Research

Abstract: Given a set of capacities describing uncertainty over a set of states and a set of acts, the question is considered when an act is never a best reply, i.e., for every capacity there is another act with higher Choquet expected utility. This question is answered for several sets of capacities with given supports, where the focus is on four different definitions of a support. One consequence of the analysis is that an act is never a best reply against the set of all capacities if and only if it is strictly dominated by a convex combination of the comonotonized versions of the other acts. This result can be seen as the extension of the analogous result for additive capacities, for instance mixed strategies in games.

Revealing Features from Optimal Choice (joint with Paola Manzini, Marco Mariotti, and Illia Pasichnichenko)

Abstract: Suppose that a decision maker (DM) uses features (namely, measurable characteristics) to describe alternatives. An analyst cannot observe directly which features the DM considers, how she evaluates them, and which pro- cedure she uses when choosing. Can we identify which features matter? We propose a “Pareto dominance” approach: the only assumption we make is that the DM does not make choices that are Pareto dominated in the set of relevant features. We characterise exactly which (collections of) pairs of a choice obser- vation and a feasible set are informative about the features that the DM uses in her internal representation of alternatives. Our results can be leveraged for the study of AI algorithms and the design of experiments.

Mis(Interpreting) the World (joint with Elias Tsakas)

Abstract: This paper introduces to the standard state-space model a new operator that allows to model distortions due to misinterpretations of the world. The main characterization theorems provide conditions under which an analyst and the agent herself respectively can identify logical inconsistencies and/or interpretation mistakes. These results provide a benchmark for studying the reasoning mechanisms that underpin recently-surging phenomena, such as belief polarization, echo chambers, etc.

Who Influences Whom? Identifying the Social Network from Behavior (joint with Abhinash Borah)

Abstract: Individual behavior is often influenced by that of peers. The identification of such peer influence from observable behavior constitutes a classic problem in the social sciences. When can we identify the social network of influence? We propose a simple model of social influence and interactions. In this framework, we characterize exactly which behavior and graph structures are informative when it comes to the question of identifying the underlying network of influence.

A General Definition of Perfect Equilibrium (joint with János Flesch, Dries Vermeulen, and Anna Zseleva)

Abstract: We propose a definition of perfect equilibrium that can be applied to a wide class of games in strategic form. The two key features in the definition are a) using nets instead of sequences, b) using a new concept of completely mixed nets of strategies, based on a more detailed interpretation of the notion of a carrier of a strategy. In the case of finite action sets our definition coincides with the original definition of Selten (1975), and in the compact-continuous case our definition yields a nonempty and compact set of perfect equilibria, which are all weak perfect equilibria according to the definition of Simon and Stinchcombe (1995). We present several examples which both motivate and illustrate our definition, including games with discontinuous payoffs as well as games played with finitely additive strategies where our definition has a bite.

Feature Identification from Mixture Choice Data (with Paola Manzini, Marco Mariotti, and Illia Pasichnichenko)

Suppose that alternatives are described in terms of their measurable characteristics (features). An analyst cannot directly observe which features a decision maker (DM) considers and which procedure she uses when choosing. However, the analyst observes choices from a set of menus. Can the analyst identify the distribution of relevant features, i.e., the probability that the DM takes a particular combination of features into account when making her choice? We show that the distribution of features is identified by the suitable joint distribution of choices from a collection of menus.

Choquet Expected Utility and Correlated Equilibrium (joint with Hans Peters and Dries Vermeulen)

Abstract: coming soon.

COMPLETE LIST OF PUBLICATIONS

Managing Anticipation and Reference-dependent Choice (joint with Jesper Armouti-Hansen)

Journal of Mathematical Economics 112 (2024), 102988

Abstract: Extensive field and experimental evidence shows that reference points shape behavior. But, what shapes the reference point? Candidates put forward in the literature range from the status quo, to rational expectations and the narrow focus of dreaming or worrying about a single possible outcome. This paper develops a model that includes all of these candidate sources. It does so, by allowing the reference point to be any convex combination of the outcomes possible under a consumption lottery. We introduce new solution concepts for reference-dependent choices, characterize these solution concepts on the level of choice data and identify the model's parameters.

Testing Negative Value of Information and Ambiguity Aversion (joint with Illia Pasichnichenko)

Winner of the 2021 Jaffray Lecture (RUD 2021 conference)

Journal of Economic Theory 213 (2023), 105730

Abstract: The standard Subjective Expected Utility model of decision-making implies that information can never have a negative value ex-ante. Many ambiguity theories have since questioned this property. We provide an experimental test of the connection between value of information and ambiguity attitude. Our results show that the value of information can indeed be negative when new information renders hedging against ambiguity impossible. Moreover, the value of information is correlated with ambiguity aversion. This confirms the predictions from ambiguity theories and may have implications for decision-making in uncertain and dynamic environments. Neither complexity avoidance nor information with ambiguous reliability can reproduce the results.

Motivation: Underlying the idea of the paper is the concept of the ex-ante value of information. Imagine you want to visit a relative of yours during Covid times. Before visiting said relative, you can undergo a PCR test. What is the value of such a test when you know all outcomes it may take, but not yet which of these it will take? This so called ex-ante value lies in you being able to condition your decision on the test outcome. You could still go (or not go) irrespective of the test outcome, but you could also decide to only visit your relative if the test comes back negative and to not visit them if the test comes back positive (or vice versa, for whatever reason). Without getting tested you can either visit your relative or not, but you don't have the option to condition this decision on the test outcome. The ex-ante value of information lies in this additional flexibility of conditioning your decision. So, when can this flexibility (which you are always free to ignore) ever be something you don't want? This is what the paper is about.

A Test of (Weak) Certainty Independence (joint with Christian König-Kersting and Stefan T. Trautmann)

Journal of Economic Theory 209 (2023), 105623

Abstract: We provide a test of the axioms of certainty and weak certainty independence in models of decision-making under subjective uncertainty. We show that it is through these two weakenings of the classic independence axiom that prominent ambiguity models retain properties that stand in conflict with the ambiguity-sensitive behavior that is revealed in our experiment. Our findings suggest that this conflict may be of a more fundamental nature than what most of these models can accommodate. Our results call for the use of ambiguity models that can accommodate an ambiguity attitude which depends on the chances of winning.

Cluster-Shortlisted Choice (single-authored)

Journal of Mathematical Economics 102 (2022), 102726

Abstract: Clustering is an essential part of data analysis and a natural simplifying operation to perform when making choices in complex situations. It is the act of grouping similar objects together. This paper develops an individual choice theory based on the idea of clustering. It shows that two simple conditions behaviorally characterize this theory and lays out to what degree its parameters can be identified from choice data. It furthermore presents an attempt at a taxonomy of some of the most prominent models in the literature on two-step conceptualizations of the act of choice.

Rational Choices: An Ecological Approach (joint with Abhinash Borah)

Theory and Decision (2019), 86(3-4), pp. 401-420

Abstract: We address the oft-repeated criticism that the demands which the rational choice approach makes on the knowledge and cognition of a decision-maker (DM) are way beyond the capabilities of typical human intelligence. Our key finding is that it may be possible to arrive at this ideal of rationality by means of cognitively less demanding, heuristic-based ecological reasoning that draws on information about others’ choices in the DM’s environment. Formally, we propose a choice procedure under which, in any choice problem, the DM, first, uses this information to shortlist a set of alternatives. The DM does this shortlisting by a mental process of categorization, whereby she draws similarities with certain societal members—the ingroup—and distinctions from others—the outgroup—and considers those alternatives that are similar (dissimilar) to ingroup (outgroup) members’ choices. Then, she chooses from this shortlisted set by applying her preferences, which may be incomplete owing to limitations of knowledge. We show that, if a certain homophily condition connecting the DM’s preferences with her ingroup–outgroup categorization holds, then the procedure never leads the DM to making bad choices. If, in addition, a certain shortlisting consistency condition holds vis-a-vis non-comparable alternatives under the DM’s preferences, then the procedure results in rational choices.

(F)Lexicographic Shortlist Method (single-authored)

Economic Theory (2018), 65(1), pp. 79-97

Abstract: Standard rational choice relies on the assumption that a decision maker is certain about her preferences. The psychology literature, on the other hand, provides well-established evidence that consumers are often uncertain about the true value of alternatives. This is particularly so when alternatives have several attributes and focusing on different attributes shifts a decision maker’s ranking of alternatives. In this paper, we propose and behaviorally characterize a new model of boundedly rational choice that formalizes these insights from psychology into a choice procedure. Simply put, our approach introduces menu dependence into the idea of lexicographic preferences. We study some of its properties and highlight how this procedure exacerbates any welfare judgments.

This or That? Sequential Rationalization of Indecisive Choice Behavior (joint with Jesper Armouti-Hansen)

Theory and Decision (2018), 84(4), pp. 507-524

Abstract: Decision-makers frequently struggle to base their choices on an exhaustive evaluation of all options at stake. This is particularly so when the choice problem at hand is complex, because the available alternatives are hard (if not impossible) to compare. Rather than striving to choose the most valuable alternative, in such situations decision-makers often settle for the choice of an alternative which is not inferior to any other available alternative instead. In this paper, we extend two established models of boundedly rational choice, the categorize then choose heuristic and the rational shortlist method, to incorporate this kind of “indecisive” choice behavior. We study some properties of these extensions and provide full behavioral characterizations.

The Anscombe-Aumann Representation and the Independence Axiom: A Reconsideration (joint with Abhinash Borah)

Theory and Decision (2016), 80(2), pp. 211-226

Abstract: We provide a new behavioral foundation for subjective expected utility (SEU) within the Anscombe–Aumann framework. In contrast to the original axiomatization of SEU, our behavioral foundation establishes that to be consistent with SEU maximization, we need not explicitly assume that preferences satisfy the independence axiom over the domain of all acts. Rather, the substantive implications of independence for an SEU representation may equivalently be derived from less demanding conditions over certain smaller classes of acts. These acts, which we refer to as uncertainty-free comparable acts, have the property that they are relatively simple for a decision maker to compare because she can rank acts within any such class based on her risk preferences alone, without having to consider the underlying uncertainty. Acts of this kind comprise constant acts and acts that are almost identical in the sense that they differ from one another in at most one state.

Selmer's Multiplicative Algorithm (single-authored)

Integers (2012), 12(1), pp. 1-20

Abstract: The behavior of the multiplicative acceleration of Selmer's algorithm is widely unknown and no general result on convergence has been detected yet. Solely for its 2-dimensional, periodic expansions, there exist some results on convergence and approximation due to Fritz Schweiger. In this paper we show that periodic expansions of any dimension do in fact converge and that the coordinates of the limit points are rational functions of the largest eigenvalue of the periodicity matrix.

MORE Working Papers

Universal Basic Income, Social Movements and Political Change (joint with Rajesh Ramachandran)

Abstract: The idea of a universal basic income (UBI) has gained momentum in recent years. Vast numbers of studies examine its consequences with respect to poverty, inequality, automation, financial viability and incentives to work; analyses that focus on its economic consequences. But, what about its political ramifications? This paper presents a theoretical model to understand the incentive effects of UBI to participate in social protest movements. Our results show that UBI has important implications for the determination of economic policies through reducing costs of political participation. And, accounting for these implications is essential to evaluate its welfare consequences.

Preferences under Ambiguity Without Event-Separability (joint with Abhinash Borah)

Abstract: We propose and axiomatically characterize a representation of ambiguity sensitive preferences. The distinguishing feature of our axiomatization is that we do not require preferences to be event-wise separable over any domain of acts. Even without any such separability restrictions, we are able to uniquely elicit the decision maker's subjective probabilities. The novel axiom that allows us to do so expresses the idea that at least in the domain of a certain class of acts the decision maker exhibits a consistent tradeoff between risk and ambiguity concerns. Under our representation of her preferences, any act is assessed by its subjective expected utility and a residual that captures her assessment of the act's exposure to ambiguity.