Perfect and Imperfect Real-Time Monitoring in a Minimum-Effort Game

This paper presents the results from a minimum-effort game in which individuals can observe the choices of others in real time. We find that under perfect monitoring almost all groups coordinate at the payoff-dominant equilibrium. However, when individuals can only observe the actions of their immediate neighbors in a circle network, monitoring improves neither coordination nor efficiency relative to a baseline treatment without real-time monitoring. We argue that the inefficiency of imperfect monitoring is due to information uncertainty, that is, uncertainty about the interpretation of the information available regarding the actions of others.minimum effort game, information uncertainty, real time monitoring, circle network, cheap talk

Exploring Higher-Order Risk Effects

Higher-order risk effects play an important role in examining economic behavior under uncertainty. A precautionary demand for saving has been linked to the property of prudence and the property of temperance has been used to show how the presence of an unavoidable risk affects one’s behavior towards a second risk. These two properties also play key roles in aversion to negative skewness and to kurtosis, respectively. Both properties recently have been characterized by preferences over lottery pairs in simple 50-50 gambles. The simplicity of this characterization is ideal for experimental investigation. This paper reports the results of such experiments and concludes that there is behavioral evidence for prudence, but not for temperance. Implications of these results for both expected-utility and non-expected-utility models are examined.risk, prudence, temperance, laboratory experiments

Fight or Flight? Defending Against Sequential Attacks in the Game of Siege

This paper examines theory and behavior in a two-player game of siege, sequential attack and defense. The attacker’s objective is to successfully win at least one battle while the defender’s objective is to win every battle. Theoretically, the defender either folds immediately or, if his valuation is sufficiently high and the number of battles is sufficiently small, then he has a constant incentive to fight in each battle. Attackers respond to defense with diminishing assaults over time. Consistent with theoretical predictions, our experimental results indicate that the probability of successful defense increases in the defenders valuation and it decreases in the overall number of battles in the contest. However, the defender engages in the contest significantly more often than predicted and the aggregate expenditures by both parties exceed predicted levels. Moreover, both defenders and attackers actually increase the intensity of the fight as they approach the end of the contest.Colonel Blotto, conflict resolution, weakest-link, game of siege, multi-period resource allocation, experiments.

Price Increasing Competition? Experimental Evidence

Economic intuition suggests that increased competition generates lower prices. However, recent theoretical work shows that a monopolist may charge a lower price than a firm facing a competitor selling a differentiated product. The direction of the price change when competition is introduced is dependent upon the joint distribution of buyer values for the two products. We explore this relationship using controlled laboratory experiments. Our results indicate that the distribution of buyer values does affect prices in a manner consistent with the theoretical predictions, although price increasing competition is rare due in part to overly intense competition regardless of the distribution of buyer values. We also explore pricing dynamics and find that sellers are more sensitive to their rivals when buyer values are positively correlated.product differentiation, pricing, market structure, market experiments

Can Markets Save Lives? An Experimental Investigation of a Market for Organ Donations

Many people die while waiting for organ transplants even though the number of usable organs is far larger than the number needed for transplant. Governments have devised many policies aimed at increasing available transplant organs with variable success. However, with few exceptions, policy makers are reluctant to establish markets for organs despite the potential for mutually beneficial exchanges. We ask whether organ markets could save lives. Controlled laboratory methods are ideal for this inquiry because human lives would be involved when implementing field trials. Our results suggest that markets can increase the supply of organs available for transplant, but that the specific institutional design of such markets must be carefully considered. However, the increased supply of transplantable organs derives disproportionately from the poor. We also find that exogenously reducing incentives to keep one’s organs has a similar effect to creating a market, but with equitable donation rates across income levels.Organ Donations, Wealth Effects, Market Design, Experimental Economics

Affecting Policy by Manipulating Prediction Markets: Experimental Evidence

Documented results indicate prediction markets effectively aggregate information and form accurate predictions. This has led to a proliferation of markets predicting everything from the results of elections to a company’s sales to movie box office receipts. Recent research suggests prediction markets are robust to manipulation attacks and resulting market outcomes improve forecast accuracy. However, we present evidence from the lab indicating that well funded, single minded manipulators can in fact destroy a prediction market’s ability to aggregate information. Our results clearly indicate that the usefulness of prediction markets as inputs to decision making may be limited.Information Aggregation, Prediction Markets, Manipulation

Do People Keep Socially Unverifiable Promises?

Previous research has suggested that communication and especially promises increase cooperation in laboratory experiments. This has been taken as evidence for internal motivations such as guilt aversion or preference for promise keeping. The original goal of this paper was to examine promises under a double blind payoff procedure to test the alternative explanation that promise keeping was due to external influence and reputational concerns. We find no evidence that communication increases the overall level of cooperation in our double blind experiment. However, our results are due in part to the high level of cooperation that we observe, leading us to conduct additional single blind conditions. Ultimately, we find no evidence that communication or payoff procedures impact aggregate cooperation.Anonymity; experiment; promises; partnership; guilt aversion; psychological game theory; trust; lies; social distance; behavioral economics; hidden action

When are Women More Generous than Men?

Previous research on gender differences in behavior has led to seemingly contradictory findings about generosity. From data generated by 290 subject pairs, we find that women are more sensitive than men to the costs of generous actions when deciding whether or not to be generous. The factors that affect the level of generosity observed in our experiments are reciprocal motivation, the level of money payoffs, and the level of social distance in the experimental protocol. The relatively greater sensitivity of women to the costs of generous behavior can explain most of the apparent inconsistencies in previously-reported findings.

Comment on "Promises and Partnership"

Charness and Dufwenberg (2006) find that promises increase cooperation and suggest that the behavior of subjects in their experiment is driven by guilt aversion. By modifying the procedures to include a double blind social distance protocol we test an alternative explanation that promise keeping was due to external influence and reputational concerns. Our data are statistically indistinguishable from those of Charness and Dufwenberg and therefore provide strong evidence that their observed effects regarding the impact of communication are due to internal factors and not due to an outside bystander.Experiment; promises; partnership; guilt aversion; psychological game theory; trust; lies; social distance; behavioral economics; hidden action

Personality and the Consistency of Risk Taking Behavior: Experimental Evidence

Researchers have found that an individual’s risk attitude is not stable across elicitation methods. Results reported by Deck et al. (2009) suggest that personality may help explain the apparent inconsistency, offering support to Borghans et al.’s (2008) argument that economists should consider a multi-domain approach to measuring risk attitudes. This paper uses laboratory methods to compare risk attitudes as measured by the Holt and Laury (2002) procedure under two different frames. We find that, as in Deck et al. (2009), one’s willingness to take financial risks (as measured by Weber et al. 2002) significantly affects behavior; however the effect is significantly greater when the task is framed as a financial decision. This paper also asks whether personality can explain the well documented behavioral difference between first price and Dutch auctions. While one’s gambling attitude (as measured by Weber et al. 2002) affects bidding behavior, it does not do so differentially between auction formats.Risk Attitudes, Personality, Auctions, Framing Effects, Laboratory Experiments