The project studies risk perception with respect to strategic uncertainty. We will use data of laboratory experiments, but also game-theoretic modeling to derive behavioral predictions and to explain behavior observed in the experiments. As in the previous phase, the project consists of two parts: a methodological part (A) with a focus on the fundamentals of risk perception and an applied part (B) with a focus on market design.
Part A: Information processing, Bayesian updating, and information transmission have emerged as non-trivial tasks in a large number of experimental studies. In this project phase, we will focus on unraveling of information in a labor market framework as well as on information transmission in the context of social identity and gender stereotypes. At a more fundamental level, we will study the sources of suboptimal choices in certain games where candidate explanations are limited depth of reasoning or a failure to update beliefs correctly.
Part B: In this part we will continue to study market institutions that induce complex games and therefore generate strategic risk. In the next project phase, we will add a new dimension, namely the presence of competition among the market institutions. In particular, we will investigate how strategic uncertainty is generated in such environments and the agents’ reaction to it.
The subproject cooperates in molecular structures, mainly with subprojects A12 and C10 on the question of how people form higher-order beliefs in games with strategic uncertainty as well as with subprojects A8, B8 and A11 on the analysis of trader decisions in financial institutions with limited transparency.