9409302 Dekel This project focuses on three research topics: (1) Experiments and or mutations are an important ingredient in the models used in the recent research on learning and evolution in economics. The proposal develops models where rates of experimentation are themselves learned or mimicked and then explores how different aspects of the environment influence the rate of experimentation that arises in the long run. (2) Models where the possible information received by an individual does not partition the set of states of the world have been used to introduce various elements of bounded rationality into decision making and game theory. However, these models implicitly assume that players are unaware of their information sets, while the applications in games often implicitly assume that the information structure is common knowledge. The research explores this apparent conflict by explicitly developing a dynamic process of how players use their information. A related objective is to develop an explicit model of forgetfulness to see how it corresponds to the general models without partitions. (3) Models of herds, or informational cascades, where buyers mimic preceding buyers rather than using their own private information ignore the fact that sellers have strong incentives to entice buyers to create a herd/cascade for their own product. The research will explore the extent to which this can happen, what types of sellers will invest in falsely creating herds/cascades, and whether more or less information is used when sellers are activity trying to create herds/cascades.
