Fakultät Sozial- und Wirtschaftswissenschaften

Lehrstuhl für VWL, insb. Finanzwissenschaft

Research Project LIMITED ATTENTION

(Marie Curie CIG 322253)

The research project consists of two main parts:

1) Evolutionary foundations of limited attention.

This part investigates in how far mathematical tools from evolutionary game theory can be used to model adaptive learning, how the allocation of attention may adapt over time, and its implications.

An interseting evolutionary aspect in this context is the relation of limited cognition and the foundation of prospect theory. Prospect Theory (Kahneman-Tversky 1973, 1992) provides a framework for a positive description of empirically observed choice behavior under uncertainty. The key elements are an S-shaped value-function with loss aversion relative to a reference point and an inversely S-shaped weighting of probabilities. Nick Netzer from the University of Zurich and Florian Herold from the University of Bamberg demonstrate in their paper “Probability weighting as evolutionary second best” that if one takes an S-shaped value function as given, probability weighting consistent with prospect theory may arise as a natural second-best solution to minimize the evolutionary fitness-loss. This paper provides a framework that allows us to understand prospect theory as evolution’s second best response to certain cognitive limitations.

A third research direction of part one of the project is the evolution of paying attention to different characteristics and correspondingly the evolution of taking roles. In their joint research Christoph Kuzmics from the University of Bielefeld and Florian Herold from the University of Bamberg consider a certain class of symmetric two-strategy two-player games with asymmetric equilibria in which the single and multiple population approaches lead to radically different evolutionary stable equilibria (hawk-dove or conflict games). They investigated what happens if the role a player assumes and the resulting social structure evolves endogenously. More precisely, they consider a single population model in which players have payoff-irrelevant, but observable labels, their strategies can be contingent on these labels. Then, in any neutrally stable strategy players with different labels manage to anti-coordinate. However, the emerging probability distribution over labels may not be efficient. Furthermore, from the evolutionary analysis a key distinction arises between two types of games: Conflict games in which players would always prefer their opponent to play “dove" (independently of their own choice) and anti-coordination games (in which players always prefer their opponent to mismatch their own action). Depending on this distinction different social structures (e.g. hierarchical and egalitarian) can (or cannot) arise in a neutrally stable equilibrium. Furthermore, the egalitarian type structure results in a neutrally stable equilibrium if the payoff in the mixed equilibrium is inefficient.

2) Social and strategic aspects of allocating limited attention and implications for political economics and public policy.

The second part of the project plans to use the results from the first part to investigate the social and strategic aspects of allocating limited attention and the implications for public policy.

 

A summary of project results can be found here(61.3 KB).

 

Working Paper

Herold, F.; Kuzmics, C. (2016), The evolution of taking roles, BERG - Working Paper Series No. 115.

Schmitt, S.Y.; Herold, F. (2016), Economic Models of Limited Attention - a Survey.

Schmitt, S.Y. (2016), Rational Allocation of Attention in Decision-Making, BERG - Working Paper Series No. 114.

González-Días, J.; Herold, F.; Domínguez, D. (2016), Strategic Sequential Voting, BERG - Working Paper Series No. 113.

Herold, F.; Netzer, N., Second-best Probability Weighting, pdf(235.9 KB).

Workshop "Limited attention and scarce cognitive resources: Recent advances in theory and economic applications"

In line with the project, a research workshop on "Limited attention and scarce cognitive resources: Recent advances in theory and economic applications" took place in Bamberg on July 17-18, 2014. The program and details on the workshop can be found here.

Workshop "Recent advances in economic theory: Information acquisition and scarce cognitive resources"

In line with the project, a research workshop on "Recent advances in economic theory: Information acquisition and scarce cognitive resources" took place in Bamberg on March 16-17, 2016. The program and details on the workshop can be found here.

This project has received funding from the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement no PCIG11-GA-2012_322253 (Limited Attention).

Contact Address:

University of Bamberg

Chair of Public Economics

Feldkirchenstr. 21

D-96045 Bamberg

Phone: +49 951 863 2548

Email: stefanie.schmitt(at)uni-bamberg.de