Outcome uncertainty and the couch potato audience

Previous studies of attendance demand for professional team sports have failed to yield clear- cut findings on the importance of outcome uncertainty to consumers. But potentially fewer problems should arise in examining the link between outcome uncertainty and demand in the television market for team sports, which in the case of English Premier League football is in fact a more important component in total club revenue. This study models both the choice of which games to show and the size of audience attracted by each game, exploiting data on audience sizes for games between 1993 and 2002. We propose a new measure of match outcome uncertainty and, from our results, both the broadcaster and the audience appear interested in competitive balance.

Cooperation with Strategy-Dependent Uncertainty Attitude

The paper shows that in a Prisoner’s Dilemma Knightian uncertainty, formalised by multiple priors, may entail cooperation at a generalised Nash Equilibrium. The main idea is that players may have an attitude towards uncertainty that depends upon their available strategies. In particular, if players anticipate to be sufficiently more optimistic when choosing to cooperate, than when defecting, then they may indeed cooperate. Though uncommon in economic modelling, choice-dependent uncertainty attitude formalises a behaviour which is well understood and widely accepted by cognitive psychologists, within the theory of Cognitive Dissonance.Cooperation, Cognitive Dissonance, Equilibrium, Games, Uncertainty

A Review of Mouse-Tracking Applications in Economic Studies

Since mouse-tracking paradigm came under the spotlight two decades ago, by providing mouse cursor trajectories, it has been applied by behavioral scientists to a variety of topics to help understand real-time psychological state when people are faced with multiple choices. In this article, we provide a comprehensive, documentation of experimental economics studies with mouse-tracking paradigm. Among these studies, some focus on measuring choice uncertainty including subject uncertainty, temporal uncertainty, and probabilistic uncertainty; the rest are concerned with economic games including bargaining games and social dilemma games. Why and how these works employ mouse-tracking technique in their experiments is elaborated in detail. Finally, limitations of mouse-tracking paradigm are discussed, and research opportunities are proposed. Basic know-hows are appended as a general guide for interested readers

Affective Decision Making and the Ellsberg Paradox

We characterize, in the framework for variational preferences, the affective decision making model of choice under risk and uncertainty introduced by Bracha and Brown (2007). This characterization (i) provides a rigorus decision-theoretic foundation for affective decision making, (ii) offers an axiomatic explanation for ambiguity-seeking in the Ellsberg Paradox and (iii) suggests a dual representation of ADM games in terms of the Legendre-Fenchel conjugate.Ellsberg paradox, Schmeidler's axiom, Affective decision making, Variational preferences, Legendre-Fenchel conjugate

von Neumann-Morgenstern and Savage Theorems for Causal Decision Making

Causal thinking and decision making under uncertainty are fundamental aspects of intelligent reasoning. Decision making under uncertainty has been well studied when information is considered at the associative (probabilistic) level. The classical Theorems of von Neumann-Morgenstern and Savage provide a formal criterion for rational choice using purely associative information. Causal inference often yields uncertainty about the exact causal structure, so we consider what kinds of decisions are possible in those conditions. In this work, we consider decision problems in which available actions and consequences are causally connected. After recalling a previous causal decision making result, which relies on a known causal model, we consider the case in which the causal mechanism that controls some environment is unknown to a rational decision maker. In this setting we state and prove a causal version of Savage's Theorem, which we then use to develop a notion of causal games with its respective causal Nash equilibrium. These results highlight the importance of causal models in decision making and the variety of potential applications.Comment: Submitted to Journal of Causal Inferenc

Divergent Platforms

A robust feature of models of electoral competition between two opportunistic, purely office-motivated parties is that both parties become indistinguishable in equilibrium. I this short note, I show that this strong connection between the office motivation of parties and their equilibrium choice of identical platforms depends on the following two - possibly counterfactual - assumptions: 1. Issue spaces are uni-dimensional and 2. Parties are unitary actors whose preferences can be represented by expected utility functions. The main goal here is to provide an example of a two-party model in which parties offer substantially different platforms in equilibrium even though no exogenous asymmetries are assumed. In this example, some voters’ preferences over the 2-dimensional issue space are assumed to exhibit non-convexities and parties evaluate their actions with respect to a set of beliefs on the electorate.Downs model, Games with Incomplete Preferences, Knightian Uncertainty, Uncertainty Aversion, Platform Divergence

Exceeding Expectations: Stochastic Dominance as a General Decision Theory

The principle that rational agents should maximize expected utility or choiceworthiness is intuitively plausible in many ordinary cases of decision-making under uncertainty. But it is less plausible in cases of extreme, low-probability risk (like Pascal's Mugging), and intolerably paradoxical in cases like the St. Petersburg and Pasadena games. In this paper I show that, under certain conditions, stochastic dominance reasoning can capture most of the plausible implications of expectational reasoning while avoiding most of its pitfalls. Specifically, given sufficient background uncertainty about the choiceworthiness of one's options, many expectation-maximizing gambles that do not stochastically dominate their alternatives "in a vacuum" become stochastically dominant in virtue of that background uncertainty. But, even under these conditions, stochastic dominance will not require agents to accept options whose expectational superiority depends on sufficiently small probabilities of extreme payoffs. The sort of background uncertainty on which these results depend looks unavoidable for any agent who measures the choiceworthiness of her options in part by the total amount of value in the resulting world. At least for such agents, then, stochastic dominance offers a plausible general principle of choice under uncertainty that can explain more of the apparent rational constraints on such choices than has previously been recognized

Social Learning with Payoff Complementarities

We incorporate strategic complementarities into a multi-agent sequential choice model with observable actions and private information. In this framework agents are concerned with learning from predecessors, signalling to successors, and coordinating their actions with those of others. Coordination problems have hitherto been studied using static coordination games which do not allow for learning behavior. Social learning has been examined using games of sequential action under uncertainty, but in the absence of strategic complementarities (herding models). Our model captures the strategic behavior of static coordination games, the social learning aspect of herding models, and the signalling behavior missing from both of these classes of models in one unified framework. In sequential action problems with incomplete information, agents exhibit herd behavior if later decision makers assign too little importance to their private information, choosing instead to imitate their predecessors. In our setting we demonstrate that agents may exhibit either strong herd behavior (complete imitation) or weak herd behavior (overoptimism) and characterize the informational requirements for these distinct outcomes. We also characterize the informational requirements to ensure the possibility of coordination upon a risky but socially optimal action in a game with finite but unboundedly large numbers of players.