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Essays on Economic Decision MakingLee, Dongwoo 17 May 2019 (has links)
This dissertation focuses on exploring individual and strategic decision problems in Economics. I take a different approach in each chapter to capture various aspects of decision problems. An overview of this dissertation is provided in Chapter 1.
Chapter 2 studies an individual's decision making in extensive-form games under ambiguity when the individual is ambiguous about an opponent's moves. In this chapter, a player follows Choquet Expected Utility preferences, since the standard Expected Utility cannot explain the situations of ambiguity. I raise the issue that dynamically inconsistent decision making can be derived in extensive-form games with ambiguity. To cope with this issue, this chapter provides sufficient conditions to recover dynamic consistency.
Chapter 3 analyzes the strategic decision making in signaling games when a player makes an inference about hidden information from the behavioral hypothesis. The Hypothesis Testing Equilibrium (HTE) is proposed to provide an explanation for posterior beliefs from the player. The notion of HTE admits belief updates for all events including zero-probability events. In addition, this chapter introduces well-motivated modifications of HTE.
Finally, Chapter 4 examines a boundedly rational individual who considers selective attributes when making a decision. It is assumed that the individual focuses on a subset of attributes that stand out from a choice set. The selective attributes model can accommodate violations of choice axioms of Independence from Irrelevant Alternative (IIA) and Regularity. / Doctor of Philosophy / This dissertation focuses on exploring individual and strategic decision problems in Economics. I take a different approach in each chapter to capture various aspects of decision problem. An overview of this dissertation is provided in Chapter 1. Chapter 2 studies an individual’s decision making in extensive-form games under ambiguity. Ambiguity describes the situation in which the information available to a decision maker is too imprecise to be summarized by a probability measure (Epstein, 1999). It is known that ambiguity causes dynamic inconsistency between ex-ante and interim decision making. This chapter provides sufficient conditions under which dynamic consistency is maintained. Chapter 3 analyzes the strategic decision making in signaling games in which there are two players: informed sender and uninformed receiver. The sender has a private information about his type and the receiver makes an inference about hidden information. This chapter suggests a notion of the Hypothesis Testing Equilibrium (HTE), which provides an alternative explanation for the receiver’s beliefs. The idea of the HTE can be used as a refinement of Perfect Bayesian Equilibrium (PBE) in signaling games to cope with the known limitations of PBE. Finally, Chapter 4 examines a boundedly rational individual who considers only salient attributes when making a decision. The individual considers an attribute only when it stands out enough in a choice set. The selective attribute model can accommodate violations of choice axioms of Independence from Irrelevant Alternative (IIA) and Regularity.
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