| Popis: |
The dissertation consists of three self contained, though interrelated chapters. In the first two chapters, I apply the behavioural model of reference dependence to two different games of incomplete information; auctions and bargaining. The main contribution of the models is that they pin down the reference point by endogenising it as the expected price of a good in equilibrium. Modelling games where the utility of a player depends on her beliefs over endogenous variables, introduces mathematical complexity. Indeed, such games lack an existence result, and in the final chapter, I extend methods available in the literature to provide sufficient conditions for the existence of monotone equilibrium in games with endogenous beliefs. In the first chapter, I model auctions where bidders have reference dependent preferences and may be loss averse. The reference point is defined either as the exante or interim expected price of the good, depending on whether bidders are naive or sophisticated. Equilibrium with consistent reference points are shown to exist and are fully characterised. The model predicts that in equilibrium, bidders both overbid and underbid in comparison to the standard risk neutral Nash equilibrium. The second chapter extends the model a two player k-double auction, where players are assumed to have preferences that exhibit reference dependence. The expected price of the good is modelled as a player’s reference point. In equilibrium the endogenous reference point is said to be consistent if behaviour given the reference point, yields an expected price equal to the reference point itself. Bias is introduced |
