A pure variation of risk in first-price auctions

We introduce a new method of varying the risk that bidders face in rst-price private value auctions. We nd that decreasing bidders risk signicantly reduces the degree of overbidding relative to the risk-neutral Bayesian-Nash equilibrium prediction. This implies that risk a¤ects bidding behavior as generally expected in auction theory. While resolving a long-standing debate on the e¤ect of risk on auction behavior, our results give rise to a new puzzle. As risk is diminished and overbidding decreases for most of the value range, a signicant degree of underbidding sets in for very low values

Do fiscal variables affect fiscal expectations? Experiments with real world and lab data

We generate observable expectations about fiscal variables through laboratory experiments using realworld data fromseveral European countries as stimuli.We compare a VAR model of expectations for data that is presented in a fiscal frame with one for neutrally presented data.We test the validity of the setup and find that participants understand the meaning of the fiscal variables, but also that their ability to perceive the correct characteristics of fiscal policy is limited. Expectations are consistent neither with rational nor with purely adaptive expectations, but instead follow an augmented-adaptive scheme

Evolution of cooperation driven by zealots

Recent experimental results with humans involved in social dilemma games suggest that cooperation may be a contagious phenomenon and that the selection pressure operating on evolutionary dynamics (i.e., mimicry) is relatively weak. I propose an evolutionary dynamics model that links these experimental findings and evolution of cooperation. By assuming a small fraction of (imperfect) zealous cooperators, I show that a large fraction of cooperation emerges in evolutionary dynamics of social dilemma games. Even if defection is more lucrative than cooperation for most individuals, they often mimic cooperation of fellows unless the selection pressure is very strong. Then, zealous cooperators can transform the population to be even fully cooperative under standard evolutionary dynamics.Comment: 5 figure

Mesoscopic structure conditions the emergence of cooperation on social networks

We study the evolutionary Prisoner's Dilemma on two social networks obtained from actual relational data. We find very different cooperation levels on each of them that can not be easily understood in terms of global statistical properties of both networks. We claim that the result can be understood at the mesoscopic scale, by studying the community structure of the networks. We explain the dependence of the cooperation level on the temptation parameter in terms of the internal structure of the communities and their interconnections. We then test our results on community-structured, specifically designed artificial networks, finding perfect agreement with the observations in the real networks. Our results support the conclusion that studies of evolutionary games on model networks and their interpretation in terms of global properties may not be sufficient to study specific, real social systems. In addition, the community perspective may be helpful to interpret the origin and behavior of existing networks as well as to design structures that show resilient cooperative behavior.Comment: Largely improved version, includes an artificial network model that fully confirms the explanation of the results in terms of inter- and intra-community structur

As If or What? - Expectations and Optimization in a Simple Macroeconomic Environment

In this paper we report the results of a laboratory experiment, in which we observed the behavior of agents in a simple macroeconomic setting. The structure of the economy was only partially known to the players which is a realistic feature of our experiment. We investigate whether subjects manage to approach optimal behavior even if they lack important information. Furthermore, we analyze subjects' perceptions of the model and whether their behavior is consistent with their perceptions. The full information model predicts changes of employment correctly, but not the level of employment. In the aggregate, subjects have correct perceptions, although individual perceptions are biased. We finally show that deviations from the full information solution are due to optimization failures than than misperceptions

Local and global interactions in an evolutionary resource game

Conditions for the emergence of cooperation in a spatial common-pool resource game are studied. This combines in a unique way local and global interactions. A fixed number of harvesters are located on a spatial grid. Harvesters choose among three strategies: defection, cooperation, and enforcement. Individual payoffs are affected by both global factors, namely, aggregate harvest and resource stock level, and local factors, such as the imposition of sanctions on neighbors by enforcers. The evolution of strategies in the population is driven by social learning through imitation, based on local interaction or locally available information. Numerous types of equilibria exist in these settings. An important new finding is that clusters of cooperators and enforcers can survive among large groups of defectors. We discuss how the results contrast with the non-spatial, but otherwise similar, game of Sethi and Somanathan (American Economic Review 86(4):766–789, 1996)

Social Experiments in the Mesoscale: Humans Playing a Spatial Prisoner's Dilemma

Background: The evolutionary origin of cooperation among unrelated individuals remains a key unsolved issue across several disciplines. Prominent among the several mechanisms proposed to explain how cooperation can emerge is the existence of a population structure that determines the interactions among individuals. Many models have explored analytically and by simulation the effects of such a structure, particularly in the framework of the Prisoner’s Dilemma, but the results of these models largely depend on details such as the type of spatial structure or the evolutionary dynamics. Therefore, experimental work suitably designed to address this question is needed to probe these issues. Methods and Findings: We have designed an experiment to test the emergence of cooperation when humans play Prisoner’s Dilemma on a network whose size is comparable to that of simulations. We find that the cooperation level declines to an asymptotic state with low but nonzero cooperation. Regarding players ’ behavior, we observe that the population is heterogeneous, consisting of a high percentage of defectors, a smaller one of cooperators, and a large group that shares features of the conditional cooperators of public goods games. We propose an agent-based model based on the coexistence of these different strategies that is in good agreement with all the experimental observations. Conclusions: In our large experimental setup, cooperation was not promoted by the existence of a lattice beyond a residual level (around 20%) typical of public goods experiments. Our findings also indicate that both heterogeneity and a ‘‘moody’