Communication channels and induced behavior

This paper reports recent findings on the effects of cheap talk communication on behavior. It exemplifies how different communication channels influence decisions in various games and information environments and addresses possible consequences for the design of real-world economic environments.communication, economic experiment, bargaining, public good

How do coalitions get built - Evidence from an extensive form coalition game with renegotiation & externalities

We investigate a three-person coalition game in which one bargainer, the builder, can propose and build a coalition over two stages. In equilibrium, coalition building ends with an efficient grand coalition, while the equilibrium path is contingent on the values of the two-person coalitions and associated externality payoffs. Considering relative payoffs need not change the equilibrium path. Nevertheless, outcomes in the experiment are often inefficient. One explanation is that bargainers have difficulties anticipating the future actions of other bargainers. This problem might be mitigated by allowing bargainers to communicate prior to each stage. A test finds that communication does in fact increase efficiency, although unevenly, and at the cost of the builder. The study implies that the nature and pattern of communication among bargainers is a critical factor in efficient coalition building.coalitional bargaining, communication, game theory, experiment

The Monotonicity Puzzle. An Experimental Investigation of Incentives Structures

Non–monotone incentive structures, which — according to theory — are able to induce optimal behavior, are often regarded as empirically less relevant for labor relationships. Scientific attention is (therefore) confined to monotone if not linear contracts. This paper reports on experimental tests comparing non–monotone vs. monotone contracts in a simple dynamic agency model. The results demonstrate that selecting the non–monotone contract over of the monotone one is not only optimal from a theoretical point of view, but also remains preferable given the agents’ observed behavior. However, roughly 50 per cent of the principals prefer the monotone contract.experimental agency, non–monotone contracts

Selfish in the End?:An Investigation of Consistency and Stability of individual Behavior

This paper puts three of the most prominent specifications of ‘other-regarding’ preferences to the experimental test, namely the theories developed by Charness and Rabin, by Fehr and Schmidt, and by Andreoni and Miller. In a series of experiments based on various dictator and prisoner’s dilemma games, we try to uncover which of these concepts, or the classical selfishapproach, is able to explain most of our experimental findings. The experiments are special with regard to two aspects: First, we investigate the consistency of individual behavior within and across different classes of games. Second, we analyze the stability of individual behavior over time by running the same experiments on the same subjects at several points in time. Our results demonstrate that in the first wave of experiments, all theories of other-regarding preferences explain a high share of individual decisions. Other-regarding preferences seem to wash out over time, however. In the final wave, it is the classical theory of selfish behaviorthat delivers the best explanation. Stable behavior over time is observed only for subjects, who behave strictly selfish. Most subjects behave consistently with regard to at least one of the theories within the same class of games, but are much less consistent across games.individual preferences; consistency; stability; experimental economics

Communication channels and induced behavior

This paper reports recent findings on the effects of cheap talk communication on behavior. It exemplifies how different communication channels influence decisions in various games and information environments and addresses possible consequences for the design of real-world economic environments

Laying off or Not? the Influence of Framing and Economics Education

This paper provides a critical re-examination of Rubinstein's survey (Rubinstein; Economic Journal 2006), in which he questions the way economics is taught. The observations obtained in our new survey cast some doubts on the original findings, and, in particular, question Rubinstein's conjecture that our students' views on economic issues are influenced by the way we teach economics.

Selfish in the End?:An Investigation of Consistency and Stability of individual Behavior

This paper puts three of the most prominent specifications of ‘other-regarding’ preferences to the experimental test, namely the theories developed by Charness and Rabin, by Fehr and Schmidt, and by Andreoni and Miller. In a series of experiments based on various dictator and prisoner’s dilemma games, we try to uncover which of these concepts, or the classical selfishapproach, is able to explain most of our experimental findings. The experiments are special with regard to two aspects: First, we investigate the consistency of individual behavior within and across different classes of games. Second, we analyze the stability of individual behavior over time by running the same experiments on the same subjects at several points in time. Our results demonstrate that in the first wave of experiments, all theories of other-regarding preferences explain a high share of individual decisions. Other-regarding preferences seem to wash out over time, however. In the final wave, it is the classical theory of selfish behaviorthat delivers the best explanation. Stable behavior over time is observed only for subjects, who behave strictly selfish. Most subjects behave consistently with regard to at least one of the theories within the same class of games, but are much less consistent across games

Selfish in the End?:An Investigation of Consistency and Stability of individual Behavior

This paper puts three of the most prominent specifications of ‘other-regarding’ preferences to the experimental test, namely the theories developed by Charness and Rabin, by Fehr and Schmidt, and by Andreoni and Miller. In a series of experiments based on various dictator and prisoner’s dilemma games, we try to uncover which of these concepts, or the classical selfishapproach, is able to explain most of our experimental findings. The experiments are special with regard to two aspects: First, we investigate the consistency of individual behavior within and across different classes of games. Second, we analyze the stability of individual behavior over time by running the same experiments on the same subjects at several points in time. Our results demonstrate that in the first wave of experiments, all theories of other-regarding preferences explain a high share of individual decisions. Other-regarding preferences seem to wash out over time, however. In the final wave, it is the classical theory of selfish behaviorthat delivers the best explanation. Stable behavior over time is observed only for subjects, who behave strictly selfish. Most subjects behave consistently with regard to at least one of the theories within the same class of games, but are much less consistent across games

Bilateral communication in procurement auctions

We ask how buyers can make use of bilateral communication in a procurement setting with moral hazard. We focus on a setting where buyers and potential sellers can exchange cheap-talk messages before trading and where the seller is determined via a buyer-determined procurement auction. In this type of auction, buyers can freely choose among bidders based on bidders’ observable characteristics and the prices they ask for. In a controlled laboratory experiment, we find that buyers use free-form text messages to make requests and to reduce social distance. The relationship between the offers sellers make and the messages they send is mediated by buyers’ requests. But, in general, buyers may increase their profits by choosing sellers who promise high quality or large profits. Furthermore, despite the cheap-talk nature of requests, buyers in our experiment increase their profits by specifically demanding high quality or large profits