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Games, Volume 15, Issue 1 (February 2024) – 5 articles

Cover Story (view full-size image): This paper presents a dynamic model of tender offers, incorporating trading during takeovers and the bidder's ability to freeze out target shareholders. Trading enables arbitrageurs with significant shareholdings to influence the bidding process, forcing bidders to offer higher preemptive bids. We find a positive correlation between the takeover premium and arbitrageurs' share accumulation before the announcement, especially in less liquid stocks. While freezeouts address the free-rider problem, front-end loaded bids do not benefit bidders due to arbitrageurs' ability to negate potential benefits. The takeover premium is unrelated to the bidder's post-acquisition ability to dilute target shareholders, also influenced by arbitrage activities. Our model offers insights into the dynamics and influencing factors of tender offers. View this paper
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4 pages, 177 KiB  
Editorial
Game Theory Applications to Socio-Environmental Studies, Development Economics, and Sustainability Research
by Elkhan Richard Sadik-Zada, Andrea Gatto, Luigi Aldieri, Giovanna Bimonte, Luigi Senatore and Concetto Paolo Vinci
Games 2024, 15(1), 5; https://doi.org/10.3390/g15010005 - 31 Jan 2024
Viewed by 1386
Abstract
The present investigation elaborates on the level of game theory application for the applied and theoretical analyses of climate change and development studies. This editorial shows that the common good character of global climate alongside the increasing internalization of environmental externalities through national [...] Read more.
The present investigation elaborates on the level of game theory application for the applied and theoretical analyses of climate change and development studies. This editorial shows that the common good character of global climate alongside the increasing internalization of environmental externalities through national regulations and international environmental treaties jointly result in the increasing congruence between the context of climate change problems and the game theoretical method. Furthermore, the adoption of the Paris Accord by the overwhelming majority of developing countries as well as the disproportionate vulnerability of the Global South have led to an increasing shift in focus with regard to international development cooperation, from poverty alleviation and economic growth to green growth and circular economy solutions, within developing countries. The underutilization of game theory in the context of development studies is not satisfactory. This paper underlines the importance of implementing an impetus to researchers for scholarly discussions and applications of game theory in a discourse on the following topics: 1. economic growth; 2. climate change mitigation and adaptation; and 3. a broader socioeconomic development. Full article
27 pages, 353 KiB  
Article
Takeovers, Freezeouts, and Risk Arbitrage
by Armando Gomes
Games 2024, 15(1), 4; https://doi.org/10.3390/g15010004 - 30 Jan 2024
Viewed by 1009
Abstract
This paper develops a dynamic model of tender offers in which there is trading on the target’s shares during the takeover, and bidders can freeze out target shareholders (compulsorily acquire remaining shares not tendered at the bid price), features that prevail on almost [...] Read more.
This paper develops a dynamic model of tender offers in which there is trading on the target’s shares during the takeover, and bidders can freeze out target shareholders (compulsorily acquire remaining shares not tendered at the bid price), features that prevail on almost all takeovers. We show that trading allows for the entry of arbitrageurs with large blocks of shares who can hold out a freezeout—a threat that forces the bidder to offer a high preemptive bid. There is also a positive relationship between the takeover premium and arbitrageurs’ accumulation of shares before the takeover announcement, and the less liquid the target stock, the stronger this relationship is. Moreover, freezeouts eliminate the free-rider problem, but front-end loaded bids, such as two-tiered and partial offers, do not benefit bidders because arbitrageurs can undo any potential benefit and eliminate the coerciveness of these offers. Similarly, the takeover premium is also largely unrelated to the bidder’s ability to dilute the target’s shareholders after the acquisition, also due to potential arbitrage activity. Full article
(This article belongs to the Special Issue Game Theory with Applications to Economics)
21 pages, 856 KiB  
Article
Nash Bargaining Game Enhanced Global Malmquist Productivity Index for Cross-Productivity Index
by Reza Fallahnejad, Mohammad Reza Mozaffari, Peter Fernandes Wanke and Yong Tan
Games 2024, 15(1), 3; https://doi.org/10.3390/g15010003 - 24 Jan 2024
Viewed by 1245
Abstract
The Global Malmquist Productivity Index (GMPI) stands as an evolution of the Malmquist Productivity Index (MPI), emphasizing global technology to incorporate all-time versions of Decision-Making Units (DMUs). This paper introduces a novel approach, integrating the Nash Bargaining Game model with GMPI to establish [...] Read more.
The Global Malmquist Productivity Index (GMPI) stands as an evolution of the Malmquist Productivity Index (MPI), emphasizing global technology to incorporate all-time versions of Decision-Making Units (DMUs). This paper introduces a novel approach, integrating the Nash Bargaining Game model with GMPI to establish a Cross-Productivity Index. Our primary objective is to develop a comprehensive framework utilizing the Nash Bargaining Game model to derive equitable common weights for different time versions of DMUs. These weights serve as a fundamental component for cross-evaluation based on GMPI, facilitating a holistic assessment of DMU performance over varying time periods. The proposed index is designed with essential properties: feasibility, non-arbitrariness concerning the base time period, technological consistency across periods, and weight uniformity for GMPI calculations between two-time versions of a unit. This research amalgamates cross-evaluation and global technology while employing geometric averages to derive a conclusive cross-productivity index. The core motivation behind this methodology is to establish a reliable and fair means of evaluating DMU performance, integrating insights from Nash Bargaining Game principles and GMPI. This paper elucidates the rationale behind merging the Nash Bargaining Game model with GMPI and outlines the objectives to provide a comprehensive Cross-Productivity Index, aiming to enhance the robustness and reliability of productivity assessments across varied time frames. Full article
(This article belongs to the Section Applied Game Theory)
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30 pages, 716 KiB  
Article
Equilibrium Selection in Hawk–Dove Games
by Mario Blázquez de Paz and Nikita Koptyug
Games 2024, 15(1), 2; https://doi.org/10.3390/g15010002 - 31 Dec 2023
Viewed by 1243
Abstract
We apply three equilibrium selection techniques to study which equilibrium is selected in a hawk–dove game with a multiplicity of equilibria. By using a uniform-price auction as an illustrative example, we find that when the demand in the auction is low or intermediate, [...] Read more.
We apply three equilibrium selection techniques to study which equilibrium is selected in a hawk–dove game with a multiplicity of equilibria. By using a uniform-price auction as an illustrative example, we find that when the demand in the auction is low or intermediate, the tracing procedure method of Harsanyi and Selten (1988) and the quantal response method of McKelvey and Palfrey (1998) select the same equilibrium. When the demand is high, the tracing procedure method does not select any equilibrium, but the quantal response method still selects the same equilibrium as when the demand is low or intermediate. The robustness to strategic uncertainty method of Andersson, Argenton and Weibull (2014) selects two of the multiple equilibria irrespective of the demand size. We also analyze the impact of an increase in the minimum bid allowed by the auctioneer in the equilibrium selection. Full article
(This article belongs to the Special Issue Applications of Game Theory to Industrial Organization)
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11 pages, 830 KiB  
Article
Testing Game Theory of Mind Models for Artificial Intelligence
by Michael S. Harré and Husam El-Tarifi
Games 2024, 15(1), 1; https://doi.org/10.3390/g15010001 - 28 Dec 2023
Viewed by 1378
Abstract
In this article, we investigate the relative performance of artificial neural networks and structural models of decision theory by training 69 artificial intelligence models on a dataset of 7080 human decisions in extensive form games. The objective is to compare the predictive power [...] Read more.
In this article, we investigate the relative performance of artificial neural networks and structural models of decision theory by training 69 artificial intelligence models on a dataset of 7080 human decisions in extensive form games. The objective is to compare the predictive power of AIs that use a representation of another agent’s decision-making process in order to improve their own performance during a strategic interaction. We use human game theory data for training and testing. Our findings hold implications for understanding how AIs can use constrained structural representations of other decision makers, a crucial aspect of our ‘Theory of Mind’. We show that key psychological features, such as the Weber–Fechner law for economics, are evident in our tests, that simple linear models are highly robust, and that being able to switch between different representations of another agent is a very effective strategy. Testing different models of AI-ToM paves the way for the development of learnable abstractions for reasoning about the mental states of ‘self’ and ‘other’, thereby providing further insights for fields such as social robotics, virtual assistants, and autonomous vehicles, and fostering more natural interactions between people and machines. Full article
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