Approximate knowledge of rationality and correlated equilibria

We extend Aumann's [3] theorem deriving correlated equilibria as a consequence of common priors and common knowledge of rationality by explicitly allowing for non-rational behavior. We replace the assumption of common knowledge of rationality with a substantially weaker notion, joint p-belief of rationality, where agents believe the other agents are rational with probabilities p = (pi)i2I or more. We show that behavior in this case constitutes a constrained correlated equilibrium of a doubled game satisfying certain p-belief constraints and characterize the topological structure of the resulting set of p-rational outcomes. We establish continuity in the parameters p and show that, for p su ciently close to one, the p-rational outcomes are close to the correlated equilibria and, with high probability, supported on strategies that survive the iterated elimination of strictly dominated strategies. Finally, we extend Aumann and Dreze's [4] theorem on rational expectations of interim types to the broader p-rational belief systems, and also discuss the case of non-common priors.

Consumer Expertise or Credit Risk? An empirical analysis of mortgage pricing

Loan mortgage interest rates are usually the result of a bank-customer negotiation process. Credit risk, consumer cross-buying potential, bundling, financial market competition and other features affecting the bargaining power of the parties could affect price. We argue that, since mortgage loan is a complex product, consumer expertise could be a relevant factor for mortgage pricing. Using data on mortgage loan prices for a sample of 1055 households for the year 2005 (Bank of Spain Survey of Household Finances, EFF-2005), and including credit risk, costs, potential capacity of the consumer to generate future business and bank competition variables, the regression results indicate that consumer expertise-related metrics are highly significant as predictors of mortgage loan prices. Other factors such as credit risk and consumer cross-buying potential do not have such a significant impact on mortgage prices. Our empirical results are affected by the credit conditions prior to the financial crisis and could shed some light on this issue.

Institutional designs to face the dark side of total allowable catches

Setting total allowable catches (TACs) is an endogenous process in which different agents and institutions, often with conflicting interests and opportunistic behaviour, try to influence policy-makers. Such policy-makers, far from being the benevolent social planners many would wish them to be, may also pursue self-interest when making final decisions. Although restricted knowledge of stock abundance and population dynamics, and weakness in enforcement, have effects, these other factors may explain the reason why TAC management has failed to guarantee sustainable exploitation of fish resources. Rejecting the exogeneity of the TAC and taking advantage of fruitful debate on economic policy (i.e. the rules vs. discretion debate, and that surrounding the independence of central banks), two institutional developments are analysed as potential mechanisms to face up to misconceptions about TACs: long-term harvest control rules, and a central bank of fish.

Sentido común y "shared knowledge" en el doblaje cinematográfico

Santamaría, José Miguel; Pajares, Eterio; Olsen, Vickie; Merino, Raquel; Eguíluz, Federico (eds.)

Climate Change and Knowledge Communities

19 p.