CentER

Michael Kosfeld

Abstract:
All economic action involves interaction among individuals. Moreover, most of these interactions have a primarily social character. We talk with friends, we ask others for advice, we arrange to meet people, we work together with colleagues, we live next to neighbours. This thesis takes a closer analytical look at the issue of social interaction in relation to the decision-making of individuals. Inspired by ideas from evolutionary game theory, learning theory and models of bounded rationality it considers three main topics: problems of coordination, economic effects of rumours, and behavioural consequences of regret. The study demonstrates in particular how both individual decision-making and social interaction affect not only the behaviour of individuals in an economy but also, via the system of interaction, the aggregate behaviour of the economy itself.