Sequential Two-Player Games with Ambiguity

If players' beliefs are strictly non-additive, the Dempster-Shafer updating rule can be used to define beliefs off the equilibrium path. We define an equilibrium concept in sequential two-person games where players update their beliefs with the Dempster-Shafer updating rule. We show that in the limit as uncertainty tends to zero, our equilibrium approximates Bayesian Nash equilibrium by imposing context-dependent constraints on beliefs under uncertainty.

Beyond Normal Form Invariance : First Mover Advantage in Two-Stage Games with or without Predictable Cheap Talk

Von Neumann (1928) not only introduced a fairly general version of the extensive form game concept. He also hypothesized that only the normal form was relevant to rational play. Yet even in Battle of the Sexes, this hypothesis seems contradicted by players' actual behaviour in experiments. Here a refined Nash equilibrium is proposed for games where one player moves first, and the only other player moves second without knowing the first move. The refinement relies on a tacit understanding of the only credible and straightforward perfect Bayesian equilibrium in a corresponding game allowing a predictable direct form of cheap talk.

Sequential two-player games with ambiguity

If players' beliefs are strictly non-additive, the Dempster-Shafer updating rule can be used to define beliefs off the equilibrium path. We define an equilibrium concept in sequential two-person games where players update their beliefs with the Dempster-Shafer updating rule. We show that in the limit as uncertainty tends to zero, our equilibrium approximates Bayesian Nash equilibrium by imposing context-dependent constraints on beliefs under uncertainty

Context dependence and consistency in dynamic choice under uncertainty: the case of anticipated regret

We examine if and to what extent choice dispositions can allow dependence on contexts and maintain consistency over time, in a dynamic environment under uncertainty. We focus on a 'minimal' case of context dependence, opportunity dependence due to being affected by anticipated regret. There are two sources of potential inconsistency, one is arrival of information and the other is changing opportunities. First, we go over the general method of resolution of potential inconsistency, by taking any kinds of inconsistency as given constraints. Second, we characterize a class of choice dispositions that are consistent to information arrival but may be inconsistent to changing opportunities. Finally, we consider the full requirement of dynamic consistency and show that it necessarily implies independence of choice opportunities.

A decision- theoretic model for M&A sale processes

A Work Project, presented as part of the requirements for the Award of a Masters Double Degree in Economics and International Business from the NOVA – School of Business and Economics and Insper Instituto de Ensino e PesquisaPRANDO, Thiago Gonzaga de Camargo Ferreira Prando. A decision-theoretic model for M&A sale processes. Dissertation (Mastership) – NOVA School of Business and Economics and Insper Instituto de Ensino e Pesquisa, São Paulo, 2016. When potential buyers receive invitations from target companies to engage in competitive M&A sale processes they face a challenging decision. Considering significant due diligence investments, target value uncertainty and unclear competitive environment, should they accept such invites? The main purpose of this study is to formulate a decision rule for prospective acquirers to enter takeover contests according to these relevant factors. In addition, this dissertation explores the formation of optimal bids in the decisive stage of controlled sales (sealed-bid auctions) with uncertain presence of one competitor. A decision-theoretic model is designed where a potential buyer (Player A) is invited to participate in an M&A sale process. Its due diligence investments are modeled as the purchase of real options and the optimal bid value is calculated according to its expected payoff maximization. The participant has incomplete information regarding the existence of rivals and their strength and takes decisions that seek robustness with respect to misspecifications. Due diligence investments decision rules are established according to Player A’s capabilities to create value through the acquisition, its beliefs regarding the potential rivalry, and required spending to analyze the target. Optimal bidding strategies ultimately depend on our participant’s beliefs concerning the potential competition. Our findings show that an uncertain strong second bidder might prevent Player A to place a higher offer. This is an exciting result that prompts re-thinking on competition’s threat. Sellers and their financial advisors should take these results into account when tailoring efficient sale processes, especially managing a proper perceived competitive environment

Backwards is the way forward: feedback in the cortical hierarchy predicts the expected future

Clark offers a powerful description of the brain as a prediction machine, which offers progress on two distinct levels. First, on an abstract conceptual level, it provides a unifying framework for perception, action, and cognition (including subdivisions such as attention, expectation, and imagination). Second, hierarchical prediction offers progress on a concrete descriptive level for testing and constraining conceptual elements and mechanisms of predictive coding models (estimation of predictions, prediction errors, and internal models)

The Patent Quality Control Process: Can We Afford An (Rationally) Ignorant Patent Office?

This paper considers patent granting as a two-tiered process, which consists of patent office examination (public enforcement) and court challenges (private enforcement). It argues that, when the patent-holder has private information about the patent validity, (i) a weak patent is more likely to be settled and thus escape court challenges than a strong patent; and (ii) when the economy suffers from the low patent quality problem, a tighter examination by the patent office may strengthen private scrutiny over a weak patent. Both work against Lemley (2001)’s hypothesis of a “rationally ignorant” patent office