Strategy revision opportunities and collusion

This paper studies whether and how strategy revision opportunities affect levels of collusion in indefinitely repeated two-player games. Consistent with standard theory, we find that such opportunities do not affect strategy choices, or collusion levels, if the game is of strategic substitutes. In games of strategic complements, by contrast, revision opportunities lead to more collusion. We discuss alternative explanations for this result

Inside Organizations: Pricing, Politics, and Path Dependence

When economists have considered organizations, much attention has focused on the boundary of the firm, rather than its internal structures and processes. In contrast, this review sketches three approaches to the economic theory of internal organization—one substantially developed, another rapidly emerging, and a third on the horizon. The first approach (pricing) applies Pigou's prescription: If markets get prices wrong, then the economist's job is to fix the prices. The second approach (politics) considers environments where important actions inside organizations simply cannot be priced, so power and control become central. Finally, the third approach (path dependence) complements the first two by shifting attention from the between variance to the within. That is, rather than asking how organizations confronting different circumstances should choose different structures and processes, the focus here is on how path dependence can cause persistent performance differences among seemingly similar enterprises

A Multilab Replication of the Induced-Compliance Paradigm of Cognitive Dissonance

According to cognitive-dissonance theory, performing counterattitudinal behavior produces a state of dissonance that people are motivated to resolve, usually by changing their attitude to be in line with their behavior. One of the most popular experimental paradigms used to produce such attitude change is the induced-compliance paradigm. Despite its popularity, the replication crisis in social psychology and other fields, as well as methodological limitations associated with the paradigm, raise concerns about the robustness of classic studies in this literature. We therefore conducted a multilab constructive replication of the induced-compliance paradigm based on Croyle and Cooper (Experiment 1). In a total of 39 labs from 19 countries and 14 languages, participants (N = 4,898) were assigned to one of three conditions: writing a counterattitudinal essay under high choice, writing a counterattitudinal essay under low choice, or writing a neutral essay under high choice. The primary analyses failed to support the core hypothesis: No significant difference in attitude was observed after writing a counterattitudinal essay under high choice compared with low choice. However, we did observe a significant difference in attitude after writing a counterattitudinal essay compared with writing a neutral essay. Secondary analyses revealed the pattern of results to be robust to data exclusions, lab variability, and attitude assessment. Additional exploratory analyses were conducted to test predictions from cognitive-dissonance theory. Overall, the results call into question whether the induced-compliance paradigm provides robust evidence for cognitive dissonance.publishedVersio

Heterogeneity and Stability: Bolster the Strong, Not the Weak

This paper provides a model of systemic panic among financial institutions with heterogeneous fragilities. Concerns about potential spillovers from each other generate strategic interaction among institutions, triggering a preemption game in which one tries to exit the market before the others to avoid spillovers. Although financial contagion originates in weaker institutions, systemic risk depends critically on the financial health of stronger institutions in the contagion chain. This analysis suggests that when concerns about spillovers prevail, then 1) increasing heterogeneity of institutions promotes systemic stability and 2) bolstering the strong institutions in the contagion chain, rather than the weak, more effectively enhances systemic stability