סמינר באסטרטגיה

Speaker: Benjamin Bachi, Berglas School of Economics, Tel Aviv University

Abstract:

We analyze two models in which two agents compete over a decision maker who exhibits difficulty comparing between alternatives. 

In the first model, agents engage in a one-dimensional competition (e.g. price) over a decision maker who responds only to large differences. 

When the alternatives are approximately the same, he sticks to his default option, or randomizes. 

In the second model, agents compete in two-attribute alternatives over a decision maker who exhibits "trade-off avoidance", and thus follows a non-compensatory choice procedure that responds purely to ordinal rankings along the two dimensions. 

The decision maker chooses a dominant alternative when one exists. In the absence of domination, he chooses according to one of the attributes (with different probabilities that reflect their relative salience), or sticks to a default option (when one exists). 

Our analysis of mixed-strategy Nash equilibria in the two models highlights the effect of the decision maker's choice procedure on the value of offered alternatives and the rate of switching away from default options. 

In the second model we also analyze the equilibrium distribution across attributes and the prevalence of domination. We discuss the potential implications of this analysis for recent discussions of "default architecture".