The Conditional Contribution Mechanism for the Provision of Public Goods

Many mechanisms have been designed to solve the free-rider problem in public good environments. The designers of those mechanisms focused on good static equilibrium properties. In this paper, I propose a new mechanism for the provision of public goods that has good dynamic properties instead. The mechanism gives all agents the possibility to condition their contribution on the total level of contribution provided by all agents. Under a reasonable variant of Better Response Dynamics all equilibrium outcomes are Pareto efficient. This makes the mechanism particularly suited for repeated public good environments. In contrast to many previously suggested mechanisms, it does further not require an institution that has the power to enforce participation and/or transfer payments. Neither does it use any knowledge of agents preferences

ESSAYS ON PACKAGE AUCTIONS

The recent auctions literature has devoted much attention to mechanisms that allow package bidding: all-or-nothing bids for sets of items. Introducing package bids can improve efficiency by reducing the bidders "exposure" risk of winning undesirable combinations of items. However, package bids can also create a free-rider problem for relatively small bidders since they need to compete jointly against their larger opponents, potentially reducing efficiency. The inherent asymmetry among different package bids significantly complicates an equilibrium analysis of the costs and benefits of allowing package bids in auctions. The first chapter makes progress in solving for Bayesian-Nash equilibria of the first-price package auction. We develop a new computational method which is based on a complementarity formulation of the system of equilibrium inequalities. Additionally, we establish existence of equilibrium for special cases. Our analysis shows that introducing package bidding can significantly improve efficiency when the exposure risk faced by bidders is large, but it can reduce efficiency otherwise. We also compare the first-price package auction with other leading package alternatives. Surprisingly, in the environment considered, the first-price package auction performs reasonably well, with respect to both revenue and efficiency, despite the presence of a strong free-rider problem. The second chapter studies the core-selecting auctions that were proposed recently as alternatives to the famous Vickrey-Clarke Groves (VCG) mechanism for environments with complementarities. The existing literature on core-selecting auctions is limited to only a complete-information analysis. We consider a simple incomplete-information model which allows us to do a full equilibrium analysis, including closed-form solutions for some distributions, for four different core-selecting auction formats suggested in the literature. Our model also admits correlations among bidders values. We second that the revenues and efficiency from core-selecting auctions improve as correlations among bidders values increase, while the revenues from the Vickrey auction worsen. Thus, there may be good reasons for policymakers to utilize a core-selecting auction rather than a VCG mechanism in realistic environments

Strategic Differentiation in Non-Cooperative Games on Networks (I)

In the existing models for finite non-cooperative games on networks, it is usually assumed that in each single round of play, regardless of the evolutionary update rule driving the dynamics, each player selects the same strategy against all of its opponents. When a selfish player can distinguish the identities of its opponents, this assumption becomes highly restrictive. In this paper, we introduce the mechanism of strategic differentiation through which a subset of players in the network, called differentiators, are able to employ different pure strategies against different opponents in their local game interactions. Within this new framework, we study the existence of pure Nash equilibria and finite-time convergence of differentiated myopic best response dynamics by extending the theory of potential games to non-cooperative games with strategic differentiation. Finally, we illustrate the effect of strategic differentiation on equilibrium strategy profiles by simulating a non-linear spatial public goods game and the simulation results show that depending on the position of differentiators in the network, the level of cooperation of the whole population at an equilibrium can be promoted or hindered. Our findings indicate that strategic differentiation may provide new ideas for solving the challenging free-rider problem on complex networks

Breaking Up a Research Consortium

Inter-firm R&D collaborations through contractual arrangements have become increasingly popular, but in many cases they are broken up without any joint discovery. We provide a rationale for the breakup date in R&D collaboration agreements. More specifically, we consider a research consortium initiated by a firm A with a firm B. B has private information about whether it is committed to the project or a free-rider. We show that under fairly general conditions, a breakup date in the contract is a (secondbest) optimal screening device for firm A to screen out free-riders. With the additional constraint of renegotiation proofness, A can only partially screen out free-riders: entry by some free-riders makes sure that A does not have an incentive to renegotiate the contract ex post. We also propose empirical strategies for identifying the three likely causes of a breakup date: adverse selection, moral hazard, and project non-viability

Incentive Systems in Multi-Level Markets for Virtual Goods

As an alternative to rigid DRM measures, ways of marketing virtual goods through multi-level or networked marketing have raised some interest. This report is a first approach to multi-level markets for virtual goods from the viewpoint of theoretical economy. A generic, kinematic model for the monetary flow in multi-level markets, which quantitatively describes the incentives that buyers receive through resales revenues, is devised. Building on it, the competition of goods is examined in a dynamical, utility-theoretic model enabling, in particular, a treatment of the free-rider problem. The most important implications for the design of multi-level market mechanisms for virtual goods, or multi-level incentive management systems, are outlined.Comment: 18 pages, 5 figures; graphics with reduced resolution. Full resolution available on author's homepage. Accepted contribution to the Workshop 'Virtual Goods' at the Conference AXMEDIS 2005, 30. November - 2. December, Florence, Ital

GLive: The Gradient overlay as a market maker for mesh-based P2P live streaming

Peer-to-Peer (P2P) live video streaming over the Internet is becoming increasingly popular, but it is still plagued by problems of high playback latency and intermittent playback streams. This paper presents GLive, a distributed market-based solution that builds a mesh overlay for P2P live streaming. The mesh overlay is constructed such that (i) nodes with increasing upload bandwidth are located closer to the media source, and (ii) nodes with similar upload bandwidth become neighbours. We introduce a market-based approach that matches nodes willing and able to share the stream with one another. However, market-based approaches converge slowly on random overlay networks, and we improve the rate of convergence by adapting our market-based algorithm to exploit the clustering of nodes with similar upload bandwidths in our mesh overlay. We address the problem of free-riding through nodes preferentially uploading more of the stream to the best uploaders. We compare GLive with our previous tree-based streaming protocol, Sepidar, and NewCoolstreaming in simulation, and our results show significantly improved playback continuity and playback latency

The Evolution of Social Contracts

Influential thinkers such as Young, Sugden, Binmore, and Skyrms have developed game-theoretic accounts of the emergence, persistence and evolution of social contracts. Social contracts are sets of commonly understood rules that govern cooperative social interaction within societies. These naturalistic accounts provide us with valuable and important insights into the foundations of human societies. However, current naturalistic theories focus mainly on how social contracts solve coordination problems in which the interests of the individual participants are aligned, not competition problems in which individual interests compete with group interests. In response, I set out to build on those theories and provide a comprehensive naturalistic account of the emergence, persistence and evolution of social contracts. My central claim is that social contracts have culturally evolved to solve cooperation problems, which include both coordination and competition problems. I argue that solutions to coordination problems emerge from “within-group” dynamics, while solutions to competition problems result largely from “between-group” dynamics