Nobuyuki Hanaki

Why Personal Ties Cannot Be Bought

Personal connections can function as privileged channels of information and trust. When the reliability of information is particularly important applying for a job, needing capital for a new enterprise, moving to a new country their role often becomes crucial. Hence the ethnic enclaves, both residential and professional, in New York City; the economic weight of the Overseas Chinese in their countries of residence; the success of Medieval networks of merchants, organized along ethnic or religious lines. Personal networks are often very successful, but they are by their nature discriminatory and thus tend to generate resentment and opposition among those excluded. Economists and sociologists debate whether networks can be replicated artificially. Not surprisingly, economists tend to be more optimistic, believing that appropriate market mechanisms, encouraged and supported by policy where necessary, can substitute for the missing personal channels. Sociologists on the other hand, see the personal, spontaneous link as the essence of the relation, and thus as something that by its nature cannot be replicated at will (e.g. Marta Tienda and Rebeca Raijman (2001), discussing James E. Rauch (2001)). We address this question in a simple model of labor markets where workers differ in their unobservable productivity. We ask how signaling the possibility of engaging

It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market

To what extent is the observed mis-pricing in experimental asset markets caused by strategic uncertainty (SU) and by individual bounded rationality (IBR)? We address this question by comparing subjects initial price forecasts in two market environments - one with six human traders, and the other with one human and five computer traders. We find that both SU and IBR account equally for the median initial forecasts deviation from the fundamental values. The effect of SU is greater for subjects with a perfect score in the Cognitive Reflection Test, and it is not significant for those with low scores.

Cognitive ability and the effect of strategic uncertainty

How is one’s cognitive ability related to the way one responds to strategic uncertainty? We address this question by conducting a set of experiments in simple 2 x 2 dominance solvable coordination games. Our experiments involve two main treatments: one in which two human subjects interact, and another in which one human subject interacts with a computer program whose behavior is known. By making the behavior of the computer perfectly predictable, the latter treatment eliminates strategic uncertainty. We find that subjects with higher cognitive ability are more sensitive to strategic uncertainty than those with lower cognitive ability.

Bounded Rationality and Strategic Uncertainty in a Simple Dominance Solvable Game

How much of the failures to achieve Pareto efficient outcome observed in a simple 2 2 dominance solvable game can be attributed to strategic uncertainty and how much is actually due to individual bounded rationality? We address this question by conducting a set of experiments involving two main treatments: one in which two human subjects interact, and another in which one human subject interacts with a computer program whose behavior is known. By making the behavior of the computer opponent perfectly predictable, the latter treatment eliminates strategic uncertainty. Our results suggest that observed coordination failures can be attributed equally to individual bounded rationality and strategic uncertainty.

If you are so rich, why aren't you smart?

We consider a differentiated-goods Cournot competition where each agent learns about how much to produce. There are two types of agents: ignorant and informed. Ignorants do not know about the demand function for their products and naively assume prices for their products will remain the same as the previous period in the process of learning. Informed ones, on the other hand, know about the demand function, and learn how much to produce by myopically best responding against the quantities produced by others. We show that there are situations in which ignorants are more successful than informed (in a sense that they obtain a higher payoff than the latter). This occurs because of the way two types of agents learn to behave. Of course, there are situations where the opposite, the informed being richer than the ignorants, is true. The nature of strategic interactions determines which outcome prevails.

Marriage relationships among households in the mid 19th century Tama, Japan

This paper studies the formation of marriage relationships between households in 19th century, Tama, Japan. Previous studies on marriage market or partner selection in the Japanese past tended to rely either on information from a single village in case of statistical analysis, or on collection of oral histories. By using the information from a household register that covers 35 villages, and applying a method of social network analysis, this paper goes beyond the limitation of previous studies. Our empirical results show that there was a tendency for socioeconomic homogamy and endogamy (within kinship and within village) among peasants in the mid 19th century Tama, Japan.

Fluid intelligence and cognitive reflection in a strategic environment: evidence from dominance-solvable games

Dominance solvability is one of the most straightforward solution concepts in game theory. It is based on two principles: dominance (according to which players always use their dominant strategy) and iterated dominance (according to which players always act as if others apply the principle of dominance). However, existing experimental evidence questions the empirical accuracy of dominance solvability. In this study, we study the relationships between the key facets of dominance solvability and two cognitive skills, cognitive reflection, and fluid intelligence. We provide evidence that the behaviors in accordance with dominance and one-step iterated dominance are both predicted by ones fluid intelligence rather than cognitive reflection. Individual cognitive skills, however, only explain a small fraction of the observed failure of dominance solvability. The accuracy of theoretical predictions on strategic decision making thus not only depends on individual cognitive characteristics, but also, perhaps more importantly, on the decision making environment itself.

Heterogeneity in Lowest Unique Integer Game

This study investigates a Lowest Unique Integer Game (LUIG) by agent-based simulation. LUIG is a game in which each player submit a positive integer, and the player who has submitted the unique least integer wins. We consider mixtures of two types of players, naive adaptive learner and more sophisticated quasi fictitious play learner, and investigate how each type of player behaves and learns. Our results show that more sophisticated quasi fictitious play learner often lose against naive adaptive learner. LUIG with small number of players seems belong to one of those situations in which it is better to be naive than to be sophisticated.