Incomplete information and risk sensitive analysis of sequential games without a predetermined order of turns

summary:The authors introduce risk sensitivity to a model of sequential games where players don't know beforehand which of them will make a choice at each stage of the game. It is shown that every sequential game without a predetermined order of turns with risk sensitivity has a Nash equilibrium, as well as in the case in which players have types that are chosen for them before the game starts and that are kept from the other players. There are also a couple of examples that show how the equilibria might change if the players are risk prone or risk adverse

Estimation of Finite Sequential Games

I study the estimation of finite sequential games with perfect information. The major challenge in estimation is computation of high-dimensional truncated integration whose domain is complicated by strategic interaction. I show that this complication resolves when unobserved off-the-equilibrium-path strategies are controlled for. Separately evaluating the likelihood contribution of each subgame perfect strategy profile that rationalizes the observed outcome allows the use of the GHK simulator, the most widely used importance-sampling probit simulator. Monte Carlo experiments demonstrate the performance and robustness of the proposed method, and confirm that misspecification of the decision order leads to underestimation of strategic effect.Inference In Discrete Games; Sequential Games; Monte Carlo Integration; GHK Simulator; Subgame Perfection; Perfect Information

Cops and Invisible Robbers: the Cost of Drunkenness

We examine a version of the Cops and Robber (CR) game in which the robber is invisible, i.e., the cops do not know his location until they capture him. Apparently this game (CiR) has received little attention in the CR literature. We examine two variants: in the first the robber is adversarial (he actively tries to avoid capture); in the second he is drunk (he performs a random walk). Our goal in this paper is to study the invisible Cost of Drunkenness (iCOD), which is defined as the ratio ct_i(G)/dct_i(G), with ct_i(G) and dct_i(G) being the expected capture times in the adversarial and drunk CiR variants, respectively. We show that these capture times are well defined, using game theory for the adversarial case and partially observable Markov decision processes (POMDP) for the drunk case. We give exact asymptotic values of iCOD for several special graph families such as $d$-regular trees, give some bounds for grids, and provide general upper and lower bounds for general classes of graphs. We also give an infinite family of graphs showing that iCOD can be arbitrarily close to any value in [2,infinty). Finally, we briefly examine one more CiR variant, in which the robber is invisible and "infinitely fast"; we argue that this variant is significantly different from the Graph Search game, despite several similarities between the two games

Beliefs in Decision-Making Cascades

This work explores a social learning problem with agents having nonidentical noise variances and mismatched beliefs. We consider an $N$-agent binary hypothesis test in which each agent sequentially makes a decision based not only on a private observation, but also on preceding agents' decisions. In addition, the agents have their own beliefs instead of the true prior, and have nonidentical noise variances in the private signal. We focus on the Bayes risk of the last agent, where preceding agents are selfish. We first derive the optimal decision rule by recursive belief update and conclude, counterintuitively, that beliefs deviating from the true prior could be optimal in this setting. The effect of nonidentical noise levels in the two-agent case is also considered and analytical properties of the optimal belief curves are given. Next, we consider a predecessor selection problem wherein the subsequent agent of a certain belief chooses a predecessor from a set of candidates with varying beliefs. We characterize the decision region for choosing such a predecessor and argue that a subsequent agent with beliefs varying from the true prior often ends up selecting a suboptimal predecessor, indicating the need for a social planner. Lastly, we discuss an augmented intelligence design problem that uses a model of human behavior from cumulative prospect theory and investigate its near-optimality and suboptimality.Comment: final version, to appear in IEEE Transactions on Signal Processin

Herd behavior, the "Penguin effect", and the suppression of informational diffusion: An analysis of informational externalities and payoff interdependency

Technology;Information;Econometric Models;Group Behaviour