Information Redundancy Neglect versus Overconfidence: A Social Learning Experiment

We study social learning in a continuous action space experiment. Subjects, acting in sequence, state their beliefs about the value of a good after observing their predecessors’ statements and a private signal. We compare the behavior in the laboratory with the Perfect Bayesian Equilibrium prediction and the predictions of bounded rationality models of decision-making: the redundancy of information neglect model and the overconfidence model. The results of our experiment are in line with the predictions of the overconfidence model and at odds with the others’. (JEL C91, D12, D82, D83)

A Discretionary Lane-Changing Decision-Making Mechanism Incorporating Drivers’ Heterogeneity: A Signalling Game-Based Approach

This paper attempts to propose a discretionary lane-changing decision-making model based on signalling game in the context of mixed traffic flow of autonomous and regular vehicles. The effects of the heterogeneity among different drivers and the endogeneity of same drivers in lane-changing behaviours, e.g., aggressive or conservative, are incorporated through the specification of different payoff functions under different scenarios. The model is calibrated and validated using the NGSIM dataset with a bilevel calibration framework, including two kinds of methods, genetic algorithm and perfect Bayesian equilibrium. Comparative results based on simulation show that the signalling game-based model outperforms the traditional space-based lane-changing model in the sense that the proposed model yields relatively stable reciprocal of time to collision and higher success rate of lane-changing under different traffic densities. Finally, a sensitivity analysis is performed to test the robustness of the proposed model, which indicates that the signalling game-based model is stable to the varying ratios of driver type.

The Revelation Principle in Multistage Games

The communication revelation principle (RP) of mechanism design states that any outcome that can be implemented using any communication system can also be implemented by an incentive-compatible direct mechanism. In multistage games, we show that in general the communication RP fails for the solution concept of sequential equilibrium (SE). However, it holds in important classes of games, including single-agent games, games with pure adverse selection, games with pure moral hazard, and a class of social learning games. For general multistage games, we establish that an outcome is implementable in SE if and only if it is implementable in a canonical Nash equilibrium in which players never take codominated actions. We also prove that the communication RP holds for the more permissive solution concept of conditional probability perfect Bayesian equilibrium.

Escalation in conflict games: on beliefs and selection

We study learning and selection and their implications for possible effort escalation in a simple game of dynamic property rights conflict: a multi-stage contest with random resolve. Accounting for the empirically well-documented heterogeneity of behavioral motives of players in such games turns the interaction into a dynamic game of incomplete information. In contrast to the standard benchmark with complete information, the perfect Bayesian equilibrium features social projection and type-dependent escalation of efforts caused by learning. A corresponding experimental setup provides evidence for type heterogeneity, for belief formation and updating, for self-selection and for escalation of efforts in later stages.

Dynamic Contracting under Positive Commitment

We consider a firm that sells products that arrive over time to a buyer. We study this problem under a notion we call positive commitment, where the seller is allowed to make binding positive promises to the buyer about items arriving in the future, but is not allowed to commit not to make further offers to the buyer in the future. We model this problem as a dynamic game where the seller chooses a mechanism at each period subject to a sequential rationality constraint, and characterize the perfect Bayesian equilibrium of this dynamic game. We prove the equilibrium is efficient and that the seller’s revenue is a function of the buyer’s ex ante utility under a no commitment model. In particular, all goods are sold in advance to the buyer at what we call the positive commitment price.

Game Theory and Diplomatic History

This chapter explores a number of issues connected with the use of game-theoretic models to organize analytic narratives. First, a causal explanation of the 1936 Rhineland crisis is developed within the confines of a game-theoretic model of asymmetric or unilateral deterrence with incomplete information. In this context, the chapter then introduces the concept of a perfect Bayesian equilibrium. Then, some methodological obstacles that may arise in a more complex case, such as the 1879 Austro-German alliance, are discussed, and suggestions for overcoming them are offered. Finally, the advantages of using game models to more fully understand real world events are highlighted.