Enforcing equilibria in multi-agent systems

We introduce and investigate Normative Synthesis: a new class of problems for the equilibrium verification that counters the absence of equilibria by purposely constraining multi-agent systems. We show that norms are powerful enough to ensure a positive answer to every instance of the equilibrium verification problem. Subsequently, we focus on two optimization versions, that aim at providing a solution in compliance with implementation costs. We show that the complexities of our procedures range between 2exptime and 3exptime, thus that the problems are no harder than the corresponding equilibrium verification ones

Cooperation Enforcement and Collusion Resistance in Repeated Public Goods Games

Enforcing cooperation among substantial agents is one of the main objectives for multi-agent systems. However, due to the existence of inherent social dilemmas in many scenarios, the free-rider problem may arise during agents' long-run interactions and things become even severer when self-interested agents work in collusion with each other to get extra benefits. It is commonly accepted that in such social dilemmas, there exists no simple strategy for an agent whereby she can simultaneously manipulate on the utility of each of her opponents and further promote mutual cooperation among all agents. Here, we show that such strategies do exist. Under the conventional repeated public goods game, we novelly identify them and find that, when confronted with such strategies, a single opponent can maximize his utility only via global cooperation and any colluding alliance cannot get the upper hand. Since a full cooperation is individually optimal for any single opponent, a stable cooperation among all players can be achieved. Moreover, we experimentally show that these strategies can still promote cooperation even when the opponents are both self-learning and collusive

Voluntary Participation in a Mechanism Implementing a Public Project

In this study, a participation game in a mechanism to implement a public project is considered; in this game, agents decide simultaneously whether they will participate in the mechanism or not. We characterize the sets of participants at strict Nash equilibria, strong equilibria, and coalition-proof equilibria of the participation game. The three sets of equilibria are shown to coincide and exist. All the equilibrium allocations are Pareto efficient at any one of three notions of equilibria. However, if the public good can be provided in multiple units or if there are multiple projects, then these sets may fail to coincide.Participation game, Public project, Strong equilibrium, Coalition-proof equilibrium, Multi-unit public good, Multiple projects

Corporate board composition, protocols, and voting behavior: experimental evidence

We model experimentally the governance of an institution. The optimal management of this institution depends on the information possessed by insiders. However, insiders, whose interests are not aligned with the interests of the institution, may choose to use their information to further personal rather than institutional ends. Researchers (e.g., Palfrey 1990) and the business press have both argued that multiagent mechanisms, which inject trustworthy but uninformed “watchdog” agents into the governance process and impose penalties for conflicting recommendations, can implement institutionally preferred outcomes. Our laboratory experiments strongly support this conclusion. In the experimental treatments in which watchdog agents were included, the intuitionally preferred allocation was implemented in the vast majority of cases. Surprisingly, implementation occurred even in the absence of penalties for conflicting recommendations.Corporations - Finance ; Game theory

Splitting an Uncertain (Natural) Capital

Most natural commons are subject to discontinuities and threshold effects, so their gradual depletion may result in a sudden irreversible loss of the associated ecological services. Yet, it is often impossible to locate these thresholds with certainty. We analyze this context using a variant of the divide-the-dollar game, in which the amount to be split among players follows a discrete or multimodal probability distribution. “Cautions equilibria” – where agents collectively behave as if the worst-case scenario were certain – are found to coexist with “dangerous equilibria” – where overall demand for ecological services might lead to their collapse – and “dreadful equilibria” – where agents collectively request so much natural capital that a collapse of ecological services is certain, even if all agents are risk averse. Communication/cooperation among agents, however, which raises the possibility of coordinated group deviations, would eliminate dreadful equilibria and reduce the occurrence of dangerous equilibria, while cautions equilibria are robust to such deviations. A direct corollary is that dangerous equilibria are Pareto-dominated by any cautions equilibrium in which all agents claim less natural capital. These results shed light on the management of common-pool resources, international climate change negotiations, and the implementation of precautionary policies.Common-pool resources, ecological thresholds, divide-the-dollar game, coalition-proof Nash equilibrium

Splitting an Uncertain (Natural) Capital

Most natural commons are subject to discontinuities and threshold effects, so their gradual depletion may result in a sudden irreversible loss of the associated ecological services. Yet, it is often impossible to locate these thresholds with certainty. We analyze this context using a variant of the divide-the-dollar game, in which the amount to be split among players follows a discrete or multimodal probability distribution. ‘Cautious equilibria’ – where agents collectively behave as if the worst-case scenario were certain - are found to coexist with ‘dangerous equilibria’ - where overall demand for ecological services might lead to their collapse - and ‘dreadful equilibria’ - where agents collectively request so much natural capital that a collapse of ecological services is certain, even if all agents are risk averse. Communication/cooperation among agents, however, which raises the possibility of coordinated group deviations, would eliminate dreadful equilibria and reduce the occurrence of dangerous equilibria, while cautious equilibria are robust to such deviations. A direct corollary is that dangerous equilibria are Pareto-dominated by any cautious equilibrium in which all agents claim less natural capital. These results shed light on the management of common-pool resources, international climate change negotiations, and the implementation of precautionary policies.Common-pool resources, Ecological thresholds, Divide-the-dollar game, Coalition-proof Nash equilibrium

Relational Contracts and Inequity Aversion

We study the effects of envy on the feasibility of relational contracts in a standard moral hazard setup with two agents. Performance is evaluated via an observable, but non-contractible signal which reflects the agent´s individual contribution to firm value. Both agents exhibit disadvantageous inequity aversion. In contrast to the literature, we find that inequity aversion may be beneficial: In the presence of envy, for a certain range of interest rates relational contracts may be more profitable. Furthermore, for some interest rates reputational equilibria exist only with inequity averse agents.Principal-Agent, Relational Contract, Inequity Aversion, Envy

Public Investment as Commitment

Should public assets such as infrastructure, education, and the environment earn the same return as private investments? We consider if time-inconsistent decision-makers can gain from institutions that enforce cost-benefit rules on large projects that influence the economy as a whole. Long-term public investments provide commitment to current preferences, leading to investment biases in such assets. The institutionalized cost-benefit prudence eliminates such biases but we show that this behavioral rule has no general social value: it implements Pareto efficiency if and only if preferences are time-consistent, and decreases welfare otherwise. We find that the long-term cost-benefit prudence is fundamentally about income transfers to the future, implying that efficient behavioral rules should target savings directly rather than the division of current investment resources.public investments, cost-benefit analysis, inconsistent preferences