2,992 research outputs found
The Evolutionary Stability of Optimism, Pessimism and Complete Ignorance
We provide an evolutionary foundation to evidence that in some situations humans maintain optimistic or pessimistic attitudes towards uncertainty and are ignorant to relevant aspects of the environment. Players in strategic games face Knightian uncertainty about opponents’ actions and maximize individually their Choquet expected utility. Our Choquet expected utility model allows for both an optimistic or pessimistic attitude towards uncertainty as well as ignorance to strategic dependencies. An optimist (resp. pessimist) overweights good (resp. bad) outcomes. A complete ignorant never reacts to opponents’ change of actions. With qualifications we show that optimistic (resp. pessimistic) complete ignorance is evolutionary stable / yields a strategic advantage in submodular (resp. supermodular) games with aggregate externalities. Moreover, this evolutionary stable preference leads to Walrasian behavior in those classes of games
Dynkin games with incomplete and asymmetric information
We study the value and the optimal strategies for a two-player zero-sum
optimal stopping game with incomplete and asymmetric information. In our
Bayesian set-up, the drift of the underlying diffusion process is unknown to
one player (incomplete information feature), but known to the other one
(asymmetric information feature). We formulate the problem and reduce it to a
fully Markovian setup where the uninformed player optimises over stopping times
and the informed one uses randomised stopping times in order to hide their
informational advantage. Then we provide a general verification result which
allows us to find the value of the game and players' optimal strategies by
solving suitable quasi-variational inequalities with some non-standard
constraints. Finally, we study an example with linear payoffs, in which an
explicit solution of the corresponding quasi-variational inequalities can be
obtained.Comment: 31 pages, 5 figures, small changes in the terminology from game
theor
On the Strategic Advantage of Negatively Interdependent Preferences
We study certain classes of supermodular and submodular games which are symmetric with respect to material payoffs but in which not all players seek to maximize their material payoffs. Specifically, a subset of players have negatively interdependent preferences and care not only about their own material payoffs but also about their payoffs relative to others. We identify sufficient conditions under which members of the latter group have a strategic advantage in the following sense: at all intragroup symmetric equilibria of the game, they earn strictly higher material payoffs than do players who seek to maximize their material payoffs. We show that these conditions are satisfied by a number of games of economic importance, and discuss the implications of these findings for the evolutionary theory of preference formation and the theory of Cournot competition.Interdependent Preferences, Submodular and Supermodular Games, Relative Profits, Cournot Oligopoly
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