4 Presentations

• 
  08:30 AM - 08:55 AM

  Markov-perfect equilibria in multi-mode differential games with endogenous timing of mode transitions

  • Serhat Gezer, presenter, Bielefeld University
  • Herbert Dawid, Bielefeld University

  In this paper Markov-perfect equilibria of multi-mode differential games, in which one player controls the transition between modes, are studied. Conditions characterizing the equilibrium feedback strategies and the value functions of both players in such type of games, which have not been previously studied, are derived. These results are applied to analyze Markov-perfect equilibria of a game capturing the dynamic interaction between two incumbent firms among which one has to decide when to extend its product range by introducing a new product. The market appeal of the new product can be (positively or negatively) influenced over time by the competing firms through costly investments. It is shown under which circumstances feedback equilibria exist for this game and demonstrated that the combination of a continuously evolving state variable, which is controlled by both players, with a discrete timing decision can give rise to strategic effects that qualitatively differ from those present in standard timing games.

• 
  08:55 AM - 09:20 AM

  Televised Political Debates: Applying the Prisoner´s Dilemma

  • Oto Montagner, presenter, University of São Paulo

  During the elections, in many countries, including Brazil, TV channels organize meetings between the candidates, and call them officially as an opportunity to listen to proposals and see them being debated. The televised debates contribute to the democracy, once it equalizes the media access between the candidates that will expose their ideas to a public´s judgment. Moreover, the electorate can learn a lot about politics with high quality debates. Trying to maximize their votes, the candidates use several strategies, including attacks, what can make impossible the main contributions of a debate on a democratic system. In this scenario, a theoretical model is developed, based on a simultaneous game, played during the preparation for the debates (the candidates know how they will behave, without knowing the opponent´s strategy) and a sequential game, played during the debate itself. Considering that the spectators are not completely satisfied with the candidates when proposals are not presented, but make a worse judgment if a politician does not answer convincingly to an accusation, the prisoner´s dilemma can be applied. Therefore, because of the way the debate is organized, the Nash Equilibrium becomes the strategy (“attack; attack”), what explains a, hypothetical, high number of accusations made by the participants. The model is empirically tested in 2nd round debates of the 1989, 2006, 2010 and 2014 presidential elections in Brazil, that were fully watched, in order to classify each participation as accusation or proposal, according to a previously defined criteria. It was observed that attack was actually the most used strategy. Also, the hypothesis that the reason for such behavior is the organization of the game, not an eventual lack of proposals by the political parties, is not empirically refuted. In addition, suggestions for changes in the rules of these programs are made, to ensure that the primary debates´ goal of exposing government plans gets reached.

• 
  09:20 AM - 09:45 AM

  Extreme equilibria in an rent-seeking then a sequential and majoritarian bargaining game with a pure investment strategies

  • Haruo Imai, presenter, KIER, Kyoto University

  In a game with a Tullock type rentseeking contest, a sequential and majoritarian bargaining game, we consider a set of equilibria involving pure investment strategies. There are many such equilibria. Especially, when investment costs change, extreme equilibria matters where some players invest most for the chance to make an offer while the rest invest little. Further, the most investing players need not enjoy the highest payoffs. Finally, we attempt to characterize the entire range of the multiple equilibria in this class utilizing the extreme equilibria.

• 
  09:45 AM - 10:10 AM

  Every Country for Itself, and the Central Bank for Us All?

  • Reinhard Neck, presenter, Alpen-Adria-Universitat Klagenfurt
  • Dmitri Blueschke, Alpen-Adria-Universitaet Klagenfurt

  In this paper we present an application of dynamic tracking games to a monetary union. We use a small stylized nonlinear three-country macroeconomic model of a monetary union (called MUMOD2) for analysing the interactions between three fiscal (governments: “core”, “thrifty periphery” and “thriftless periphery”) and one monetary (common central bank) policy makers, assuming different objective functions of these decision makers. Using the OPTGAME algorithm, we calculate numerical solutions for cooperative (Pareto optimal) and non-cooperative games (feedback Nash). We show how the policy makers react upon demand shocks according to these solution concepts. To this end we calibrate the model so as replicate some features of the present situation of the Euro Area. In particular, we introduce a negative asymmetric demand side shock aimed at describing the macroeconomic dynamics within a monetary union in a situation similar to the economic crisis (2007-2010) and the sovereign debt crisis (since 2010) in Europe and extrapolate the future development of the monetary union for the next few years under alternative assumptions about future shocks. We investigate the welfare consequences of five scenarios: decentralized fiscal policies by independent governments (the present situation), decentralized fiscal policies with a coalition between the two periphery countries, decentralized fiscal policies with a coalition between the core and the thrifty country (as a model for Greece against the rest), centralized fiscal policy (a fiscal union) with an independent central bank, and a fully centralized fiscal and monetary union. For the latter two scenarios, we investigate the effects of different assumptions about the joint objective function corresponding to different weights for the three governments in the bargaining process assumed to precede the design of the common fiscal policy. We show the importance of these weights and hence of the regulations contained in the fiscal constitution of the union for the macroeconomic outcomes of the resulting games in terms of sustainability of fiscal policies and main objective variables of the policy makers. With the scenario analysis, we systematically investigate the policy trade-offs and the strategic choices resulting from different modes of interaction between the fiscal policy makers and the central bank.