Related papers: Bubbles are rational
Noncooperative games with uncertain payoffs have been classically studied under the expected-utility theory framework, which relies on the strong assumption that agents behave rationally. However, simple experiments on human decision makers…
Recent theories from complexity science argue that complex dynamics are ubiquitous in social and economic systems. These claims emerge from the analysis of individually simple agents whose collective behavior is surprisingly complicated.…
In the context of strategic games, we provide an axiomatic proof of the statement Common knowledge of rationality implies that the players will choose only strategies that survive the iterated elimination of strictly dominated strategies.…
Rationality is often related to optimal decision making. Humans are known to be bounded rational agents. However, recent advances in computing, and other scientific and technical fields along with large amount of data have led to a feeling…
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as…
Rationality is frequently associated with making the best possible decisions. It's widely acknowledged that humans, as rational beings, have limitations in their decision-making capabilities. Nevertheless, recent advancements in fields,…
Bayesian rationality in strategic games presumes that it is possible to translate strategic uncertainty into imperfect information. Correlated equilibrium is guided by the idea that players are Bayes rational, have a common prior, and…
Finite objects and more specifically finite games are formalized using induction, whereas infinite objects are formalized using coinduction. In this article, after an introduction to the concept of coinduction, we revisit on infinite…
Empirical evidence shows that human behaviour often deviates from game-theoretical rationality. For instance, humans may hold unrealistic expectations about future outcomes. As the evolutionary roots of such biases remain unclear, we…
Equilibrium notions for games with unawareness in the literature cannot be interpreted as steady-states of a learning process because players may discover novel actions during play. In this sense, many games with unawareness are…
Equilibrium notions for games with unawareness in the literature cannot be interpreted as steady-states of a learning process because players may discover novel actions during play. In this sense, many games with unawareness are…
We study cautious reasoning in finite sequential games played by agents with perfect recall. Our contribution lies in formulating a definition of prudent rationalizability (Heifetz et al. 2021, BEJTE) as an iterative reduction procedure of…
Considering a simple economy, we derive a new Hamilton-Jacobi equation which is satisfied by the value of a ''bubble'' asset. We then show, by providing a rigorous mathematical analysis of this equation, that a unique non-zero stable…
We develop a model to study the role of rationality in economics and biology. The model's agents differ continuously in their ability to make rational choices. The agents' objective is to ensure their individual survival over time or,…
A notion of incentive for agents is introduced which leads to a very general notion of an equilibrium for a finite game. Sufficient conditions for the existence of these equilibria are given. Known existence theorems are shown to be…
The substantial turmoil created by both 2000 dot-com crash and 2008 subprime crisis has fueled the belief that the two classical paradigms of economics, which are the invisible hand and the rational agent, are not appropriate to describe…
We develop a general game-theoretic framework for reasoning about strategic agents performing possibly costly computation. In this framework, many traditional game-theoretic results (such as the existence of a Nash equilibrium) no longer…
We present infinite extensive strategy profiles with perfect information and we show that replacing finite by infinite changes the notions and the reasoning tools. The presentation uses a formalism recently developed by logicians and…
To regulate a social system comprised of self-interested agents, economic incentives are often required to induce a desirable outcome. This incentive design problem naturally possesses a bilevel structure, in which a designer modifies the…
The quest for understanding the complex phenomena of the world has led to the development of various fields of science, each with its own methods, models, and assumptions. However, sometimes these fields can intersect and inspire each…