Implications of Trust, Fear, and Reciprocity for Modeling Economic Behavior

This paper reports three experiments with triadic or dyadic designs. The experiments include the moonlighting game in which first-mover actions can elicit positively or negatively reciprocal reactions from second movers. First movers can be motivated by trust in positive reciprocity or fear of negative reciprocity, in addition to unconditional other-regarding preferences. Second movers can be motivated by unconditional other-regarding preferences as well as positive or negative reciprocity. The experimental designs include control treatments that discriminate among actions with alternative motivations. Data from our three experiments and a fourth one are used to explore methodological questions, including the effects on behavioral hypothesis tests of within-subjects vs. across-subjects designs, single-blind vs. double-blind payoffs, random vs. dictator first-mover control treatments, and strategy responses vs. sequential play.

Risk Aversion as Attitude towards Probabilities: A Paradox

Theories of decision under risk that challenge expected utility theory model risk attitudes at least partly with transformation of probabilities. We explain how attributing risk aversion (partly or wholly) to attitude towards probabilities, can produce extreme probability distortions that imply paradoxical risk aversion.risk aversion, probability transformation, calibration, reference dependence, loss aversion

On Modeling Voluntary Contributions to Public Goods

This paper addresses four "stylized facts" that summarize data from experimental studies of voluntary contributions to provision of public goods. Theoretical propositions and testable hypotheses for voluntary contributions are derived from two models of social preferences, the inequity aversion model and the egocentric other-regarding preferences model. We find that the egocentric other-regarding preferences model with classical regularity properties can better account for the stylized facts than the inequity aversion model with non-classical properties.

Risky Decisions in the Large and in the Small: Theory and Experiment

null

Small- and Large-Stakes Risk Aversion: Implications of Concavity Calibration for Decision Theory

A growing literature reports the conclusions that: (a) expected utility theory does not provide a plausible theory of risk aversion for both small-stakes and large-stakes gambles; and (b) this decision theory should be replaced with an alternative theory characterized by loss aversion. This paper explains that the arguments in previous literature fail to support these conclusions. Either concavity calibration has no general implication for expected utility theory or it has problematic implications for all decision theories that involve concave transformations (utility or value functions) of positive money payoffs, which makes loss aversion irrelevant to the argument

Voting cycles when a dominant point exists

We conduct experiments in which humans repeatedly play one of two games against a computer decision maker that follows either a reinforcement learning or an Experience Weighted Attraction algorithm. Our experiments show these learning algorithms more sensitively detect exploitable opportunities than humans. Also, learning algorithms respond to detected payoff increasing opportunities systematically; however, the responses are too weak to improve the algorithms payoffs. Human play against various decision maker types doesn't significantly vary. These factors lead to a strong linear relationship between the humans and algorithms action choice proportions that is suggestive of the algorithm's best response correspondence.

A computational electoral competition model with social clustering and endogenous interest groups as information brokers

We extend the basic model of spatial competition in two directions. First, political parties and voters do not have complete information but behave adaptively. Political parties use polls to search for policy platforms that maximize the probability of winning an election and the voting decision of voters is influenced by social interaction. Second, we allow for the emergence of interest groups. These interest groups transmit information about voter preferences to the political parties, and they coordinate voting behavior. We use simulation methods to investigate the convergence properties of this model. We find that the introduction of social dynamics and interest groups increases the separation between parties platforms, prohibits convergence to the center of the distribution of voter preferences, and increases the size of the winning set.

Identification of Voters with Interest Groups Improves the Electoral Chances of the Challenger

This short paper investigates the consequences of voters identifying with special interest groups in a spatial model of electoral competition. We show that, by effectively coordinating voting behavior, identification with interest groups leads to an increase in the size of the winning set, that is, the set of policy platforms for the challenger that will defeat the incumbent. Consequently, our paper points at a novel process through which interest groups can enhance the electoral chances of a challenger.

Identification of Voters with Interest Groups Improves the Electoral Chances of the Challenger

Interest groups are introduced in a spatial model of electoral competition between two political parties. We show that, by coordinating voting behavior, these interest groups increase the winning set, which is defined as the set of policy platforms for the challenger that will defeat the incumbent. Therefore interest groups enhance the probability of the challenger winning the election.spatial voting models, electoral competition, winning set, interest groups

Alternative payoff mechanisms for choice under risk

Most experiments on decision theory ask individual subjects to make more than one decision. The isolation hypothesis is commonly used to justify the choice of the random lottery incentive mechanism as the preferred payoff protocol. This research note reports on the main findings on the theoretical and empirical performance of different payoff mechanisms on eliciting individuals' attitudes toward risk. It challenges the conventional view that the random lottery incentive mechanism introduces no biases in inducing risk preferences