Projection Equilibrium: Theory, Experimental Evidence, and ApplicationsStephanie Wang
17. Juni 2021
Stephanie Wang (Pittsburgh University, http://www.pitt.edu/~swwang/) presents her project "Projection Equilibrium: Theory, Experimental Evidence, and Applications" in the Microeconomics Research Seminar via Zoom on Thursday, June 17, 17:15-18:45. You may write to huyen.nguyen-1"AT"uni-hamburg.de or gero.henseler"AT"uni-hamburg.de to register for the seminar (getting the Zoom access data).
Abstract: We develop a parsimonious model of projective social beliefs for Bayesian games. The key aspect of the model is a tight link between the extent to which people project onto others and the extent to which they simultaneously anticipate but underestimate others' projection onto them. We provide strong experimental evidence for this link, and explore the model's implications to a variety of settings. In risky cooperation, people under-invest in relationships and too often infer that others have antagonistic preferences. When no one supports an opinion, no one speaks up, but unpopular opinions come to appear as popular even if speech is almost free. In common-value trade, sellers underbluff, buyers are cursed, and the model closely matches the existing evidence.