Information and Incentives in Dynamic Games
{'Code': '04050100', 'Directorate': {'LongName': 'Direct For Social, Behav & Economic Scie'}, 'Division': {'LongName': 'Divn Of Social and Economic Sciences'}}
{'SignBlockName': 'Daniel H. Newlon'}
Mathematical economics provides rigorous models and powerful                    analytical tools for studying a wide range of important and                     fundamental economic issues.  This project emphasizes some of                   most active areas of research in mathematical economics, namely                 work on the roles played by information and incentives in                       dynamic bargaining among economic agents.                                                                                                                       The project consists of three parts.  The first part explores                   the idea that equilibrium in games might arise as the result of                 the players learning from thir previous play.  This new                         approach does not model the learning process as part of an                      equilibrium, but rather assumes that the players use different                  sorts of "reasonable" behavioal rules.  One question given                      special attention is the relationship between restrictions on                   these behavioral rules and various sorts of euilibrium                          refinements.  The second part generalizes single player studies                 of reputation-effects.  Previous research found the reputation                  effects particularly powerful when only a single player has an                  incentive to maintain a reputation.  The single player is able                  to pick out the equilibrium he most prefers through maintaining                 a reputation.  The third part studies the nature of the optimal                 contract between a risk-neutral principal and a risk-averse                     agent when the agent's action is subject to moral hazard and                    the parties are free to renegotiate the contract after the                      agent has performed his duties but before all the effects of                    the agent's actions have been revealed.  The objective of this                  part of the project is to learn how the constraint to                           renegotiation-proof contracts limits the amount of risk that                    the agent can be forced to bear, and the amount of effort that                  the agent can be induced to provide.                                                                                                                            This project makes methodological and substantive contributions                 to our understanding of information and incentives in the                       dynamics of economic games.  Methodologically, the project                      develops a new approach to dynamic games that allows the                        analyst to derive and not just assume the beliefs of the                        participants in the games.  The traditional approach obtains                    solutions to dynamic games by making "plausible" assumptions                    about the beliefs of players.  These assumptions are called                     equilibrium refinements.  Unfortunately, game-theoretic models                  usually can not be tested because there are many different                      plausible assumptions about player beliefs, each with a                         different outcome; hence, this new approach moves us closer to                  the goal of a testable dynamic game theory.  Substantively, the                 project provides new insights into the incentives of economic                   agents to obtain and maintain reputations.  Contract theory is                  extended to permit the study of the optimal contract for                        settings in which there is a long gap between the time the                      agent's actions are undertaken and the time their effects are                   realized and where in the interim there is the possibility of                   renegotiation.
{'FirstName': 'Drew', 'LastName': 'Fudenberg', 'EmailAddress': 'drew.fudenberg@gmail.com', 'StartDate': '09/01/1988', 'EndDate': None, 'RoleCode': 'Principal Investigator'}
{'Name': 'Massachusetts Institute of Technology', 'CityName': 'Cambridge', 'ZipCode': '021394301', 'PhoneNumber': '6172531000', 'StreetAddress': '77 MASSACHUSETTS AVE', 'CountryName': 'United States', 'StateName': 'Massachusetts', 'StateCode': 'MA'}
[{'Code': '1320', 'Text': 'ECONOMICS'}, {'Code': '9145', 'Text': 'SPECIAL PROGRAMS-RESERVE'}]
{'url': 'https://www.nsf.gov/awardsearch/download?DownloadFileName=1988&All=true', 'xml': '8808204.xml'}