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  5. Dynamics and Reputation
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Dynamics and Reputation

Paper Session

Sunday, Jan. 7, 2024 10:15 AM - 12:15 PM (CST)

Grand Hyatt, Republic A
Hosted By: Econometric Society
  • Chair: Raphael Boleslavsky, Indiana University

Reputation Effects with Endogenous Records

Harry Pei
,
Northwestern University

Abstract

A patient player interacts with a sequence of short-run players. The patient player is either an honest type who always takes a commitment action and never erases any record, or an opportunistic type who decides which action to take and whether to erase that action from his record at a low cost. We show that the patient player will have an incentive to build a reputation in every equilibrium and can secure a payoff that is strictly greater than his commitment payoff after accumulating a long enough good record. However, as long as the patient player has a sufficiently long lifespan, his equilibrium payoff must be close to his minmax value. Although a small probability of opportunistic type can wipe out all of the patient player's returns from building reputations, it only has a negligible effect on the short-run players' welfare.

Reputational Bargaining with Ultimatum Opportunities

Mehmet Ekmekci
,
Boston College
Hanzhe Zhang
,
Michigan State University

Abstract

Two parties negotiate in the presence of external resolution opportunities (court, arbitration, or war). The outcome of external resolution depends on the privately held justifiability/strength of their claims. A justified party issues an ultimatum for resolution whenever possible, but an unjustified party strategically bluffs with an ultimatum to establish a reputation for being justified. We show that the availability of ultimatum opportunities can benefit or hurt an unjustified party in equilibrium. When the chances of being justified become negligible, agreement is immediate and efficient; and if the set of justifiable demands is rich, our solution incorporates ultimatum in the Rubinstein division of Abreu and Gul (2000) in a simple way.

Post-Breakthrough Payoffs and Incentives for Experimentation

Martin Dumav
,
Charles III University of Madrid
William Fuchs
,
University of Texas-Austin
Jangwoo Lee
,
Chinese University of Hong Kong

Abstract

[Please, see the extended abstract attach]

Waiting for Fake News

Raphael Boleslavsky
,
Indiana University

Abstract

This paper studies a dynamic model of information acquisition, in which information might be secretly manipulated. A principal must choose between a safe action with known payoff and a risky action with uncertain payoff, favoring the safe action under the prior belief. She may delay her decision to acquire additional news that reveals the risky action’s payoff, without knowing exactly when such news will arrive. An uninformed agent with a misaligned preference may have the capability to generate a false arrival of news, which is indistinguishable from a real one, distorting the information content of news and the principal’s search. The analysis characterizes the positive and normative distortions in the search for news arising from such manipulation, and it considers three remedies that increase the principal’s payoff: a commitment to naive search, transfer of authority to the agent, and delegation to an intermediary who is biased in the agent’s favor.
JEL Classifications
  • C7 - Game Theory and Bargaining Theory
  • D8 - Information, Knowledge, and Uncertainty