We examine collective decision-making in a jury voting game under the unanimity rule when voters have ambiguous beliefs. Unlike in existing studies (Ellis in Theoretical Economics 11:865–895, 2016; Fabrizi et al., in: AUT Economics Working Paper, 2021; Ryan in Theory and Decision 90:543–577, 2021), the locus of ambiguity is the likelihood function (signal precision) rather than the prior. This significantly alters the properties of symmetric equilibria. While prior ambiguity may induce multiple equilibria (Fabrizi et al., in: AUT Economics Working (...) Paper, 2021; Ryan in Theory and Decision 90:543–577, 2021) we show that, under likelihood ambiguity, there exists a unique non-trivial symmetric responsive equilibrium that takes the same form as in the absence of ambiguity (Feddersen and Pesendorfer in The American Political Science Review 92:23–35, 1998). Moreover, likelihood ambiguity partially offsets the pernicious effects of pivotality on decision quality: the frequency of Type I error (convicting the innocent) is typically lower than in the absence of ambiguity. (shrink)

Economics bases the choice theory on the mental experiment that introduces the choice correspondence, which associates to every set of possible actions the subset of preferred actions. If some conditions are satisfied, then the choice correspondence implies a binary preference ordering on actions and an ordinal utility function. This approach applies both to decisions under certainty and decisions under uncertainty. The preference ordering depends on the consequence of actions. Under certainty, there is only one consequence to every action, while, under (...) uncertainty, many consequences are possible, associated with the states of the world. These consequences are represented by the action itself, the states of the world, and the corresponding outcomes. Current theories consider only outcomes, but some theories include state dependent preference. Preference for the action itself is not considered, but it might be relevant. The rationality of the theory is a different question from the rationality of the decision-maker. Moreover, the rationality of the theory may imply the rationality of a preference ordering, but this does not require the rationality of the decision-maker. It is only assumed that he/she behaves according to the calculation made by the theorist. The rationality of the preference ordering requires the rationality of the preference on outcomes, of the expectations on the events, and of their connection with the preference ordering on actions. The normative relevance of rational preferences is removed by the introduction of many alternative rational theories, which justify contrasting behaviors in identical situations. (shrink)

David Hume’s Treatise on Human Nature famously fell `deadborn from the press’ because it was too far ahead of its time. Basu’s book is one of a number published in recent years that suggest we are at last ready to put its precepts into action.1 Modern game theory provides a framework that makes Hume’s insights genuinely applicable, and I totally agree with Basu that this is not only the right way forward, but that it now looks increasingly likely that (...) this is the road that wil actualy be folowed ± not only in political economy, but across the board in the social sciences. (shrink)

We present a theoretical framework of individual-decision making that incorporates both moral motivations and social influence into the utility function. The main idea of the paper is that individuals face a trade-off between their material individual interests and their desire to follow moral obligation. In our model, we assume that moral motivation is weak or conditional in the sense that it may be influenced by others’ actions. Specifically, in our framework one’s moral obligation is a combination of two main (...) components: an autonomous component and a social component that captures the influence of others. Our theoretical framework is able to explain many stylized results commonly observed in the literature and suggests a different mechanism to explain economic behavior. (shrink)

We investigate whether the display of portfolio performance as coming from one large portfolio or two smaller subportfolios matters to individuals and whether prospect theory can explain this preference. To this end, we run a large survey experiment of 3267 individuals in 5 European countries presenting an identical overall return as coming from one portfolio or two smaller subportfolios to individuals. We also elicited the coefficients of the prospect theory value function through price list lotteries. In losses, following prospect theory (...) and mental accounting predictions, we observe emprically a preference for the display of returns as coming from 2 subportfolios, one displaying a small gain and the other a large loss, over a unique portfolio displaying the aggregated resulting loss. As expected, for an overall gain, individuals favor one portfolio over two subportfolios, one displaying a small loss and the other a larger gain. The shape of the value function does not explain individuals’ preferences. The reference point seems to be the main factor involved in explaining individuals’ choice of two subportfolio presentations of the outcome. (shrink)

An underlying assumption in computational approaches in cognitive and brain sciences is that the nervous system is an input–output model of the world: Its input–output functions mirror certain relations in the target domains. I argue that the input–output modelling assumption plays distinct methodological and explanatory roles. Methodologically, input–output modelling serves to discover the computed function from environmental cues. Explanatorily, input–output modelling serves to account for the appropriateness of the computed function to the explanandum information-processing task. I compare very briefly (...) the modelling explanation to mechanistic and optimality explanations, noting that in both cases the explanations can be seen as complementary rather than contrastive or competing. (shrink)

In the spirit of Von Neumann and Morgenstern (Theory of games and economic behavior, Princeton University Press, Princeton, 1944), we introduce a notion of network stability. We study the structure of stable economic networks and their associated stable payoff allocations by analyzing the conditions under which complete networks and star networks (both with desirable property of inclusiveness) are stable. We also address conditions for existence and uniqueness of stable set of networks.

In this paper, we provide a detailed review of previous classifications of 2 × 2 games and suggest a mathematically simple way to classify the symmetric 2 × 2 games based on a decomposition of the payoff matrix into a cooperative and a zero-sum part. We argue that differences in the interaction between the parts is what makes games interesting in different ways. Our claim is supported by evolutionary computer experiments and findings in previous literature. In addition, we provide a (...) method for using a stereographic projection to create a compact 2-d representation of the game space. (shrink)

We propose a method to associate a coalitional interval game with each strategic game. The method is based on the lower and upper values of finite two-person zero-sum games. Associating with a strategic game a coalitional interval game we avoid having to take either a pessimistic or an optimistic approach to the problem. The paper makes two contributions to the literature: It provides a theoretical foundation for the study of coalitional interval games and it also provides, (...) studies, and characterizes a natural method of associating coalitional interval games with strategic games. (shrink)

We relax the assumption that priors are common knowledge, in the standard model of games of incomplete information. We make the realistic assumption that the players are boundedly rational: they base their actions on finite-order belief hierarchies. When the different layers of beliefs are independent of each other, we can retain Harsányi's type-space, and we can define straightforward generalizations of Bayesian Nash Equilibrium and Rationalizability in our context. Since neither of these concepts is quite satisfactory, we propose a hybrid concept, (...) Mirage Equilibrium, providing us with a practical tool to work with inconsistent belief hierarchies. When the different layers of beliefs are correlated, we must enlarge the type-space to include the parametric beliefs. This presents us with the difficulty of the inherent openness of finite belief subspaces. Appealing to bounded rationality once more, we posit that the players believe that their opponent holds a belief hierarchy one layer shorter than they do and we provide alternative generalizations of BNE and Rationalizability. Finally, we show that, when beliefs are degenerate point beliefs, the definition of Mirage Equilibrium coincides with that of the generalized BNE. (shrink)

Economists’ conceptions about the “nature of the economic agent” are central to understanding their economic thinking, the phenomena that deserve their attention, the way they build models and theories—as well as the scope and relevance of those theories. Moreover, according to the “psychological” traits of the agent, the subsequent economic theory can accommodate (or not) certain economic phenomena. These claims certainly apply to Brian J. Loasby’s economics. The objective of this article is to survey and analyse Loasby’s reconstruction of economics (...) based on the revision of the psychological foundations of economic agent. We show the influence that George A. Kelly, Adam Smith, Alfred Marshall, Friedrich Hayek and Herbert Simon (among others) play in his work. According to Loasby, concepts such as uncertainty, motivation, imagination, and connecting principles, are central to explaining the growth and organization of knowledge, complexity, and the evolution of economic systems. (shrink)

We study the strategic interactions within testing in a model of political agency. A principal decides between convicting and acquitting an agent of unknown innocence based on a noisy signal that is manipulable by the agent’s unobserved actions. We identify conditions under which the principal sets a threshold conviction strategy in the form of “beyond a reasonable doubt.” We show that, in spite of strategic concerns, the amount of information that a principal can glean from the test is entirely determined (...) by the threshold; in equilibrium, the threshold is set where the signal realization conveys just enough information to validate a conviction. As such, the game of testing is analytically equivalent to the principal’s statistical inference problem. We next examine how exogenous shocks on preference parameters affect the principal’s equilibrium threshold and welfare. In general, the principal benefits from being better at distinguishing types; whether she should increase or decrease the threshold depends crucially on whether the agent’s distribution of signals varies with types in the absence of manipulation. (shrink)

We introduce possibilistic beliefs into strategic games, describing a player’s belief about his opponents’ strategies as the set of their strategies he regards as possible. We formulate possibilistic strategic games where each player has preferences over his own strategies conditional on his possibilistic belief about his opponents’ strategies. We define several solution concepts for possibilistic strategic games such as (strict) equilibria, rationalizable sets, iterated elimination of never-best responses, and iterated elimination of strictly dominated strategies, and we study their properties and (...) relationships. We develop a class of possibilistic strategic games called possibilistic supermodular games to relate supermodular games to possibilistic strategic games. Lastly, we discuss a direction of extending our possibilistic framework to games with incomplete information. (shrink)

The sexual revolution that took place in the late 1960s and early 1970s is one of the most profound social changes during the second half of the twentieth century in America. Before the revolution, there existed a norm proscribing premarital sex (PS norm); premarital sex was not accepted. After the sexual revolution, the PS norm no longer existed; premarital sex became accepted. In the literature on how premarital sex became accepted, little attention is given to the institutional change that (...) transpired—the collapse of a sexual norm. This study specifies one micro-mechanism of this social change. Specifically, adopting methodological individualism and the prisoner's dilemma game, I develop a theory that explains how a technological innovation for contraception triggered a change in individuals' perception of premarital sex, which led to their behavioral change. As a result, premarital sex became accepted, and the norm proscribing premarital sex collapsed. I use General Social Survey data to test the hypothesized micro-mechanism of the institutional change. The empirical analysis supports the hypothesis derived from the theory. Based on the above analyses, I discuss two alternative explanations and the issue of teenage pregnancy. (shrink)

Whereas original prospect theory was introduced over 40 years ago, its formula for multi-outcome prospects has never yet been published, resulting in many misunderstandings. This note provides that formula.

We generalize the concept of a cooperative non-transferable utility game by introducing a socially structured game. In a socially structured game every coalition of players can organize themselves according to one or more internal organizations to generate payoffs. Each admissible internal organization on a coalition yields a set of payoffs attainable by the members of this coalition. The strengths of the players within an internal organization depend on the structure of the internal organization and are represented by (...) an exogenously given power vector. More powerful players have the power to take away payoffs of the less powerful players as long as those latter players are not able to guarantee their payoffs by forming a different internal organization within some coalition in which they have more power.We introduce the socially stable core as a solution concept that contains those payoffs that are both stable in an economic sense, i.e., belong to the core of the underlying cooperative game, and stable in a social sense, i.e., payoffs are sustained by a collection of internal organizations of coalitions for which power is distributed over all players in a balanced way. The socially stable core is a subset and therefore a refinement of the core. We show by means of examples that in many cases the socially stable core is a very small subset of the core.We will state conditions for which the socially stable core is non-empty. In order to derive this result, we formulate a new intersection theorem that generalizes the KKMS intersection theorem. We also discuss the relationship between social stability and the wellknown concept of balancedness for NTU-games, a sufficient condition for non-emptiness of the core. In particular we give an example of a socially structured game that satisfies social stability and therefore has a non-empty core, but whose induced NTU-game does not satisfy balancedness in the general sense of Billera. (shrink)

In this study, we analyze choice in the presence of some conflict that affects the decision time, a subject that has been documented in the literature. We axiomatize a multiattribute decision time representation, which is a dynamic extension of the classic multiattribute expected utility theory that allows potentially incomplete preferences. Under this framework, one alternative is preferred to another in a certain period if and only if the weighted sum of the attribute-dependent expected utility induced by the former alternative is (...) larger than that induced by the latter for all attribute weights in a closed and convex set. MDT uniquely determines the decision time as the earliest period at which the ranking between alternatives becomes decisive. The comparative statics result indicates that the decision time provides useful information to locate indifference curves in a specific setting. MDT also explains various empirical findings in economics and other relevant fields. (shrink)

This volume reflects the ‘philosophy of science in practice’ approach and takes a fresh look at traditional philosophical problems in the context of natural, social, and health research. Inspired by the work of Nancy Cartwright that shows how the practices and apparatuses of science help us to understand science and to build theories in the philosophy of science, this volume critically examines the philosophical concepts of evidence, laws, causation, and models and their roles in the process of scientific reasoning. (...) Each chapter is an important one in the philosophy of science, while the volume as a whole deals with these philosophical concepts in a unified way in the context of actual scientific practice. This volume thus aims to contribute to this new direction in the philosophy of science.​. (shrink)

In the theoretical description of prospect theory, distinct sets of parameters can control the curvature of the value function and the shape of the probability weighting function. There is one for the gain domain and one for the loss domain. However, in most estimations, behaviour over losses is assumed to perfectly reflect behaviour over gains, through a unique set of parameters. We examine the consequences of relaxing this simplifying assumption in the context of Tanaka et al.’s (Am Econ Rev 100(1):557–571, (...) 2010) risk-elicitation procedure based on multiple price lists. We show that subjects’ behaviour for gains is mostly reflected for losses at the aggregate and individual levels, and is consistent with the distinctive prospect theory fourfold pattern. Reflection is only partial as the mean curvature of the value function is slightly less convex for losses than it is concave for gains. These results are robust to a high-stake context. However, we demonstrate that assuming reflection can have huge consequences on loss-aversion measures. Incidentally, we also highlight the existence of a strong, negative and persistent pure loss-frame effect on elicited loss aversion. We recommend that future practitioners and modellers are particularly cautious about the loss-aversion values they obtain or use because these are especially sensitive to parametric assumptions and framing. (shrink)

Some computational phenomena rely essentially on pragmatic considerations, and seem to undermine the independence of the specification from the implementation. These include software development, deviant uses, esoteric languages and recent data-driven applications. To account for them, the interaction between pragmatics, epistemology and ontology in computational artefacts seems essential, indicating the need to recover the role of the language metaphor. We propose a User Levels (ULs) structure as a pragmatic complement to the Levels of Abstraction (LoAs)-based structure defining the ontology and (...) epistemology of computational artefacts. ULs identify a flexible hierarchy in which users bear their own semantic and normative requirements, possibly competing with the logical specification. We formulate a notion of computational act intended in its pragmatic sense, alongside pragmatic versions of implementation and correctness. (shrink)

How is it possible that models from game theory, which are typically highly idealised, can be harnessed for designing institutions through which we interact? I argue that game theory assumes that social interactions have a specific structure, which is uncovered with the help of directed graphs. The graphs make explicit how game theory encodes counterfactual information in natural collections of its models and can therefore be used to track how model-interventions change model-outcomes. For model-interventions to inform (...) real-world design requires the truth of a causal hypothesis, namely that structural relations specified in a model approximate causal relations in the target interaction; or in other words, that the directed graph can be interpreted causally. In order to increase their confidence in this hypothesis, market designers complement their models with natural and laboratory experiments, and computational methods. Throughout the paper, the reform of a matching market for medical residents provides a case study for my proposed view, which hasn't been previously considered in the philosophy of science. (shrink)

Scientific theories of consciousness identify its contents with the spatiotemporal structure of neural population activity. We follow up on this approach by stating and motivating Dynamical Emergence Theory, which defines the amount and structure of experience in terms of the intrinsic topology and geometry of a physical system’s collective dynamics. Specifically, we posit that distinct perceptual states correspond to coarse-grained macrostates reflecting an optimal partitioning of the system’s state space—a notion that aligns with several ideas and results from computational neuroscience (...) and cognitive psychology. We relate DET to existing work, offer predictions for empirical studies, and outline future research directions. (shrink)

Savage’s famous representation theorem is based on seven postulates of rational choice. We resolve some loose ends in the literature concerning the relationship between different versions of Savage’s axioms. This leads us to the present form of the representation theorem. We also discuss some issues regarding the historical development of Savage’s representation theorem.

This paper develops a model of individual decision-making under bounded rationality in which discretionary cognitive adjustment creates a durable stock that complements choice of action. While it increases utility, adjustment also entails a cost, because focusing attention optimally is effortful and mental resources are scarce. Associated behavioral phenomena are categorized based on whether the operative motivation in adjusting is forward-looking utility maximization or justification of prior action. The theory is in line with prior conceptions of cognitive dissonance, but also offers (...) a more empirically consistent explanation of the endowment effect, persuasive advertising, and sunk-cost effects than existing accounts. (shrink)

A widespread need to explain the behavior and outcomes of AI-based systems has emerged, due to their ubiquitous presence. Thus, providing renewed momentum to the relatively new research area of eXplainable AI (XAI). Nowadays, the importance of XAI lies in the fact that the increasing control transference to this kind of system for decision making -or, at least, its use for assisting executive stakeholders- already affects many sensitive realms (as in Politics, Social Sciences, or Law). The decision-making power (...) handover to opaque AI systems makes mandatory explaining those, primarily in application scenarios where the stakeholders are unaware of both the high technology applied and the basic principles governing the technological solutions. The issue should not be reduced to a merely technical problem; the explainer would be compelled to transmit richer knowledge about the system (including its role within the informational ecosystem where he/she works). To achieve such an aim, the explainer could exploit, if necessary, practices from other scientific and humanistic areas. The first aim of the paper is to emphasize and justify the need for a multidisciplinary approach that is beneficiated from part of the scientific and philosophical corpus on Explaining, underscoring the particular nuances of the issue within the field of Data Science. The second objective is to develop some arguments justifying the authors’ bet by a more relevant role of ideas inspired by, on the one hand, formal techniques from Knowledge Representation and Reasoning, and on the other hand, the modeling of human reasoning when facing the explanation. This way, explaining modeling practices would seek a sound balance between the pure technical justification and the explainer-explainee agreement. (shrink)

Schematic conflict occurs when evidence is interpreted in different ways (for example, by different people, who have learned to approach the given evidence with different schemata). Such conflicts are resolved either by weighting some schemata more heavily than others, or by finding common-ground inferences for several schemata, or by a combination of these two processes. Belief functions, interpreted as representations of evidence strength, provide a natural model for weighting schemata, and can be utilized in several distinct ways to compute common-ground (...) inferences. In two examples, different computations seem to be required for reasonable common-ground inference. In the first, competing scientific theories produce distinct, logically independent inferences based on the same data. In this example, the simple product of the competing belief functions is a plausible evaluation of common ground. In the second example (sensitivity analysis), the conflict is among alternative statistical assumptions. Here, a product of belief functions will not do, but the upper envelope of normalized likelihood functions provides a reasonable definition of common ground. Different inference contexts thus seem to require different methods of conflict resolution. A class of such methods is described, and one characteristic property of this class is proved. (shrink)

There is a general conception of levels in philosophy which says that the world is arrayed into a hierarchy of levels and that there are different modes of analysis that correspond to each level of this hierarchy, what can be labelled the ‘Hierarchical Correspondence View of Levels” (or HCL). The trouble is that despite its considerable lineage and general status in philosophy of science and metaphysics the HCL has largely escaped analysis in specific domains of inquiry. The goal of this (...) paper is to take up a recent call to domain-specificity by examining the role of the HCL in cognitive science. I argue that the HCL is, in fact, a conception of levels that has been employed in cognitive science and that cognitive scientists should avoid its use where possible. The argument is that the HCL is problematic when applied to cognitive science specifically because it fails to distinguish two important kinds of shifts used when analysing information processing systems: shifts in grain and shifts in analysis. I conclude by proposing a revised version of the HCL which accommodates the distinction. (shrink)

Enactivism advances an understanding of cognition rooted in the dynamic interaction between an embodied agent and their environment, whilst new mechanism suggests that cognition is explained by uncovering the organised components underlying cognitive capacities. On the face of it, the mechanistic model’s emphasis on localisable and decomposable mechanisms, often neural in nature, runs contrary to the enactivist ethos. Despite appearances, this paper argues that mechanistic explanations of cognition, being neither narrow nor reductive, and compatible with plausible iterations of ideas like (...) emergence and downward causation, are congruent with enactivism. Attention to enactivist ideas, moreover, may serve as a heuristic for mechanistic investigations of cognition. Nevertheless, I show how enactivism and approaches that prioritise mechanistic modelling may diverge in starting assumptions about the nature of cognitive phenomena, such as where the constitutive boundaries of cognition lie. (shrink)

Previous work by Diffo Lambo and Moulen [Theory and Decision 53, 313–325 (2002)] and Felsenthal and Machover [The Measurement of Voting Power, Edward Elgar Publishing Limited (1998)], shows that all swap preserving measures of voting power are ordinally equivalent on any swap robust simple voting game. Swap preserving measures include the Banzhaf, the Shapley–Shubik and other commonly used measures of a priori voting power. In this paper, we completely characterize the achievable hierarchies for any such measure on a swap (...) robust simple voting game. Each possible hierarchy can be induced by a weighted voting game and we provide a constructive proof of this result. In particular, the strict hierarchy is always achievable as long as there are at least five players. (shrink)

Fodor’s theory of concepts holds that the psychological capacities, beliefs or intentions which determine how we use concepts do not determine reference. Instead, causal relations of a specific kind between properties and our dispositions to token a concept are claimed to do so. Fodor does admit that there needs to be some psychological mechanisms mediating the property–concept tokening relations, but argues that they are purely accidental for reference. In contrast, I argue that the actual mechanisms that sustain the reference determining (...) concept tokening relations are necessary for reference. Fodor’s atomism is thus undermined, since in order to refer with a concept it is necessary to possess some specific psychological capacities. (shrink)

The concepts and powerful mathematical tools of Dynamical Systems Theory (DST) yield illuminating methods of studying cognitive processes, and are even claimed by some to enable us to bridge the notorious explanatory gap separating mind and matter. This article includes an analysis of some of the conceptual and empirical progress Dynamical Systems Theory is claimed to accomodate. While sympathetic to the dynamicist program in principle, this article will attempt to formulate a series of problems the proponents of the approach in (...) question will need to face if they wish to prolong their optimism. The main points to be addressed involve the reductive tendencies inherent in Dynamical Systems Theory, its somewhat muddled position relative to connectionism, the metaphorical nature DST-C exhibits which hinders its explanatory potential, and DST-C's problematic account of causality. Brief discussions of the mathematical and philosophical backgrounds of DST, seminal experimental work and possible adaptations of the theory or alternative suggestions (dynamicist connectionism, neurophenomenology, R&D theory) are included. (shrink)

We propose a solution concept for games that are played among players with present-biased preferences that are possibly naive about their own, or about their opponent’s future time inconsistency. Our perception-perfect outcome essentially requires each player to take an action consistent with the subgame perfect equilibrium, given her perceptions concerning future types, and under the assumption that other present and future players have the same perceptions. Applications include a common pool problem and Rubinstein bargaining. When players are naive about their (...) own time inconsistency and sophisticated about their opponent’s, the common pool problem is exacerbated, and Rubinstein bargaining breaks down completely. (shrink)

This article presents the results of an experiment that completely measures the utility function and probability weighting function for different positive and negative monetary outcomes, using a representative sample of N = 1,935 from the general public. The results confirm earlier findings in the lab, suggesting that utility is less pronounced than what is found in classical measurements where expected utility is assumed. Utility for losses is found to be convex, consistent with diminishing sensitivity, and the obtained loss-aversion coefficient of (...) 1.6 is moderate but in agreement with contemporary evidence. The estimated probability weighting functions have an inverse-S shape and they imply pessimism in both domains. These results show that probability weighting is also an important phenomenon in the general population. Women and lower educated individuals are found to be more risk averse, in agreement with common findings. In contrast to previous studies that ascribed gender differences in risk attitudes solely to differences in the degree utility curvature, however, our results show that this finding is primarily driven by loss aversion and, for women, also by a more pessimistic psychological response toward the probability of obtaining the best possible outcome. (shrink)

The idea of confining the idea of ‘rationality’ with that of the ‘choice of best elements’ unnecessarily limits the sense and scope of ‘rationality’. The existing internal consistency conditions that are popularly used in the social choice theory to assess a choice function are insufficient to analyse several choice patterns. The paper tries to address that problem by accepting a broader definition of rationality and characterizes choice behaviours where an individual chooses a k-th best element from set of alternatives, (...) where k is an integer. (shrink)

We propose the notion of myopic-farsighted absorbing set to determine the networks that emerge in the long run when some players are myopic while others are farsighted. A set of networks is a myopic-farsighted absorbing set if (No External Deviation) there is no myopic-farsighted improving path from networks within the set to some networks outside the set, (External Stability) there is a myopic-farsighted improving path from any network outside the set to some network within the set, and (Minimality) there is (...) no proper subset satisfying No External Deviation and External Stability. Contrary to the notion of myopic-farsighted stable set, we show that a myopic-farsighted absorbing set always exists. We partially characterize the myopic-farsighted absorbing sets and we provide sufficient conditions for the equivalence between a myopic-farsighted absorbing set and a myopic-farsighted stable set. We also introduce and fully characterize the notion of proper myopic-farsighted absorbing set that refines the concept of myopic-farsighted absorbing set by selecting the more absorbing networks. Finally, we consider a threshold game that illustrates the role of the relative number of farsighted and myopic players for reaching efficiency. (shrink)

This paper aims to contribute to the development of a “third-generation” rational choice theory by introducing a Multiple Player Approach for analysing collective action problems. Drawing on the foundational first and second generation works of Olson (The logic of collective action, Cambridge University Press, Cambridge, 1965) and Ostrom (Scand Polit Stud 23(1):3–16), we introduce five player types that we believe capture essential empirical features of many real world collective action problems: Blind Riders, Tough Riders, Hard Riders, Easy Riders, and Low (...) Riders. We consider the complex interaction and dynamics that unfold among them. The main novelty of the analysis is to draw attention to the need for active societal support to effectively empower and reward hard riders for resolving collective action problems, particularly when facing external shocks such as the Covid-19 pandemic, Brexit, and financial crises. (shrink)

We provide an escape route from the opportunity paradox, which is described as a conflict between the ex ante and ex post perspectives on compensation by restricting the preference domain. Taste-independence is introduced as a property of preferences such that individuals’ maximized utility levels are the same regardless of their tastes for work. Using the optimal income taxation model, we obtain a compatibility theorem when individuals’ utilities are taste-independent and quasilinear in consumption.

The problem of intertemporal choice arises when outcomes are received in different moments of time. This paper presents an axiomatic model of intertemporal choice when consumption in the previous moment of time contributes to utility evaluation of consumption in the current moment. This model generalizes classic discounted utility theory (also known as constant or exponential discounting) in two ways. First, in every moment of time, a decision maker derives utility not only from current consumption but also from “residual” consumption in (...) the previous moment of time. Second, these utilities are discounted with weights that are essentially a quasi-hyperbolic discounting function. The paper presents an application of the proposed model to the problem of optimal consumption and savings given a fixed income (wealth). When a decision maker derives satisfaction from both instantaneous consumption as well as a share of consumption in the previous moment of time, optimal consumption path is cyclic—periods of relatively high consumption are interchanged with periods of relatively low consumption. These cycles decay over time. Asymptotically, the consumption path exhibits conventional properties (constant, increasing or decreasing over time when a gross interest rate multiplied by discount factor is correspondingly equal to, greater than, or less than one). (shrink)

We study stable strategy profiles in a pure exchange game of bads, where each player dumps his or her bads such as garbage onto someone else. Hirai et al. (Mathematical Social Sciences 51(2):162–170, 2006) show that cycle dumping, in which each player follows an ordering and dumps his or her bads onto the next player, is a strong Nash equilibrium and that self-disposal is $$\alpha $$ -stable for some initial distributions of bads. In this paper, we show (...) that a strategy profile of bullying, in which all players dump their bads onto a single player, becomes $$\alpha $$ -stable for every exchange game of bads. We also provide a necessary and sufficient condition for a strategy profile to be $$\alpha $$ -stable in an exchange game of bads. In addition, we show that repeating an exchange after the first exchange makes self-disposal stationary. (shrink)

We consider a situation where an individual is facing an uncertain situation, but may costly alter his knowledge of the uncertainties. We study in this context how risk aversion may modify the individual search behavior. We consider a one-armed bandit problem (where one arm is safe and the other is risky) and study how the agent risk aversion can change the sequence of arms selected. The main result is that when the utility function is more concave, the agent has more (...) chances to select the safe arm. We also discuss how search is affected by risk aversion. (shrink)

This volume presents 38 classic texts in formal epistemology, and strengthens the ties between research into this area of philosophy and its neighbouring intellectual disciplines. The editors provide introductions to five subsections: Bayesian Epistemology, Belief Change, Decision Theory, Interactive Epistemology and Epistemic Logic. 'Formal epistemology' is a term coined in the late 1990s for a new constellation of interests in philosophy, the origins of which are found in earlier works of epistemologists, philosophers of science and logicians. It addresses a growing (...) agenda of problems concerning knowledge, belief, certainty, rationality, deliberation, decision, strategy, action and agent interaction - and it does so using methods from logic, probability, computability, decision and game theory. The volume also includes a thorough index and suggestions for further reading, and thus offers a complete teaching and research package for students as well as research scholars of formal epistemology, philosophy, logic, computer science, theoretical economics and cognitive psychology. (shrink)

We propose a two-step guessing game to measure the depth of thinking. We apply this method to the P beauty contest game. Using our method, we find that 81% of subjects do not make choice following best response reasoning while the classical method would suggest only 12%. The result suggests that the classical method has the fundamental problem that it cannot distinguish if a submitted number is due to best response reasoning or not. It also suggests that traditional (...) level k analysis falsely attributes some sophistication to random players, and that the degree of false attribution is large. Our procedure provides an alternative way to identify whether the individual has best response reasoning which is essential for any positive level of depth of thinking and differentiates between the depth of thinking and random choice, and hence provides a very different conclusion, which is suggestive of limitations of the classical method. (shrink)

The Monty Hall game is one of the most discussed decision problems, but where a convincing behavioral explanation of the systematic deviations from probability theory is still lacking. Most people not changing their initial choice, when this is beneficial under information updating, demands further explanation. Not only trust and the incentive of interestingly prolonging the game for the audience can explain this kind of behavior, but the strategic setting can be modeled more sophisticatedly. When aiming to increase the (...) odds of winning, while Monty’s incentives are unknown, then not to switch doors can be considered as the most secure strategy and avoids a sure loss when Monty’s guiding aim is not to give away the prize. Understanding and modeling the Monty Hall game can be regarded as an ideal teaching example for fundamental statistic understandings. (shrink)

This study investigates experimentally whether people in retrospective are self-aware that they engage in status-seeking behavior. Subjects participated in a real-effort task where effort translated into a donation to a charity. Within-subjects we varied the visibility of their performance (private/public feedback). On average, subjects exerted more effort in the public treatment. After the real-effort task, subjects were asked to state their retrospective beliefs about their performance in public given feedback about their performance in private, and about the performance of other (...) subjects in public given the average performance in private. Between-subjects, we varied the compensation that participants would receive for providing accurate performance estimates. Our results show a lack of self-awareness about status-seeking behavior that is robust to increased belief compensation. We also found that subjects expected others to be as status-seeking as they are themselves or even less. (shrink)

Evidence Theory is a branch of mathematics that concerns combination of empirical evidence in an individual’s mind in order to construct a coherent picture of reality. Designed to deal with unexpected empirical evidence suggesting new possibilities, evidence theory is compatible with Shackle’s idea of decision-making as a creative act. This essay investigates this connection in detail, pointing to the usefulness of evidence theory to formalise and extend Shackle’s decision theory. In order to ease a proper framing of the issues involved, (...) evidence theory is compared with sub-additive probability theory and Ewens’s infinite alleles model. Furthermore, the original version of evidence theory is presented along with its most recent developments. (shrink)

We analyse the incentives of individuals to misrepresent their truthful judgments when engaged in collective decision-making. Our focus is on scenarios in which individuals reason about the incentives of others before choosing which judgments to report themselves. To this end, we introduce a formal model of strategic behaviour in logic-based judgment aggregation that accounts for such higher-level reasoning as well as the fact that individuals may only have partial information about the truthful judgments and preferences of their peers. We find (...) that every aggregation rule must belong to exactly one of three possible categories: it is either (i) immune to strategic manipulation for every level of reasoning, or (ii) manipulable for every level of reasoning, or (iii) immune to manipulation only for everykth level of reasoning, for some natural number kgreater than 1. (shrink)