Rational reasoning or adaptive behavior? Evidence from two-person beauty contest games

Many experiments have shown that human subjects do not necessarily behave in line with game theoretic assumptions and solution concepts. The reasons for this non-conformity are multiple. In this paper we study the argument whether a deviation from game theory is because subjects are rational, but doubt that others are rational as well, compared to the argument that subjects, in general, are boundedly rational themselves. To distinguish these two hypotheses, we study behavior in repeated 2-person and many-person Beauty- Contest-Games which are strategically different from one another. We analyze four different treatments and observe that convergence toward equilibrium is driven by learning through the information about the other player’s choice and adaptation rather than self-initiated rational reasoning.Beauty contest, Guessing game, Bounded rationality, Weak dominance, Learning

Relative payoffs and happiness: An experimental study

Some current utility models presume that people are concerned with their relative standing in a reference group. If this is true, do certain types care more about this than others? Using simple binary decisions and self-reported happiness, we investigate both the prevalence of ``difference aversion'' and whether happiness levels influence the taste for social comparisons. Our decision tasks distinguish between a person’s desire to achieving the social optimum, equality or advantageous relative standing. Most people appear to disregard relative payoffs, instead typically making choices resulting in higher social payoffs. While we do not find a strong general correlation between happiness and concern for relative payoffs, we do observe that a willingness to lower another person’s payoff below one’s own (competitive preferences) seems correlated with unhappiness.Happiness, relative payoffs, social preferences, subjective well-being, Leex

Relative Payoffs and Happiness: An Experimental Study

Are people concerned with their relative standing in a reference group? Do certain types care more about this than others? Little work has been done to identify underlying determinants for an inclination to make social comparisons and to explain variation across individuals. We investigate whether a person's level of happiness influences her taste for social comparisons and offer subjects choices in decision tasks where there is little or no difference in their monetary reward across choices, but where the material payoff for another person is strongly impacted. These decision tasks are calibrated to distinguish between a person's pure taste for achieving the social optimum, equality or preferences for advantageous relative standing. Self-reported happiness, as measured by scales derived from subjects' responses to questionnaires, is correlated with individual choices. Somewhat surprisingly, we find that most people appear to disregard relative payoffs, instead typically making choices resulting in higher social payoffs. While we do not find a strong correlation between happiness and difference aversion, we do observe that a willingness to lower another person's payoff below one's own (competitive preferences) seems correlated with unhappiness.

The impact of smiling cues on social cooperation

This is the final version. Available on open access from Wiley via the DOI in this recordWhile there is a plethora of experimental studies on the effects of preplay communication on economic behavior, little is known about the impact of simple cues, such as smiling, on pro-sociality. This article presents a comprehensive analysis exploring how the presence of a smiling opportunity affects pro-social behavior as measured by a one-shot linear public goods game. Our design varies (i) whether smiling is costly or costless and (ii) whether one or both members in a group are given the opportunity to smile. To test for the robustness of our results, we consider two versions of smiling cues: (i) a smiling label and (ii) a smiling face (emoji). Our findings indicate that introducing a cost for smiling has detrimental behavioral consequences regardless of the cue. Specifically, when smiling is costly, only a small minority of subjects are willing to smile as opposed to when smiling is costless. As a result, subjects contribute significantly less. These results remain the same regardless of the type of smiling cue that subjects can send. Overall, our findings provide new evidence that simple cues such as smiles embody information that influences pro-social behavior in social interactions.University of BirminghamUniversity of Exete

If You are Offered the Right of First Refusal, Should You Accept? An Investigation of Contract Design

Rights of first refusal are contract clauses intended to provide the holder of a license or lease with some protection when the contract ends. The simplest version gives the right holder the ability to act after potential competitors. However, another common implementation requires the right holder to accept or reject some offers before potential competitors are given the same offer, and, if the right holder rejects the initial offer, allows the right to be exercised affirmatively only if competitors are subsequently offered a better deal (e.g. a lower price). We explore, theoretically and experimentally, the impact this latter form of right of first refusal can have on the outcome of negotiation. Counterintuitively, this “right” of first refusal can be disadvantageous to its holder. This suggests that applied contract design may benefit from the same kind of attention to detail that has begun to be given to practical market design.Economic

An experiment on case-based decision making

“The final publication is available at Springer via http://dx.doi.org/10.1007/s11238-015-9492-1”."We experimentally investigate the disposition of decision makers to use case-based reasoning as suggested by Hume (An enquiry concerning human understanding, 1748) and formalized by case-based decision theory (Gilboa and Schmeidler in Q J Econ 110:605–639, 1995). Our subjects face a monopoly decision problem about which they have very limited information. Information is presented in a manner which makes similarity judgements according to the feature matching model of Tversky (Psychol Rev 84:327–352, 1977) plausible. We provide subjects a “history” of cases. In the (Formula presented.) between-subject design, we vary whether information about the current market is given and whether immediate feedback about obtained profits is provided. The results provide support for the predictions of case-based decision theory, particularly when no immediate feedback is provided.Department of Economics, Texas A&M UniversityMelbern G. Glasscock Center for Humanities Research, Texas A&M UniversityNS

The development of social preferences

This paper examines how social preferences develop with age. This is done using a range of mini-dictator games from which we classify 665 subjects into a variety of behavioural types. We expand on previous developmental studies of pro-sociality and parochialism by analysing individuals aged 9–67, and by employing a cross country study where participants from Spain interact with participants from different ethnic groups (Arab, East Asian, Black and White) belonging to different countries (Morocco, China, Senegal and Spain). We identify a ‘U-shaped’ relationship between age and egalitarianism that had previously gone unnoticed, and appeared linear. An inverse “U-shaped” relationship is found to be true for altruism. A gender differential is found to emerge in teenage years, with females becoming less altruistic but more egalitarian than males. In contrast to the majority of previous economic studies of the development of social preferences, we report evidence of increased altruism, and decreased egalitarianism and spite expressed towards black individuals from Senegal

The Development of Social Preferences

This paper examines how social preferences develop with age. This is done using a range of mini-dictator games from which we classify 665 subjects into a variety of behavioural types. We expand on previous developmental studies of pro-sociality and parochialism by analysing individuals aged 9–67, and by employing a cross country study where participants from Spain interact with participants from different ethnic groups (Arab, East Asian, Black and White) belonging to different countries (Morocco, China, Senegal and Spain). We identify a ‘U-shaped’ relationship between age and egalitarianism that had previously gone unnoticed, and appeared linear. An inverse “U-shaped” relationship is found to be true for altruism. A gender differential is found to emerge in teenage years, with females becoming less altruistic but more egalitarian than males. In contrast to the majority of previous economic studies of the development of social preferences, we report evidence of increased altruism, and decreased egalitarianism and spite expressed towards black individuals from Senegal