307 research outputs found
On transparency in organizations
Non-transparency both in the form of incomplete information disclosure and in the form of coarse feedback disclosure is optimal in virtual all organizational arrangements of interest. Speci�cally, in moral hazard interactions, some form of non-transparency is always desirable, as soon as the dimensionality of the problem
exceeds the dimensionality of the action spaces of the various agents
Social learning with coarse inference
We study social learning by boundedly rational agents. Agents take a decision in sequence, after observing their predecessors and a private signal. They are unable to understand their predecessors’ decisions in their finest details: they only understand the relation between the
aggregate distribution of actions and the state of nature. We show that, in a continuous action space, compared to the rational case, agents put more weight on early signals. Despite this behavioral bias, beliefs converge to the truth. In a discrete action space, instead, convergence
to the truth does not occur even if agents receive signals of unbounded precisions
Inefficiencies in bargaining - departing from Akerlof and Myerson-Satterthwaite
We consider bargaining problems in which parties have access to
outside options. The size of the pie is commonly known and each party
privately knows the realization of her outside option. Parties are assumed
to have a veto right, which allows them to obtain at least their
outside option payoff in any event. Besides, agents can receive no subsidy
ex post. We show that inefficiencies are inevitable for virtually all
distributions of outside options, as long as the size of the surplus generated
by the agreement is uncertain and may be arbitrarily small for
all realizations of either party’s outside option. Our inefficiency result
holds true whatever the degree of correlation between the distributions
of outside options, and even if it is known for sure that an agreement is
beneficial. The same insights apply to the bargaining between a buyer
and a seller privately informed of their valuations and to public good
problems among agents privately informed of their willingness to pay
The European UTMS/IMT2000 license auctions
We survey the recent European UMTS license auctions and compare
their outcomes with the predictions of a simple model that emphasizes future
market structure as a main determinant of valuations for licenses. Since the
main goal of most spectrum allocation procedures is economic efficiency, and
since consumers (who are affected by the ensuing market structure) do not
participate at the auction stage, good designs must alleviate the asymmetry
among incumbents and potential entrants by actively encouraging entry
Towards a theory of deception
This paper proposes an equilibrium approach to belief manipulation and deception
in which agents only have coarse knowledge of their opponent�s strategy. Equilibrium
requires the coarse knowledge available to agents to be correct, and the inferences and
optimizations to be made on the basis of the simplest theories compatible with the
available knowledge. The approach can be viewed as formalizing into a game theoretic
setting a well documented bias in social psychology, the Fundamental Attribution Er-
ror. It is applied to a bargaining problem, thereby revealing a deceptive tactic that is
hard to explain in the full rationality paradigm
Public statistics and private experience: varying feedback information in a take or pass game
We study how subjects in an experiment use different forms of public
information about their opponents’ past behaviour. In the absence
of public information, subjects appear to use rather detailed statistics
summarizing their private experiences. If they have additional public
information, they make use of this information even if it is less precise
than their own private statistics–except for very high stakes. Making
public information more precise has two consequences: It is also
used when the stakes are very high and it reduces the number of subjects
who ignore any information–public and private. That is, precise
public information crowds in the use of own information. Finally, our
results shed some light on unravelling in centipede games
Valuation equilibrium
We introduce a new solution concept for games in extensive form with perfect information, valuation equilibrium, which is based on a partition of each player's moves into similarity classes. A valuation of a player'is a real-valued function on the set of her similarity classes. In this equilibrium each player's strategy is optimal in the sense that at each of her nodes, a player chooses a move that belongs to a class with maximum valuation. The valuation of each player is consistent with the strategy profile in the sense that the valuation of a similarity class is the player's expected payoff, given that the path (induced by the strategy profile) intersects the similarity class. The solution concept is applied to decision problems and multi-player extensive form games. It is contrasted with existing solution concepts. The valuation approach is next applied to stopping games, in which non-terminal moves form a single similarity class, and we note that the behaviors obtained echo some biases observed experimentally. Finally, we tentatively suggest a way of endogenizing the similarity partitions in which moves are categorized according to how well they perform relative to the expected equilibrium value, interpreted as the aspiration level
A note of revenue maximization and efficiency in multi-object auctions
Combining the result of Palfrey (1983) about the role of bundling and the revenue equivalence theorem, this note shows that there is a conflict between revenue maximization and efficiency in multi-object auctions even with symmetric bidders
- …