1,721,006 research outputs found
Communication With Unknown Perspectives
No full textConsider a group of individuals with unobservable perspectives (subjective prior beliefs) about a sequence of states. In each period, each individual receives private information about the current state and forms an opinion (a posterior belief). She also chooses a target individual and observes the target's opinion. This choice involves a trade-off between well-informed targets, whose signals are precise, and well-understood targets, whose perspectives are well known. Opinions are informative about the target's perspective, so observed individuals become better understood over time. We identify a simple condition under which long-run behavior is history independent. When this fails, each individual restricts attention to a small set of experts and observes the most informed among these. A broad range of observational patterns can arise with positive probability, including opinion leadership and information segregation. In an application to areas of expertise, we show how these mechanisms generate own field bias and large field dominance
Public Disagreement
No full textWe develop a model of deliberation under heterogeneous beliefs and incomplete information, and use it to explore questions concerning the aggregation of distributed information and the consequences of social integration. We show that when priors are correlated, all private information is eventually aggregated and public beliefs are identical to those arising under observable priors. When priors are independently distributed, however, some private information is never revealed, and communication breaks down entirely in large groups. Interpreting integration in terms of the observability of priors, we show how increases in social integration lead to less divergent public beliefs on average.Institute for Advanced Study (Princeton, N.J.
Nash meets Rubinstein in final-offer arbitration
Get PDFI consider a final-offer arbitration model in which the offers are submitted sequentially, the parties are allowed to accept offers, and the arbitrator maximizes Nash's social welfare function. I show that backwards induction in this three-period model leads to the subgame-perfect equilibrium outcome of Rubinstein's infinite-horizon alternating-offer bargaining game
Sensitivity of equilibrium behavior to higher-order beliefs in nice games
Get PDFWe analyze “nice” games (where action spaces are compact intervals, utilities continuous and strictly concave in own action), which are used frequently in classical economic models. Without making any “richness” assumption, we characterize the sensitivity of any given Bayesian Nash equilibrium to higher-order beliefs. That is, for each type, we characterize the set of actions that can be played in equilibrium by some type whose lower-order beliefs are all as in the original type. We show that this set is given by a local version of interim correlated rationalizability. This allows us to characterize the robust predictions of a given model under arbitrary common knowledge restrictions. We apply our framework to a Cournot game with many players. There we show that we can never robustly rule out any production level below the monopoly production of each firm
Reputation without commitment in finitely repeated games
Get PDFIn the reputation literature, players have commitment types, which represent the possibility that they do not have standard payoffs, but instead are constrained to follow a particular plan. In this paper, we show that arbitrary commitment types can emerge from incomplete information about the stage payoffs. In particular, any finitely repeated game with commitment types is strategically equivalent to a standard finitely repeated game with incomplete information about the stage payoffs. Then classic reputation results can be achieved with uncertainty concerning only the stage payoffs
Bargaining with Optimism
Get PDFExcessive optimism is a prominent explanation for bargaining delays. Recent results demonstrate that optimism plays a subtle role in bargaining, and its careful analysis may shed valuable insights into negotiation behavior. This article reviews some of these results, focusing on the following findings. First, when there is a nearby deadline, optimistic players delay the agreement to the last period before the deadline, replicating a broad empirical regularity known as the deadline effect. Second, there cannot be a substantial delay under persistent optimism; i.e., excessive optimism alone cannot explain delays. Third, when optimistic players are expected to learn during the negotiation, they delay the agreement in order to persuade their opponents. The delays in these results can be quite costly, Pareto inefficient, and common knowledge at the beginning of the game
Robust Predictions in Infinite-Horizon Games--an Unrefinable Folk Theorem
No full textWe show that in any game that is continuous at infinity, if a plan of action ai is played by a type ti in a Bayesian Nash equilibrium, then there are perturbations of ti for which ai is the only rationalizable plan and whose unique rationalizable belief regarding the play of the game is arbitrarily close to the equilibrium belief of ti. As an application to repeated games, we prove an unrefinable folk theorem: any individually rational and feasible payoff is the unique rationalizable payoff vector for some perturbed type profile. This is true even if perturbed types are restricted to believe that the repeated-game payoff structure and the discount factor are common knowledge.Institute for Advanced Study (Princeton, N.J.
INVARIANCE TO REPRESENTATION OF INFORMATION
No full textAbstract. Under weak assumptions on the solution concept, I construct an invariant selection across all finite type spaces, in which the types with identical information play the same action. Along the way, I establish an interesting lattice structure for finite type spaces and construct an equilibrium on the space of all finite types
Moderation of an Ideological Party
No full textIt is a common fear in many countries that ideological parties will come to power through elections but
will implement extreme policies. Many countries cope with this problem by overriding the election results
when such parties are elected. We demonstrate that the alternative approach of containing these parties
within the democratic system is more effective.We show that, as the probability of state’s intervention in the
next elections increases, an ideological party implements a more extreme policy in equilibrium. This hurts
the median voter. Our main result shows that from the median voter’s perspective, the optimal intervention
scheme can be implemented by committing not to intervene and adjusting election times appropriately. That
is, elections are a better incentive mechanism than the threat of a coup
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