Cursed Equilibrium
2005; Wiley; Volume: 73; Issue: 5 Linguagem: Inglês
10.1111/j.1468-0262.2005.00631.x
ISSN1468-0262
Autores Tópico(s)Game Theory and Applications
ResumoEconometricaVolume 73, Issue 5 p. 1623-1672 Cursed Equilibrium Erik Eyster, Erik Eyster Dept. of Economics, London School of Economics, Houghton Street, London WC2A 2AE, U.K.; [email protected]and Dept. of Economics, University of California–Berkeley, Berkeley, CA 94720, U.S.A.; [email protected]; http://emlab.berkeley.edu/users/rabin/index.html.Search for more papers by this authorMatthew Rabin, Matthew Rabin We thank Colin Camerer and seminar participants at Arizona, Berkeley, Birmingham, Caltech, Edinburgh, ESSET 2001 (Gerzensee), ESA Meeting 2002 (Strasbourg), Essex, Harvard, LSE, Nottingham, Nuffield, UCL, Zurich, Pompeu Fabra, and especially Dirk Engelmann, three anonymous referees, and Glenn Ellison for helpful comments, as well as Davis Beekman, Kitt Carpenter, David Huffman, and extra especially Jeff Holman for valuable research assistance. We are grateful to Chris Avery, John Forsythe, Serena Guarnaschelli, John Kagel, Mark Isaac, Dan Levin, Richard McKelvey, and Tom Palfrey for sharing their data. Eyster thanks the Olin and MacArthur Foundations, and Rabin thanks the Russell Sage, MacArthur, and National Science Foundations for financial support.Search for more papers by this author Erik Eyster, Erik Eyster Dept. of Economics, London School of Economics, Houghton Street, London WC2A 2AE, U.K.; [email protected]and Dept. of Economics, University of California–Berkeley, Berkeley, CA 94720, U.S.A.; [email protected]; http://emlab.berkeley.edu/users/rabin/index.html.Search for more papers by this authorMatthew Rabin, Matthew Rabin We thank Colin Camerer and seminar participants at Arizona, Berkeley, Birmingham, Caltech, Edinburgh, ESSET 2001 (Gerzensee), ESA Meeting 2002 (Strasbourg), Essex, Harvard, LSE, Nottingham, Nuffield, UCL, Zurich, Pompeu Fabra, and especially Dirk Engelmann, three anonymous referees, and Glenn Ellison for helpful comments, as well as Davis Beekman, Kitt Carpenter, David Huffman, and extra especially Jeff Holman for valuable research assistance. We are grateful to Chris Avery, John Forsythe, Serena Guarnaschelli, John Kagel, Mark Isaac, Dan Levin, Richard McKelvey, and Tom Palfrey for sharing their data. Eyster thanks the Olin and MacArthur Foundations, and Rabin thanks the Russell Sage, MacArthur, and National Science Foundations for financial support.Search for more papers by this author First published: 05 August 2005 https://doi.org/10.1111/j.1468-0262.2005.00631.xCitations: 319 AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Abstract There is evidence that people do not fully take into account how other people's actions depend on these other people's information. This paper defines and applies a new equilibrium concept in games with private information, cursed equilibrium, which assumes that each player correctly predicts the distribution of other players' actions, but underestimates the degree to which these actions are correlated with other players' information. We apply the concept to common-values auctions, where cursed equilibrium captures the widely observed phenomenon of the winner's curse, and to bilateral trade, where cursedness predicts trade in adverse-selections settings for which conventional analysis predicts no trade. We also apply cursed equilibrium to voting and signalling models. 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