Browsing by Subject "Incomplete information"

Now showing 1 - 7 of 7

Open Access
Behavioral implementation under incomplete information
(Elsevier, 2023-09-11) Dalkıran, Nuh Aygün; Barlo, M.
We investigate implementation under incomplete information allowing for individuals' choices featuring violations of rationality. Our primitives are individuals' interim choices that do not have to satisfy the weak axiom of revealed preferences. In this setting, we provide necessary as well as sufficient conditions for behavioral implementation under incomplete information. We also introduce behavioral interim incentive Pareto efficiency and investigate its implementability under incomplete information.
Open Access
Magical thinking in an incomplete information bargaining game: an experimental study
(2024-07) Güngör, Kübra Nur
This thesis investigates the effect of magical thinking on individuals’ decision-making processes, with a specific focus on incomplete information ultimatum bargaining games. Hiding behind the small pie is a robust finding of this literature where the proposers use an information advantage for their personal gain. Using a simple ultimatum bargaining setup, we examine the impact of the timing of uncertainty resolution on the proposers’ offers and the frequency of hiding behind the small pie behavior. We employ a between-subject design with two treatments: BEF(ore) and AFT(er), varying the timing of randomization that determines the pie size without any variation in the information set of proposers across treatments. The probit regression analysis results suggest that treatment variation impacts the proposers’ tendency to hide behind the small pie, in line with our hypothesis. To the best of our knowledge, this is the first study investigating the effect of magical thinking in a sequential bargaining game.
Open Access
A note on efficient signaling of bargaining power
(Springer, 2000) Bac, M.
Strategic delay and restricted offers are two modes of signaling bargaining power in alternating offers bargaining games. This paper shows that when both modes are available, the best signaling strategy of the "strong" type of the informed player consists of a pure strategic delay followed by an offer on the whole pie. There is no signaling motivation for issue-by-issue bargaining when the issues are perfectly substitutable.
Open Access
On the informational content of wage offers
(Wiley-Blackwell Publishing, Inc., 2002) Bac, M.
This paper studies screening and signaling roles of the offer wage and investigates its impact on matching efficiency. It develops a matching model of a large job market populated by observationally indistinguishable, heterogeneous firms and workers. Heterogeneity is introduced in the simplest way, by assuming two basic types of firms and workers, where one type has an advantage over the other: firms prefer good quality workers and workers prefer firms with better attributes, wages being equal. However, good quality workers are much more productive in firms with better attributes, hence efficiency requires firms and workers of the same type be matched. In the model, firms offer wages and workers make application decisions. This simple model generates a rich class of predictions in the form of perfect Bayesian equilibria, relating wage offers and matching efficiency to the distribution of unobservable characteristics: If the proportion of "good" firms to "bad" workers is large, perfect matching occurs through wage offers that do both signaling and screening. In another equilibrium, wages signal firm types but do only partial screening if the good worker population is sufficiently large. Both firm types offer the same wage in equilibrium if the market is predominantly populated by good workers and good firms. Other equilibria exhibit Gresham's Law in the job market: pessimistic workers and firms of the good type withdraw and take their outside options. The screening/signaling motive for wage offers thus has the potential of explaining a variety of wage patterns.
Open Access
Order of limits in reputations
(Springer, 2016) Dalkıran, N. A.
The fact that small departures from complete information might have large effects on the set of equilibrium payoffs draws interest in the adverse selection approach to study reputations in repeated games. It is well known that these large effects on the set of equilibrium payoffs rely on long-run players being arbitrarily patient. We study reputation games where a long-run player plays a fixed stage-game against an infinite sequence of short-run players under imperfect public monitoring. We show that in such games, introducing arbitrarily small incomplete information does not open the possibility of new equilibrium payoffs far from the complete information equilibrium payoff set. This holds true no matter how patient the long-run player is, as long as her discount factor is fixed. This result highlights the fact that the aforementioned large effects arise due to an order of limits argument, as anticipated. Â© 2016, Springer Science+Business Media New York.
Open Access
Stochastic control approach to reputation games
(IEEE, 2020) Nuh Aygün, Dalkıran; Yüksel, S.
Through a stochastic-control-theoretic approach, we analyze reputation games, where a strategic long-lived player acts in a sequential repeated game against a collection of short-lived players. The key assumption in our model is that the information of the short-lived players is nested in that of the long-lived player. This nested information structure is obtained through an appropriate monitoring structure. Under this monitoring structure, we show that, given mild assumptions, the set of perfect Bayesian equilibrium payoffs coincides with Markov perfect equilibrium payoffs, and hence, a dynamic programming formulation can be obtained for the computation of equilibrium strategies of the strategic long-lived player in the discounted setup. We also consider the undiscounted average-payoff setup, where we obtain an optimal equilibrium strategy of the strategic long-lived player under further technical conditions. We then use this optimal strategy in the undiscounted setup as a tool to obtain a tight upper payoff bound for the arbitrarily patient long-lived player in the discounted setup. Finally, by using measure concentration techniques, we obtain a refined lower payoff bound on the value of reputation in the discounted setup. We also study the continuity of equilibrium payoffs in the prior beliefs.
Open Access
A theory of trade concessions
(Elsevier BV, 1997) Bac, M.; Raff, H.
We present a model of tariff disputes and concessions consisting of an infinitely repeated game under bilateral incomplete information. Given potential agreements to be reached through unilateral or reciprocal concessions, we find that an agreement involving reciprocal concessions is reached immediately if the discount factor is large and/or the volume of trade is small. Otherwise prior beliefs about country type matter: when both countries hold pessimistic priors, immediate reciprocal concessions still occur. Very different prior beliefs lead to an immediate unilateral concession of the pessimistic country, whereas optimistic priors coupled with low discount factors may generate delayed agreements. (C) 1997 Elsevier Science B.V.