Economics

Permanent URI for this collectionhttps://hdl.handle.net/10679/316

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Now showing 1 - 5 of 5

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Costly switching from a status quo
(Elsevier, 2018-12) Güney, Begüm; Richter, M.; Economics; GÜNEY, Begüm
We axiomatically characterize a theory of status quo-dependent choice where an agent faces switching costs that depend upon both the status quo and the alternative he switches to. In a choice problem with a status quo, the agent chooses the alternatives that yield the highest utility net of switching cost. This generates status quo bias and also allows for a wide range of reference effects. We examine the behavior of such agents in Prisoner’s Dilemma (PD) games. In a single PD game, switching costs can lead to cooperation. However, across different PD games, it is not “anything goes” and instead we derive necessary and sufficient conditions for cooperation rates to be consistent with our model. We then verify that these conditions are satisfied by Charness et al.’s (2016) experimental data. We also perform a similar analysis for other theories such as models of status quo bias, magical thinking, inequity aversion, and fairness; and find that these theories make either invalidated or looser predictions.
Open Access
A new estimation technique of sovereign default risk
(Elsevier, 2016-12-27) Soytaş, Mehmet Ali; Volkan, Engin; Economics; SOYTAŞ, Mehmet Ali; VOLKAN, Engin
Using the fixed-point theorem, sovereign default models are solved by numerical value function iteration and calibration methods, which due to their computational constraints, greatly limits the models' quantitative performance and foregoes its country-specific quantitative projection ability. By applying the Hotz-Miller estimation technique (Hotz and Miller, 1993)- often used in applied microeconometrics literature- to dynamic general equilibrium models of sovereign default, one can estimate the ex-ante default probability of economies, given the structural parameter values obtained from country-specific business-cycle statistics and relevant literature. Thus, with this technique we offer an alternative solution method to dynamic general equilibrium models of sovereign default to improve upon their quantitative inference ability.
Open Access
On efficient computation of equilibrium under social coalition structures
(TÜBİTAK, 2020) Caskurlu, B.; Ekici, Özgür; Kizilkaya, F. E.; Economics; EKİCİ, Özgün
In game-theoretic settings the key notion of analysis is an equilibrium, which is a profile of agent strategies such that no viable coalition of agents can improve upon their coalitional welfare by jointly changing their strategies. A Nash equilibrium, where viable coalitions are only singletons, and a super strong equilibrium, where every coalition is deemed viable, are two extreme scenarios in regard to coalition formation. A recent trend in the literature is to consider equilibrium notions that allow for coalition formation in between these two extremes and which are suitable to model social coalition structures that arise in various real-life settings. The recent literature considered the question on the existence of equilibria under social coalition structures mainly in Resource Selection Games (RSGs), due to the simplicity of this game form and its wide range of application domains. We take the question on the existence of equilibria under social coalition structures from the perspective of computational complexity theory. We study the problem of deciding the existence of an equilibrium in RSGs with respect to a given social coalition structure. For an arbitrary coalition structure, we show that it is computationally intractable to decide whether an equilibrium exists even in very restricted settings of RSGs. In certain settings where an equilibrium is guaranteed to exist we give polynomial-time algorithms to find an equilibrium.
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On existence of equilibrium under social coalition structures
(Cambridge University Press, 2022-02) Caskurlu, B.; Ekici, Özgün; Kizilkaya, F. E.; Economics; EKİCİ, Özgün
In a strategic-form game, a strategy profile is an equilibrium if no viable coalition of agents (or players) benefits (in the Pareto sense) from jointly changing their strategies. Weaker or stronger equilibrium notions can be defined by considering various restrictions on coalition formation. For instance, in a Nash equilibrium, it is assumed that viable coalitions are singletons, and in a super strong equilibrium, it is assumed that every coalition is viable. Restrictions on coalition formation can be justified by communication limitations, coordination problems, or institutional constraints. In this paper, inspired by social structures in various real-life scenarios, we introduce certain restrictions on coalition formation, and on their basis, we introduce a number of equilibrium notions. As an application, we study our equilibrium notions in resource selection games (RSGs), and we present a complete set of existence and nonexistence results for general RSGs and their important special cases.
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On singleton congestion games with resilience against collusion
(Springer, 2021) Caskurlu, B.; Ekici, Özgün; Kızılkaya, F. E.; Economics; EKİCİ, Özgün
We study the subclass of singleton congestion games in which there are identical resources with increasing cost functions. In this domain, we prove that there always exists an outcome that is resilient to weakly-improving deviations by singletons (i.e., the outcome is a Nash equilibrium), by the grand coalition (i.e., the outcome is Pareto efficient), and by coalitions with respect to an a priori given partition coalition structure (i.e., the outcome is a partition equilibrium). To our knowledge, this is the strongest existence guarantee in the literature on congestion games when weakly-improving deviations are considered. Our proof technique gives the false impression of a potential function argument but it is a novel application of proof by contradiction.

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