Economics Experimental Lab
【Abstract】Substantial evidence in field, laboratory, and thought experiments in multiple disciplines shows that decision makers often choose a dominated strategy, which contradicts current economic theory. Moreover, experimental evidence shows that the choice of dominated strategies in some mechanisms are significantly reduced in their counterparts. To bridge this gap between theory and reality, we firstly propose two alternative axiomatic approaches: formalizing a distinct anomaly in human reasoning that agents fail to reason state-by-state and tying together a broad range of evidence for the choice of dominated strategies. Secondly, we extend the concept to game theory and mechanism design, where we identify a large class of mechanisms that successfully achieve desirable goals even with boundedly rational agents or agents who mistrust the market makers. Thirdly, we test and verify our theory and its implications in a laboratory experiment with a crossover design that enables pooled data, within-subject, and cross-subject comparisons in both decision problems and games. Finally, we address how our approach contributes to accomplishing two goals simultaneously in modelling bounded rationality: providing a unified framework that subsumes existing ones as limiting cases and stimulating transdisciplinary conversations connecting the concepts of heuristics and emotions in psychology, the utilization of eye-tracking technology in neuroscience, and considerations of the moral foundation underlying a mechanism design in ethics.
【Title】Bounded Rationality and Mechanism Design: A Seed to Transdisciplinary Conversations.
【Speaker】Luyao Zhang, Ohio State University
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