arXiv subjects

Christoph Kuzmics

Publications and source records attributed to Christoph Kuzmics.

8 recordsLinked to original sources

arXiv2026

Renegotiation-Proof Cheap Talk

An informed Expert and an uninformed Decision-Maker, with conflicting interests, engage in repeated cheap talk communication in a sequence of new decision problems. While the Decision-Maker's optimal payoff is attainable in some subgame perfect equilibrium, no payoff profile close to the Decision-Maker's optimal one is immune to renegotiation. Pareto efficient renegotiation-proof equilibria entail a compromise between the Expert and the Decision-Maker. This could involve the Expert being truthful and the Decision-Maker not fully utilizing this information to their advantage. The Decision-Maker's maximal renegotiation-proof equilibrium payoff depends on the Expert's preferences and the prior distribution of the state. In the Crawford and Sobel (1982) environment a more biased Expert harms the Decision-Maker. In a model with transparent Expert motives a more volatile environment harms the Decision-Maker while helping the Expert.

econ.TH↗

arXiv2024

Randomization advice and ambiguity aversion

We design and implement lab experiments to evaluate the normative appeal of behavior arising from models of ambiguity-averse preferences. We report two main empirical findings. First, we demonstrate that behavior reflects an incomplete understanding of the problem, providing evidence that subjects do not act on the basis of preferences alone. Second, additional clarification of the decision making environment pushes subjects' choices in the direction of ambiguity aversion models, regardless of whether or not the choices are also consistent with subjective expected utility, supporting the position that subjects find such behavior normatively appealing.

econ.TH↗

arXiv2024

Farkas' Lemma and Complete Indifference

In a finite two player game consider the matrix of one player's payoff difference between any two consecutive pure strategies. Define the half space induced by a column vector of this matrix as the set of vectors that form an obtuse angle with this column vector. We use Farkas' lemma to show that this player can be made indifferent between all pure strategies if and only if the union of all these half spaces covers the whole vector space. This result leads to a necessary (and almost sufficient) condition for a game to have a completely mixed Nash equilibrium. We demonstrate its usefulness by providing the class of all symmetric two player three strategy games that have a unique and completely mixed symmetric Nash equilibrium.

econ.TH↗

arXiv2024

Robust equilibria in cheap-talk games with fairly transparent motives

For cheap-talk games with a binary state space in which the sender has state-independent preferences, we characterize equilibria that are robust to introducing slight state-dependence on the side of the sender. Not all equilibria are robust, but the sender-optimum is always achieved at some robust equilibrium.

econ.TH↗

arXiv2023

Communication, Renegotiation and Coordination with Private Values

An equilibrium is communication-proof if it is unaffected by new opportunities to communicate and renegotiate. We characterize the set of equilibria of coordination games with pre-play communication in which players have private preferences over the coordinated outcomes. The set of communication-proof equilibria is a small and relatively homogeneous subset of the set of qualitatively diverse Bayesian Nash equilibria. Under a communication-proof equilibrium, players never miscoordinate, play their jointly preferred outcome whenever there is one, and communicate only the ordinal part of their preferences. Moreover, such equilibria are robust to changes in players' beliefs and interim Pareto efficient

econ.TH↗

arXiv2023

An Ellsberg paradox for ambiguity aversion

The 1961 Ellsberg paradox is typically seen as an empirical challenge to the subjective expected utility framework. Experiments based on Ellsberg's design have spawned a variety of new approaches, culminating in a new paradigm represented by, now classical, models of ambiguity aversion. We design and implement a decision-theoretic lab experiment that is extremely close to the original Ellsberg design and in which, empirically, subjects make choices very similar to those in the Ellsberg experiments. In our environment, however, these choices cannot be rationalized by any of the classical models of ambiguity aversion.

econ.TH↗

arXiv2022

Limit Orders and Knightian Uncertainty

A range of empirical puzzles in finance has been explained as a consequence of traders being averse to ambiguity. Ambiguity averse traders can behave in financial portfolio problems in ways that cannot be rationalized as maximizing subjective expected utility. However, this paper shows that when traders have access to limit orders, all investment behavior of an ambiguity-averse decision-maker is observationally equivalent to the behavior of a subjective expected utility maximizer with the same risk preferences; ambiguity aversion has no additional explanatory power.

econ.TH↗

arXiv2020

Prevalence Estimation from Random Samples and Census Data with Participation Bias

Countries officially record the number of COVID-19 cases based on medical tests of a subset of the population with unknown participation bias. For prevalence estimation, the official information is typically discarded and, instead, small random survey samples are taken. We derive (maximum likelihood and method of moment) prevalence estimators, based on a survey sample, that additionally utilize the official information, and that are substantially more accurate than the simple sample proportion of positive cases. Put differently, using our estimators, the same level of precision can be obtained with substantially smaller survey samples. We take into account the possibility of measurement errors due to the sensitivity and specificity of the medical testing procedure. The proposed estimators and associated confidence intervals are implemented in the companion open source R package cape.

stat.ME↗