I am an Assistant Professor of Economics at Indiana University.Department of Economics
100 S Woodlawn Ave
Bloomington, IN 47405
This paper introduces communication as a strategic choice in global games. To study the effects of communication, I consider four protocols (three one-round and one multi-round) and I characterize the resulting equilibria. The theory provides clear predictions, which are then tested in an experimental setting. Theoretically, all of the communication protocols studied in this paper equally improve welfare above that attainable without communication. This welfare improvement is achieved by reducing miscoordination and by allowing agents to select the payoff dominant as opposed to the risk-dominant equilibrium. The experimental results demonstrate that the multi-round protocol provides significantly higher welfare, while one-round communication has mixed effect.
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.
Cheap talk games are well known to suffer from multiplicity of equilibria. A common approach in addressing this issue is to appeal to refinement concepts that discipline the equilibrium set. However, a potential issue with such an approach is the presence of intrinsic costs of lying that, if left unmodeled, might affect the predictive accuracy of such refinements. We study a game experimentally that allows us to explicitly control for intrinsic costs of lying, by punishing or rewarding lying. The game is simple to implement, and makes sharp and contrasting predictions in the presence/absence of lying costs. We are thus able to make unbiased predictions on the efficacy of the various refinement concepts in question.