On the Evolutionary Emergence of Optimism

Successful individuals were frequently found to be overly optimistic. This is puzzling because it might be thought that optimistic individuals who consistently overestimate their eventual payoffs will not do as well as realists who see the situation as it truly is and hence will not survive evolutionary pressures. We show that contrary to this intuition, there is a large class of either competitive or cooperative strategic interactions between randomly matched pairs of individuals in the population, in which "cautiously" optimistic individuals not only survive but also prosper and take over the entire population. The reason for this result is that optimistic individuals who overestimate the impact of their actions on their payoffs, behave more aggressively than realists and pessimists. When the interactions between individuals involve negative externalities (the payoff of one player decreases with the actions taken by another player) and the actions are strategic substitutes, being aggressive induces the opponent to be softer, so optimists gain a strategic advantage that, for moderate levels of optimism, outweighs the loss from having the wrong perception of the environment. Likewise, when the interactions between individuals involve positive externalities and the actions are strategic complements, being aggressive triggers a favorable aggressive behavior from the opponent. Hence, in both cases, cautiously optimistic types fare better on average than other types of individuals. We show that if the initial distribution of types is sufficiently wide, then over time it will converge in distribution to a mass point on some level of cautious optimism.

The Positive Foundation of the Common Prior Assumption

The existence of a common prior is a property of the state space used to model the players' asymmetric information. We show that this property is not just a technical artifact of the model, but that it is immanent to the players' beliefs. To this end, we devise a condition, phrased solely in terms of the players' mutual beliefs about the basic, objective issues of possible uncertainty, which is equivalent to the existence of a common prior

FROM INNATE MORALITY TOWARDS A NEW POLITICAL ETHOS: SIMONE WEIL WITH CAROL GILLIGAN AND JUDITH BUTLER

In 1943, Simone Weil proposed to supersede the declaration of human rights with a declaration of obligations towards every human being's balancing pairs of body and soul's needs, for engaging and inspiring more effectively against autocratic and populist currents in times of crisis. We claim that Weil's proposal, which remains pertinent today, may have been sidestepped because her notion of needs lacked a fundamental dimension of relationality, prominent in the 'philosophical anthropology' underlying the (different) visions for a new political ethos of both Judith Butler and Carol Gilligan. From the radical starting point of innate morality common to all three thinkers, we therefore indicate how an enriched notion of interlaced needs, encompassing both balance and relationality, may restore the viability of a declaration of human obligations as a robust source of inspiration. In this combination of balance and relationality, Butler's notion of aggressive nonviolence is key.Em 1943, Simone Weil propôs substituir a Declaração dos Direitos Humanos por uma declaração das obrigações para com o equilíbrio das necessidades físicas e espirituais de todos os seres humanos, que permitisse comprometer e inspirar mais eficazmente as pessoas perante as correntes autocráticas e populistas dos tempos de crise. Afirmamos que a proposta de Weil, ainda pertinente hoje, pode ter sido posta de lado por causa da falta de uma dimensão fundamental de relacionalidade na sua noção de necessidades, dimensão essa que é proeminente na ‘antropologia filosófica’ de Judith Butler e Carol Gilligan, e que subjaz às suas (diferentes) visões de um novo ethos político. Do ponto de partida radical da moralidade inata, comum às três autoras, indicamos aqui como uma noção enriquecida das necessidades entrelaçadas, abrangendo tanto equilíbrio como relacionalidade, pode restaurar a viabilidade de uma declaração das obrigações humanas como uma fonte robusta de inspiração. Para esta combinação de equilíbrio e relacionalidade, a noção de Butler de não-violência agressiva é essencial

Common Knowledge of Rationality and Market Clearing in Economies with Asymmetric Information

Consider an exchange economy with asymmetric information. What is the set of outcomes that are consistent with common knowledge of rationality and market clearing? To address this question we define an epistemic model for the economy that provides a complete description not only of the beliefs of each agent on the relationship between states of nature and prices but also of the whole system of interactive beliefs. The main result, theorem 1, provides a characterization of outcomes that are consistent with common knowledge of rationality and market clearing (henceforth, CKRMC outcomes) in terms of a solution notion - Ex - Post Rationalizability - that is defined directly in terms of the parameters that define the economy. We then apply theorem 1 to characterize the set of CKRMC outcomes in a general class of economies with two commodities. CKRMC manifests several intuitive properties that stand in contrast to the full revelation property of Rational Expectations Equilibrium: In particular, we obtain that for a robust class of economies: (1) there is a continuum of prices that are consistent with CKRMC in every state of nature, and hence these prices do not reveal the true state, (2) the range of CKRMC outcomes is monotonically decreasing as agents become more informed about the economic fundamentals, and (3) trade is consistent with common knowledge of rationality and market clearing even when there is common knowledge that there are no mutual gains from trade.common knowledge, rationality, rationalizability, rationalizable expectations

Unawareness, Beliefs, and Speculative Trade

We define a generalized state-space model with interactive unawareness and probabilistic beliefs. Such models are desirable for potential applications of asymmetric unawareness. Applying our unawareness belief structures, we show that the common prior assumption is too weak to rule out speculative trade in all states. Yet, we prove a generalized "No-speculative-trade" theorem according to which there can not be common certainty of strict preference to trade. Moreover, we prove a generalization of the "No-agreeing-to-disagree" theorem. Finally, we show the existence of a universal unawareness belief type space.Unawareness, awareness, common prior, agreement, speculative trade, universal type-space, interactive epistemology, inattention

A Canonical Model for Interactive Unawareness

Heifetz, Meier and Schipper (2005) introduced a generalized state-space model that allows for non-trivial unawareness among several individuals and strong properties of knowledge. We show that this generalized state-space model arises naturally if states consist of maximally consistent sets of formulas in an appropriate logical formulation

What to Maximize If You Must

The assumption that decision makers choose actions to maximize their preferences is a central tenet in economics. This assumption is often justified either formally or informally by appealing to evolutionary arguments. In contrast, this paper shows that in almost every game, payoff. maximization cannot be justified by appealing to such arguments. We show that in almost every game, for almost every distortion of a player's actual payoffs, some extent of this distortion is beneficial to the player because of the resulting effect on opponents' play. Consequently, such distortions will not be driven out by any evolutionary process involving payoff.- monotonic selection dynamics, in which agents with higher actual payoffs proliferate at the expense of less successful agents. In particular, under any such selection dynamics, the population will not converge to payoff- maximizing behavior. We also show that payoff-maximizing behavior need not prevail even when preferences are imperfectly observed.

Dynamic unawareness and rationalizable behavior

We define generalized extensive-form games which allow for mutual unawareness of actions. We extend Pearce's (1984) notion of extensive-form (correlated) rationalizability to this setting, explore its properties and prove existence.Unawareness, extensive-form games, extensive-form rationalizability

Prudent Rationalizability in Generalized Extensive-Form Games

We define an extensive-form analogue of iterated admissibility, called Prudent Rationalizability (PR). In each round of the procedure, for each information set of a player a surviving strategy of hers is required to be rational vis-a-vis a belief system with a full-support belief on the opponents' previously surviving strategies that reach that information set. Somewhat surprisingly, prudent rationalizable strategies may not refine the set of Extensive-Form Rationalizable (EFR) strategies (Pearce 1984). However, we prove that the paths induced by PR strategy-profiles (weakly) refine the set of paths induced by EFR strategies. PR applies also to generalized extensive-form games which model mutual unawareness of actions (Heifetz, Meier and Schipper, 2011a). We demonstrate the applicability of PR in the analysis of verifiable communication, and show that it yields the same, full information unraveling prediction as does the unique sequential equilibrium singled out by Milgrom and Roberts (1986); yet, we also show that under unawareness full unraveling might fail.Prudent rationalizability, caution, extensive-form rationalizability, extensive-form games, unawareness, verifiable communication