Maria Betto

Perceptiveness and Choice

Not all choices are obvious. When they are not, a decision-maker’s perceptiveness determines how well she can resolve the complex trade-offs between alternatives and thus reach a decisive conclusion. This paper leverages the theory of fuzzy sets to introduce this notion to standard choice theory. In particular, fuzziness is used to provide a maximum level of perceptiveness, on a [0, 1] scale, with which one can say that an alternative is just as good as another — i.e. an agent has to be more perceptive than that to realize that this is not true. I develop an axiomatic characterization of rationality for fuzzy binary relations, which I then show is equivalent to both a Fuzzy Weak Axiom (FWARP) and a representation by a family of nested, interval-valued utilities. While a fully perceptive individual is rational in the classical sense, lower perceptiveness generates coarser preference rankings where only the starkest of comparisons can be properly and accurately perceived. I illustrate the model with applications to Game Theory, and provide a novel explanation for the status quo bias where the size of the bias naturally increases with task complexity.

Asymmetric All-Pay Auctions with Spillovers

with Matthew W. Thomas, Accepted at Theoretical Economics, 2023

When opposing parties compete for a prize, the sunk effort players exert during the conflict can affect the value of the winner’s reward. These spillovers can have substantial influence on the equilibrium behavior of participants in applications such as lobbying, warfare, labor tournaments, marketing, and R&D races. To understand this influence, we study a general class of asymmetric, two-player all-pay auctions where we allow for spillovers in each player’s reward. The link between participants’ efforts and rewards yields novel effects — in particular, players with higher costs and lower values than their opponent sometimes extract larger payoffs.