Cumulative prospect theory (CPT) is a framework pioneered by Kahneman and Tversky, which is believed, based on extensive experimentation with human subjects, to form a better theory than expected utility theory (EUT) to model human behavior when faced with choices. Given the pervasive role of humans as agents in networks (e.g. social networks) and markets (e.g. labor markets) building mechanisms based on presumably more accurate models of human behavior is of great interest both for increasing human welfare and for building more efficient commerical systems that interact with humans. Since CPT includes EUT as a special case, research in this direction provides a strict generalization of existing modeling techniques. Game theoretic models are pervasive in the study of interactions between autonomous agents. There is a rich theory for EUT agents. Game theory for CPT agents, however, is barely getting off the ground. Our starting point is some recent works of Keskin, where notions of Nash equilibrium and correlated equilibrium were defined for games with CPT agents, i.e. agents who evaluate their prospects using CPT. In this talk we present some of our findings in the course of investigating the structure of CPT Nash and correlated equilibria. In particular, even though the set of CPT correlated equilibria can fail to be convex, unlike in the EUT case, and can even be disconnected, we demonstrate that, just as in the EUT case, the set of CPT Nash equilibria lies on the boundary of the set of CPT correlated equilibria. The talk will give a gentle introduction to the underlying ideas of CPT, which may be unfamiliar to many.
Venkat Anantharam is on the faculty of the EECS Department at the University of California, Berkeley. He received the Philips India Medal and the President of India Gold Medal from IIT Madras in 1980 and an NSF Presidential Young Investigator award in 1988. He is a co-recipient of the 1998 Prize Paper Award of the IEEE Information Theory Society, and a co-recipient of the 2000 Stephen O. Rice Prize Paper Award of the IEEE Communications Theory Society. He received the Distinguished Alumnus Award from IIT Madras in 2008. He is a Fellow of the IEEE.