Marciano Siniscalchi Professor of Economics 3223 Andersen Hall, Department of Economics Northwestern University Phone: (847) 491-5398 email: marciano AT northwestern DOT edu My Curriculum Vitae updated April 2016.

# News (April 28, 2016)

Finally times two! I have now uploaded both of the papers that constitute the basic theory of structural rationality. This represents the culmination of an embarrassingly long-running project on the behavioral foundations of dynamic game theory. Structural rationality is, in a sense, " inspired " by experimental evidence on behavior in a game tree and in the associated strategic form, as well as on Selten's strategy method. Structural rationality implies sequential rationality. However, unlike the latter, it allows for the elicitation of conditional beliefs. More generally, it makes it possible to translate interesting game-theoretic assumptions---including backward- and forward-induction---into fully testable behavioral predictions.

The first paper, Structural Rationality in Dynamic Games, defines structural preferences and proves the results on sequential rationality and elicitation. The second, Foundations for Structural Preferences, provides an axiomatic characterization of, well, structural preferences.

I also have a third paper in preparation, tentatively titled Structural Preferences: Applications to Epistemic Game Theory. Among other results, it provides a behavioral characterization of strong belief (Battigalli and Siniscalchi, 2002) that can be directly related to Brandenburger, Friedenberg and Keisler's 2008 characterization of assumption for lexicographic preferences. It is not ready for public consumption, but if you are curious, please email me for a current work-in-progress draft.

In slightly older news, my paper with Eddie Dekel and Amanda Friedenberg on lexicographic beliefs and assumption has been accepted for publication.

# Research

## Published / Forthcoming / Accepted Papers

Lexicographic Beliefs and Assumption, with Eddie Dekel and Amanda Friedenberg; Journal of Economic Theory, vol. 163, May 2016. Working-paper version (updated).

Ambiguity in the small and in the large (former title: "A more robust definition of multiple priors"). Econometrica, vol. 80 n. 6, November 2012.
Supplemental appendix with an axiomatization of locally Lipschitz and "nice" preferences, plus additional results.
Previous version with additional material and extensive calculations for specific decision models.

Dynamic Choice under Ambiguity, Theoretical Economics, vol. 6 n.3, September 2011.

Two out of three ain't bad: a comment on 'The ambiguity aversion literature: A critical assessment', Economics and Philosophy, Vol. 25 n.3, 2009.

Vector Expected Utility and Attitudes toward Variation, Econometrica, Vol. 77 n. 3, May 2009. Supplementary material. Also see the additional material below (under Manuscripts).

Parental Guidance and Supervised Learning, with Alessandro Lizzeri. Quarterly Journal of Economics, vol. 123 n. 3, August 2008. The working-paper version has additional material, so we are keeping it available for download.

Interactive epistemology in games with payoff uncertainty, with Pierpaolo Battigalli. Research in Economics, vol. 61, 2007.

A Behavioral Characterization of Plausible Priors, Journal of Economic Theory vol. 128, 2006. See also the Online Appendix for additional results and omitted proofs.

Efficient Sorting in a Dynamic Adverse-Selection Model, with Igal Hendel and Alessandro Lizzeri. Review of Economic Studies vol. 72 n. 2, April 2005. See also the Web Appendix for additional results and omitted proofs.

A Subjective Spin on Roulette Wheels, with Paolo Ghirardato, Fabio Maccheroni and Massimo Marinacci; Econometrica , vol. 71 n. 6, November 2003.

Rationalization and Incomplete Information, with Pierpaolo Battigalli. Advances in Theoretical Economics, Vol. 3 No. 1, Article 3. BEPRess link: http://www.bepress.com/bejte/advances/vol3/iss1/art3.

Rationalizable Bidding in First-Price Auctions, with Pierpaolo Battigalli. Games and Economic Behavior, 45, October 2003, pp. 38-72.

Strong Belief and Forward-Induction Reasoning, with Pierpaolo Battigalli; Journal of Economic Theory (2002), 106 no. 2, pp. 356-391.

Hierarchies of Conditional Beliefs and Interactive Epistemology in Dynamic games, with Pierpaolo Battigalli. Journal of Economic Theory (1999), 88, 188-230. Additional material not in the published version.

Interactive Beliefs, Epistemic Independence and Strong Rationalizability, with Pierpaolo Battigalli. Research in Economics (1999) 53, 247-273.

## Manuscripts

Structural Rationality in Dynamic Games; April 2016.
Abstract. The analysis of dynamic games hinges on assumptions about players' actions and beliefs at information sets that are not actually reached during game play, and that players themselves do not expect to reach. However, it is not obvious how to elicit intended actions and conditional beliefs at such information sets. Hence, key concepts such as sequential rationality, backward induction, and forward induction do not readily translate to testable behavioral assumptions. This paper addresses this concern by introducing a novel optimality criterion, structural rationality. In any dynamic game, structural rationality implies sequential rationality. In addition, if players are structurally rational, their intended actions and conditional beliefs can be elicited via the strategy method (Selten, 1967). Finally, structural rationality is consistent with experimental evidence indicating that subjects behave differently in the strategic and extensive form, but take the extensive form into account even if they are asked to commit to strategies ahead of time.

Foundations for Structural Preferences; April 2016.
Abstract. The analysis of key game-theoretic concepts such as sequential rationality or backward- and forward-induction hinges on assumptions about players' actions and beliefs at information sets that are not actually reached during game play, and that players themselves do not expect to reach. However, it is not obvious how to elicit intended actions and conditional beliefs at such information sets. In Siniscalchi (2016), I address this concern by introducing a novel optimality criterion, \emph{structural rationality}, which implies sequential rationality but allows for the incentive-compatible elicitation of beliefs and intended actions. The present paper complements the analysis by providing an axiomatic foundation for structural preferences.

Risk Sharing in the Small and in the Large, with Paolo Ghirardato; February 2016.
Abstract. This paper analyzes risk sharing in economies with no aggregate uncertainty when agents have non-convex preferences. In particular, agents need not be globally risk-averse, or uncertainty-averse in the sense of Schmeidler (1989). We identify a behavioral condition under which betting is inefficient (i.e., every Pareto-efficient allocation provides full insurance, and conversely) if and only if agents' subjective beliefs (defined as in Rigotti, Shannon, and Strzalecki, 2008) have a non-empty intersection. Our condition is consistent with empirical and experimental evidence documenting violations of convexity in either outcomes or utilities. Our results show that the connection between speculative betting and inconsistent beliefs is robust to substantial departures from convexity.

Recursive Vector Expected Utility; Preliminary version, May 2010. Comments welcome!
Abstract. This paper proposes and axiomatizes a recursive version of the vector expected utility (VEU) decision model (Siniscalchi, 2009). Recursive VEU preferences are dynamically consistent and consequentialist.'' Dynamic consistency implies standard Bayesian updating of the baseline (reference) prior in the VEU representation, but imposes no constraint on the adjustment functions and one-step-ahead adjustment factors. This delivers both tractability and flexibility. Recursive VEU preferences are also consistent with a dynamic, i.e. intertemporal extension of atemporal VEU preferences. Dynamic consistency is characterized by a time-separability property of adjustments---the VEU counterpart of Epstein and Schneider (2003)'s rectangularity for multiple priors. A simple exchangeability axiom ensures that the baseline prior admits a representation a la de Finetti, as an integral of i.i.d. product measures with respect to a unique probability µ. Jointly with dynamic consistency, the same axiom also implies that µ is updated via Bayes' Rule to provide an analogous representation of baseline posteriors. Finally, an application to a dynamic economy a la Lucas (1978) is sketched.

Additional Material for Vector Expected Utility...
December 2007 version; contains an alternative formulation and additional results.
Machina's Reflection Example and VEU Preferences: a Very Short Note. Shows that VEU preferences that are ambiguity-averse in the sense of Ghirardato and Marinacci (2002), but not in the sense of Schemidler (1989), can accommodate Machina's now-famous example.

Bayesian Updating for General Maxmin-Expected Utility Preferences, September 2001. The main result of this paper has been incorporated in Section 4 of Dynamic Choice under Ambiguity'', available above. So this paper is basically obsolete...

## Contributed Papers

Epistemic Game Theory, January 2014; with Eddie Dekel. Forthcoming in the Handbook of Game Theory, vol. 4. See also Online appendix, with Eddie Dekel and Luciano Pomatto.

Ambiguity and Ambiguity Aversion, June 2013; with Mark Machina. In the Handbook of the Economics of Risk and Uncertianty, 2014.

Epistemic Game Theory: Beliefs and Types, March 2007. Marciano Siniscalchi, The New Palgrave Dictionary of Economics, forthcoming, Palgrave Macmillan, reproduced with permission of Palgrave Macmillan.

Ambiguity and Ambiguity Aversion, March 2005. Marciano Siniscalchi, The New Palgrave Dictionary of Economics, forthcoming, Palgrave Macmillan, reproduced with permission of Palgrave Macmillan.