Essays on bounded rationality: Individual decision and strategic interaction

Economics is a social science which, therefore, focuses on people and on the decisions they make, be it in an individual context, or in group situations. It studies human choices, in face of needs to be fulfilled, and a limited amount of resources to fulfill them. For a long time, there was a convergence between the normative and positive views of human behavior, in that the ideal and predicted decisions of agents in economic models were entangled in one single concept. That is, it was assumed that the best that could be done in each situation was exactly the choice that would prevail. Or, at least, that the facts that economics needed to explain could be understood in the light of models in which individual agents act as if they are able to make ideal decisions. However, in the last decades, the complexity of the environment in which economic decisions are made and the limits on the ability of agents to deal with it have been recognized, and incorporated into models of decision making in what came to be known as the bounded rationality paradigm. This was triggered by the incapacity of the unboundedly rationality paradigm to explain observed phenomena and behavior. This thesis contributes to the literature in three different ways. Chapter 1 is a survey on bounded rationality, which gathers and organizes the contributions to the field since Simon (1955) first recognized the necessity to account for the limits on human rationality. The focus of the survey is on theoretical work rather than the experimental literature which presents evidence of actual behavior that differs from what classic rationality predicts. The general framework is as follows. Given a set of exogenous variables, the economic agent needs to choose an element from the choice set that is avail- able to him, in order to optimize the expected value of an objective function (assuming his preferences are representable by such a function). If this problem is too complex for the agent to deal with, one or more of its elements is simplified. Each bounded rationality theory is categorized according to the most relevant element it simplifes. Chapter 2 proposes a novel theory of bounded rationality. Much in the same fashion as Conlisk (1980) and Gabaix (2014), we assume that thinking is costly in the sense that agents have to pay a cost for performing mental operations. In our model, if they choose not to think, such cost is avoided, but they are left with a single alternative, labeled the default choice. We exemplify the idea with a very simple model of consumer choice and identify the concept of isofin curves, i.e., sets of default choices which generate the same utility net of thinking cost. Then, we apply the idea to a linear symmetric Cournot duopoly, in which the default choice can be interpreted as the most natural quantity to be produced in the market. We find that, as the thinking cost increases, the number of firms thinking in equilibrium decreases. More interestingly, for intermediate levels of thinking cost, an equilibrium in which one of the firms chooses the default quantity and the other best responds to it exists, generating asymmetric choices in a symmetric model. Our model is able to explain well-known regularities identified in the Cournot experimental literature, such as the adoption of different strategies by players (Huck et al. , 1999), the inter temporal rigidity of choices (Bosch-Dom enech & Vriend, 2003) and the dispersion of quantities in the context of di cult decision making (Bosch-Dom enech & Vriend, 2003). Chapter 3 applies a model of bounded rationality in a game-theoretic set- ting to the well-known turnout paradox in large elections, pivotal probabilities vanish very quickly and no one should vote, in sharp contrast with the ob- served high levels of turnout. Inspired by the concept of rhizomatic thinking, introduced by Bravo-Furtado & Côrte-Real (2009a), we assume that each per- son is self-delusional in the sense that, when making a decision, she believes that a fraction of the people who support the same party decides alike, even if no communication is established between them. This kind of belief simplifies the decision of the agent, as it reduces the number of players he believes to be playing against { it is thus a bounded rationality approach. Studying a two-party first-past-the-post election with a continuum of self-delusional agents, we show that the turnout rate is positive in all the possible equilibria, and that it can be as high as 100%. The game displays multiple equilibria, at least one of which entails a victory of the bigger party. The smaller one may also win, provided its relative size is not too small; more self-delusional voters in the minority party decreases this threshold size. Our model is able to explain some empirical facts, such as the possibility that a close election leads to low turnout (Geys, 2006), a lower margin of victory when turnout is higher (Geys, 2006) and high turnout rates favoring the minority (Bernhagen & Marsh, 1997).

Bidding for the surplus: realizing efficient outcomes in general economic environments

In this paper, we consider two classes of economic environments. In the first type, agents are faced with the task of providing local public goods that will benefit some or all of them. In the second type, economic activity takes place via formation of links. Agents need both to both form a network and decide how to share the output generated. For both scenarios, we suggest a bidding mechanism whereby agents bid for the right to decide upon the organization of the economic activity. The subgame perfect equilibria of this game generate efficient outcomes.

Information Design

There are two ways of creating incentives for interacting agents to behave in a desired way. One is by providing appropriate payoff incentives, which is the subject of mechanism design. The other is by choosing the information that agents observe, which we refer to as information design. We consider a model of symmetric information where a designer chooses and announces the information structure about a payoff relevant state. The interacting agents observe the signal realizations and take actions which affect the welfare of both the designer and the agents. We characterize the general finite approach to deriving the optimal information structure for the designer - the one that maximizes the designer's ex ante expected utility subject to agents playing a Bayes Nash equilibrium. We then apply the general approach to a symmetric two state, two agent, and two actions environment in a parameterized underlying game and fully characterize the optimal information structure: it is never strictly optimal for the designer to use conditionally independent private signals; the optimal information structure may be a public signal or may consist of correlated private signals. Finally, we examine how changes in the underlying game affect the designer's maximum payoff. This exercise provides a joint mechanism/information design perspective.

Frequency of CCR5 Delta-32 Mutation in Human Immunodeficiency Virus (HIV)-seropositive and HIV-exposed Seronegative Individuals and in General Population of Medellin, Colombia

Repeated exposure to human immunodeficiency virus (HIV) does not always result in seroconversion. Modifications in coreceptors for HIV entrance to target cells are one of the factors that block the infection. We studied the frequency of Delta-32 mutation in ccr5 gene in Medellin, Colombia. Two hundred and eighteen individuals distributed in three different groups were analyzed for Delta-32 mutation in ccr5 gene by polymerase chain reaction (PCR): 29 HIV seropositive (SP), 39 exposed seronegative (ESN) and 150 individuals as a general population sample (GPS). The frequency of the Delta-32 mutant allele was 3.8% for ESN, 2.7% for GPS and 1.7% for SP. Only one homozygous mutant genotype (Delta-32/Delta-32) was found among the ESN (2.6%). The heterozygous genotype (ccr5/Delta-32) was found in eight GPS (5.3%), in one SP (3.4%) and in one ESN (2.6%). The differences in the allelic and genotypic frequencies among the three groups were not statistically significant. A comparison between the expected and the observed genotypic frequencies showed that these frequencies were significantly different for the ESN group, which indirectly suggests a protective effect of the mutant genotype (Delta-32/Delta-32). Since this mutant genotype explained the resistance of infection in only one of our ESN persons, different mechanisms of protection must be playing a more important role in this population.

Under-achievement and the glass ceiling: Evidence from a TV game show

We use a Colombian TV game show to test gender differences in competitivebehavior where there is no opportunity for discrimination and females face no genderspecificexternal constraints. Each game started with six contestants who had toanswer general knowledge questions in private. There were five rounds of questionsand, at the end of each, one participant was eliminated. Despite equality in startingnumbers, women earn less than men and exit the game at a faster rate. In particular,there are more voluntary withdrawals by women than men. We draw an analogybetween the game and the process by which employees rise through the levels of acorporation. As such, we note that glass ceilings may result, in part, from women sown behavior and this raises the issue of how women are socialized to behave. At thesame time, our results illustrate that maintaining and promoting gender diversity at thelower/middle ranks of organizations is necessary to obtain gender diversity at the top.

A general class of adaptative strategies

We exhibit and characterize an entire class of simple adaptive strategies,in the repeated play of a game, having the Hannan-consistency property: In the long-run, the player is guaranteed an average payoff as large as the best-reply payoff to the empirical distribution of play of the otherplayers; i.e., there is no "regret." Smooth fictitious play (Fudenberg and Levine [1995]) and regret-matching (Hart and Mas-Colell [1998]) areparticular cases. The motivation and application of this work come from the study of procedures whose empirical distribution of play is, in thelong-run, (almost) a correlated equilibrium. The basic tool for the analysis is a generalization of Blackwell's [1956a] approachability strategy for games with vector payoffs.

Stochastic evolution of rules for playing normal form games

The evolution of boundedly rational rules for playing normal form games is studied within stationary environments ofstochastically changing games. Rules are viewed as algorithms prescribing strategies for the different normal formgames that arise. It is shown that many of the folk results of evolutionary game theory typically obtained witha fixed game and fixed strategies carry over to the present case. The results are also related to recent experimentson rules and games.

The extreme core allocations of the assignment game

Although assignment games are hardly ever convex, in this paper a characterization of their set or extreme points of the core is provided, which is also valid for the class of convex games. For each ordering in the player set, a payoff vector is defined where each player receives his marginal contribution to a certain reduced game played by his predecessors. We prove that the whole set of reduced marginal worth vectors, which for convex games coincide with the usual marginal worth vectors, is the set of extreme points of the core of the assignment game

The extreme core allocations of the assignment game

Although assignment games are hardly ever convex, in this paper a characterization of their set or extreme points of the core is provided, which is also valid for the class of convex games. For each ordering in the player set, a payoff vector is defined where each player receives his marginal contribution to a certain reduced game played by his predecessors. We prove that the whole set of reduced marginal worth vectors, which for convex games coincide with the usual marginal worth vectors, is the set of extreme points of the core of the assignment game

Innovations in hypoxic training

Athletes seem compelled to include some forms of altitude training in their preparation expecting additional performance gains compared to equivalent training at sea-level. For the general population, altitude training often only consists in spending weeks at altitude to enhance red blood cell production, hemoglobin mass and thus oxygen delivery to the muscles. Over the past two decades, intermittent hypoxic training (IHT), that is, a method where athletes live at or near sea-level but train in hypobaric hypoxia (HH, real altitude) or normobaric hypoxia (NH, simulated altitude) was shown to induce exclusive adaptations directly at the muscular level that may support performance improvements. Our work first demonstrated significant differences between exposure and exercise in HH vs. NH that may help disentangling hypoxia and hypobaria for athletes or mountaineers who use NH to prepare for altitude competitions or expeditions. Second, we produced a comprehensive review of the strikingly poor and controversial benefits of IHT for performance enhancement in team or racket sports. Using evidence of peripheral muscular adaptations with the recruitment of fast-twitch fibers playing a major role, we then developed and assessed the potential of a new training method in hypoxia based on the repetitions of "all-out" sprints interspersed with incomplete recovery periods, the so called "repeated sprint training in hypoxia" (RSH). We have consequently shown RSH to delay fatigue when sprints with incomplete recoveries are repeated until exhaustion both in cycling and cross-country ski double poling. We definitely outlined RSH as a promising training strategy and proposed new studies to judge the efficacy of RSH in team sports and determine the specific mechanisms that may enhance team game results. In conclusion, our work allowed updating the panorama over the contemporary hypoxic training possibilities. It provides an overview of the current scientific knowledge about intermittent hypoxic training and repeated sprint training in hypoxia (RSH). This will benefit athletes and teams in intermittent sports looking to include a hypoxic stimulus to their training to gain a specific competitive edge.

A course on collaboration between social workers and general practitioners during their vocational training

The educational programme reported was an experiment in the vocational training scheme of the department of General Practice, Erasmus University, Rotterdam, Holland, and is now part of the course. The programme focused on the training in team function (co-operation) given to trainee GPs and social workers. It became clear that both groups during their professional training develop markedly different attitudes and views about patient (client) care. These differences form a fundamental handicap in any discussion about teamwork. During the programme the students were made aware of this divergence of viewpoint and were taught how to handle these resulting handicaps and, if possible, to eliminate them.

Mediating the Immediate – Endogenous meanings and simulated narratives in ludic spaces

The thesis discusses games and the gaming experience. It is divided into two main sections; the first examines games in general, while the second concentrates exclusively on electronic games. The text approaches games from two distinct directions by looking at both their spatiality and their narrativity at the same time. These two points of view are combined right from the beginning of the text as they are used in conceptualising the nature of the gaming experience. The purpose of the thesis is to investigate two closely related issues concerning both the field of game studies and the nature of games. In regard to studying games, the focus is placed on the juxtaposition of ludology and narratology, which acts as a framework for looking at gaming. In addition to aiming to find out whether or not it is possible to undermine the said state of affairs through the spatiality of games, the text looks at the interrelationships of games and their spaces as well as the role of narratives in those spaces. The thesis is characterised by discussing alternative points of view and its hypothetical nature. During the text, it becomes apparent that the relationship between games and narratives is strongly twofold: on one hand, the player continuously narrativizes the states the game is in while playing, while the narratives residing within the game space form their own partially separate narrative spaces, on the other. These spaces affect the conception the player has of the game states and the events taking place in the game space itself.

Playing cat and mouse : consumer empowerment and marketing interaction on the net

Peer-reviewed

Learning through role-playing games: an approach for active learning and teaching

This study evaluates the use of role-playing games (RPGs) as a methodological approach for teaching cellular biology, assessing student satisfaction, learning outcomes, and retention of acquired knowledge. First-year undergraduate medical students at two Brazilian public universities attended either an RPG-based class (RPG group) or a lecture (lecture-based group) on topics related to cellular biology. Pre- and post-RPG-based class questionnaires were compared to scores in regular exams and in an unannounced test one year later to assess students' attitudes and learning. From the 230 students that attended the RPG classes, 78.4% responded that the RPG-based classes were an effective tool for learning; 55.4% thought that such classes were better than lectures but did not replace them; and 81% responded that they would use this method. The lecture-based group achieved a higher grade in 1 of 14 regular exam questions. In the medium-term evaluation (one year later), the RPG group scored higher in 2 of 12 questions. RPG classes are thus quantitatively as effective as formal lectures, are well accepted by students, and may serve as educational tools, giving students the chance to learn actively and potentially retain the acquired knowledge more efficiently.

Playing to Learn: Business Simulation Games as Leadership Learning Environments

The aim of this dissertation is to investigate if participation in business simulation gaming sessions can make different leadership styles visible and provide students with experiences beneficial for the development of leadership skills. Particularly, the focus is to describe the development of leadership styles when leading virtual teams in computer-­supported collaborative game settings and to identify the outcomes of using computer simulation games as leadership training tools. To answer to the objectives of the study, three empirical experiments were conducted to explore if participation in business simulation gaming sessions (Study I and II), which integrate face-­to-­face and virtual communication (Study III and IV), can make different leadership styles visible and provide students with experiences beneficial for the development of leadership skills. In the first experiment, a group of multicultural graduate business students (N=41) participated in gaming sessions with a computerized business simulation game (Study III). In the second experiment, a group of graduate students (N=9) participated in the training with a ‘real estate’ computer game (Study I and II). In the third experiment, a business simulation gaming session was organized for graduate students group (N=26) and the participants played the simulation game in virtual teams, which were organizationally and geographically dispersed but connected via technology (Study IV). Each team in all experiments had three to four students and students were between 22 and 25 years old. The business computer games used for the empirical experiments presented an enormous number of complex operations in which a team leader needed to make the final decisions involved in leading the team to win the game. These gaming environments were interactive;; participants interacted by solving the given tasks in the game. Thus, strategy and appropriate leadership were needed to be successful. The training was competition-­based and required implementation of leadership skills. The data of these studies consist of observations, participants’ reflective essays written after the gaming sessions, pre-­ and post-­tests questionnaires and participants’ answers to open-­ ended questions. Participants’ interactions and collaboration were observed when they played the computer games. The transcripts of notes from observations and students dialogs were coded in terms of transactional, transformational, heroic and post-­heroic leadership styles. For the data analysis of the transcribed notes from observations, content analysis and discourse analysis was implemented. The Multifactor Leadership Questionnaire (MLQ) was also utilized in the study to measure transformational and transactional leadership styles;; in addition, quantitative (one-­way repeated measures ANOVA) and qualitative data analyses have been performed. The results of this study indicate that in the business simulation gaming environment, certain leadership characteristics emerged spontaneously. Experiences about leadership varied between the teams and were dependent on the role individual students had in their team. These four studies showed that simulation gaming environment has the potential to be used in higher education to exercise the leadership styles relevant in real-­world work contexts. Further, the study indicated that given debriefing sessions, the simulation game context has much potential to benefit learning. The participants who showed interest in leadership roles were given the opportunity of developing leadership skills in practice. The study also provides evidence of unpredictable situations that participants can experience and learn from during the gaming sessions. The study illustrates the complex nature of experiences from the gaming environments and the need for the team leader and role divisions during the gaming sessions. It could be concluded that the experience of simulation game training illustrated the complexity of real life situations and provided participants with the challenges of virtual leadership experiences and the difficulties of using leadership styles in practice. As a result, the study offers playing computer simulation games in small teams as one way to exercise leadership styles in practice.