Essays on Behavioral Game Theory

Abstract

This dissertation addresses a collection of problems concerning the interpretation and technical properties of solution concepts in dynamic behavioral games. In particular it introduces a geometric characterization of perfect recall, a novel framework for modeling dynamic strategic settings with interdependent strategic constraints, and a collection of novel solution concepts for games with imperfect recall. This geometric characterization of perfect recall reveals the reason for non-existence of equilibria in games with imperfect recall. In addition, mixed behavioral strategies are shown to nontrivially extend the set of equilibria in games with imperfect recall, and guarantee the existence of equilibria in any finite extensive form game. In conjunction, these results indicate that mixed behavioral strategies are the most natural class of strategies in general extensive form games. The concept of an extensive form generalized game, a novel framework for modeling dynamic strategic settings with interdependent strategic constraints is introduced, and sufficient conditions for existence of equilibria in mixed, behavioral, and mixed behavioral strategies in this setting are provided, including a generalization of perfect recall. Various existing behaviorally motivated strategic models, including games with rationally inattentive players, are contained within this framework. Finally, the notion of sophisticated sequentially rational equilibrium, a novel alternative to Nash equilibrium in extensive form games with imperfect recall is introduced. Intuitively, instead of being fixed ex-ante, the beliefs of sophisticated sequentially rational players are dynamically updated following a deviation. While sophisticated sequentially rational equilibria coincide with Nash equilibria in games with perfect recall, they do not in games with imperfect recall. Since sophisticated sequential rationality is more natural than ex-ante optimality provided players are rational, sophisticated, and dynamically update their beliefs, sophisticated sequentially rational equilibria are interpretatively preferable to Nash equilibria in games with imperfect recall.