Working Papers

To Catch a Stag: Identifying payoff- and risk-dominance effects in coordination games.
Revise & resubmit, Games & Economic Behavior. Full Paper, Slides
Abstract: Five decades after Harsanyi and Selten’s seminal work on equilibrium selection, we remain unable to predict the outcomes of real-life coordination even in simple cases. One reason is that experiments have struggled to quantify the effects of payoff- and risk-dominance and to separate them from context factors like feedback, repetition, and complexity. This experiment is the first to demonstrate that both payoff- and risk-dominance significantly and independently impact coordination decision-making. Three innovations characterize the design: First, payoff- and risk-dominance are disentangled using orthogonal measures of strategic incentives and welfare externalities. Second, a no-feedback, choice-list format minimizes deviations from one-shot incentives. Third, beliefs about others’ behavior are elicited next to decisions. Surprisingly, beliefs do not only drive the effect of risk dominance but also the one of payoff dominance. This is in line with subjects viewing efficient coordination as a "team"-problem.

The Fundamental Theorem of Epistemic Game Theory.
Reject & resubmit, Econometrica. Full Paper, Slides
Abstract: In many applications of game theory, infinite strategy sets stand in for large finite strategy sets. It is then expected that results back-translate from infinite to finite. Transfinite non-best reply eliminations in infinite games raise concerns whether this always works. In response, a measure-theoretic characterization of common belief in rationality via two alternative procedures is developed. Procedure one is transfinite non-best reply elimination. Procedure two, elimination of non-best replies and supporting beliefs, avoids all transfinite iterations. Thus, transfinite non-best reply eliminations never require infinite reasoning depths, and infinite-game results always back-translate to the finite. The real cause of transfinite eliminations turns out to be non-best reply elimination itself. That procedure ignores belief-based information that is critical for strategic rationality in infinite games.

Additive Context-Dependent Preferences. Extended Abstract, Slides  
Abstract: “Money equals utility” is a much criticized ‘axiom’ that is central across a vast range of economic experiments and theory. Subjecting this ‘axiom’ to experimental testing requires an empirically tractable theory of context-dependent preferences. This paper presents novel behavioral foundations for additive context-dependent preferences and state-dependent expected utility. Crucially, these behavioral foundations do not require empirically implausible comparisons of alternatives across different states. Moreover, they can handle any state-dependent, multi-alternative decision problem. In particular, no diversity-type assumptions are used. A central application is to direct utility measurement in games, enabling a causal understanding of how e.g. risk attitudes and other-regarding concerns affect strategic choice.

An Additive Equilibrium Theory for Admissibility in Games. (with Christian Bach) Extended Abstract
Abstract: Admissibility (the elimination of weakly dominated strategies) is the most common tool for refining equilibrium predictions in normal form games. Curiously, equilibrium notions that exclude weakly dominated strategies (e.g., perfect equilibrium) strictly refine the combined predictions of corresponding non-equilibrium solution concepts (e.g., admissibility) and Nash equilibrium. This paper uses an epistemic approach to cautious reasoning in games to understand the nature of this “extra refinement”. It emerges that the gap between equilibrium refinements and their non-equilibrium counterparts stems from a questionable requirement that players be fully lexicographically correct about each others’ cautious theories. This is what causes perfect equilibria to strictly refine the set of admissible equilibria. More seriously, the same requirement also causes an iteratively admissible refinement of perfect equilibrium to be impossible for almost all normal form games. This is true even though any game admits a Nash equilibrium in iteratively admissible strategies. As an alternative to full lexicographic correctness, a notion of correct primary theories is developed. Primary correctness additively combines with cautious non-equilibrium solution concepts. This yields foundations for admissible equilibrium and for a novel iteratively admissible equilibrium.