Reward and Punishment in Minigames

Minigames capturing the essence of Public Goods experiments show that even in the absence of rationality assumptions, both punishment and reward will fail to bring about prosocial behavior. This holds in particular for the well-known Ultimatum Game, which emerges as a special case. But reputation can induce fairness and cooperation in populations adapting through learning or imitation. Indeed, the inclusion of reputation effects in the corresponding dynamical models leads to the evolution of economically productive behavior, with agents contributing to the public good and either punishing those who don't, or rewarding those who do. Reward and punishment correspond to two types of bifurcation with intriguing complementarity. The analysis suggests that reputation is essential for fostering social behavior among selfish agents, and that it is considerably more effective with punishment than with rewards

Fairness Versus Reason in the Ultimatum Game

In the Ultimatum Game, two players are offered a chance to win a certain sum of money. All they must do is divide it. The proposer suggests how to split the sum. The responder can accept or reject the deal. If the deal is rejected, neither player gets anything. The rational solution, suggested by game theory, is for the proposer to offer the smallest possible share and for the responder to accept it. If humans play the game, however, the most frequent outcome is a fair share. In this paper, we develop an evolutionary approach to the Ultimatum Game. We show that fairness will evolve if the proposer can obtain some information on what deals the responder has accepted in the past. Hence, the evolution of fairness, similar to the evolution of cooperation, is linked to reputation

Numerical analysis of a reinforcement learning model with the dynamic aspiration level in the iterated Prisoner's Dilemma

Humans and other animals can adapt their social behavior in response to environmental cues including the feedback obtained through experience. Nevertheless, the effects of the experience-based learning of players in evolution and maintenance of cooperation in social dilemma games remain relatively unclear. Some previous literature showed that mutual cooperation of learning players is difficult or requires a sophisticated learning model. In the context of the iterated Prisoner's Dilemma, we numerically examine the performance of a reinforcement learning model. Our model modifies those of Karandikar et al. (1998), Posch et al. (1999), and Macy and Flache (2002) in which players satisfice if the obtained payoff is larger than a dynamic threshold. We show that players obeying the modified learning mutually cooperate with high probability if the dynamics of threshold is not too fast and the association between the reinforcement signal and the action in the next round is sufficiently strong. The learning players also perform efficiently against the reactive strategy. In evolutionary dynamics, they can invade a population of players adopting simpler but competitive strategies. Our version of the reinforcement learning model does not complicate the previous model and is sufficiently simple yet flexible. It may serve to explore the relationships between learning and evolution in social dilemma situations.Comment: 7 figure

Satisficing in sales competition: experimental evidence

In a duopoly market, aspirations express how much sellers want to earn given their expectations about the other's behavior. We define individually and mutually satisficing sales behavior for given individual beliefs and aspirations. In a first experimental phase, whenever satisficing is not possible, beliefs, aspirations, or sales have to be adapted. In a second phase, testing the absorption of satisficing, participants are free to select nonsatisficing sales profiles. The results reveal that most people are satisficers who, either mandatorily or deliberately, tend to adjust aspiration levels if they cannot be satisfied.

Bargaining and Distribution of Power in the EU's Conciliation Committee

The European Union (EU) has moved towards bicameralism, making the codecision procedure its most important mechanism for decision making. To gauge if European Parliament (EP) and Council of Ministers (CM) are equally powerful ‘codecision makers’, understanding of the final stage of the procedure – bargaining in the Conciliation Committee – is crucial. Here, EP and CM are assumed to have spatial preferences determined by their respective internal decision mechanisms. Applying bargaining theory to predict inter-institutional agreements in the Conciliation Committee, it turns out that although institutionally the Council and the Parliament are seemingly in a symmetric position, CM has significantly greater influence on EU legislation.European Union codecision procedure, Conciliation Committee, bargaining, spatial voting, decision procedures

Satisficing in sales competition : experimental evidence

In a duopoly market, aspirations express how much sellers want to earn given their expectations about the other's behavior. We define individually and mutually satisficing sales behavior for given individual beliefs and aspirations. In a first experimental phase, whenever satisficing is not possible, beliefs, aspirations, or sales have to be adapted. In a second phase, testing the absorption of satisficing, participants are free to select nonsatisficing sales profiles. The results reveal that most people are satisficers who, either mandatorily or deliberately, tend to adjust aspiration levels if they cannot be satisfied

- CONTINUOUS-TIME EVOLUTIONARY DYNAMICS: THEORY AND PRACTICE

This paper surveys some recent developments in the literature which studies continuous-timeevolutionary dynamics in the context of economic modeling.Evolutionary Game Theory, Equilibrium Analysis, Bounded Rationality

Essays in Economic Theory

This dissertation consists of three research papers on cheap talk game and satisficing behaviour. The first chapter examines the potential for communication via cheap talk between an expert and a decision maker whose type (preferences) is uncertain. The expert privately observes states for each type of the decision maker and wants to persuade the decision maker to choose an action in his favour by informing her of the states. The decision maker privately observes her type and chooses an action. An optimal action for the decision maker depends upon both her type and type-specific states. In equilibrium the expert can always inform the decision maker in the form of comparative statements and the decision maker also can partially reveal her type to the expert or public. The second and third chapters build a dynamic model of satisficing behaviour in which an agent’s “expected” payoff is explicitly introduced, where this expectation is adaptively formed. If the agent receives a payoff above her satisficing level she continues with the current action, updating her valuation of the action. If she receives a payoff below her satisficing level and her valuation falls below her satisficing level she updates both her action and satisficing level. In the second chapter, we find that in the long run, all players satisfice. In individual decision problems, satisficing behaviour results in cautious, maximin choice and in normal form games like the Prisoner’s Dilemma and Stag Hunt, they in the long run play either cooperative or defective outcomes conditional on past plays. In coordination games like the Battle of the Sexes, Choosing Sides and Common Interest, they in the long run coordinate on Pareto optimal outcomes. In the third chapter, we find that satisficing players in the long run play subgame dominant paths, which is a refinement of subgame perfection, and identify conditions with which they ‘always cooperate’ or ‘fairly coordinate’ in repeated Prisoner’s Dilemma and Battle of the Sexes games, respectively, and truthfully communicate in sender-receiver games. Proofs and simulations are provided in appendices