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Strategic Problems with Risky Prospects

Author

Listed:
  • Alessandro Sontuoso

    (Smith Institute for Political Economy and Philosophy, Chapman University
    Center for Social Norms and Behavioral Dynamics, University of Pennsylvania)

  • Christina Bicchieri

    (Center for Social Norms and Behavioral Dynamics, University of Pennsylvania)

  • Alexander Funcke

    (Center for Social Norms and Behavioral Dynamics, University of Pennsylvania)

  • Einav Hart

    (Center for Social Norms and Behavioral Dynamics, University of Pennsylvania)

Abstract

We study games where the impact of strategic uncertainty (i.e., ambiguity arising from uncertainty about other players’ actions and beliefs) is compounded by the simultaneous presence of risky prospects (chance moves with commonly-known conditional probabilities). We embed such games in an experimental environment that allows us to test if risk-taking behavior is affected by information that reduces the extent of strategic uncertainty. In doing so, we test some implications of expected utility theory, while making minimal assumptions about individual-level (risk or ambiguity) attitudes. Our analysis provides evidence for an effect of the information: notably, we find that the effect on choice behavior is triggered in some cases by a rational belief revision about others’ actions, and in other cases by a reversal in risk preferences.

Suggested Citation

  • Alessandro Sontuoso & Christina Bicchieri & Alexander Funcke & Einav Hart, 2020. "Strategic Problems with Risky Prospects," Working Papers 20-23, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:20-23
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    File URL: https://digitalcommons.chapman.edu/esi_working_papers/318/
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    Cited by:

    1. Jennifer A. Loughmiller-Cardinal & James Scott Cardinal, 2023. "The Behavior of Information: A Reconsideration of Social Norms," Societies, MDPI, vol. 13(5), pages 1-27, April.

    More about this item

    Keywords

    Strategic Uncertainty; Risk Preferences; Belief Revision; Mixed-Motive games; Network;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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