Ken Binmore

An Outside Option Experiment

In the economic modeling of bargaining, outside options have often been naively treated by taking them as the disagreement payoffs in an application of the Nash bargaining solution. The paper contrasts this method of predicting outcomes with that obtained from an analysis of optimal strategic behavior in a natural game-theoretic model of the bargaining process. The strategic analysis predicts that the outside options will be irrelevant to the final deal unless a bargainer would then go elsewhere. An experiment is reported which indicates that this prediction performs well in comparison with the conventional predictor.

The Economics of bargaining

Nash bargaining theory - an introduction Nash bargaining theory I perfect equilibrium in a bargaining model, A.Rubinstein Nash bargaining theory II perfect equilibria in bargaining models involuntary unemployment as a perfect equilibrium in a bargaining model a theory of disagreement in bargaining, V.P.Crawford Nash bargaining and incomplete information a bargaining model with incomplete information about Times preferences, A.Rubinstein distortion of utilities and the bargaining problem, J.Sobel Nash bargaining theory II, K.Binmore.

WHY EXPERIMENT IN ECONOMICS

Scientific economists are not wasting their time in the laboratory.Scientific experimental economists can settle down to the twofold role of consolidating economic theory in those contexts where it works fairly well,and providing a source of inspiration for revising the theory where it does not work so well.In situations where the theory does not work at all,we need to accept our limitations and look to disciplines like psychology for the answers.The comparative advantage of economists is that they not only understand the formal statements and institutions within which the assumptions from which statements are deduced are likely to be valid.

Muddling Through: Noisy Equilibrium Selection☆

Abstract This paper examines an evolutionary model in which the primary source of “noise” that moves the model between equilibria is not arbitrarily improbable mutations but mistakes in learning. We model strategy selection as a birth–death process, allowing us to find a simple, closed-form solution for the stationary distribution. We examine equilibrium selection by considering the limiting case as the population gets large, eliminating aggregate noise. Conditions are established under which the risk-dominant equilibrium in a 2×2 game is selected by the model as well as conditions under which the payoff-dominant equilibrium is selected. Journal of Economic Literature Classification Numbers C70, C72.

Noncooperative models of bargaining

Publisher Summary This chapter focuses on the noncooperative models of bargaining. John Nashs (1950) path- breaking paper introduces the bargaining problem, and his pioneering work on noncooperative bargaining theory was taken up again and developed by numerous authors. The target of such a noncooperative theory of bargaining is to find theoretical predictions of what agreement, if any, will be reached by the bargainers, thereby to explain the manner in which the bargaining outcome depends on the parameters of the bargaining problem and to shed light on the meaning of some of the verbal concepts that are used when bargaining is discussed in ordinary language. Three directions in which progress has been particularly fruitful are (1) sequential models have been introduced in studying specific bargaining procedures, (2) refinements of Nash equilibrium have been applied, and (3) bargaining models have been embedded in market situations to provide insights into markets with decentralized trading. In spite of this progress, important challenges are still ahead. The most pressing is that of establishing a properly founded theory of bargaining under incomplete information. A resolution of this difficulty must presumably await a major breakthrough in the general theory of games of incomplete information. From the perspective of economic theory in general, the main challenge remains the modeling of trading institutions (with the nature of money as the most obvious target).

Applying game theory to automated negotiation

With existing technology, it is already possible for personal agents to schedule meetings for their users, to write the small print of an agreement, and for agents to search the Internet for the cheapest price. But serious negotiation cranks the difficulty of the problem up several notches. In this paper, we review what game theory has to offer in the light of experience gained in programming automated agents within the ADEPT (Advance Decision Environment for Process Tasks) project, which is currently being used by British Telecom for some purposes.

Modeling Rational Players: Part II

Game theory has proved a useful tool in the study of simple economic models. However, numerous foundational issues remain unresolved. The situation is particularly confusing in respect of the non-cooperative analysis of games with some dynamic structure in which the choice of one move or another during the play of the game may convey valuable information to the other players. Without pausing for breath, it is easy to name at least 10 rival equilibrium notions for which a serious case can be made that here is the “right†solution concept for such games.

Playing for real

Ken Binmores previous game theory textbook, Fun and Games (D.C. Heath, 1991), carved out a significant niche in the advanced undergraduate market; it was intellectually serious and more up-to-date than its competitors, but also accessibly written. Its central thesis was that game theory allows us to understand many kinds of interactions between people, a point that Binmore amply demonstrated through a rich range of examples and applications. This replacement for the now out-of-date 1991 textbook retains the entertaining examples, but changes the organization to match how game theory courses are actually taught, making Playing for Real a more versatile text that almost all possible course designs will find easier to use, with less jumping about than before. In addition, the problem sections, already used as a reference by many teachers, have become even more clever and varied, without becoming too technical. Playing for Real will sell into advanced undergraduate courses in game theory, primarily those in economics, but also courses in the social sciences, and serve as a reference for economists.

The Theory of Choice: A Critical Guide.

Introduction. Part I: Individual Choice: 1. Rationality. 2. Consumer Theory. 3. How People Choose. 4. Risk, Ignorance and Imagination. 5. Homo Economicus Homo Sociologicus. 6. Autonomy. Part II: Interactive Choice: 7. Game Theory. 8. Bargaining. 9. Game Theory Applied. 10. Organizations. 11. Cultural Exchange. 12. Anarchic Order. Part III: Collective Choice: 13. Social Choice. 14. Democracy. 15. Power. 16. Planning. 17. Agendas. 18. Social Justice. Keywords. Bibliography. Index.

Do People Exploit Their Bargaining Power? An Experimental Study*

Do people “play fair,” or do they exploit their bargaining power? This paper suggests that such questions may not be well posed. It studies two bargaining situations that are very similar from the point of view of current fairness/focal theories of behavior, but differ in their strategic aspects. Different behavior in the two cases and a tendency by subjects after the experiment to describe as “fair” what actually occurred are reported.