Individual Learning in Normal Form Games // 1997 - 1997 // None

We propose and test a simple belief learning model. We find considerable heterogeneity across individual players; some players are well described by ficti- tious play (long memory)learning, other players by Cournot (short memory)learning, and some players are in between. Representative agent versions of the model fit significantly less well and sometimes point to incorrect inferences. The model tracks players' behavior well across a variety of payoff matrices and information conditions.

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Individual Learning in Normal Form Games: Some Laboratory Results

Landscape Dynamics // 2005 - Present // SES-0436509

Dan Friedman

Ralph Abraham

Paul Viotti

Supported bn NSF grant SES-0436509, this project demonstrates new techniques for social science models. The techniques include nonlinear partial differential equations and agent-based models. The primary application is to financial market dynamics (especially bubbles and crashes), with secondary applications including Downsian voting models and Veblen consumption dynamics. 'Adaptive landscape' is a classic metaphor in theoretical biology. The landscape is defined over an abstract space of potential biological traits, and successful species are represented by peaks, i.e., trait combinations that have the highest fitness. We develop the landscape idea mathematically, drawing on insights and techniques from dynamical systems theory, agent-based systems, evolutionary game theory, and fluid dynamics. The abstract space represents possible choices (in one or more dimensions) by individuals, and the social state is the distribution of actual choices. Then an individual's payoff is a landscape whose shape depends on the social state. Individuals respond to the landscape and seek higher payoff. As they do so, the distribution of choices changes in continuous time, and therefore the landscape also changes. New peaks representing high payoff can appear, and old peaks can disappear, or flatten into plateaus, or move. Thus an application produces a dynamic interplay between social state and landscape. Main website: http://www.vismath.org/research/landscapedyn

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Humans, Robots and Market Crashes: A Laboratory Study

Bubbles and Crashes

Bubble and Crashes: a Cyborg Approach

Conspicuous Consumption Dynamics

Towards Evolutionary Game Models of Financial Markets

Evolving Landscapes for Population Games

Evolutionary Games in Economics

Customer Markets // 1997 - 2003 // SBR 9617917

Dan Friedman

Timothy Cason

Garrett Milam

Markets with switch costs and consequent buyer-seller attachments are called customer markets, following Okun (1981). Customer markets are interesting for three complementary reasons. First, they are pervasive in modern economics, with a major share of wholesale and intermediate transactions as well as labor and retail. Second, their performance characteristics may differ from auction markets. Third, they are not yet well understood, either theoretically or empirically. Supported by NSF grant SBR 9617917 (1997-2000) we use laboratory experiments to expand empirical knowledge of customer markets.

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Dynamics of Price Dispersion

Bargaining versus Posted Price Competition in Customer Markets

Laboratory Study of Customer Markets

Buyer Search and Price Dispersion: A Laboratory Study

Customer Search and Market Power: Some Laboratory Evidence

Learning in a Laboratory Market with Random Supply and Demand

Local Interactions // 1997 - 2001 // None

Dan Friedman

Alessandra Cassar

Latest works in economics have focused on local communities of interactions as a way to model sustainable cooperation - in Prisoner's Dilemma games - and relatively fast coordination on the risk-dominant equilibrium - in Coordination games. We tested in the laboratory some new network theories on how does the network architecture - the pattern of links between individuals - encourage coordination and cooperation. We implemented a computational model - in Swarm - to study how the pattern of relations linking financial institutions - the network - affects the diffusion of financial crises.

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Cyberspace Markets // 2000 - 2005 // IIS 9986651

Supported by NSF grant IIS 9986651 (2000-2003). Researched effective cyberspace markets. Measured effectiveness in terms of a market's ability to lead intelligent (but self-interested) traders quickly to efficient transactions and to encourage their participation. Methodologies: * theoretical models of market equilibrium and transient performance; * computer simulations of traders and their market interactions; * laboratory markets with human traders interacting with automated traders; and * statistical analysis of recent cyberspace activity.

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Searching for the Sunk Cost Fallacy

Internet Congestion: A Lab Experiment

Revealed Altruism // 2002 - 2007 // None

Dan Friedman

James C. Cox

We introduce parametric and non-parametric models of other-regarding preferences, over my own payoff and others' payoffs. My preferences are systematically affected by my emotional state, which responds to relative status and to the kindness or unkindness of others' choices (``intentions''). The emotional state determines the marginal rate of substitution between my own and others' payoffs, and thus my subsequent choices. The models are applied to a variety of existing and new data sets. The Revealed Altruism paper is a copy of the Econometrica article. The Tractable Model paper is the penultimate version of the Games and Economic Behavior article.