Ryuichiro Ishikawa

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.

Rational expectation can preclude trades

We reconsider the no trade theorem in an exchange economy where the traders have non-partition information. By introducing a new concept, rationality of expectations, we show some versions of the theorem different from previous works, such as Geanakoplos (http://cowles.econ.yale.edu, 1989). We also reexamine a standard assumption of the no trade theorem: the common prior assumption.

How Does Childbirth Alter Intrahousehold Resource Allocation? Evidence from Japan

Exploiting unique panel data that include direct measurements of resource allocation within households, we investigated the impact of childbirth on intrahousehold allocation for married Japanese couples. Based on a collective model of the household, we developed reduced-form and structural-form estimation equations that allow us to focus on private goods to track the changes in intrahousehold resource allocation. We found one additional child is associated with a reduction in the wifes private expenditure share by at least two percentage points. This may be because she substitutes more say in decisions on the children for her own private expenditure share.

Inductive Game Theory: A Simulation Study of Learning a Social Situation

Inductive game theory (IGT) aims to explore sources of beliefs of a person in his individual experiences from behaving in a social situation. It has various steps, each of which already involves a lot of different aspects. A scenario for IGT was spelled out in Kaneko-Kline [15]. So far, IGT has been studied chiefly in theoretical manners, while some other papers targeted applications and conducted an experimental study. In this chapter, we undertake a simulation study of a player’s learning about some details of a social situation. First, we give a brief overview of IGT, and its differences from the extant game theories. Then, we explain several points pertinent to our simulation model.

Arrow-Fisher-Hanemann-Henry and Dixit-Pindyck Option Values Under Strategic Interactions

We extend the Arrow-Fisher-Hanemann-Henry (AFHH) and Dixit-Pindyck (DP) option values to game situations. By reinterpreting the AFHH option value as a change in the surplus from conservation because of the prospect of future information, we deal with the conceptual difficulty associated with the AFHH option value in the presence of strategic interactions. We then introduce the DP option value into a game situation. We show that the equivalence between the expected value of information and the DP option value in the standard model does not hold under strategic interactions.

The More Kids, The Less Mom’s Divvy: Impact of Childbirth on Intrahousehold Resource Allocation

We investigate how childbirth affects intrahousehold resource allocation for married Japanese couples. We develop reduced-form and structural-form specifications from a unified theoretical framework. Under a weak set of assumptions, we can focus on private goods to track the changes in intrahousehold resource allocation. Our estimation results show that the allocation of resources within household tend to move to the disadvantage of women after childbirth. One additional child is associated with at least 2.6 percentage points decrease in womens private expenditure share. Our estimation results reject the income-pooling hypothesis, and show that women are more risk averse than men.

Belief Revision for Inductive Game Theory

Inductive game theory captures how a player inductively derives his/her personal views from experiences. The player may have multiple views, some of which differ from the objective situation, but may revise them with further experiences. This paper gives a logical formulation of this revision process by focusing on the role of player’s beliefs. For this objective, we take the AGM approach of belief revision. The idea behind our logic is that the player’s belief state is represented by a belief set of propositional formulas, thereby describing a revision process for the belief states by using a revision operation in AGM theory. In this setting, the player’s personal views are described as models for the current belief set. We also present an application of our framework to a class of inductive games, called festival games, and show how to derive prejudices and discrimination in society.

Beauty Contests and Asset Prices under Asymmetric Information

In this paper, we study a dynamic Gaussian financial market model in which the traders form higher-order expectations about the fundamental value of a single risky asset. Rational uninformed traders are introduced into an otherwise standard differential information economy to investigate the impact of asymmetric information. In a two-period economy, there is a unique linear equilibrium; beauty contests under asymmetric information do not introduce excess volatility driven by self-fulfilling multiple equilibria. Under certain conditions, there is a nonmonotonic relationship between price volatility and the proportion of uninformed traders.