35 research outputs found
Strategic Problems with Risky Prospects
We study “hypothetical reasoning” in games where the impact of risky prospects (chance moves with commonly-known conditional probabilities) is compounded by strategic uncertainty. We embed such games in an environment that permits us to verify if risk-taking behavior is affected by information that reduces the extent of strategic uncertainty. We then test some implications of expected utility theory, while making minimal assumptions about individuals’ (risk or ambiguity) attitudes. Results indicate an effect of the information on behavior: this effect is triggered in some cases by a belief-revision about others’ actions, and in other cases by a reversal in risk preferences
Taking the sting out of choice: Diversification of investments
It is often the case that one can choose a mix of alternative options rather than have to select one option only. Such an opportunity to diversify may blunt the risk involved in all-or-none choice. Here we investigate repeated investment decisions in two-valued options that differ in their riskiness, looking for the effects of recent decisions and their outcomes on upcoming decisions. We compare these effects to those evident in all-or-none choice between the same risky options. The “state of the world”, namely, the likelihood of the high versus the low outcomes of the options, is manipulated. We find that aggregate allocation diverges from uniformity (i.e., from 1/n), and is sensitive to outcome probabilities, with the pattern of results indicating reactivity to the outcome of the previous decision. Round-to-round dynamics reveal that the outcome of the previous decision has an effect on the subsequent decision, on top of inertia; the aspects of the outcome that influence the next decision indicate an effect of a missed opportunity, if there was one, in the previous decision. Importantly, recent outcomes have a similar effect in diversification decisions and in all-or-none choice
Competition and moral behavior: A meta-analysis of forty-five crowd-sourced experimental designs
Consequences of Asking Sensitive Questions
Data and analyses materials for "The (Better than Expected) Consequences of Asking Sensitive Questions
Enlarging the market yet decreasing the profit: An experimental study of competitive behavior when investment affects the prize
In many competitive
situations, our investments increase our gains: Developing better products or
research proposals may lead to higher contracts or patents or larger grants.
Does increasing investment in such cases always guarantee higher gains? We used
an experimental repeated competition game in which prizes depended on
contestants' investments (n=108). Contestants invested more when they increased
the potential prize (``enlarge the market''), yet in some cases this tendency
was counterproductive (``decrease the profit''): Contestants in fact diminished
their earnings, compared to sitting out the competition and keeping their
initial funds. Moreover, when a contestant's investment decreased an opponent's
prize, the contestant tended to invest less; this effect, in turn, led to
higher overall gains for both contestants. This result implies that prosocial
considerations are at play. Notably, in certain situations, excessive
competitive tendencies may lead to a larger waste of resources
Informational Asymmetries and Observational Learning in Search
As economics modeling moves from super rational decision makers to considering boundedly rational agents, some economic problems deserve a second look. This paper studies the effects of learning on the efficiency of search. Once learning is taken into account, the structure of information flow becomes important. In particular, I highlight the truncated information structure in the search problem. Agents stop searching once a sufficiently attractive price is found. Therefore, they observe the performance of shorter searches, but do not directly observe the performance of longer searches. I design and conduct an experiment to test the hypothesis that this asymmetric flow of information leads agents to search too little. I find strong evidence in its favor. This suggests that in the presence of learning, the provision of a more symmetric information structure will make search more efficient. Copyright Springer Science + Business Media, Inc. 2005search, learning, experiment, regret,