I am an Assistant Professor of Economics at Indiana University.Department of Economics
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The paper introduces communication as a strategic choice in a regime change coordination game with incomplete information. Communication makes agents more aggressive and they take on the regime more often than they would without communicating. Moreover, the agents attack the regime even more than they would if they acted based on their combined information. Richer the massage space more coordinated the attacks are with less unsuccessful attempts. The effect of communication on welfare is two-fold: (i) it reduces one sided attempts on the regime, reducing wasted cost; (2) it increases the rate of coordinated attacks. The experimental results show that communication does reduce misscoordination, however, the subjects are not strategic with their messages and they miss out on the opportunity to increase their welfare by being more aggressive as predicted by the theory. This result highlights how the effects of communication are different in the environments with incomplete information, in contrast with the overwhelming experimental evidence that shows that communication is beneficial in coordination games with complete information.
We examine the efficiency gains of introducing a pre-play phase—allowing agents to communicate their intentions and commit to them—in a game with Pareto ranked equilibria. We focus on a game in which a Pareto inferior equilibrium is usually chosen. We first derive the theoretical conditions under which the efficient equilibrium is unique in the extended game and then we test our theory in the lab. The introduction of the pre-play revision phase increases the coordination on the Pareto dominant equilibrium, restoring over 50% of the efficiency lost in the standard setting. The results shed new light on cheap talk and reveal that a combination of communication and commitment leads to significantly higher welfare.
A common assumption in game theory is that players concentrate on one game at a time. However, in everyday life, we play many games and make many decisions at the same time, and, thus, we have to decide how best to divide our limited attention across these settings. In this paper we ask how players solve this attention-allocation problem and how their decision affects the way players behave in any given game when that game is viewed in isolation. We find that the attention of players is attracted to particular features of the games they play: the maximum payoff in the game, the minimum payoff, the degree of inequality in the game’s payoff, whether the game has zero payoffs, the complexity of the game, and the type of game being played. Moreover, how much attention a subject gives to a particular game depends on the other game that he or she is simultaneously attending to.
We extend the model of costly information acquisition to the case where a decision maker is able to affect his own incentives to pay attention via an ex-ante redistribution of payoffs across states. We use this framework to derive a novel method to elicit the level and the cost of attention solely from observing the choices of payoff redistribution. While existing work in this literature typically involves enriched datasets (e.g., mouse and eye tracking, response times, stochastic choice data etc.) our method requires only standard choice data. We run an experiment and estimate the level and the cost of attention using our elicitation technique.
We study the interaction of two well-known behavioral norms – truth-telling and fairness. Experimental findings collectively suggest how in isolation, each of these phenomena emerge in spite of what rational models of homo economicus might predict. But how do they complement each other? To address this question, we construct a simple modification of the ultimatum game in which the responder has private valuations over the surplus to be shared and can communicate these to the proposer via cheap-talk messages. We take this game to the lab. When provided with minimal yet explicit incentives to lie, we find that play involves not only greater incidence of lying, but also convergence to self-interested play. That is, the outcomes of the ultimatum sub-game largely revert to its unique sub-game perfect equilibrium. Our results speak to a linkage effect between social norms.