October 2
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12:00 PM
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1:00 PM
UW-ISyE looks forward to welcoming Bhaskar Ray Chaudhury from the University of Illinois Urbana–Champaign.
Response-Aware Rational Equilibrium (RARE) in Pricing Games
We study a broad class of pricing games with budget-constrained buyers, encompassing both rival and non-rival assets. We show that pure Nash equilibria may fail to exist even when buyer preferences have a simple structure. This instability can arise from myopic price deviations whose apparent profitability relies on competitors leaving their prices unchanged. Once competitors respond in their own interests, however, the gains from such deviations may disappear. Motivated by this observation, we introduce response-aware rational equilibrium (RARE), a notion of stability in which sellers anticipate the joint responses of their competitors when evaluating a price change. We require these responses to be individually rational: each responding seller must earn at least as much as it would by maintaining its price after the initial deviation. A price profile is a RARE if no seller has a deviation that remains profitable against every admissible response. We study the existence and structural properties of RARE, as well as its emergence through natural revenue-improving market dynamics. Response-aware equilibria offer a natural framework for studying emerging economies populated by AI agents, whose ability to model other agents and simulate their responses brings strategic anticipation to the forefront of economic decision-making.
Bio: Bhaskar Ray Chaudhury is an Assistant Professor in the Department of Industrial and Enterprise Systems Engineering at the University of Illinois Urbana–Champaign, with an affiliate appointment in the Siebel School of Computing and Data Science. His research lies at the intersection of theoretical computer science, economics, and machine learning, with a focus on fair division, equilibrium computation, and the foundations of data economics. He has received several honors, including the NSF Career Award, best paper awards at the ACM Conference on Economics and Computation, and an oral presentation at ICML.