Special Session 41: Dynamics and Games

Design of efficient mechanisms for industrial pollution control

Alberto A Alvarez-Lopez UNED - Dep. Economic Theory and Mathematical Economics Spain Co-Author(s):    Pinto, Alberto A.; Martins, Filipe

Abstract: Industrial pollution and its limitation have become a very important concern. In this paper we consider a polluting industry and a government with the possibility of supervising this pollution. The interaction between the firms within the industry and the government is modelled as an evolutionary game. We show that, by defining an appropriate fine, the government can design a pollution control mechanism with which all firms optimally achieve the same level of pollution reduction---which we call green level, and in turn can be predetermined by the government. This mechanism requires a specific level of government`s supervision for each firm that is proportional to the firm`s cost of pollution reduction. We also provide two specific examples of fine to design the mechanism: piecewise affine and piecewise quadratic. The practical implementation of the former is much easier, but the latter exhibits the property that the rate of convergence to the green level is greater the more polluting the companies are. These properties are very relevant for applications in environmental policy.

The Centipede Game and Financial Bubbles

Bruno Dupire Bloomberg/NYU USA Co-Author(s):

Abstract: The Centipede Game leads to a counterintuitive Nash equilibrium that destroys wealth. We study this game and investigate versions of the game that lead to a model of formation and burst of financial bubbles, where participants are first incentivize to feed the trend, then run for the exit. We analyze these mechanisms and examine how the model fits behavioral economics interpretations and the observed dynamics of financial bubbles.

Platform-induced coordination by Julian Chitiva and Penelope Hernandez

Penelope Hernandez ERI-CES University of Valencia Spain Co-Author(s):

Abstract: We study how platforms influence collective action by strategically designing information networks. Users face a fundamental coordination trade-off, aligning actions with their private types while conforming to others` behaviour. In a Bayesian game where users receive private signals correlated with both their types and a payoff-relevant state, the platform controls which signals each user observes, shaping beliefs and equilibrium outcomes.

Stable coalition formation through bargaining for the preservation of public goods

Alberto Pinto LIAAD INESC TEC, DM, FCUP, Portugal Portugal Co-Author(s):    Elvio Accinelli, Atefeh Afsar, Filipe Martins, Jose Martins, Bruno M.P.M. Oliveira, Luis Quintas

Abstract: The notion of Union is Strength is essential for preserving public goods and mitigating public bads such as air quality. International environmental agreements serve this role by forming stable coalitions, in which agents join or leave based on free-riding incentives. Building on the Baliga-Maskin model, we show that such coalitions can emerge from a simple Markov chain mechanism where agents enter or exit through utility-based bargaining. However, stable coalition formation is challenging, as members may receive substantially lower utility than free-riders. This asymmetry gives rise to Barrett`s paradox of cooperation: even with large coalitions and strong preferences among free-riders, overall utility may remain far below that of the grand coalition. Encouragingly, the paradox of cooperation can be resolved when free-riders have sufficiently low preferences.

Convergence to Nash equilibria in monotone games and their characterization

Jarowit Sledzinsk University of Warsaw, Faculty of Mathematics, Informatics and Mechanics Poland Co-Author(s):

Abstract: The first AI agent playing the board game Stratego on a human expert level was trained by Regularized Nash Dynamics (R-NaD), an algorithm which converges to Nash equilibria in zero-sum games. Such property of convergence is exceptional - a classical evolutionary game theory replicator dynamics is recurrent in zero-sum games. R-NaD converges to the equilibrium not only in zero-sum games but in a recently introduced wider class of the so-called monotone games. The original definition of the monotone games is difficult to interpret and was not investigated any further than showing it includes zero-sum games and some other known but tight classes. In this talk, we are going to briefly present the ideas behind R-NaD and show our own results concerning monotone games. We formulated a monotonicity-equivalent condition for 2-player games, which is much easier to interpret than the original one. This led us to look closer at the monotone games. We obtained a full classification of games with two strategies and symmetric games with three strategies with respect to pure Nash equilibria.