1 / 36

Understanding Strategic Thinking: Approaches and Applications

This article explores various approaches to understanding strategic thinking in different contexts such as games, auctions, and betting games. It examines the cognitive hierarchy model and its applications in the lab and real-world scenarios, including eye-tracking and fMRI studies. The article also discusses open questions and potential links to Theory of Mind, disorders of strategic thinking, and the role of experience and expertise.

dheaton
Download Presentation

Understanding Strategic Thinking: Approaches and Applications

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Applications (see Crawford+ 2010 review) • Matrix steps • Hedden, Zhang Cog 02, TICS 03 • 2D matrix beauty contest • Chen, Huang, Wang (NatlTaiwanU) 09 • Hide-and-seek • Crawford, Iriberri AER 06; Alec Smith, Forsell+ in prep • Coordination games & cheaptalk (theory) • Ellingsen, Ostling AER 12? • Auctions • Crawford, Iriberri Ecma 07; Gneezy MS 05; Ivanov Ecma 09; Nunnari+ in prep • Private-information betting games • Brocas+ REStud in press • Global games (theory) • Kneeland (UBritishColumbia) 09? • Heterogeneous CH/QRE splice • Rogers, Palfrey, Camerer JEcTheory 09 RSF 4.July.2014

  2. RSF 4.July.2014

  3. 2. Lowest unique positive integer game (LUPI) • Swedish lottery • n=53,000 players • Choose k from 1 to 99,999 • Lowest unique number wins 10,000€ • If n is Poisson distributed… • mixed equilibrium solves enp(k+1) = enp(k) – np(k) Östling, Wang, Chou, Camerer AEJ: Micro 12 RSF 4.July.2014

  4. Poisson equilibrium is a surprisingly good approximation (week 1)… RSF 4.July.2014

  5. …but Q-cognitive hierarchy fits deviations CH τ=1.80 RSF 4.July.2014

  6. Lab replicates direction of field deviations RSF 4.July.2014

  7. RSF 4.July.2014

  8. RSF 4.July.2014

  9. Imitation learning produces convergence over time (week 7) RSF 4.July.2014

  10. 4. Field application: Cold opened (unreviewed) movies (Brown, Camerer, Lovallo AEJ 12, Mgt Sci 13) Film distributors choose: Show movie to critics before opening Withhold (7% 2000-06; 25% 2007-2009) RSF 4.July.2014

  11. Logical “unravelling argument” predicts no cold openings(Milgrom Bell J 81, Grossman JLE 81 ) • Suppose quality is U ~ [0,100] Movies below q* are opened cold --> E(q|cold)=q*/2 Movies with q  [q*/2,q*] are misjudged judged as bad, they are “not so bad” …. • open all movies except very worst • CH: Naïve moviegoers overestimate q, box office gross is higher than predicted RSF 4.July.2014

  12. RSF 4.July.2014

  13. Low quality movies are cold opened Cold Openings Average Rating of 30 critics RSF 4.July.2014

  14. Low quality movies are cold opened Number of movies Sophisticated moviegoers know cold openings have this quality Average Rating of 30 critics RSF 4.July.2014

  15. Low quality movies are cold opened Naive moviegoers think cold openings have this quality Number of movies Sophisticated moviegoers know cold openings have this quality Average Rating of 30 critics RSF 4.July.2014

  16. Why open cold? “If you screen [a bad movie] for critics all they can do is say something which may prevent someone from going to the movie.” Greg Basser, CEO Village Roadshow Entertainment Group “…if negative reviews are expected, the studio may decide not to screen a picture hoping to delay bad news.” Mark Litwak, Reel Power RSF 4.July.2014

  17. OLS estimation strategy • Bm = αE(qm) + ΣkβkXmk + εm Box office =f(expected quality,other controls) • What is E(qm)? • Reviewed movies: E(qm)=qm • Cold opened movies: E(qm)> qm (from CH) • Bm = αCCOLD + αRqm+ ΣkβkXmk + εm • Coefficient αC > 0 indicates CH naivete • Coefficient αC = 0 indicates sophistication RSF 4.July.2014

  18. RSF 4.July.2014

  19. Cold opening variable is significantly positive in US • 15% increase in revenue • insignificant in UK, Mexico, US rental (DVD) markets • Can be fit with CH model with 1.63 (Brown+ Mgt Sci in press) RSF 4.July.2014

  20. No effects in UK, Mexico, US rentals (word leaks out) RSF 4.July.2014

  21. Propensity score matching RSF 4.July.2014

  22. PSM similar to OLS regression RSF 4.July.2014

  23. Studios learning that cold opening pays? RSF 4.July.2014

  24. frontier 2: What is level 0? • My current view • Level 0 is fast, salient • Fundamentally an empirical question: • Cf. Schelling: • “one cannot, without empirical evidence, deduce whatever understandings can be perceived in a non-zero sum game of maneuver any more than one can prove, by formal deduction, that a particular joke is bound to be funny.” RSF 4.July.2014

  25. But what’s salient? • “personal” numbers • ends + center of a number line • visual: Itti-Koch “low level” algorithm • Private info: Strategy = known state • e.g. bid your value in an auction • e.g. report state honestly in sender-receiver RSF 4.July.2014

  26. Neurally Based Models of Visual Salience(Itti Koch Nature 05) RSF 4.July.2014

  27. RSF 4.July.2014

  28. Schelling (1960) map RSF 4.July.2014

  29. RSF 4.July.2014

  30. RSF 4.July.2014

  31. Fails on categorical distinctiveness RSF 4.July.2014

  32. Meta-model approach: Level 0’s focus on strategy features (Wright, Leyton-Brown subm 14) RSF 4.July.2014

  33. Georganas+ 14 (UG1) Nash (30%) Level 1 (33%) RSF 4.July.2014

  34. RSF 4.July.2014

  35. Conclusions • Cognitive hierarchy approach • Lab, field, eyetracking, fMRI • Many open questions • Are there distinct types? • Closer link to ToM regions • Beliefs, intentions, attributions • Disorders of strategic thinking • Paranoia, gullibility, autism(s) • Experience and expertise • Endogenized steps RSF 4.July.2014

More Related