Objective Game theory has been very successful in shaping modern economic theory over the past fifty years. Yet, the solution concepts developed under the assumption of perfect rationality require a degree of cognitive sophistication on players part that need not be realistic. In this project, I wish to broaden the definitions of equilibrium concepts to take into account the cognitive limitations of players. Armed with these equilibrium concepts, I wish to revisit a number of classic economic applications of game theory and economics in the hope that the proposed approach enhances our economic understanding. I also wish to check whether the proposed concepts are confirmed experimentally. Specifically, the project will rely on three new solution concepts I have recently introduced: the limited foresight equilibrium (Jehiel, 1995) in which players are viewed as knowing only the evolution of moves over the next n periods, the analogy-based expectation equilibrium (Jehiel, 2005) in which players understand only the average behavioural strategy of their opponents over bundles of states, and the valuation equilibrium (Jehiel and Samet, 2007) in which players attach the same valuation to a bundle of moves (possibly corresponding to different decision nodes). In each case, I assume that players choose their strategy based on the simplest representation of their environment that is consistent with their partial understanding. And as in the standard rationality paradigm, I assume that the partial understanding of players as parameterized by their cognitive type is correct. The heart of the project is to show how these approaches can be used to shed new light on major subfields of economic theory such as mechanism design, the theory of reputation, the theory of incomplete contracts and the theory of speculative markets. I also wish to test experimentally the solution concepts so as to check their empirical validity. Fields of science social scienceseconomics and businesseconomicsnatural sciencesmathematicsapplied mathematicsgame theory Keywords cognitive limitations game theory learning Programme(s) FP7-IDEAS-ERC - Specific programme: "Ideas" implementing the Seventh Framework Programme of the European Community for research, technological development and demonstration activities (2007 to 2013) Topic(s) ERC-AG-SH1 - ERC Advanced Grant - Individuals, institutions and markets Call for proposal ERC-2008-AdG See other projects for this call Funding Scheme ERC-AG - ERC Advanced Grant Coordinator ECOLE D'ECONOMIE DE PARIS Address Boulevard jourdan 48 75014 Paris France See on map Region Ile-de-France Ile-de-France Paris Activity type Higher or Secondary Education Establishments Principal investigator Philippe Jehiel (Prof.) Administrative Contact Claire Saint-Léger (Ms.) Links Contact the organisation Opens in new window Website Opens in new window EU contribution € 526 418,00 Beneficiaries (2) Sort alphabetically Sort by EU Contribution Expand all Collapse all ECOLE D'ECONOMIE DE PARIS France EU contribution € 526 418,00 Address Boulevard jourdan 48 75014 Paris See on map Region Ile-de-France Ile-de-France Paris Activity type Higher or Secondary Education Establishments Principal investigator Philippe Jehiel (Prof.) Administrative Contact Claire Saint-Léger (Ms.) Links Contact the organisation Opens in new window Website Opens in new window UCL Elizabeth Garrett Anderson Institute for Women’s Health United Kingdom EU contribution € 151 952,00 Address Gower street WC1E 6BT London See on map Region London Inner London — West Camden and City of London Activity type Higher or Secondary Education Establishments Administrative Contact Michael Browne (Mr.) Links Contact the organisation Opens in new window Website Opens in new window
