When information hurts Markets, Games, and Strategic Behaviour By Todd Kaplan.

Slides:

Advertisements

Similar presentations

1 Signalling Often a player wants to convey his private information to other players. It might be information about his own payoffs (My costs are low,

Advertisements

Information Economics Consider the following variants on the game of poker: The Certainty Game – 5 cards dealt face up so that all players can see them.

“A little knowledge is a dangerous thing. So is a lot.”

Social Networks 101 P ROF. J ASON H ARTLINE AND P ROF. N ICOLE I MMORLICA.

Taxes on cars Buying a used car (Private & Dealer Buying a new car Financing.

Saving Money. What does it mean to save money? Saving means putting some of your money away for emergencies and/or short-term (less than one year) financial.

Chapter 10 Sales and Marketing Cash Sales and Sales on Account Proving Cash Most cash registers are really computer terminals with a display screen.

ECON 102 Tutorial: Week 8 Ayesha Ali office hours: 8:00AM – 8:50AM tuesdays LUMS.

Module 4: Investing Review

Pondering more Problems. Enriching the Alice-Bob story Go to AGo to B Go to A Alice Go to B Go to A Go to B Go shoot pool Alice.

Signaling Game Problems. Signaling game. Two players– a sender and receiver. Sender knows his type. Receiver does not. It is not necessarily in the sender’s.

ECON 100 Tutorial: Week 9 office: LUMS C85.

Investing your money This class is going to give you money to invest. How would you invest it??

© 2009 Pearson Education Canada 20/1 Chapter 20 Asymmetric Information and Market Behaviour.

1 Business System Analysis & Decision Making - Lecture 5 Zhangxi Lin ISQS 5340 July 2006.

Adverse Selection Asymmetric information is feature of many markets

Intro to Market Equilibrium

©2007, The McGraw-Hill Companies, All Rights Reserved 10-1 McGraw-Hill/Irwin Buying call options  Assume a buyer pays $3 of investment cost for a call.

Asymmetric Information ECON 370: Microeconomic Theory Summer 2004 – Rice University Stanley Gilbert.

Banking and Bank Runs We are going to learn a bit about what a bank does and why it leads to the possibility of bank runs. –We will start out today with.

Managerial Economics-Charles W. Upton Asymmetric Information.

Managerial Economics-Charles W. Upton Takeover Bids.

How do Dealers Make Money? Economics 71a Spring 2007 Extra Lecture notes 2.4a.

Banking and Bank Runs We are going to learn a bit about what a bank does and why it leads to the possibility of bank runs. –We will start out today with.

Jennifer Jones Lindsay Yoshitomi Leslie White Jeff Guba.

Currency Conversion Spot Rates Forward Rates Hedging Strategies

By: Jason Arkell-Boles. HIDDEN DISASTERS IN HOMES Mold Leaky Drains Old Materials Bad electrical Poorly done renovations Leaky roof Roof that needs to.

CALCULATING THE COST OF TOTAL CREDIT Personal Finance.

The Money Market. Money and Bonds Money, which can be used for transactions, pays no interest. currency checkable deposits.

Exam Questions. Fred and Elmer No Price War Price War.

1 Bargaining & Markets u As before: Buyers and Sellers, δtp,δtp, δ t (1-p). u Matching: Seller meets a buyer with probability α. A buyer meets a seller.

ECONOMIC PROBLEMS OF THE 1920s 1. Overproduction.  Industry produced more than people bought.

Starbucks, Beating The Prisoners Dillema Brooke Hatcher Econ 202 April 28 th, 2012.

Saving and Investing. Why Save?  Saving : setting aside income for a period of time so that it can be used later  People save for purchases that require.

Chapter 4 Study Guide.

Practice Questions. __b__The adverse selection process is prevalent in the used car market because: a.only poorer people are likely to purchase used cars.

Introduction to Game Theory

By: Patrick Collins. Table of Contents Intro Car Choice Payments Financing Maintenance Insurance.

Business Management.

Consumer Choice With Uncertainty Part II: Examples Agenda: 1.The Used Car Game 2.Insurance & The Death Spiral 3.The Market for Information 4.The Price.

Warm Up Turn to page 25 in your textbook Read “Consumer Action” What can Yolanda do to help her business be more profitable? How will she know if her price.

Budgeting and Financial Planning Why should people make a plan for how to get and spend money? What strategies can be used to do this most effectively?

Extensive Games with Imperfect Information

Chapter ElevenCopyright 2009 Pearson Education, Inc. Publishing as Prentice Hall. 1 Chapter 11 Game Theory and Asymmetric Information.

HOME Microsoft Xbox 360 Zune. We need 1-3 million dollars! It will be definitely worth it we will pay you back and more! HOME MICROSOFT XBOX Zune.

Information. Information Problems Adverse Selection: The Market for Lemons Two types of cars: ½ are good cars ($100) and ½ are lemons ($50). Sellers know.

Employment Standards Act:  All employees must be paid minimum wage  Exception: Training Wage ($6.00 for the first 500 hours work)  Employers must make.

STARTER  What kind of risks may be involved in putting money in a bank savings account?  Think of a way to balance risk and return when making investment.

The Apple Market Debrief. 1. At what price were apples most frequently sold in round Three?

SESSION 19: INSURING Talking Points Insuring 1. Insurance is a product that allows people to pay a fee (called a premium) now to transfer the costs of.

Experimental Probability

Budgeting and Financial Planning Why should people make a plan for how to get and spend money? What strategies can be used to do this most effectively?

 Today that will take part in a simulation that will require them to assume the roles to merchants and traders.  Half of the group will become traders,

Investing in Real Estate Through Your Strategic Affluence 401k This material is copyright © 2013 by SSEN LLC and is used under license by Strategic Affluence.

Chapter 13 Exchange Rates and the Foreign Exchange Market: An Asset Approach.

Microeconomics Course E John Hey. Examinations Go to Read.

The Banking System Before the Great Depression. Objective By the end of the lesson, SWBAT explain how the over value of companies and the flow of money.

Culture Slide My favorite Things Goals in life Free slide Sources.

Incomplete Information and Bayes-Nash Equilibrium.

By: Donté Howell Game Theory in Sports. What is Game Theory? It is a tool used to analyze strategic behavior and trying to maximize his/her payoff of.

Life Impact | The University of Adelaide University of Papua New Guinea Professional Skills An introduction to financial literacy.

© Mark E. Damon - All Rights Reserved Directions: As you play the game, click on the TEXT DOLLAR AMOUNT that the contestant calls, not the surrounding.

Money and Banking Lecture 22. Review of the Previous Lecture Role of Financial Intermediaries Pool Savings Safekeeping, accounting services and access.

The Stock Market and Business Cycle. What is a Stock Market? When you start up a business you need money. Not everyone has enough money so often they.

The Law of Demand. What is demand? buy a good or service Demand is the desire, willingness, and ability to buy a good or service want First, a consumer.

caveat emptor overview

Adverse selection Abhinash adhikari Astha gyawali Bijay chalise

Presentation transcript:

When information hurts Markets, Games, and Strategic Behaviour By Todd Kaplan

Insurance Problem You have a fantastic job as a professional video-game player that pays £100,000 per year. The group Parents against Violence of Videogames PAVLOV secretly put subliminal messages in the video game Halo2. These messages will cause a condition in people that have played Halo2 at the start of the year This will cause players to start drooling whenever they shoot people in video games. Such drooling is detrimental to playing the game at a world-class level. Fortunately, this condition is only triggered in roughly half the population that played Halo2.

Insurance Problem 2. Also fortunately, several expensive sessions with a renowned psychologist can cure the condition. The cure is worth it and costs £100,000. There is an insurance company that may offer you insurance for a price of £60,000. You have to decide on whether or not to buy the insurance if it is made available. (Assuming that you purchase the cure whether or not you have insurance.) At the same time, the insurance company has to decide whether or not to offer the insurance. The payoffs for both the company and the video game player are displayed in the following table.

Payoffs Payoff in utils. Why is the payoff to a player buying insurance 60?

Expected payoffs w/o Information What is the expected payoffs? What are the Nash equilibria?

With information. Microsoft announces that it has a downloadable program that will present a test that will tell the player for certain whether or not she/he is susceptible to the subliminal messages. What are the equilibria when a player knows his type? What are the equilibria when the seller knows the players type and the player doesnt? What are the equilibria when they both know a players type? What are the expected equilibrium payoffs? Does the information help anyone?

Without Info results. Group at Exeter

With info results. Also Exeter

Other Insurance Examples Examples: –Genetic testing Breast Cancer, etc. –Car insurance. (I know if I am a safe driver.) –Banking (Diamond-Dybvig)/ Pensions. Bank wants to provide steady return. Banks can keep temporary returns secret. If depositors learn state of investment is low, then they may withdraw early. Note problem exists if only the buyer knows, only the seller knows, both know, or simply if a test is available.

Solutions Ban testing. Of course there are other concerns involved knowing. Mandatory insurance: everyone must buy insurance and the provider must sell to everyone.