|
Speakers |
|
Università di Trento Learning to be Fair [pdf] Abstract
We study the process of equilibrium selection in games when players have "sophisticated" preferences of the type discussed, among others, by Rabin (1993) and Segal and Sobel (2007). To this end, we employ standard noisy version of the best response dynamics. We obtain several results concerning some popular games such as the Prisoner's Dilemma, the Battle of the Sexes and the Dictator Game. For example we show that with the preferences for reciprocity introduced by Rabin (1993), the cooperative Nash equilibrium in the Prisoner's Dilemma is never stochastically stable. |
|
University of Oslo Procrastination, partial naivete, and behavioral welfare analysis Abstract This paper has a dual purpose. First, I present a new modeling of partial naivete and apply this to procrastination. The decision maker is partially naive by perceiving that his current preferences may persist in the future. The behavioral implications of such partial naivete differ from those of related literature. Second, I suggest a general principle for welfare analysis in multi-self settings through a new application of Pareto-dominance, which reduces to the usual criterion for intertemporal choice if preferences are time consistent. In the case of procrastination, it leads to a clear welfare conclusion: Being partially naive reduces welfare. |
|
Hebrew University of Jerusalem Rule Rationality versus Act Rationality [ppt] Abstract People's actions often deviate from rationality, i.e., self-interested behavior. We propose a paradigm called rule-rationality, according to which people do not maximize utility in each of their acts, but rather follow rules or modes of behavior that usually-but not always-maximize utility. Specifically, rather than choosing an act that maximizes utility among all possible acts in a given situation, people adopt rules that maximize average utility among all applicable rules, when the same rule is applied to many apparently similar situations. The distinction is analogous to that between Bentham's "act-utilitarianism" and the "rule-utilitarianism" of Mill, Harsanyi, and others. The genesis of such behavior is examined, and examples are given. The paradigm may provide a synthesis between rationalistic neo-classical economic theory and behavioral economics. |
|
The Russell Sage Foundation Multiple Choice Tests As A Game Of Hide And Seek (joint work with Ygal Attali and David Budescu) Abstract We observe test-making and test-taking behavior in large scale high stakes multiple choice college admission tests. Test-makers want to minimize the chance that test-takers will answer correctly, unless they have true knowledge. Test-takers want to maximize the chance of discovering the correct answer, even if they don't know which it is. Surprisingly, test-takers seem to be doing a better job than test-makers, although the latter are professionals. In particular (at least until recently), test-takers seem not to have discovered -- or applied -- the game-theoretical recommendation for this situation: to randomize the answer key. |
|
University of Aberdeen How to Place Trust Well: An Experimental Study in the Role of the Source of Information [pdf] Abstract The paper reports on experiments designed to determine the effect of the source of information on cooporation in simple trust games. In the control treatment, without knowing the allocator's history, the investor can invest an endowment; if the investor invests, the allocator can keep or split the returns to investment. In each of the four treatments, the investor receives information about the allocator. The first treatment replicates a previous finding: When a reliable authority informs the investor about the allocator's last choice, allocator's trustworthiness is enforced and investor's trust is built (Bracht and Feltovich (2009)). In the second treatment, each allocator sends a message about his past play to the investor. This treatment in ineffective: allocators are selfish and deceive investors about opportunistic actions; investors become more and more discouraged. In the third treatment, each investor forwards information about the allocator's response to the allocator's next investor. This treatment is effective: cooperation and efficiency are increased. In the fourth treatment, a third party -- a randomly selected impartial observer -- forwards information about an allocator's history. This is the most interesting treatment: Doing the right thing (telling the truth about opportunistic behavior) conflicts with promoting society's material benefit (lying about opportunism to encourage investment). Surprisingly, this treatment is effective: The impartial observer tends to tell the truth, both investors and allocators anticipate truthful reporting, and cooperate. |
|
Fordham University Taking Wason to the market: Studies of the Wason selection task in competitive markets [doc] (joint work with Boris Maciejovsky(Imperial College)) Abstract A vast literature shows that individuals frequently violate normative principles in reasoning. In this paper, we report results of several studies designed to determine if information dissemination in competitive auctions can reduce, or even eliminate, logical errors in the Wason selection task. It is well known that groups perform better than individuals in intellective tasks with demonstrably correct solutions. Typically, these studies assume that group members share common goals. We extend this line of research by replacing standard face-to-face group interactions with competitive auctions, allowing for conflicting individual incentives. We demonstrate that competitive combinatorial auctions induce equally impressive learning effects as standard group interactions, and uncover specific and general knowledge transfers from these institutions to new reasoning problems. We explain these results within the theoretical framework of collective induction. |
|
Florida State University Credible Communication and Collusion (joint work with David J. Cooper and Kai-Uwe Kuhn) Abstract In this paper we analyze the experimentally the type of communication that is needed to achieve persistent collusion in a simple collusion game. As expected from earlier literature on communication and collusion, any type of communication leads to a short run treatment effect. However, consistent with theories of credible cheap talk, subjects learn very quickly that communication is not credible when the complete contingent strategies cannot be conveyed. In a treatment with unrestricted pre-game communication via a chat window we can show that communication of a contingent strategy threatening punishment for non-compliance is the most successful strategy to achieve collusion. Furthermore, subjects learn through repeated play to use such strategies, which helps the establishment of a positive treatment effect in the long run. Surprisingly, collusion is even more successful when we allow for renegotiation. This is despite the fact that individuals almost always renegotiate to the Pareto optimal continuation equilibrium and therefore face no punishments for deviations from first priod collusion. However, we show that non-monetary punishments in form of verbal admonishion in the renegotiation phase is sufficient to generate incentives to stick to collusive promises in period 1. Renegotiation therefore does not just eliminate punishment in the market but also creates a new punishment channel via non-monetary payoffs. The paper tests for the presence of a variety of other behavioral explanations for collusive outcomes. |
|
University of Maryland Fear of Losing in Dynamic Auctions: An Experimental Study [pdf] (joint work with Emel Filiz-Ozbay, Erkut Ozbay, and Pacharasut Sujarittanonta) Abstract We analyze the implications of different pricing rules in discrete clock auctions. The two most common pricing rules are highest-rejected bid (HRB) and lowest-accepted bid (LAB). Under HRB, the winners pay the lowest price that clears the market; under LAB, the winners pay the highest price that clears the market. This pricing difference creates stronger incentives for bid shading under LAB. When bidders seek to maximize profits, the HRB auction maximizes revenues and is fully efficient. The bid shading under LAB means that a bidder may regret losing. Bidders that anticipate this regret may limit bid shading, causing the LAB auction to achieve higher revenues than the HRB auction. Our experiments confirm that this is the case. The LAB auction achieves higher revenues, but is less efficient than the HRB auction. This also is the case in a version of the clock auction with provisional winners that is commonly used in spectrum auctions. This revenue result may explain the frequent use of LAB pricing despite the efficiency and simplicity advantages of HRB pricing. |
|
New York University Bargaining and Reputation: Experimental Evidence on Bargaining in the Presence of Irrational Types Abstract We conduct two sets of laboratory experiments to understand what role if any, commitment and reputation play in bargaining situations. The experiments implement the Abreu & Gul (2000) bargaining model that demonstrates how introducing "behavioral types'', which are obstinate in their demands, creates incentives for all players to build reputations for being hard bargainers. The data are qualitatively consistent with the theory, as subjects mimic induced obstinate types. Furthermore, we find evidence for the emergence of complementary types, whose initial demands instantaneously acquiesce to induced obstinate demands. However, there are important quantitative differences between the observed behavior and several of the finer predictions of the model: subjects are inclined to make aggressive demands too often, and participate in excessively long conflicts before reaching agreements. We present evidence that these deviations are in part a consequence of uncertainty over the set obstinate types. Finally, we relate our results to findings from both bilateral bargaining and reputation formation experiments in economics. |
|
University of Southampton Fairness and Desert in Tournaments [pdf] (joint work with Rebecca Stone) Abstract
We model the behavior of agents who, in competitive situations, care about receiving their "just deserts", i.e., what they feel they deserve. We assume that agents have a meritocratic notion of desert, so an agent feels she deserves more than a rival if and only if she works the hardest. The agents feel hard done by when they receive less than their fair share, and can feel elation or guilt when they receive more. |
|
University of Valencia Free riding in Schelling models: Avoiding the cost of moving (joint work with Jon Benito , Pablo Brañas , Penélope Hernández and Juan A. Sanchis) Abstract
Schelling (1971) seminal model predicts complete segregation in equilibrium. Using this model, Benito et al. (2009) implement Schelling’s standard model in an experimental setting and obtain the results predicted in the theoretical model, i.e. subjects move when they are unhappy and the complete segregated equilibrium is fully achieved with a minimum number of rounds (movements). |
|
The Hebrew University of Jerusalem Do the Weak Stand a Chance? Distribution of Resources in a Competitive Environment (joint work with Judith Avrahami) Abstract When two agents of unequal strength compete, the stronger one is expected to always win the competition. This expectation is based on the assumption that evaluation of performance is complete, hence flawless. If, however, the agents are evaluated on the basis of only a small sample of their performance, the weaker agent still stands a chance of winning occasionally. A theoretical analysis indicates that, to increase the chance of this happening the weaker agent ought to give up on enough occasions so that he or she can match the stronger agent on the remaining ones. We model such a competition in a game, present its game-theoretic solution, and report an experiment, involving 144 individuals, in which we tested whether players (both weak and strong) are actually sensitive to their relative strengths and know how to allocate their resources accordingly. Our results indicate that they do. |
|
Harvard University Heuristic Forecasting: An Asset Pricing Application (joint work with Andreas Fuster and Joshua Brock Mendel) Abstract We assume that agents do not know true data generating processes and instead estimate parsimonious models to forecast future events. We apply this framework to asset pricing. Heuristic forecast models generate asset price dynamics that are characterized by commonly observed empirical regularities: excess volatility, momentum (positively auto-correlated high frequency returns), and value (negatively auto-correlated low frequency returns). |
|
Paris School of Economics Games with Type Indeterminate Players [pdf] (joint work with J. Busemeyer and V. I. Danilov) Abstract The Type Indeterminacy model is a theoretical framework that uses some elements of quantum formalism to model the constructive preference perspective suggested by Kahneman and Tversky. In this paper we extend the TI-model from simple to strategic decision-making. In Part I we introduce TI-games by means of an example. We investigate a 2X2 game with the pre-play of a cheap-talk promise game. We show in a numerical example that in the TI-model the promise game can have impact on next following behavior when the standard classical model predicts no impact whatsoever. The TI approach differs from other behavioral approaches in identifying the source of the effect of cheap-talk promises in the intrinsic indeterminacy of the players' type. In Part II, we formulate some basic concepts for the analysis of games with type indeterminate players. We develop the theory in close connection with the standard approach to game of incomplete information à la Harsanyi. We show an equivalence between static games of incomplete information and static TI-games. We extend this equivalence result to dynamic commuting TI-games. Finally, we develop a new solution concept for non-commuting dynamic TI-games. It differs from the Perfect Bayesian equilibrium by the rule used for updating beliefs. The updating rule captures the novelty brought about by Type Indeterminacy namely that in addition to affecting information and payoffs, the action of a player impacts on the profile of types and thus on future actions. We provide an example showing that strategies that form a Perfect Bayesian equilibrium are not part of any Perfect TI-equilibrium. |
|
University of Pittsburgh Raising Revenue With Raffles: Evidence from a Laboratory Experiment [pdf] (joint work with Wooyoung Lim and Theodore Turocy) Abstract Lottery and raffle mechanisms have a long history as economic institutions for raising funds. In a series of laboratory experiments we find that total spending in raffles is much higher than Nash equilibrium predicts. Moreover, this overspending is persistent as the number of participants in the raffle increases. Subjects as a group do not strategically reduce spending as group sizes increase, in contrast to the comparative statics theory provides. The lack of strategic response cannot be explained by learning direction theory or level-k reasoning models, although quantal response equilibrium can fit the observed distribution of choices. Much of the observed spending levels in the larger groups cannot be explained by financial incentives. |
|
Maastricht University Learning by (Limited) Forward Looking Players [pdf] Abstract We present a model of adaptive economic agents that are k periods forward looking. Agents in our model are randomly matched to interact in finitely repeated games. They form beliefs by relying on their past experience in the same situation (after the same recent history) and then best respond to these beliefs looking k periods ahead. We establish almost sure convergence of our stochastic process and characterize absorbing sets. These can be very different from the predictions in both the fully rational model and the adaptive, but myopic case. In particular we find that also Non-Nash outcomes can be sustained almost all the time whenever they are individually rational and satisfy an efficiency condition. We then characterize stochastically stable states in 2×2 games and show that under certain conditions the efficient action in Prisoner's Dilemma games and Coordination games can be singled out as uniquely stochastically stable. We show that our results are consistent with typical patterns observed in experiments on repeated Prisoner's Dilemma games. Finally, if populations are composed of some myopic and some forward looking agents parameter constellations exists such that either might obtain higher average payoffs. |
|
University of California, Davis Sorting with Shame in the Laboratory [pdf] Abstract
Fiduciary professions like medicine, accounting, mortgage banking, and credit rating are subject to moral hazard and require trust and trustworthiness to function. I tested for the sorting power of shame in a charitable contributions game where subjects could choose to contribute either $5 publicly or $0-$10 privately. Control subjects contributed $1.5 privately. Treatment subjects, after an announcement of the prediction that they would likely contribute less than $2 privately, contributed $5 publicly. Hence, the belief that a subject might exploit the discretionary aspect of a (fiduciary-like) position can deter entry into such a position. That suggests that scandals creating those beliefs could change a field by repelling shame-sensitive people -- possibly to the detriment of the field and the economy as a whole. |
|
University of Pennsylvania Effecting Cooperation Abstract
There is a large repeated games literature illustrating how future interactions provide incentives for cooperation. Much of this literature assumes public monitoring: players always observe precisely the same thing. Even slight deviations from public monitoring to private monitoring that incorporate differences in players' observations dramatically complicate coordination. Equilibria with private monitoring often seem unrealistically complex. |
|
INRA MULTI-UNIT AUCTIONS AND COMPETITION STRUCTURE [pdf] (joint work with Sophie THOYER) Abstract Is it better for a seller who wants to auction multiple units to face many small bidders or few large bidders? Since multi-unit auction models usually have many equilibria, there are no theoretical predictions on the impact of the competition structure on the performance of a multi-unit auction (in terms of expected revenue and allocation efficiency). Our experimental results with uniform-price auctions support that with a constant degree of rationing, when the number of bidders increases while individual demand decreases, there is less strategic bidding (demand reduction). It leads to higher expected revenue with a lower variance but allocation efficiency is not significantly different. |
|
University of Arizona Choice of Routes in Networks with Different Information Structures: (joint work with Amnon Rapoport, Eyran Gisches) Abstract
Abstract |
|
Harvard University Unraveling of Matching Markets: Some Experimental Evidence [docx] Abstract
Markets sometimes unravel, with offers becoming inefficiently early, at dispersed times. One solution has been to design centralized clearinghouses that try to attract widespread participation at an efficiently late time. However even markets organized by clearinghouse need to make it safe for participants to wait to participate in the clearinghouse. It is therefore important to understand why participants sometimes feel compelled to transact earlier and earlier. But this is necessarily a complex subject, since moving transaction times earlier is a one-dimensional response to a multi-dimensional set of market conditions, so there will be many environments that press participants to transact earlier, for different reasons. |
|
New York University On Blame-freeness and Reciprocity: An Experimental Study [doc] (joint work with Mariana Blanco and Boğaçhan Çelen) Abstract Recent years have witnessed a growing literature on the theory of reciprocity. Founded on the seminal work of Rabin ---further extended by Falk and Fischbacher, Dufwenberg and Kirschteiger, Sobel and Segal and others, the theory of reciprocity is predicated on the assumption that people are willing to reward nice or kind acts and to punish unkind ones. This assumption raises the question as to how to define "kindness." In this paper we offer a new definition of kindness that we call "blame-freeness." Put most simply, blame-freeness states that in judging whether player i has been kind or unkind to player j in a social situation, player j would have to put himself in the strategic position of player i, while retaining the intrinsic constituents of his preferences (i.e., j does not become i but simply takes his strategic position), and ask if he would have acted in a manner that was worse than i did under identical circumstances. If j would have acted in a more unkind manner than i acted, then we say that j does not blame i for his behavior. If, however, j would have been nicer than i was, then we say that "j blames i" for his actions (i's actions were blameworthy). We consider this notion a natural, intuitive and empirically relevant way to explain the motives of people engaged in reciprocal behavior. After developing the conceptual framework, we then test this concept in a laboratory experiment involving tournaments and find significant support for the theory. |
|
Osaka Prefecture University Evolution of Payoff-dependent Preferences [pdf] Abstract
We consider a situation where each player's preferences are "payoff-dependent" in the sense that the utility of the payoff-dependent preferences is determined by the payoff of each person and those of others. |
|
Rutgers-Camden Not So Cheap Talk: A Model of Advice with Communication Costs [pdf] (joint work with Jo Hertel and John Smith) Abstract We model a game similar to the interaction between an academic advisor and advisee. Like the classic cheap talk setup, an informed player sends information to an uninformed receiver who is to take an action which affects the payoffs of both sender and receiver. However, unlike the classic cheap talk setup, the preferences regarding the receiver's actions are identical for both sender and receiver. Additionally, the sender incurs a communication cost which is increasing in the complexity of the message sent. We characterize the resulting equilibria. We show that if communication is costly then there is no equilibrium in which communication is complete. Under one out-of-equilibrium condition, our equilibrium is analogous to that found in Crawford and Sobel (1982). Under a more restrictive out-of-equilibrium condition, our equilibrium is analogous to that under the No Incentive to Separate (NITS) condition as discussed in Chen, Kartik and Sobel (2008). Finally, we model the competency of the advisee by the probability that the action is selected by mistake. We show that the informativeness of the sender is decreasing in the likelihood of the mistake. Therefore, we expect the informativeness of the relationship to be increasing in the competency of the advisee. |
|
National Taiwan University A Window of Cognition: Eyetracking the Reasoning Process in Spatial Beauty Contest Games (joint work with Chun-Ting Chen, Chen-Ying Huang, and Joseph Tao-yi Wang) Abstract We introduce a two-person “beauty contest” game (aka guessing game) played spatially on a two dimensional plane. Each player chooses a location and is rewarded by hitting a personal "target" based on his opponent's location. By trackingobserving subjects' eye movements on the plane, we are able to observe the decision-making process. A level-k model of heterogeneous cognition can explain both the final choices and the lookup patterns during the decision-making process. We fit a Markov-switching model to describe the lookup patterns, and classify subjects into various level-k types. Moreover, we employ a likelihood ratio-based test to select between competing level-k types, and show that when a resampling test cannot reject alternative level-k types using final choices alone, a further analysis of the lookups helps us distinguish between competing types. In particular, when the two classifications disagree, choice data alone could not reject nearly all of the lookup-based type alternatives, while most of the choice-based type alternatives could be rejected using lookup data. |
|
The Center for The Study of Rationality, The Hebrew University The Rationality of Irrationality [doc] Abstract The bounded rationality assumption does not contradict the rationality assumption. Specifically, in small decisions it is rational to act like boundedly rational agents. This proposition may provide answers to many challenges to rational choice economic theory that are posed by behavioral economics. In particular, it provides an answer to the "Rabin paradox," and challenges our understanding of how to refute the rationality assumption. |
|
The Hebrew University of Jerusalem Mental Equilibrium and Rational Emotions Abstract We introduce emotions into an equilibrium notion. In a mental equilibrium each player.selects. an emotional state which determines the player's preferences over the outcomes of the game. These preferences typically differ from the players' material preferences. The emotional states interact to play a Nash equilibrium and in addition each player's emotional state must be a best response (with respect to material preferences) to the emotional states of the others. We rst discuss the concept behind the denition of mental equilibrium and show that this behavioral equilibrium notion organizes quite well the results of some of the most popular experiments in the literature of experimental economics. We expose some attractive properties of mental equilibria which are useful for deriving the set of mental equilibria for specic games. |
|
Vanderbilt University and University of Warwick Conformity and stereotyping in social groups (joint work with Edward Cartwright and Myrna Wooders) Abstract
We demonstrate that correlated equilibrium can express conformity to norms and the coordination of behavior within social groups. Given a social group structure -- a partition of players into social groups --we propose three properties that one may expect of a correlated equilibrium consistent with social group structures satisfying behavioral conformity. These are (a) within-group anonymity (conformity within groups), (b) group independence (no conformity between groups), and (c) predictable social group behavior (ex-post stability). We also consider stereotyped beliefs -- beliefs that all (other) players in a social group can be expected to behave in the same way. We demonstrate that: |
|
University of Arizona Does Experience Teach? Professionals and Minimax Play in the Lab [pdf] Abstract Does expertise in strategic behavior obtained in the field transfer to the abstract setting of the laboratory? Palacios-Huerta and Volij (2008) argue that the behavior of professional soccer players in mixed-strategy games conforms closely to minimax play while the behavior of students (who are presumably novices in strategic situations requiring unpredictability) does not. We reexamine their data, showing that, in fact, the play of professionals is inconsistent with the minimax hypothesis in several respects: (i) professionals follow non-stationary mixtures, with card frequencies that are negatively correlated between the first and the second half of the experiment; (ii) professionals tend to switch between under and over playing a card relative to its equilibrium frequency, and (iii) the distribution of card frequencies across professionals is far from the distribution implied by minimax. In each of these respects the behavior of students conforms more closely to the Minimax Hypothesis. |