Pre-Play communication with forgone costly messages: experimental evidence on forward induction

We study communication in a two-player coordination game with Pareto-ranked equilibria. Prior research demonstrates that efficient coordination is difficult without communication but obtains regularly with (mandatory) costless pre-play messages. In a laboratory experiment, we modify communication by making the sending of messages optional and costly. Even small costs dramatically reduce message use, but efficient coordination of actions occurs with similar frequency to that observed under costless communication. Our results can be accounted for by Govindan and Wilson's formalization of forward induction (GW-FI), which selects, among the pure-strategy equilibrium outcomes, the one in which efficiency is achieved without communication. Consistent with the introspective character of GW-FI, the fraction of players who achieve efficient coordination by forgoing the use of reasonably costly optional messages is substantial from the first period, is remarkably stable at that level, and is not significantly affected by learning.Coordination, communication, forward induction, experiment, stag hunt

Evolutionary game theory

Game Theory

Game theory

game theory

Leading by Words: A Voluntary Contribution Experiment With One-Way Communication

In this paper, we study a voluntary contribution mechanism with one-way communication. The relevance of one person's words is assessed by assigning exogenously the role of the "communicator" to one group member. Contrary to the view that the mutual exchange of promises is necessary for the cooperation-enhancing effect of communication, we ï¬nd that, compared to a standard voluntary contribution mechanism with no communication, one-way communication signiï¬cantly increases contributions and renders them stable over time. Moreover, the positive effects of one-way communication persist even when communication is one-shot.Public goods experiment, Computer-mediated communication, Cheap-talk, Cooperation

Trust and reciprocity in incentive contracting

Principals can attempt to get agents to perform certain actions preferable to the principal by using ex post punishments or rewards to align incentives. Field data is mixed on whether, and to what extent, such informal incentive contracting (paradoxically) crowds out efficient solutions to the agency problem. This paper explores, via a novel set of laboratory experiments, the impact of ex post incentives on informal contracts between principals and agents in bargaining environments in which there are gains from exchange and when there is an opportunity for the principal to relay a no-cost demand of the division of those gains. Incentive contracting in these environments does not crowd-out off-equilibrium cooperation, and at high incentive levels cooperation is crowded in.incentives; trust; reciprocity; organizations; experimental economics

Psychological Foundations of Incentives

During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically questionable view of human motivation. The purpose of this paper is to show that this narrow view of human motivation may severely limit understanding the determinants and effects of incentives. Economists may fail to understand the levels and the changes in behaviour if they neglect motives like the desire to reciprocate or the desire to avoid social disapproval. We show that monetary incentives may backfire and reduce the performance of agents or their compliance with rules. In addition, these motives may generate very powerful incentives themselves.incentives, contracts, reciprocity, social approval, social norms, intrinsic motivation.

Promises & Partnership

We examine, experimentally and theoretically, how communication within a partnership may mitigate the problem (highlighted in contract theory) of hidden action. What is the form and content of the communication? Which model of decision-making can capture the impact of communication? We consider free-form communication, measure beliefs (about actions and beliefs), and examine which motivational forces influence subjects. We find they harbor belief-dependent preferences that can be captured using psychological game theory. In particular, agents are influenced by guilt aversion, which suggests a theory of why and how communication influences behavior in which statements of intent and resulting expectations play a special role. This has bearing on how to understand partnerships and contracts.Promises; partnership; contract theory; behavioral economics; hidden action; moral hazard; lies; social preferences; psychological game theory; guilt aversion; reciprocity; fairness

When Europe encounters urban governance: Policy Types, Actor Games and Mechanisms of cites Europeanization

This paper examines European Union (EU) causal mechanisms and policy instruments affecting the urban domain throughout the lenses of the Europeanization approach. Instead of looking at EU instruments that are formally/legally consecrated to cities, we use theoretical public policy analysis to explore the arenas and the causal mechanisms that structure the encounters between the EU and urban systems of governance. Policy instruments are related to policy arenas and in turn to different mechanisms of transmission thus originating a typology of European Policy Modes. The paper focuses on four different EU instruments in the in the macro-area of sustainable development and proposes potential game-theoretical models for each of them. In the conclusions we highlight the differences between this approach and the traditional analysis of EU urban policy, and suggest avenues for future empirical research based on typologies of policy instruments and modes of Europeanization