Resolute Choice in interaction: a qualitative experiment.

The purpose of this paper is that of extending the model of Resolute Choice (McClennen 1990) to a situation of interaction and comparing its performance with the Sophisticated-subgame perfect equilibrium model in an experiment. A non-cooperative game in which two players with different preference orderings over outcomes move sequentially is adopted as a framework to compare the two models. I consider those combinations of the players' preference structures which generate the different plans and find those game situations where either one or two outcomes Pareto-dominant over Sophisticated Choice exist. Two definitions of Resolute Choice are therefore tested, which allow to discriminate choice between two different Pareto dominant outcomes. In the experiment three games with the same structure but different payoffs are played. The design allows preliminary group discussion among the players about the decisions to be taken, which is taped and transcribed. The results show support for Resolute Choice as Pareto dominance, while the ability of Resolute Choice as Nash bargaining to explain behaviour is quite limited. The subjects' motivations are very useful in interpreting the results. They show that choice for a Pareto dominant outcome is mainly driven by the idea of Pareto optimality itself. Motivations differ slightly according to which strategy is chosen to reach one of the Pareto dominant outcomes. A result to be noted is the relevance of the different payoffs of the games in motivating choice. The method used in the experiment to elicit the subjects' responses is the strategy method. A direct consequence is that the results are all in terms of strategies chosen by subjects. In view of this, an alternative way to look at the experiment results has been tried, which consists in a simulation of the outcomes of the games that would have resulted from direct interaction among the players. The results have then been compared to the ones from the experiment.dynamic decision making, myopia, sophistication, resoluteness, non-cooperative game

Naïve, Resolute or Sophisticated? A Study of Dynamic Decision Making

Dynamically inconsistent decision makers have to decide, implicitly or explicitly, what to do about their dynamic inconsistency. Economic theorists have identified three possible responses – to act naively (thus ignoring the dynamic inconsistency), to act resolutely (not letting their inconsistency affect their behaviour) or to act sophisticatedly (hence taking into account their inconsistency). We use data from a unique experiment (which observes both decisions and evaluations) in order to distinguish these three possibilities. We find that the majority of subjects are either naïve or resolute (with slightly more being naïve) but very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic situations.Dynamic decision making, naivety, sophistication, resoluteness, dynamic inconsistencies

An experimental inquiry into the nature of relational goods

Our experiment aims at studying the impact of two types of relational goods on the voluntary contributions to the production of a public good, i.e. acquaintance among the contributors and having performed a common work before the experiment. We implement two treatments with 128 participants from two different groups. In the first treatment the subjects are left talking in a room before the experiment (cheap talk treatment); they are not suggested any particular topic to talk about, nor are they requested to perform any activity in particular. The second treatment involves the performance of a common work (namely, the computation of some indices of economic performance of three companies, based on their balance sheets). The two groups of subjects are composed either by people with or without previous acquaintance. An equal number of subjects from each of these groups is then allocated to either treatment. After that the subjects played a standard 10-rounds public goods game in groups of 4. The groups were gender-homogeneous. This allows us also to inquire for the possible presence of a gender effect in our experiment. Our results show that: 1) both common work and previous acquaintance increase the average contribution to the public good, 2) there is a relevant gender effect with women contributing more or less than men, depending on the treatment. Therefore, we conclude that relational goods are important to enhance cooperation, that acquaintance and working together are rather complements than substitutes, and that different relational goods produce different effects on cooperation. Also, we find further evidence for women's behaviour to be more context-specific than men's.relational goods; public goods experiments; gender effect

Choquet OK?

There is a large theoretical literature in both economics and psychology on decision making under ambiguity (as distinct from risk) and many preference functionals proposed in this literature for describing behaviour in such contexts. However, the empirical literature is scarce and largely confined to testing between various proposed functionals. Using a new design, in which we create genuine ambiguity in the laboratory and can control the amount of ambiguity, we generate data which enables us to estimate several of the proposed preference functionals. In particular, we fit Subjective Expected Utility, Prospect Theory, Choquet Expected Utility, Maximin, Maximax, and Minimum Regret preference functionals, and examine how the fit changes when we vary the ambiguity. We find that the Choquet formulation performs best overall, though it is clear that different decision makers have different functionals. We also identify new decision rules which are not explicitly modelled in the literature.Ambiguity, Subjective Expected Utility, Prospect Theory, Choquet Expected Utility, Decision Making, Maximin, Maximax, Minimum Regret, Bingo Blower

Choquet OK?

There is a large theoretical literature in both economics and psychology on decision making under ambiguity (as distinct from risk) and many preference functionals proposed in this literature for describing behaviour in such contexts. However, the empirical literature is scarce and largely confined to testing between various proposed functionals. Using a new design, in which we create genuine ambiguity in the laboratory and can control the amount of ambiguity, we generate data which enables us to estimate several of the proposed preference functionals. In particular, we fit Subjective Expected Utility, Prospect Theory, Choquet Expected Utility, Maximin, Maximax, and Minimum Regret preference functionals, and examine how the fit changes when we vary the ambiguity. We find that the Choquet formulation performs best overall, though it is clear that different decision makers have different functionals. We also identify new decision rules which are not explicitly modelled in the literature.There is a large theoretical literature in both economics and psychology on decision making under ambiguity (as distinct from risk) and many preference functionals proposed in this literature for describing behaviour in such contexts. However, the empirical literature is scarce and largely confined to testing between various proposed functionals. Using a new design, in which we create genuine ambiguity in the laboratory and can control the amount of ambiguity, we generate data which enables us to estimate several of the proposed preference functionals. In particular, we fit Subjective Expected Utility, Prospect Theory, Choquet Expected Utility, Maximin, Maximax, and Minimum Regret preference functionals, and examine how the fit changes when we vary the ambiguity. We find that the Choquet formulation performs best overall, though it is clear that different decision makers have different functionals. We also identify new decision rules which are not explicitly modelled in the literature.Non-Refereed Working Papers / of national relevance onl

The Descriptive and Predictive Adequacy of Theories of Decision Making Under Uncertainty/Ambiguity

In this paper we examine the performance of theories of decision making under uncertainty/ambiguity from the perspective of their descriptive and predictive power, taking into account the relative parsimony of the various theories. To this end, we employ an innovative experimental design which enables us to reproduce ambiguity in the laboratory in a transparent and non-probabilistic way. We find that judging theories on the basis of their theoretical appeal, or on their ability to do well in testing contexts, is not the same as judging them on the basis of their explanatory and predictive power. We also find that the more elegant theoretical models do not perform as well as simple rules of thumb.In this paper we examine the performance of theories of decision making under uncertainty/ambiguity from the perspective of their descriptive and predictive power, taking into account the relative parsimony of the various theories. To this end, we employ an innovative experimental design which enables us to reproduce ambiguity in the laboratory in a transparent and non-probabilistic way. We find that judging theories on the basis of their theoretical appeal, or on their ability to do well in testing contexts, is not the same as judging them on the basis of their explanatory and predictive power. We also find that the more elegant theoretical models do not perform as well as simple rules of thumb.Non-Refereed Working Papers / of national relevance onl