Heterogeneous Social Preferences

Recent research has shown the usefulness of social preferences for explaining behavior in laboratory experiments. This paper demonstrates that models of social preferences are particularly powerful in explaining behavior if they are embedded in a setting of heteroge-neous actors with heterogeneous (social) preferences. For this purpose a simple model is in-troduced that combines the basic ideas of inequity aversion, social welfare preferences, recip-rocity and heterogeneity. This model is applied to 43 games and it can be shown that its pre-dictive accuracy is clearly higher than that of the isolated approaches. Furthermore, it can explain most of the "anomalies" (the "contradictions") that are discussed in Goeree and Holt (2001).

Some forgotten equilibria of the Bertrand duopoly!?

This note analyzes the Bertrand duopoly with constant but asymmetric marginal costs on a market with homogenous products. It is shown that there exist some equilibria that are ignored in the literature on IO. In addition, in this setting (perfectly or nearly perfectly) competitive equilibria exist.

Endogenous Property Rights in a Hold up-Experiment

In a hold-up experiment designed to test theoretical predictions following from Hart (1995) and deMeza/Lockwood (1998) regarding investment behavior Sonnemans et al. (2001) (SOS) find only a partial confirmation of theory. According to SOS these deviations from standard theory can be explained by positive reciprocal behavior. In this paper, we replicate the experiment by SOS and add another group of treatments in which asset ownership is endogenized by auctioning off the assets. Our experiment shows that the results by SOS crucially depend on the ownership structure being exogenously assigned by the experimenter. We present experimental evidence that, by and large, corroborates the theoretical predictions made by Hart (1995).property rights, hold-up, experiment, endogenous ownership structure

Small is Successful!?

This paper provides experimental evidence on exit behavior of asymmetrically sized firms in a duopoly with declining demand. We conduct three treatments: (a) The basic model with indivisible real capital. The structure of this treatment represents the main findings of Ghemawat and Nalebuff (1985); (b) an extension of the basic model by introducing a bankruptcy constraint; (c) here we allow for divisible real capital (Ghemawat and Nalebuff (1990)). In all three treatments we find behavior that is, by and large, in line with subgame perfect Nash Equilibrium. However, there is a problem of multiplicity of equilibria in (b) and we find an anchor effect as well as learning effects in (c).Exit, duopoly, declining market, experimental economics

Bounded Rationality in Principal‐Agent Relationships

We conducted six treatments of a standard moral hazard experiment with hidden action. All treatments had identical Nash equilibria. However, the behavior in all treatments and periods was inconsistent with established agency theory (Nash equilibrium). In the early periods of the experiment, behavior differed significantly between treatments. This difference largely vanished in the final periods. We used logit equilibrium (LE) as a device to grasp boundedly rational behavior and found the following: (1) LE predictions are much closer to subjects’ behavior in the laboratory; (2) LE probabilities of choosing between strategies and experimental behavior show remarkably similar patterns; and (3) profit‐maximizing contract offers according to the LE are close to those derived from regressions.experiment, logit equilibrium, moral hazard, hidden action

Some forgotten equilibria of the Bertrand duopoly!?

This note analyzes the Bertrand duopoly with constant but asymmetric marginal costs on a market with homogenous products. It is shown that there exist some equilibria that are ignored in the literature on IO. In addition, in this setting (perfectly or nearly perfectly) competitive equilibria exist

To choose or not to choose: contracts, reference points, reciprocity, and signaling

Hart and Moore (2008) argue that varying degrees of flexibility in contracts induce differing reference points and aspiration levels for parties' shares of a transaction's total surplus. As a consequence, a trade-off between adaptational flexibility and the prevention of distributional conflicts emerges. In a recent paper, Fehr et al. (2011) analyze a buyer-seller-relationship with incomplete contracts and ex ante uncertainty regarding the sellers' cost level to test these effects. We re-run their experiment and introduce another treatment with exogenously determined contract types. Like FHZ we find reference point effects in both treatments. However, uncooperative shading behavior in our treatments differs substantially from that described in FHZ. Furthermore, it makes a significant difference whether contract types are determined by buyers or determined exogenously. We explain this by introducing two further effects, a reciprocity effect and a signaling effect

Small is successful!?: A Study of Exit Behavior in a Declining Markets Experiment

This paper provides experimental evidence on exit behavior of asymmetrically sized firms in a duopoly with declining demand. We conduct three treatments: (a) The basic model with indivisible real capital. The structure of this treatment represents the main findings of Ghemawat and Nalebuff (1985); (b) an extension of the basic model by introducing a bankruptcy constraint; (c) here we allow for divisible real capital (Ghemawat and Nalebuff (1990)). In all three treatments we find behavior that is, by and large, in line with subgame perfect Nash Equilibrium. However, there is a problem of multiplicity of equilibria in (b) and we find an anchor effect as well as learning effects in (c)

Quasi-Rational R&D Behavior in an Environment with Fundamental Uncertainty

The objective of our paper is to study R&D investments and pricing behavior in an environment with fundamental uncertainty. We designed a multi-period experiment in which each period consisted of two stages, an R&D phase and a pricing stage. Participants in the experiment had almost no information about the underlying functions, parameters, and probabilities. Subjects' behavior in the fundamentally uncertain environment of our experiment may best be characterized as some kind of procedural rationality which we call quasi-rationality. Pricing decisions are particularly close to equilibrium values. Although we do find some hints of the existence of behavioral effects in R&D decisions, only reinforcement effects are significant across both treatments and different model specifications. The introduction of patents has only a minor impact on R&D behavior. Overall, subjects learn to adapt remarkably well to a rather complex and fundamentally uncertain environment

Unterhaltungsqualität und Public Value

Gebühren finanzierte TV Sender haben die Aufgabe Public Value zu schaffen. In der Regel umfasst der Leistungsauftrag dabei sowohl Information und Bildung als auch Unterhaltung. Während sich für informierende und bildende Inhalte relativ leicht feststellen lässt, worin der Nutzen für die Öffentlichkeit besteht, ist dies für die Unterhaltung weniger eindeutig. An dieser Stelle setzt der Beitrag an. Es wird argumentiert, dass der Public Value von Unterhaltung von der Qualität der Unterhaltung abhängt. Hierfür muss zunächst geklärt werden, an welchen Kriterien sich die Qualität von Unterhaltung festmachen lässt. Die Qualität stellt sich vielschichtig dar, es müssen unterschiedliche Perspektiven z.B. von Rezipienten, Produzenten und Regulierern berücksichtigt werden. Auf Basis einer Messung von Qualität wird in einen zweiten Schritt diskutiert, welche Unterhaltungsangebote einen Public Value aufweisen und welchen dieser fehlt, so dass sie nicht zu den Aufgaben eines Service Public Senders zu zählen sind. Dabei zeigt sich, dass eine absolute Bewertung nicht gerechtfertigt ist, sondern jeweils die Kontextbedingungen eines Medienmarkts berücksichtigt werden müssen. Anhand von konkreten Unterhaltungsangeboten von europäischen Service Public Anbietern wird die Messung von Qualität illustriert und mit den Kontextbedingungen in Bezug gesetzt