Browsing by Subject "game theory"

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  • Tunca, Sezgin; Lindegren, Martin; Ravn-Jonsen, Lars; Lindroos, Marko (2019)
    Game theory has been an effective tool to generate solutions for decision making in fisheries involving multiple countries and fleets. Here, we use a coupled bio-economic model based on a Baltic Sea dynamic multispecies food web model called BALMAR and, we compare non-cooperative (NC) and cooperative game (grand coalition: GC) solutions. Applications of game theory based on a food web model under climate change have not been studied before and the present study aims to fill this gap in the literature. The study focuses on the effects of climate variability on the biological, harvest and economic output of the game models by examining two different climate scenarios, a first scenario characterized by low temperature and high salinity and a second scenario by high temperature and low salinity. Our results showed that in the first scenario sprat spawning stock biomass (SSB) and harvest dropped dramatically both in the NC and the GC cases whereas, herring and cod SSBs and harvests were higher compared to a base scenario (BS) keeping temperature and salinity at mean historical levels. In the second scenario, the sprat SSB and the harvest was higher for both GC and NC cases while the cod and the herring SSBs and harvests were lower. The total GC payoffs clearly outperformed the NC payoffs across all scenarios. Likewise, the first and second scenario GC payoffs for countries were higher except for Poland. The findings suggested the climate vulnerability of Baltic Sea multi-species fisheries and these results would support future decision-making processes of Baltic Sea fisheries.
  • Miettinen, Topi (2001)
    In the thesis, I will present a formal game theoretic model on determination of a fair social contract introduced by Binmore (1994, 1998). Bimore considers a social contract as an implicit contract that determines the rights and duties of contracting individuals. Binmore's construction is naturalistic and ethically relativistic. The driving forces are biological and social evolution. Morality is seen as an equilibrium selection mechanism to coordinate among multiple equilibria available. Binmore wants to construct a synthesis of the theories of Rawls (1971) and Harsanyi (1977). He picks up an idea familiar to economists from the theory of the firm and presents three time intervals. In the short run, all the decisions of importance are made. In the medium run, social evolution alters the fair social contract. In the long run, genetic codes adapt to the prevailing shorter run circumstances. In the short run, players are playing two games simultaneously: the game of life where players strategy choices are only restricted by physical, natural and biological constraints and the game of morals where side-stepping from the fair social contract strategies launches punishments on one hand and a negotiation process on the other. The negotiation process takes place behind the veil of ignorance familiar from theories of Rawls and Harsanyi. Binmore uses bayesian decision theory in maximizing empathetic preferences that are identical to extended preferences of Harsanyi. This approach leads Harsanyi to utilitarianism. Binmore, however, sticks to non-commitment approach in the negotiation process. By these means he ends up with a maximin conclusion familiar from Rawls, that Rawls thought to require abandoning bayesian decision theory. In the medium-run the weights of empathetic preferences adapt and finally settle to an evolutionary stable equilibrium. The solutions of Rawlsian and utilitarian approaches coincide. Finally long-run approach presents a theory why the market system has evolved. As far as the scope is restricted to division of market goods, the fair social contract coincides in the long run with the walrasian equilibrium. We proceed by first discussing, how moral and ethical theories fit to traditional economics. We try to shed light on some issues of dispute in economics that are essential for the theory. We will then present the essential tools of game theory necessary for the understanding of the ideas. We will shortly present theories of Rawls and Harsanyi. After presenting the predecessors, we will tackle Binmores theory. First the short and medium run processes are presented. Secondly, we dive into the deep waters of genetic adaptation of long run treatment. Finally, we will present critiques and further ideas.
  • Toikka, Juuso (2004)
    In this thesis we analyze how patent policy affects the strategic behavior of firms. We develop an infinite horizon model of innovation where each period firms are randomly matched to ideas which can be developed into innovations. The model allows for simultaneous independent discovery so that the number of firms producing the same innovation is determined endogenously. The issues that we consider are (1) innovators' optimal choice of protection between patents and (trade) secrecy, and (2) the effect of patents on the firms' ability to sustain tacit collusion. In studying the choice of protection, we find that firms may find it optimal to patent even if patent protection is weaker than protection under secrecy. This follows because of the prisoner's dilemma created by the patent policy: If no one else patents, the firm gets the patent and the corresponding monopoly profits for sure whereas secrecy yields only oligopoly profits in the event that there are others that have developed the same innovation. On the hand, if the competitors patent when successful, then secrecy yields positive profits only when no competitor is successful with the same innovation. Applying for the patent gives the innovator a chance of receiving a monopoly even when others are successful. This explains how the patent policy can at the same time enhance incentives to innovate and increase the spreading of information through increased spillovers. We show that welfare maximizing patent policy may either reduce or increase spillovers. Turning to the effects of patents on the competitiveness of an industry, we argue that a patent system makes collusion among innovators more difficult. Our argument is based on two properties of the patent system. First, a patent not only protects against infringement but also against punishment by former collusion members. Second, a deviator has an equal chance with the former collusion members to get a patent on future innovations. We show that if a patent system reduces spillovers, it renders collusion impossible. Moreover, it is possible to design a patent system that simultaneously increases knowledge spillovers and eliminates collusion.
  • Miettinen, Topi (2006)
    Experiments suggest that communication increases the contribution of public goods (Ledyard, 1995) and also that people trade off the benefit of lying against the harm that they inflict on others (Gneezy, 2005). We construct a two-player model of pre-play negotiation that assumes the latter and implies the former finding. We call a strategy profile agreeable if an agreement to play accordingly would not be broken and if both players have an incentive to reach such an agreement. In a symmetric game with strategic substitutes, as the standard Cournot duopoly, the trading off of benefit and harm when lying implies that players' incentives to respect an agreement decrease with its efficiency. Such conflicts may be absent in symmetric games with (weak) strategic complements. In fact, in the linear public good game or the moral hazard in teams, an efficient agreement is agreeable if and only if any non-equilibrium action profile is agreeable. JEL Classification C72, C78, Z13.
  • Rahikainen, Mika; Lindroos, Marko; Kaitala, Veijo (Helsingin yliopisto, taloustieteen laitos, 2008)
    Discussion Papers
  • Sääksvuori, Lauri (2007)
    Markets are the necessary prerequisite for human development. The freehold of a property and the freedom of exchange are the bedrocks of individual and societal well-being. However, economic research has proved that the markets do not efficiently allocate goods under asymmetric information. The affluence through free markets is dependent on others whose behavior we do not know or even fully understand. Conventionally, attempts to solve the problems of imperfect information have relied on jurisdiction and establishment of hierarchical organizations. The rise of the Internet has lately revolutionized the customs of social and economic exchange. Electronic marketplaces span the boundaries of cultural and juristically inconsistent territories, as a result, the prevailing contract monitoring turns out to be inadequate. Should the virtual exchange obey existing laws, the transaction costs may top the benefits of trade, and thus prevent otherwise mutually valuable transactions. In this study, we examine conditions for the endogenously emerging markets based on trust and reputation. The analysis is focused on the effects of different forms of feedback information in markets that suffer from moral hazard due to sequential trading. The study presents data-oriented evidence on why and when people trust each other in economic transactions. Electronic markets, particularly electronic auctions, are presented as the primary application context for the feedback system based on trust and reputations. The experimental data for the research were collected in a laboratory experiment taking advantage of newly designed and implemented computer application. The participants in experimental sessions were all students at the University of Helsinki. The contribution of the thesis is threefold. Firstly, we develop further the idea of tailored trustworthiness aggregates. Secondly, we introduce a novel extensive form game to model trust decisions with endogenous payoff formation. This game design unites the ordinary Trust Game with auctions. Thirdly, based on the unique data from the experiment, we tackle the motivation behind the individual’s trust decision. The experimental results in this study demonstrate that, in an economic exchange, the economic agent behaves simultaneously both fairly and selfishly. Furthermore, the expression of mixed motives appears to be sensitive to the variations in the flow of information. The data collected for this study clearly indicate that the augmentation of information improves the economic efficiency of endogenously organized marketplaces. Market efficiency does not require a large number of participants, complete information or full economic understanding, but incentives to trust each other.