Publications

2002
Bruno Bassan, Olivier Gossner, M. S., & Zamir, S. . (2002). Positive Value of Information in Games. Discussion Papers. presented at the 8, International Journal of Game Theory 32 (2003), 17-31. Retrieved from /files/dp294.pdf Publisher's VersionAbstract
We exhibit a general class of interactive decision situations in which all the agents benefit from more information. This class includes as a special case the classical comparison of statistical experiments   la Blackwell.More specifically, we consider pairs consisting of a game with incomplete information G and an information structure S such that the extended game “(G,S) has a unique Pareto payoff profile u. We prove that u is a Nash payoff profile of “(G,S), and that for any information structure that is coarser than S, all Nash payoff profiles of “(G,T) are dominated by u. We then prove that our condition is also necessary in the following sense: Given any convex compact polyhedron of payoff profiles, whose Pareto frontier is not a singleton, there exists an extended game “(G,S) with that polyhedron as the convex hull of feasible payoffs, an information structure T coarser than S and a player i who strictly prefers a Nash equilibrium in “(G,T) to any Nash equilibrium in “(G,S).
Gary Bornstein, T. K., & Selten, R. . (2002). Repeated Price Competition Between Individuals and Between Teams. Discussion Papers. presented at the 11, Journal of Economic Behavior and Organization (in Press). Retrieved from /files/dp303.pdf Publisher's VersionAbstract
We conducted an experimental study of price competition in a duopolistic market. The market was operationalized as a repeated game between two teams  with one, two, or three players in each team. Each player simultaneously demanded a price, and the team whose total asking price was smaller won the competition and was paid its asked price. The losing team was paid nothing. In case of a tie, the teams split the asking price. For teams with multiple players we manipulated the way in which the team s profit was divided between the team members. In one treatment each team member was paid his or her asking price if the team won, and half that if the game was tied, while in the other treatment the team s profit for winning or tying the game was divided equally among its members. We found that asking (and winning) prices were significantly higher in competition between individuals than in competition between two- or three-person teams. There were no general effects of team size, but prices were sustained at a higher level when each team member was paid his or her own asked price than when the team s profits were divided equally.
Aumann, R. J. . (2002). Risk Aversion in The Talmud. Discussion Papers. presented at the 5, Economic Theory 21 (2003), 233-239. Retrieved from /files/dp287.pdf Publisher's VersionAbstract
Evidence is adduced that the sages of the ancient Babylonian Talmud, as well as some of the medieval commentators thereon, were well aware of sophisticated concepts of modern theories of risk-bearing.
Neyman, A. . (2002). Stochastic Games: Existence of the MinMax. Discussion Papers. presented at the 8, In Stochastic Games and Applications, A. Neyman and S. Sorin (Eds.), Kluwer Academic Press (2003). Retrieved from /files/dp295.pdf Publisher's Version
Gershon Ben-Shakhar, 5a Bar-Hillel, M. K. . (2002). Trial by Polygraph: Reconsidering the Use of the Guilty Knowledge Technique in Court. Discussion Papers. presented at the 5, Law and Human Behavior 26 (2002) 527-541. Retrieved from /files/dp288.pdf Publisher's VersionAbstract
Polygraph test results are by and large ruled inadmissible evidence in criminal courts in the US, Canada and Israel. This is well-conceived with regard to the dominant technique of polygraph interrogation, known as the Control Question Technique (CQT), because it indeed does not meet the required standards for admissible scientific evidence. However, a lesser known and rarely practiced technique, known as the Guilty Knowledge Test (GKT), is capable, if carefully administered, of meeting the recently set Daubert criteria. This article describes the technique, and argues for considering its admissibility as evidence in criminal courts.
Ullmann-Margalit, E. . (2002). Trust Out of Distrust. Discussion Papers. presented at the 5, The Journal of Philosophy 99 (2002), 532-548. Retrieved from /files/dp289.pdf Publisher's VersionAbstract
The paper aims to establish the possibility of trust from within a Hobbesian framework. It shows that distrust situations can be structured in two ways, the first referred to as Hard and the second as Soft, both of which are compatible with Hobbes s stark assumptions about human nature. In Hard distrust situations (which are prisoner s-dilemma structured) the distrust strategy is dominant; in the Soft variety (which are stag-hunt structured) trust is an equilibrium choice. In order to establish the possibility of trust there is no need to claim that the state of nature is Soft rather than Hard, nor even that Soft is likelier. Game theoretical considerations show that all that is needed to give trust a chance is the ambiguity or uncertainty on the part of the players as to which of the two basic situations of distrust in fact obtains: which game was picked by Nature for them to play.
David Assaf, L. G., & Samuel-Cahn, E. . (2002). Two Choice Optimal Stopping. Discussion Papers. presented at the 12, Advances of Applied Probability 36 (2004), 1116-1147. Retrieved from /files/dp306.pdf Publisher's VersionAbstract
Let Xn, . . . ,X1 be i.i.d. random variables with distribution function F. A statistician, knowing F, observes the X values sequentially and is given two chances to choose X s using stopping rules. The statistician s goal is to stop at a value of X as small as possible. Let V2n equal the expectation of the smaller of the two values chosen by the statistician when proceeding optimally. We obtain the asymptotic behavior of the sequence V2n for a large class of F s belonging to the domain of attraction (for the minimum) D(G'$\pm$), where G'$\pm$(x) = [1 'ˆ’ exp('ˆ’x'$\pm$)] I(x'¥0). The results are compared with those for the asymptotic behavior of the classical one choice value sequence V1n ,as well as with the 'prophet value  sequence E(minXn, . . . ,X1).
Mas-Colell, S. H., & Andreu, . (2002). Uncoupled Dynamics Cannot Lead to Nash Equilibrium. Discussion Papers. presented at the 9, American Economic Review 93 (2003), 1830-1836. Retrieved from /files/ uncoupl.html Publisher's VersionAbstract
We call a dynamical system uncoupled if the dynamic for each player does not depend on the payoffs of the other players. We show that there are no uncoupled dynamics that are guaranteed to converge to Nash equilibrium, even when the Nash equilibrium is unique.
2001
Yaari, M. E. . (2001). A Credit Market a La David Hume. Discussion Papers. presented at the 6. Retrieved from /files/dp244.pdf Publisher's VersionAbstract
In Book III of his Treatise of Human Nature, David Hume considers the following simple interaction: "I suppose a person to have lent me a sum of money, on condition that it be restor'd in a few days, and also suppose, that after the expiration of the term agreed on, he demands the sum" and Hume asks: "What reason or motive have I to restore the money?" [1740, p. 479] The answer, he concludes, must be "that the sense of justice and injustice [which is the motive for repaying the loan] is not deriv'd from nature, but arises artificially, tho' necessarily, from education and human conventions." [p. 483] It is my purpose in this essay to offer formal (and modern) underpinnings for Hume's argument. I shall do so in the context of Hume's own example, cited above, where the interaction being considered is one between lender and borrower.
Peleg, P. S., & Bezalel, . (2001). A Note on an Axiomatization of the Core of Market Games. Discussion Papers. presented at the 5, Mathematics of Operations Research 27 (2002), 441-444. Retrieved from /files/dp240.pdf Publisher's VersionAbstract
As shown by Peleg, the core of market games is characterized by nonemptiness, individual rationality, superadditivity, the weak reduced game property, the converse reduced game property, and weak symmetry. It was not known whether weak symmetry was logically independent. With the help of a certain transitive 4-person TU game it is shown that weak symmetry is redundant in this result. Hence the core on market games is axiomatized by the remaining five properties, if the universe of players contains at least four members.
Neyman, J. - F. M., & Abraham, . (2001). A Value on 'AN. Discussion Papers. presented at the 11, International Journal of Game Theory 32 (2003), 109-120. Retrieved from /files/dp276.pdf Publisher's VersionAbstract
We prove here the existence of a value (of norm 1) on the spaces 'NA and even 'AN, the closure in the variation distance of the linear space spanned by all games f o mu, where mu is a non-atomic, non-negative finitely additive measure of mass 1 and f a real-valued function on [0, 1] which satisfies a much weakened continuity at zero and one.
Jacob, A. H., & Assaf, . (2001). An Economic Rationale for the Legal Treatment of Omissions in Tort Law. Discussion Papers. presented at the 12, Theoretical Inquiries in Law 3 (2002). Retrieved from /files/dp281.pdf Publisher's VersionAbstract
This paper provides an economic justification for the exemption from liability for omissions and for the exceptions to this exemption. It interprets the differential treatment of acts and omissions in tort law as a proxy for a more fundamental distinction between harms caused by multiple injurers each of whom can single-handedly prevent the harm (either by acting or failing to act) and harms caused by a single injurer (either by acting or failing to act). Since the overall cost to which a group of injurers is exposed is constant, attributing liability to many injurers reduces the part each has to pay and consequently reduces one's incentives to take precautions. The broad exemption from liability for omissions is a way of carving a simple, practical rule to distinguish between the typical cases in which an agent can be easily selected and provided with sufficient incentives (typically, cases of acts) and cases in which there is a serious problem of dilution of liability (typically, cases of omissions). The exceptions to the rule exempting from responsibility for omissions are also explained in terms of efficiency. The imposition of liability for omissions depends on the ability to identify a salient agent, i.e., to single out one or few legally responsible agents and differentiate their role from that of others. Tort law designs three types of "salience rules." It either creates salience directly (by attributing liability to a single agent), or it can exploit salience created "naturally", or it can induce injurers to create salience voluntarily.
Winter, B. P., & Eyal, . (2001). Constitutional Implementation. Discussion Papers. presented at the 1, Review of Economic Design (2002) 7, 187-204. Retrieved from /files/dp232.pdf Publisher's VersionAbstract
We consider the problem of implementing a social choice correspondence H in Nash equilibrium when the constitution of the society is given by an effectivity function E. It is assumed that the effectivity function of H, E^H, is a sub-correspondence of E. We found necessary and efficient conditions for a game form Gamma to implement H (in Nash equilibria) and to satisfy, at the same time, that E^Gamma, the effectivity function of Gamma, is a sub-correspondence of E^H (which guarantees that Gamma is compatible with E). We also find sufficient conditions for the coincidence of the set of winning coalitions of E^Gamma and E^H, and for E^Gamma=E^H. All our results are sharp as is shown by suitable examples.
Pradeep Dubey, J. G., & Shubik, M. . (2001). Default and Punishment in General Equilibrium. Discussion Papers. presented at the 5. Retrieved from /files/dp241.pdf Publisher's VersionAbstract
We extend the standard model of general equilibrium with incomplete markets to allow for default and punishment. The equilibrating variables include expected delivery rates, along with the usual prices of assets and commodities. By reinterpreting the variables, our model encompasses a broad range of moral hazard, adverse-selection, and signalling phenomena (including the Akerloflemons model and Rothschild-Stiglitz insurance model) in a general equilibrium framework. We impose a condition on the expected delivery rates for untraded assets that is similar to the trembling hand refinements used in game theory. Despite earlier claims about the nonexistence of equilibrium with adverse selection, we show that equilibrium always exists, even with exclusivity constraints on asset sales, and transactions-liquidity costs or information-evaluation costs for asset trade. We show that more lenient punishment which encourages default may be Pareto improving because it allows for better risk spreading. We also show that default opens the door to a theory of endogenous assets.
Sudholter, B. P., & Peter, . (2001). Dummy Paradox of the Bargaining Set, The. Discussion Papers. presented at the 6, International Journal of Mathematics, Game Theory and Algebra, 12 (2002), 443-446. Also in L.A. Petrosjan & V.V. Mazalov (eds.) Game Theory and Applications, Vol. 8, Nova Science Publishers, New York (2002),119-124. Retrieved from /files/dp256.pdf Publisher's VersionAbstract
By means of an example of a superadditive 0-normalled game, we show that the maximum payoff to a dummy in the bargaining set may decrease when the marginal contribution of the dummy to the grand coalition becomes positive.
Goren, H. . (2001). Effect of Out-Group Competition on Individual Behavior and Out-Group Perception in the Intergroup Prisoner's Dilemma (IPD) Game, The. Discussion Papers. presented at the 9, Group Processes and Intergroup Relations 4 (2001), 160-182. Retrieved from /files/dp271.doc Publisher's VersionAbstract
Hebrew University of Jerusalem students participated in two experiments of repeated play of the Intergroup Prisoners' Dilemma (IPD) game, which involves conflict of interests between two groups and, simultaneously, within each group. The experiments manipulated the level of competition exhibited by the out-group members (i.e., their level of contribution to their group's effort in the conflict). Consistent with the hypothesis that participants use strategies of reciprocal cooperation between groups, higher levels of out-group competition caused participants to increase their contribution and lower levels caused them to decrease it. In addition, participants had accurate recall of the contribution levels of out-group members, and they attributed motivations to out-group members in a manner that reflected their level of contribution. The nature of reciprocation with the out-group is discussed in light of both behavioral and cognitive data.
Haimanko, P. D., & Ori, B., . (2001). Envy and the Optimality of Tournaments. Discussion Papers. presented at the 6. Retrieved from ' Publisher's VersionAbstract
We show that tournaments tend to outperform piece-rate contracts when there is sufficient envy among the agents.
Bracht, H. I., & Juergen, . (2001). Estimation of Learning Models on Experimental Game Data. Discussion Papers. presented at the 6. Retrieved from /files/dp243.pdf Publisher's VersionAbstract
The objective of this paper is both to examine the performance and to show properties of statistical techniques used to estimate learning models on experimental game data. We consider a game with unique mixed strategy equilibrium. We discuss identification of a general learning model and its special cases, reinforcement and belief learning, and propose a paramaterization of the model. We conduct Monte Carlo simulations to evaluate the finite sample performance of two kinds of estimators of a learning model's parameters. Maximum likelihood estimators of period to period transitions and mean squared deviation estimators of the entire path of play. In addition, we investigate the performance of a log score estimator of the entire path of play and a mean squared deviation estimator of period to period transitions. Finally, we evaluate a mean squared estimator of the entire path of play with observed actions averaged over blocks, instead of behavioral strategies. We propose to estimate the learning model by maximum likelihood estimation as this method performs well on the sample size used in practice if enough cross sectional variation is observed.
Itzhak Venezia, D. G., & Shapira, Z. . (2001). Exclusive Vs. Independent Agents: A Separating Equilibrium Approach. Discussion Papers. presented at the 2, Journal of Economic Behavior and Organization 40 (1999), 443-456. Retrieved from /files/dp237.doc Publisher's VersionAbstract
We provide a separating equilibrium explanation for the existence of the independent insurance agent system despite the potentially higher costs of this system compared to those of the exclusive agents system (or direct underwriting). A model is developed assuming asymmetric information between insurers and insureds; the formers do not know the riskiness of the latter. We also assume that the claims service provided by the independent agent system to its clients is superior to that offered by direct underwriting system, that is, insureds using the independent agent system are more likely to receive reimbursement of their claims. Competition compels the insurers to provide within their own system the best contract to the insured. It is shown that in equilibrium the safer insureds choose direct underwriting, whereas the riskier ones choose independent agents. The predictions of the model agree with previous research demonstrating that the independent agent system is costlier than direct underwriting. The present model suggests that this does not result from inefficiency but rather from self-selection. The empirical implication of this analysis is that, ceteris paribus, the incidence of claims made by clients of the independent agents system is higher than that of clients of direct underwriting. Implications for the co-existence of different distribution systems due to unbundling of services in other industries such as brokerage houses and the health care industry are discussed.
Klaus Abbink, Ron Darziv, Z. G. H. G. B. I. A. K. B. R. A. S. R. S., & Zamir, S. . (2001). Fisherman's Problem: Exploring the Tension Between Cooperative and Non-Cooperative Concepts in a Simple Game, The. Discussion Papers. presented at the 2, Journal of Economic Psychology 24 (2003), 425-445. Retrieved from /files/dp238.pdf Publisher's VersionAbstract
We introduce and experiment the Fisherman s Game in which the application of economic theory leads to four different benchmarks. Non-cooperative sequential rationality predicts one extreme outcome while the core (which coincides with the competitive market equilibrium) predicts the other extreme. Intermediate, disjoint outcomes are predicted by fairness utility models and the Shapley value. Non of the four benchmarks fully explains the observed behavior. However, since elements of both cooperative and non-cooperative game theory are crucial for organizing our data, we conclude that effort towards bridging the gap between the various concepts is a promising approach for future economic research.