Bounded Rationality and Overconfidence in Dynamic Games

Wednesdays@NICO Seminar, Noon, November 20, 2013, Chambers Hall 

Professor Jennifer Cutler, Illinois Institute of Technology

Bounded Rationality and Overconfidence in Dynamic Games

Abstract

Behavioral research has long shown that people are limited in their ability to reason through the downstream implications of decisions they make, and that they tend to exhibit a bias towards underestmating the skill of others relative to themselves. I introduce a general framework for studying the implications of such bounded rationality and overconfidence in dynamic competitive games, and use this framework to identify environmental characteristics that lead to overconfidence providing a systematic payoff advantage -- i.e., when it really is beneficial to underestimate the competition.

Biography

Jennifer Cutler is an Assistant Professor of Marketing at the Illinois Institute of Technology Stuart School of Business. Her research draws from psychology, economics, and computer science, and focuses on understanding the implications of consumer and managerial bounded rationality in problems relevant to marketing and management. She received her PhD in Business Administration from Duke University and her ScB in Cognitive Science (with a specialization in natural language processing) from Brown University. Additionally, she spent many years at Microsoft working on speech recognition tools, human-computer interaction, and product life cycle process improvement.