scholarly journals Identification of games of incomplete information with multiple equilibria and unobserved heterogeneity

10.3982/qe666 ◽  
2019 ◽  
Vol 10 (4) ◽  
pp. 1659-1701 ◽  
Author(s):  
Victor Aguirregabiria ◽  
Pedro Mira
Keyword(s):  
Private Information ◽  
Multiple Equilibria ◽  
Unobserved Heterogeneity ◽  
Common Knowledge ◽  
Sufficient Conditions ◽  
Finite Mixture Model ◽  
Payoff Function ◽  
Finite Mixture ◽  
Relevant Variables ◽  
Necessary And Sufficient

This paper deals with identification of discrete games of incomplete information when we allow for three types of unobservables: payoff‐relevant variables, both players' private information and common knowledge, and nonpayoff‐relevant variables that determine the selection between multiple equilibria. The specification of the payoff function and the distributions of the common knowledge unobservables is nonparametric with finite support (i.e., finite mixture model). We provide necessary and sufficient conditions for the identification of all the primitives of the model. Two types of conditions play a key role in our identification results: independence between players' private information, and an exclusion restriction in the payoff function. When using a sequential identification approach, we find that the up‐to‐label‐swapping identification of the finite mixture model in the first step creates a problem in the identification of the payoff function in the second step: unobserved types have to be correctly matched across different values of observable explanatory variables. We show that this matching‐type problem appears in the sequential estimation of other structural models with nonparametric finite mixtures. We derive necessary and sufficient conditions for identification, and show that additive separability of unobserved heterogeneity in the payoff function is a sufficient condition to deal with this problem. We also compare sequential and joint identification approaches.

scholarly journals Mechanisms for Automated Negotiation in State Oriented Domains

1996 ◽  
Vol 5 ◽  
pp. 163-238 ◽  
Author(s):  
G. Zlotkin ◽  
J. S. Rosenschein
Keyword(s):  
Private Information ◽  
Common Knowledge ◽  
Sufficient Conditions ◽  
General Category ◽  
Automated Negotiation ◽  
Negotiation Protocol ◽  
Interacting Agents ◽  
The Stability ◽  
Definition Of ◽  
Necessary And Sufficient

This paper lays part of the groundwork for a domain theory of negotiation, that is, a way of classifying interactions so that it is clear, given a domain, which negotiation mechanisms and strategies are appropriate. We define State Oriented Domains, a general category of interaction. Necessary and sufficient conditions for cooperation are outlined. We use the notion of worth in an altered definition of utility, thus enabling agreements in a wider class of joint-goal reachable situations. An approach is offered for conflict resolution, and it is shown that even in a conflict situation, partial cooperative steps can be taken by interacting agents (that is, agents in fundamental conflict might still agree to cooperate up to a certain point). A Unified Negotiation Protocol (UNP) is developed that can be used in all types of encounters. It is shown that in certain borderline cooperative situations, a partial cooperative agreement (i.e., one that does not achieve all agents' goals) might be preferred by all agents, even though there exists a rational agreement that would achieve all their goals. Finally, we analyze cases where agents have incomplete information on the goals and worth of other agents. First we consider the case where agents' goals are private information, and we analyze what goal declaration strategies the agents might adopt to increase their utility. Then, we consider the situation where the agents' goals (and therefore stand-alone costs) are common knowledge, but the worth they attach to their goals is private information. We introduce two mechanisms, one 'strict', the other 'tolerant', and analyze their affects on the stability and efficiency of negotiation outcomes.

On the threshold strategies in optimal stopping problems for diffusion processes

2017 ◽  
Vol 54 (3) ◽  
pp. 963-969 ◽  
Author(s):  
Vadim Arkin ◽  
Alexander Slastnikov
Keyword(s):  
Diffusion Process ◽  
Optimal Stopping ◽  
Diffusion Processes ◽  
Sufficient Conditions ◽  
Payoff Function ◽  
Threshold Strategy ◽  
One Dimensional ◽  
Stopping Set ◽  
Optimal Stopping Problems ◽  
Necessary And Sufficient

Abstract We study a problem when the optimal stopping for a one-dimensional diffusion process is generated by a threshold strategy. Namely, we give necessary and sufficient conditions (on the diffusion process and the payoff function) under which a stopping set has a threshold structure.

HETEROGENEITY ON THE TECHNICAL EFFICIENCY IN JAPANESE AIRPORTS

2011 ◽  
Vol 56 (04) ◽  
pp. 523-534 ◽  
Author(s):  
CARLOS PESTANA BARROS ◽  
SHUNSUKE MANAGI ◽  
YUICHIRO YOSHIDA
Keyword(s):  
Production Efficiency ◽  
Latent Class ◽  
Unobserved Heterogeneity ◽  
Latent Class Model ◽  
Stochastic Frontier ◽  
Finite Mixture Model ◽  
Finite Mixture ◽  
Business Strategies ◽  
Class Model ◽  
Managerial Implications

This paper evaluates the production activities of Japanese airports by using a finite mixture model that allows controlling for unobserved heterogeneity. In doing so, a stochastic frontier latent class model, which allows the existence of different technologies, is adopted to estimate production frontiers. This procedure not only enables the identification of different groups of Japanese airports but also permits the analysis of their production efficiency. The main result is that there are two groups of Japanese airports, both following completely different "technologies" to obtain passengers and cargo, suggesting that business strategies need to be adapted to the characteristics of the airports. Some managerial implications are developed.

scholarly journals Subgame Maxmin Strategies in Zero-Sum Stochastic Games with Tolerance Levels

2021 ◽  
Author(s):  
János Flesch ◽  
P. Jean-Jacques Herings ◽  
Jasmine Maes ◽  
Arkadi Predtetchinski
Keyword(s):  
Stochastic Games ◽  
Sufficient Conditions ◽  
Payoff Function ◽  
Surprising Result ◽  
Countable State ◽  
Finite Action ◽  
Zero Sum ◽  
Necessary And Sufficient ◽  
Action Spaces ◽  
Special Case

AbstractWe study subgame $$\phi $$ ϕ -maxmin strategies in two-player zero-sum stochastic games with a countable state space, finite action spaces, and a bounded and universally measurable payoff function. Here, $$\phi $$ ϕ denotes the tolerance function that assigns a nonnegative tolerated error level to every subgame. Subgame $$\phi $$ ϕ -maxmin strategies are strategies of the maximizing player that guarantee the lower value in every subgame within the subgame-dependent tolerance level as given by $$\phi $$ ϕ . First, we provide necessary and sufficient conditions for a strategy to be a subgame $$\phi $$ ϕ -maxmin strategy. As a special case, we obtain a characterization for subgame maxmin strategies, i.e., strategies that exactly guarantee the lower value at every subgame. Secondly, we present sufficient conditions for the existence of a subgame $$\phi $$ ϕ -maxmin strategy. Finally, we show the possibly surprising result that each game admits a strictly positive tolerance function $$\phi ^*$$ ϕ ∗ with the following property: if a player has a subgame $$\phi ^*$$ ϕ ∗ -maxmin strategy, then he has a subgame maxmin strategy too. As a consequence, the existence of a subgame $$\phi $$ ϕ -maxmin strategy for every positive tolerance function $$\phi $$ ϕ is equivalent to the existence of a subgame maxmin strategy.

Expenditure-based segmentation of tourists taking into account unobserved heterogeneity: The case of Venice

2019 ◽  
Vol 26 (3) ◽  
pp. 475-499 ◽  
Author(s):  
Reza Mortazavi ◽  
Magdalena Lundberg
Keyword(s):  
Mixture Model ◽  
Latent Class ◽  
Unobserved Heterogeneity ◽  
Finite Mixture Model ◽  
Finite Mixture ◽  
Homogeneous Group ◽  
Latent Classes ◽  
Different Types

Visitors to big tourist cities are very likely heterogeneous and can be classified into different segments, for example, low and high spenders. Previous studies on visitor expenditure-based segmentation seem to have only taken into account observed heterogeneity, usually segmenting tourists based on observed characteristics. In the present study, however, the visitors to Venice, Italy, are segmented with respect to their spending into different groups based on both observed and unobserved heterogeneity using a finite mixture model. The results indicate that the visitors belong to three latent classes with respect to their expenditure. Interestingly, different variables affect expenditure differently depending on the latent class belonging. The overall conclusion is that segmenting tourists into different classes based on unobserved heterogeneity with respect to their spending is preferable and more informative than treating the visitors as one homogeneous group. The approach is also more useful for different types of policymaking.

scholarly journals Application of Bayesian Hierarchical Finite Mixture Model to Account for Severe Heterogeneous Crash Data

Signals ◽  
2021 ◽  
Vol 2 (1) ◽  
pp. 41-52
Author(s):  
Mahdi Rezapour ◽  
Khaled Ksaibati
Keyword(s):  
Mixture Model ◽  
Traffic Safety ◽  
Unobserved Heterogeneity ◽  
Final Analysis ◽  
Finite Mixture Model ◽  
Information Criteria ◽  
Finite Mixture ◽  
Maximum Likelihood Estimates ◽  
Bayesian Hierarchical ◽  
Explanatory Variables

Various techniques have been proposed in the literature to account for the observed and unobserved heterogeneity in the crash dataset. Those include techniques such as the finite mixture model (FMM), or hierarchical techniques. The FMM could provide a flexible framework by providing various distributions for various individual observations. However, the shortcoming of the standard FMM is that it cannot account for the heterogeneity in a single model’s structure, and the data needs to be disaggregated to its resultant subsamples. That would result in a loss of information. On the other hand, a second plausible approach is to use a hierarchical technique to account for the data heterogeneities, being based on various explanatory variables, and based on engineering intuition. In the context of traffic safety, while some researchers, for instance, considered the seasonality, some others considered highway systems or even genders. However, a question might arise: are the same observations within a same hierarchy homogenous? Are all the observations within different clusters heterogeneous? Additionally, how about other variables? Although the results in the literature highlighted accounting for the structure of the dataset would result in an acceptable interclass correlation (ICC), and also result in a significant improvement in terms of reduction in the deviance information criteria (DIC), there is no justification why to use those specific hierarchies and reject others. A more reasonable approach is to let the algorithm come up with the best distributions based on the provided parameters and accommodate observations to the related mixtures. In that approach those observations that belong to various subjective hierarchies, e.g., winter versus summer, but found to be similar would be set in a similar cluster. That is why we proposed this methodology to implement an objective hierarchy of the FMM to be used for the hierarchical technique. Here, due to the label switching problem of the FMM in the context of Bayesian, the FMM first conducted in the context of maximum likelihood estimates, and then assigned observations were used for the final analysis. The results of the DIC highlighted a significant improvement in the model fit compared with a subjective assigned hierarchy based on highway system. Additionally, although the subjective model resulted in a very low ICC due to so much heterogeneity in the dataset, the implemented methodology resulted in an acceptable ICC (0.3), justifying the use of hierarchy. The Bayesian hierarchical finite mixture model (BHFMM) is one of earliest application in traffic safety studies. The findings of this study have important implications for the future studies to account for a higher heterogeneity of the crash dataset based on the distance of observations to each cluster.

scholarly journals Cost efficiency of African insurance companies using a finite mixture model

2016 ◽  
Vol 19 (1) ◽  
pp. 64-81 ◽  
Author(s):  
Carlos Barros ◽  
Peter Wanke
Keyword(s):  
Mixture Model ◽  
Cost Efficiency ◽  
Latent Class ◽  
Unobserved Heterogeneity ◽  
Latent Class Model ◽  
Finite Mixture Model ◽  
Finite Mixture ◽  
Policy Implications ◽  
Business Strategies ◽  
Insurance Companies

This paper evaluates the operational practices by African insurance companies from Angola and Mozambique, using a finite mixture model that allows controlling for unobserved heterogeneity. More precisely, a stochastic frontier latent class model is adopted in this research to estimate the cost frontiers for each of the different technologies embedded in this heterogeneity. This model not only enables the identification of different groups of African insurance companies from Angola and Mozambique, but it also permits the analysis of their cost efficiency. The results indicate the existence of three different technology groups in the sample, suggesting the need for different business strategies. The policy implications are also derived.

A Nonspeculation Theorem with an Application to Committee Design

2017 ◽  
Vol 17 (2) ◽  
Author(s):  
Jidong Chen ◽  
Mark Fey ◽  
W. Ramsay Kristopher
Keyword(s):  
Private Information ◽  
Multiple Equilibria ◽  
Common Knowledge ◽  
Pareto Optimal ◽  
Unique Equilibrium ◽  
Optimal Outcome ◽  
Agreement Theorems

AbstractVarious well known agreement theorems show that if players have common knowledge of actions and a “veto" action is available to every player, then they cannot agree to forgo a Pareto optimal outcome simply because of private information in settings with unique equilibrium. We establish a nonspeculation theorem which is more general than previous results and is applicable to political and economic situations that generate multiple equilibria. We demonstrate an application of our result to the problem of designing an independent committee free of private persuasion.

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