versus-cold studies. Section 3 describes the experimental design and derives hypotheses. Section 4 provides a theoretical analysis. Section 5 proposes a set-up for empirical analysis. Section 6 presents the results. Section 7 discusses the results and procedures of this study and provides suggestions for improvements in future research. Section 8 concludes. Count to ten first page 3 of 37 2. LITERATURE REVIEW Traditionally economics has assumed that people are rational decision makers with perfect foresight who pursue only their self-interest. It is now widely recognized that other than selfish considerations play an essential part in both social and business life. A large body of experimental evidence established that people do take factors of trust, reciprocity, and fairness into account (see Camerer, 2003 for a review). Several simple games have been developed that mimic the key features of economic interactions and that can measure social preferences (i.e. displaying behavior that deviates from rational and selfish choice). Consider for example the ultimatum game in which one player, the proposer, offers a split of a certain amount of money between himself and a second player, the responder. The responder can then accept this split or reject it such that both players receive nothing. Although accepting any offer is always the best response in the traditional economic sense, people often reject offers in which they would get only a small part of the pie. Rejection in the ultimatum game can be viewed as punishment, since the responder pays a cost (foregoing a positive amount of money) such that the other player is left with no earnings as well. Many proposers seem to anticipate this and offer (close to) a fair split. Proposers offer substantial amounts even in dictator games, when the responder does not have the option to reject (see again Camerer, 2003). In gift-exchange games, two players sequentially choose how large a gift that want to send to each other. Second movers often reimburse large amounts sent by first movers (e.g. Charness, 2004; Fehr and Gächter, 2000). Fehr, Gächter and Kirchsteiger (1997) added a third stage to the game in which first movers can reward or punish the other party. First movers utilized this option frequently, and the amount sent by second-movers increased dramatically.
Load more

Recommended publications
  • PRICING and MODULARITY DECISIONS UNDER COMPETITION Feng Tao Hao Shao and Kinkeung Lai (Communicated by Stefan Wolfgang Pickl) 1
    JOURNAL OF INDUSTRIAL AND doi:10.3934/jimo.2018152 MANAGEMENT OPTIMIZATION Volume 16, Number 1, January 2020 pp. 289{307 PRICING AND MODULARITY DECISIONS UNDER COMPETITION Feng Taoa aDepartment of Management Science and Engineering East China University of Science and Technology, Shanghai, 200237, China Hao Shaobc∗ and KinKeung Laide bShanghai University of International Business and Economics Gubei Road, 200336, Shanghai, China cShanghai Wage Intelligent Technology Co., Ltd dCollege of Economics, Shenzhen University, Shenzhen, China eInternational Business School, Shaanxi Normal University, Xian, China (Communicated by Stefan Wolfgang Pickl) Abstract. This paper considers price and modularity of competition between two firms with deterministic demand, in which demand is dependent on both the prices and the modularity levels determined by two firms. Bertrand com- petition and Stackelberg competition are formulated to derive the equilibrium solutions analytically. Because of the complexity, an intensive numerical study is conducted to investigate the impact of the sensitive parameters on equilib- rium prices and modularity levels, as well as optimal profits of the two firms. An important and interesting finding is that optimal profits of the two firms under both types of competition are decreasing with the modularity cost when the price and modularity sensitivities are low, where both firms are worse-off due to decrease of the modularity levels; but they are increasing when the price and modularity sensitivities are high, where both firms are better-off at the ex- pense of modular design. Our research reveals that Stackelberg game improves the modularity levels in most of the cases, though both firms perform better in Bertrand competition in these cases when jointly deciding the prices and modularity levels in the two firms.
    [Show full text]
  • Loss of Commitment? an Evolutionary Analysis of Bagwell’S Example1
    Loss of Commitment? An Evolutionary Analysis of Bagwells Example1 Jörg Oechssler2 Karl H. Schlag3 Department of Economics Economic Theory III Humboldt University, Berlin University of Bonn April, 1997 1 We wish to thank Wolfgang Leininger for starting this project by asking us about the relevance of noise for evolutionary predictions, and Wieland Müller and Larry Samuelson for contributing valuable comments. Financial support by the Deutsche Forschungsgemeinschaft through SFBs 303 and 373 is gratefully acknowledged. 2 Institut für Wirtschaftstheorie, Spandauer Str. 1, 10178 Berlin, Germany, FAX: +49302093-5619, Email: [email protected] 3 Adenauerallee 24-26, 53113 Bonn, Germany, Email: [email protected] bonn.de Abstract In a recent paper Bagwell (1995) pointed out that only the Cournot outcome, but not the Stackelberg outcome, can be supported by a pure Nash equilib- rium when actions of the Stackelberg leader are observed with the slightest error. The Stackelberg outcome, however, remains close to the outcome of a mixed equilibrium. We compare the predictions in various classes of evolutionary and learning processes in this game. Only the continuous best response dynamic uniquely selects the Stackelberg outcome under noise. All other dynamics analyzed allow for the Cournot equilibrium to be selected. In typical cases Cournot is the unique long run outcome even for vanishing noise in the signal. JEL classi cation numbers: C72, C73. Key words: imperfectly observable commitment, evolution, imitation, learn- ing, equilibrium selection. 1 Introduction In a recent paper Bagwell (1995) pointed out that a rst mover advantage in games depends crucially on the fact that the action taken by the rst mover is perfectly observable.
    [Show full text]
  • Endogenous Maverick Behavior: a Model
    ENDOGENOUS MAVERICK BEHAVIOR: A MODEL John Kwokaa Birzhan Batkeyevb David Hummela December 2020 a Professor of Economics and PhD Candidate, respectively, Northeastern University, Boston b Professor, International School of Economics, Kazakh-British Technical University, Almaty ABSTRACT Key questions about the concept of a maverick firm have long remained unanswered. These include what causes a firm to behave like a maverick and whether such behavior is an inherent characteristic of the firm or a strategy choice, and if the latter, what determines that choice. The latter possibility has important policy implications. This paper offers a model in which a small low-cost entrant into a market initially finds it optimal to engage in aggressive “maverick” behavior but as it grows or its cost advantage erodes, it switches to more cooperative behavior with its larger rival. This model highlights the observable determinants of endogenous maverick behavior, notably, the maverick’s capacity. We offer some observations on the maverick behavior of actual firms and implications of this model for competition policy. I. Introduction The concept of a maverick firm plays an important but unusual role in economic research and antitrust policy. It is important because it captures the commonsense notion that there are firms whose aggressive behavior disrupts otherwise greater cooperation in a market. The economics and business literature as well as the popular press, for example, have often referred to companies such as Southwest Airlines and T-Mobile as maverick firms, citing well- documented evidence of their disproportionate impact on pricing and promotion in their markets. Consistent with that, Merger Guidelines in the U.S.
    [Show full text]
  • Investment Under Uncertainty, Competition and Regulation Adrien Nguyen Huu
    Investment under uncertainty, competition and regulation Adrien Nguyen Huu To cite this version: Adrien Nguyen Huu. Investment under uncertainty, competition and regulation. 2013. hal- 00831263v2 HAL Id: hal-00831263 https://hal.archives-ouvertes.fr/hal-00831263v2 Preprint submitted on 6 Sep 2013 (v2), last revised 3 Feb 2014 (v4) HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Investment under uncertainty, competition and regulation Adrien Nguyen Huu1 McMaster University, Hamilton, Canada Fields Institute for Research in Mathematical Sciences, 222 College Street, Toronto, Canada Abstract We investigate a randomization procedure undertaken in real option games which can serve as a raw model of regulation in a duopoly model of preemp- tive investment. We recall the rigorous framework of Grasselli and al. [7] and extend it to a random regulator. This model generalizes and unifies the different competitive frameworks proposed in the literature, and creates a new one similar to a Stackelberg leadership. We fully characterize strategic interactions in the several situations following from the parametrization of the regulator. Finally, we study the effect of the coordination game and un- certainty of outcome when agents are risk-averse, providing new intuitions for the standard case.
    [Show full text]
  • Convergence Analysis and Implementation Details for Markov Chains Games
    Int. J. Appl. Math. Comput. Sci., 2015, Vol. 25, No. 2, 337–351 DOI: 10.1515/amcs-2015-0026 COMPUTING THE STACKELBERG/NASH EQUILIBRIA USING THE EXTRAPROXIMAL METHOD: CONVERGENCE ANALYSIS AND IMPLEMENTATION DETAILS FOR MARKOV CHAINS GAMES a b a,∗ KRISTAL K. TREJO ,JULIO B. CLEMPNER ,ALEXANDER S. POZNYAK aDepartment of Automatic Control, Center for Research and Advanced Studies Av. IPN 2508, Col. San Pedro Zacatenco, 07360 Mexico City, Mexico e-mail: {apoznyak,ktrejo}@ctrl.cinvestav.mx bCenter for Economics, Management and Social Research, National Polytechnic Institute Lauro Aguirre 120, col. Agricultura, Del. Miguel Hidalgo, Mexico City, 11360, Mexico e-mail: [email protected] In this paper we present the extraproximal method for computing the Stackelberg/Nash equilibria in a class of ergodic controlled finite Markov chains games. We exemplify the original game formulation in terms of coupled nonlinear pro- gramming problems implementing the Lagrange principle. In addition, Tikhonov’s regularization method is employed to ensure the convergence of the cost-functions to a Stackelberg/Nash equilibrium point. Then, we transform the problem into a system of equations in the proximal format. We present a two-step iterated procedure for solving the extraproximal method: (a) the first step (the extra-proximal step) consists of a “prediction” which calculates the preliminary position approximation to the equilibrium point, and (b) the second step is designed to find a “basic adjustment” of the previous prediction. The procedure is called the “extraproximal method” because of the use of an extrapolation. Each equation in this system is an optimization problem for which the necessary and efficient condition for a minimum is solved using a quadratic programming method.
    [Show full text]
  • Computation of Stackelberg Equilibria of Finite Sequential Games∗
    Computation of Stackelberg Equilibria of Finite Sequential Games∗ Branislav Bosanskˇ y´y Simina Branzeiˆ z Kristoffer Arnsfelt Hansenx Peter Bro Miltersen{ Troels Bjerre Sørensenk Abstract The Stackelberg equilibrium is a solution concept that describes optimal strategies to commit to: Player 1 (the leader) first commits to a strategy that is publicly announced, then Player 2 (the follower) plays a best response to the leader’s choice. We study the problem of computing Stackelberg equilibria in finite sequential (i.e., extensive-form) games and provide new exact algorithms, approximate algorithms, and hardness results for finding equilibria for several classes of such two-player games. 1 Introduction The Stackelberg competition is a game theoretic model introduced by von Stackelberg [25] for studying market structures. The original formulation of a Stackelberg duopoly captures the scenario of two firms that compete by selling homogeneous products. One firm—the leader—first decides the quantity to sell and announces it publicly, while the second firm—the follower—decides its own production only after observing the announcement of the first firm. The leader firm must have commitment power (e.g., is the monopoly in an industry) and cannot undo its publicly announced strategy, while the follower firm (e.g., a new competitor) plays a best response to the leader’s chosen strategy. The Stackelberg competition has been an important model in economics ever since (see, e.g., [22, 15, 1, 24, 19, 11]), while the solution concept of a Stackelberg equilibrium has been studied in a rich body of literature in computer science, with a number of important real-world applications developed in the last decade [23].
    [Show full text]
  • 41 Professor Julio B. CLEMPNER, Phd E-Mail: [email protected]
    Economic Computation and Economic Cybernetics Studies and Research, Issue 4/2016, Vol. 50 ________________________________________________________________________________ Professor Julio B. CLEMPNER, PhD E-mail: [email protected] Instituto Politécnico Nacional, Mexico Professor Alexander S. POZNYAK, PhD E-mail: [email protected] Center for Research and Advanced Studies ANALYZING AN OPTIMISTIC ATTITUDE FOR THE LEADER FIRM IN DUOPOLY MODELS: A STRONG STACKELBERG EQUILIBRIUM BASED ON A LYAPUNOV GAME THEORY APPROACH Abstract. This paper presents a novel game theory approach for representing the Stackelberg dynamic duopoly models. The problem is fitted into a class of ergodic controllable finite Markov chains game. It is consider the case where a strong Stackelberg equilibrium point is convenient for both firms. We first analyze the best-reply dynamics of the Stackelberg duopoly model such that each firm’s best-reply strategies set agree with the set of maximizers of the opponents’ strategies. Then, the classical Stackelberg duopoly game is transformed into a potential game in terms of the Lyapunov theory. As a result, a duopoly model has the benefit that the best-reply dynamics results in a natural implementation of the behavior of a Lyapunov-like function. In addition, the strong equilibrium point properties of Stackelberg and Lyapunov meet in potential games. We validate the proposed method theoretically by computing the complexity and by a numerical experiment related to the duopoly model. Keywords: Dynamic duopoly model, complexity, strong Stackelberg equilibrium, Lyapunov equilibrium, Stackelberg games, Lyapunov games, Markov decision process JEL Classification: C72, C73, D43, E37, C32 1. Introduction 1.1 Brief review Game theory is an increasingly important paradigm for reasoning about complex duopoly/oligopolies problems.
    [Show full text]
  • Cournot Or Stackelberg Competition? a Survey on Experimental Evidence
    Munich Personal RePEc Archive Cournot or Stackelberg competition? A survey on experimental evidence Hildenbrand, Andreas Department of Economics, Justus Liebig University Giessen 17 August 2010 Online at https://mpra.ub.uni-muenchen.de/24468/ MPRA Paper No. 24468, posted 18 Aug 2010 01:16 UTC Cournot or Stackelberg Competition? A Survey on Experimental Evidence Andreas Hildenbrand∗ August 17, 2010 ∗Department of Economics, Justus Liebig University Giessen, Licher Straße 66, 35394 Gießen, Germany. Telephone: +49 641 99-22203. Telefax: +49 641 99-22209. Electronic Mail: [email protected]. World Wide Web: wirtschaft.uni- giessen.de. Abstract In this survey, I look into experimental studies on duopolistic quantity competition with homogeneous products and duopolistic price competition with heterogeneous products. The focus is on the sequence of competition. That is, I summarize and analyze ex- perimental studies checking Cournot competition against Stackelberg competition. I find that while Stackelberg equilibrium outcomes are seldom under quantity competi- tion, under price competition, the Stackelberg equilibrium prediction seems to be more appropriate. However, after discussing the experimental setups, I conclude that some methodological problems are present. Moreover, I make recommendations for further research. Keywords: Cournot competition, simultaneous competition, simultaneous play, Stackel- berg competition, sequential competition, sequential play, duopoly, homogeneous prod- ucts, heterogeneous products, experiemtal economics. Journal of Economic Literature Classification Codes: C720, C910, D430, L130. 1 Introduction Although the Cournot model and the Stackelberg model of duopolistic quantity compe- tition with homogeneous products and duopolistic price competition with heterogeneous products are part and parcel of every textbook on industrial organization,1 only few ex- periments testing these models have been conducted yet.
    [Show full text]
  • Markets, Competition, and Strategy LEC0101
    ECO380H1S: Markets, Competition, and Strategy LEC0101 (Tue 10:00-13:00, MP202) LEC0201 (Tue 14:00-17:00, LM159) Instructor: Yao Luo Office: Max Gluskin House, 322 Email: [email protected] Office hours: Tue 13:00-14:00, or by appointment Head teaching assistant: LEC0101: Cheok in Fok, Email: [email protected] LEC0201: Alvaro Jose Pinzon Giraldo, Email: [email protected] TA office hours: TBA Objectives This course in applied microeconomics is concerned with the functioning of markets and the strategic behavior of firms. The focus is on strategic relationships between organizations, including competitive and cooperative relationships among firms. The first unit will cover basic models of imperfect competition and the impact of market structure. The second unit will focus on pricing strategies. The final unit will examine elements of firm competition that are not covered in the basic models. Prerequisite: ECO200Y1/ECO204Y1/ECO206Y1; ECO220Y1/ECO227Y1/(STA220H1, STA255H1)/(STA237H1, STA238H1)/(STA257H1, STA261H1) The Department of Economics checks whether students have the course prerequisites, and students are removed if they do not have them. It is the students’ responsibility to read the calendar. The instructor cannot waive prerequisites. Grading There will be three problem sets, one term test, and a final exam. Each problem set counts for 5%. The term test counts for 35%. The final exam counts for 50%. We use Crowdmark. Collaboration on the problem sets is encouraged. Collaborating students can choose to submit a single group answer (maximum group size: 3 students). You are encouraged to type your homework, but hand-written work will be accepted if it is clearly presented.
    [Show full text]
  • Loss of Commitment? an Evolutionary Analysis of Bagwell's Example1
    Loss of Commitment? An Evolutionary Analysis of Bagwells Example1 Jörg Oechssler Karl H. Schlag! Department of Economics Economic Theory III Humboldt University, Berlin University of Bonn April, 1997 We wish to thank Wolfgang Leininger for starting this project by asking us about the relevance of noise for evolutionary predictions, and Wieland Müller and Larry Samuelson for contributing valuable comments. Financial support by the Deutsche Forschungsgemeinschaft through SFBs 303 and 373 is gratefully acknowledged. Institut für Wirtschaftstheorie, Spandauer Str. 1, 10178 Berlin, Germany, FAX: +49302093-5619, Email: [email protected] ! Adenauerallee 24-26, 53113 Bonn, Germany, Email: [email protected] bonn.de Abstract In a recent paper Bagwell (1995) pointed out that only the Cournot outcome, but not the Stackelberg outcome, can be supported by a pure Nash equilib- rium when actions of the Stackelberg leader are observed with the slightest error. The Stackelberg outcome, however, remains close to the outcome of a mixed equilibrium. We compare the predictions in various classes of evolutionary and learning processes in this game. Only the continuous best response dynamic uniquely selects the Stackelberg outcome under noise. All other dynamics analyzed allow for the Cournot equilibrium to be selected. In typical cases Cournot is the unique long run outcome even for vanishing noise in the signal. JEL classi cation numbers: C72, C73. Key words: imperfectly observable commitment, evolution, imitation, learn- ing, equilibrium selection. 1 Introduction In a recent paper Bagwell (1995) pointed out that a rst mover advantage in games depends crucially on the fact that the action taken by the rst mover is perfectly observable.
    [Show full text]
  • On the Efficiency of Local Electricity Markets Under Decentralized And
    On the Efficiency of Local Electricity Markets Under Decentralized and Centralized Designs: A Multi-leader Stackelberg Game Analysis Hélène Le Cadre To cite this version: Hélène Le Cadre. On the Efficiency of Local Electricity Markets Under Decentralized and Centralized Designs: A Multi-leader Stackelberg Game Analysis . 2018. hal-01619885v2 HAL Id: hal-01619885 https://hal.archives-ouvertes.fr/hal-01619885v2 Preprint submitted on 4 Jan 2018 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. On the Efficiency of Local Electricity Markets Under Decentralized and Centralized Designs: A Multi-leader Stackelberg Game Analysis∗ H´el`eneLe Cadrey Abstract In this paper, we analytically compare centralized and decentralized market designs involving a national and local market operators, strategic generators having market power and bidding sequentially in local mar- kets, to determine which design is more efficient for the procurement of energy. In the centralized design, used as benchmark, the national market operator optimizes the exchanges between local markets and the genera- tors' block bids. In the decentralized design, generators act as Stackelberg leaders, anticipating the local market prices and the flows on the trans- mission lines. Clearing of the local markets can be either simultaneous or sequential.
    [Show full text]
  • Signaling in Bayesian Stackelberg Games
    Signaling in Bayesian Stackelberg Games Haifeng Xu1, Rupert Freeman2, Vincent Conitzer2, Shaddin Dughmi1, Milind Tambe1 1University of Southern California, Los Angeles, CA 90007, USA {haifengx,shaddin,tambe}@usc.edu 2Duke University, Durham, NC 27708, USA {rupert,conitzer}@cs.duke.edu ABSTRACT that are correlated with the action she has chosen. This ability can Algorithms for solving Stackelberg games are used in an ever- of course never hurt the leader: she always has the choice of send- growing variety of real-world domains. Previous work has ex- ing an uninformative signal. In a two-player normal-form game, it tended this framework to allow the leader to commit not only to turns out that no benefit can be had from sending an informative a distribution over actions, but also to a scheme for stochastically signal. This is because the expected leader utility conditioned on signaling information about these actions to the follower. This can each signal, which corresponds to a posterior belief of the leader’s result in higher utility for the leader. In this paper, we extend this action, is weakly dominated by the expected leader utility of com- methodology to Bayesian games, in which either the leader or the mitting to the optimal mixed strategy [4]. But this is no longer true follower has payoff-relevant private information or both. This leads in games with three or more players. Moreover, intriguingly, the to novel variants of the model, for example by imposing an incen- enriched problem with signaling can still be solved in polynomial tive compatibility constraint for each type to listen to the signal time in these games [4].
    [Show full text]