nep-exp New Economics Papers
on Experimental Economics
Issue of 2005‒06‒19
four papers chosen by
Daniel Houser
George Mason University

  1. Analogy-Based Expectation Equilibrium By Philippe Jehiel
  2. Nash rationalizability of collective choice over lotteries By T. DEMUYNCK; L. LAUWERS
  3. Boycotts, power politics or trust building: how to prevent conflict? By A. SCHOLLAERT; D. VAN DE GAER
  4. Inferential Expectations By Gordon Menzies; Daniel John Zizzo

  1. By: Philippe Jehiel
    Date: 2005–06–13
    Abstract: To test the joint hypothesis that players in a noncooperative game (allowing mixed strategies) maximize expected utilities and select a Nash equilibrium, it suffices to study the reaction of the revealed collective choice upon changes in the space of strategies available to the players. The joint hypothesis is supported if the revealed choices satisfy an extended version of Richter’s congruence axiom together with a contraction-expansion axiom that models the noncooperative behavior. In addition, we provide sufficient and necessary conditions for a binary relation to have an independent ordering extension, and for individual choices over lotteries to be rationalizable.
    Keywords: independence condition, binary extensions, rationalizability, Nash equilibrium in mixed strategies
    JEL: C72 C92
    Date: 2005–04
    Abstract: In a game of imperfect information, the paper analyzes whether different types of intervention by third parties can ensure that political (ethnic, religious, social, . . . ) groups within a country will pursue a cooperative strategy and how easy it is to predict their effects. We conclude that a strong boycott is the most effective instrument, then comes a weak boycott, followed by power politics. Finally, apart from requiring very detailed information on the relevant parameters of the economy, the use of confidence building measures has a serious flaw: it is incapable of averting civil war.
    Keywords: Non Cooperative Games; Third-party Intervention; Conflict Prevention
    JEL: C72 D74
    Date: 2005–06
  4. By: Gordon Menzies (School of Finance and Economics, University of Technology, Sydney); Daniel John Zizzo (University of East Anglia)
    Abstract: We propose that the formation of beliefs be treated as statistical hypothesis tests, and we label such beliefs inferential expectations. If a belief is overturned through the build-up of evidence, agents are assumed to switch to the rational expectation. Rational expectations are shown to be a special (limiting) case of inferential expectations, with the test size a becoming a metric for rationality. When inferential expectations are built into a Dornbusch-style model of the exchange rate, regression tests of Uncovered Interest Parity and the rational expectations version of the term structure both display downward bias in the slope coefficient. We present the results of an experiment that supports inferential expectations.
    Keywords: expectations; macroeconomics; rationality; uncovered interest parity; term structure; exchange rate
    JEL: C91 D84 E50 F31
    Date: 2005–05–01

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