11952430
David vs. Goliath: An Analysis of Asymmetric Mixed-Strategy Games and Experimental Evidence
Mixed strategies are widely used to model strategic situations in diverse fields such as economics, marketing, political science, and biology. However, some of the implications of asymmetric mixed-strategy solutions are counterintuitive. We develop a stylized model of patent race to examine some of these implications. In our model two firms compete to develop a product and obtain a patent. However, one firm values the patent more because of its market advantages, such as brand reputation and distribution network. Contrary to some intuition, we find that the firm that values the patent less is likely to invest more aggressively in developing the product and will also win the patent more often. We argue that the reason for these counterintuitive results is inherent in the very concept of mixed strategy solution. In a laboratory test, we examine whether subjects' behavior conforms to the equilibrium predictions. We find that the aggregate behavior of our subjects is consistent with the game-theoretic predictions. With the help of the experience-weighted attraction (EWA) learning model proposed by Camerer and Ho (1999), we show that adaptive learning can account for the investment behavior of our subjects.We find that the EWA learning model tracks the investment decisions of our subjects well, whether we hold out trials or an entire group of subjects.
15127807
Pricing of Information Products on Online Servers: Issues, Models, and Analysis
Online information servers that provide access to diverse databases where users can search for, browse through, and download the information they need have been rapidly increasing in number in the past few years. Online vendors have traditionally charged users for information on the based on the length of the time they were connected to the databases. With hardware and software advances, many online servers have recently started changing their pricing strategies to search-based and/or subscription-fee pricing. This paper examines the various issues involved in pricing these information products, and presents an economic approach to analyze conditions under which the various pricing schemes may prove optimal for the online servers. Our results show that the variation in consumer expertise and valuation of information affects the choice of a pricing strategy by the server. We present general conditions under which subscription-fee pricing is optimal even when consumer demand is inelastic. We also find that, given the cost structures characterizing the market, undifferentiated online servers can compete and coexist in the market each making positive profits. We show that in a competitive setting an increase in costs of online servers can sometimes benefit them by enabling them to differentiate themselves. Our results offer insights into the trends in pricing strategies and may provide an explanation as to why many servers may persist with connect-time strategies.
30649473
Joint Bidding in the Name-Your-Own-Price Channel: A Strategic Analysis
In this paper, we study the name-your-own-price (NYOP) channel. We examine theoretically and empirically whether asking consumers to place a joint bid for multiple items, rather than bid one item at a time as practiced today, can increase NYOP retailers' profits. Relatedly, we also examine whether allowing consumers to self-select whether to place a joint bid or itemwise bids increases retailers' profits and consumers' surplus. We construct a dynamic model that incorporates both demand uncertainty and supply uncertainty to address these issues. Our theoretical analysis identifies the conditions under which joint bidding can increase both NYOP retailers' profits and consumers' surplus. We find that some consumers might bid more for the very same items when they place joint bids. The increase in bid amount is related to the fact that joint bidding reduces the chance of mismatch between NYOP retailers' costs and consumer bids. We conducted a laboratory study to assess the descriptive validity of some of the model predictions, because there are no field data on joint bidding in the NYOP channel. The results of the study are directionally consistent with our theory.
14981222
On a generalized notion of mistake bounds
This paper proposes the use of constructive ordinals as mistake bounds in the on-line learning model. This approach elegantly generalizes the applicability of the on-line mistake bound model to learnability analysis of very expressive concept classes like pattern languages, unions of pattern languages, elementary formal systems, and minimal models of logic programs. The main result in the paper shows that the topological property of effective finite bounded thickness is a sufficient condition for on-line learnability with a certain ordinal mistake bound. An interesting characterization of the on-line learning model is shown in terms of the identification in the limit framework. It is established that the classes of languages learnable in the on-line model with a mistake bound of α are exactly the same as the classes of languages learnable in the limit from both positive and negative data by a Popperian, consistent learner with a mind change bound of α. This result nicely builds a bridge between the two models. C © 2001 Academic Press
16271065
Generalization and specialization strategies for learning r.e. languages
Overgeneralization is a major issue in the identification of grammars for formal languages from positive data. Different formulations of generalization and specialization strategies have been proposed to address this problem, and recently there has been a flurry of activity investigating such strategies in the context of indexed families of recursive languages. The present paper studies the power of these strategies to learn recursively enumerable languages from positive data. In particular, the power of strong-monotonic, monotonic, and weak-monotonic (together with their dual notions modeling specialization) strategies are investigated for identification of r.e. languages. These investigations turn out to be different from the previous investigations on learning indexed families of recursive languages and at times require new proof techniques. A complete picture is provided for the relative power of each of the strategies considered. An interesting consequence is that the power of weak-monotonic strategies is equivalent to that of conservative strategies. This result parallels the scenario for indexed classes of recursive languages. It is also shown that any identifiable collection of r.e. languages can also be identified by a strategy that exhibits the dual of weak-monotonic property. An immediate consequence of the proof of this result is that if attention is restricted to infinite r.e. languages, then conservative strategies can identify every identifiable collection.
644359
Anomalous Learning Helps Succinctness
Abstract It is shown that allowing a bounded number of anomalies (mistakes) in the final programs learned by an algorithmic procedure can considerably “succinctify” those final programs. Naturally, only those contexts are investigated in which the presence of anomalies is not actually required for successful inference (learning). The contexts considered are certain infinite subclasses of the class of characteristic functions of finite sets. For each finite set D , these subclasses have a finite set containing D . This latter prevents the anomalies from wiping out all the information in the sets featured in these subclasses and shows the context to be fairly robust. Some of the results in the present paper are shown to be provably more constructive than others. The results of this paper can also be interpreted as facts about succinctness of coding finite sets, which facts have interesting consequences for learnability of decision procedures for finite sets.
120386960
Evolutionary games with two timescales
We consider a two timescale model of learning by economic agents wherein active or 'ontogenetic' learning by individuals takes place on a fast scale and passive or 'phylogenetic' learning by society as a whole on a slow scale, each affecting the evolution of the other. The former is modelled by the Monte Carlo dynamics of physics, while the latter is modelled by the replicator dynamics of evolutionary biology. Various qualitative aspects of the dynamics are studied in some simple cases, both analytically and numerically, and its role as a useful modelling device is emphasized.
1383539
On the Limitations of Locally Robust Positive Reductions
Polynomial-time positive reductions, as introduced by Selman, are by definition globally robust — they are positive with respect to all oracles. This paper studies the extent to which the theory of positive reductions remains intact when their global robustness assumption is removed.