Of mice and men: Within gender variation in strategic behavior

We study behavioral differences across and within genders in a family of ultimatum and dictator games. We find these differences are due not only to altruistic preferences but also beliefs about the strategic behavior of others. The behavior of men in strategic situations is not significantly more aggressive than women on average. But this average masks wide variation in intra-gender behavior. In particular, a sizable minority of males are “mice,” behaving timidly in strategic environments. Our experimental design shows that the standard ultimatum game can mask significant inter- and intra-gender differences in strategic behavior. These behavioral patterns in strategic environments are shown to be correlated with preferences for altruism in non-strategic settings. Such gender differences could well manifest themselves in real-world large-stakes transactions, such as salary negotiations.     

Second chance offers versus sequential auctions: theory and behavior

Second chance offers in online marketplaces involve a seller conducting an auction for a single object and then using information from the auction to offer a losing bidder a take-it-or-leave-it price for another unit. We theoretically and experimentally investigate this practice and compare it to two sequential auctions. We show that the equilibrium bidding strategy in the second chance offer mechanism only exists in mixed strategies, and we observe that this mechanism generates more profit for the auctioneer than two sequential auctions. We also observe virtually no rejections of profitable offers in the ultimatum bargaining stage.      

Preferences and beliefs in a sequential social dilemma: a within-subjects analysis

In empirical analyses of games, preferences and beliefs are typically treated as independent. However, if beliefs and preferences interact, this may have implications for the interpretation of observed behavior. Our sequential social dilemma experiment allows us to separate different interaction channels. When subjects play both roles in such experiments, a positive correlation between first- and second-mover behavior is frequently reported. We find that the observed correlation primarily originates via an indirect channel, where second-mover decisions influence beliefs through a consensus effect, and the first-mover decision is a best response to these beliefs. Specifically, beliefs about second-mover cooperation are biased toward own second-mover behavior, and most subjects best respond to stated beliefs. However, we also find evidence for a direct, preference-based channel. When first movers know the true probability of second-mover cooperation, subjects' own second moves still have predictive power regarding their first moves.     

Indirect reciprocity and strategic reputation building in an experimental helping game

We study indirect reciprocity and strategic reputation building in an experimental helping game. At any time only half of the subjects can build a reputation. This allows us to study both pure indirect reciprocity that is not contaminated by strategic reputation building and the impact of incentives for strategic reputation building on the helping rate. We find that pure indirect reciprocity exists, but also that the helping decisions are substantially affected by strategic considerations. Finally, we find that strategic do better than non-strategic players and non-reciprocal do better than reciprocal players, casting doubt on previously proposed evolutionary explanations for indirect reciprocity.     

Exploring the role of gender in common-pool resource extraction: evidence from laboratory and field experiments in fisheries

There is active debate on gender issues in natural resource management. For example, it is proposed that women are more cooperative than men when dealing with natural resources decisions; however, few scientific studies have directly addressed this hypothesis. We provide evidence for a greater cooperative attitude in women compared to men in both college students and coastal fishing communities of Baja California, Mexico, by means of game theory experiments. In both laboratory and field experiments, women changed their behaviour towards lower extraction compared to men, when regulations, sanctions or social scolding were introduced in the games. These results suggest that raising the role of women in decision-making, along with an adequate institutional framework, may lead to a more sustainable use of natural resources.     

Irreversible investment with uncertainty and strategic behavior

The paper provides a model of technology adoption in the case where adopting alone is more expensive than adopting when others have already done so (network effect). In addition, if each agent gains at the expense of his rivals, he may also have an incentive for ‘preemptive adoption’. We deal with these two issues in a dynamic programing framework, where adoption is seen as a strategic switching time decision problem for agents facing an ongoing stochastic operating benefit plus sunken investment costs. The model defines the option value of investing for a continuous time stochastic game. In the case of network benefits alone, agents follow a stationary bandwagon strategy, representing the effect caused by a war of attrition. Yet, as network benefits reduce adoption costs after an agent has switched, rivals may follow suit. In the opposite case, where going first gives the innovator a higher payoff the bandwagon rule is turned over and the option value of investing first may be lower than that of going second. This gives rise to sequential adoption.     

First- and second-order subjective expectations in strategic decision-making: Experimental evidence

We study first- and second-order subjective expectations (beliefs) in strategic decision-making. We elicit probabilistically both first- and second-order beliefs and apply the method to a Hide-and-Seek experiment. We study the relationship between choice and beliefs in terms of whether observed choice coincides with the optimal action given elicited beliefs. We study the relationship between first- and second-order beliefs under a coherence criterion. Weak coherence requires that if an event is assigned, according to first-order beliefs, a probability higher/lower/equal to the one assigned to another event, then the same holds according to second-order beliefs. Strong coherence requires the probability assigned according to first- and second-order beliefs to coincide. Evidence of heterogeneity across participants is reported. Verbal comments collected at the end of the experiment shed light on how subjects think and decide in a complex environment that is strategic, dynamic and populated by potentially heterogeneous individuals.     

Inferring repeated-game strategies from actions: evidence from trust game experiments

Summary. Combining a strategy model, an inference procedure and a new experimental design, we map sequences of observed actions in repeated games to unobserved strategies that reflect decision-makers’ plans. We demonstrate the method by studying two institutional settings with distinct theoretical predictions. We find that almost all strategies inferred are best responses to one of the inferred strategies of other players, and in one of the settings almost all of the inferred strategies, which include triggers to punish non-cooperators, are consistent with equilibrium strategies. By developing a method to infer unobserved repeated-game strategies from actions, we take a step toward making game theory a more applied tool, bridging a gap between theory and observed behavior.Received: 23 December 2002, Revised: 19 April 2005, JEL Classification Numbers: C72, C80, C90.The authors are indebted for discussions with Ray Battalio, David Cooper, Robin Dubin, John Duffy, Ellen Garbarino, Susan Helper, Margaret Meyer, John Miller, Jim Rebitzer, Mari Rege, Al Roth, and John Van Huyck. The authors also benefited from discussants at economic department seminars at Case Western Reserve, McMaster and McGill University, University of Pittsburgh, SUNY-Stony Brook, and Texas A&M, and participants at the 2002 European Winter Meeting of the Econometric Society. We are grateful for the financial support provided by the Department of Economics at the University of Pittsburgh and Case Western Reserve University.     

A global game with strategic substitutes and complements: Comment

In Karp et al. (2007), an argument is made to show existence of Bayesian–Nash equilibrium in global games that may include both strategic substitutes and complements. This note documents a gap in the proof of that statement.     

House money effects in public good experiments: Comment

We reconsider evidence from experiments that claim to show that using “house money” in standard public goods experiments has no effect on behavior. We show that it does have an effect when one examines the data using appropriate statistical methods that consider individual-level responses and account for the error structure of the panel data. JEL Classification D7 · C92 I am grateful for comments from two referees and an editor. All data and statistical code are available for public access at the ExLab Digital Library located at http://exlab.bus.ucf.edu.     

Evolutionary economics goes mainstream: A review of the theory of learning in games

The Theory of Learning in Games by Fudenberg and Levine surveys a key branch of evolutionary economics from a mainstream perspective. Its publication provides an opportunity to reassess the prospects and goals for evolutionary economics.     

Simon's and Siegel's responses to the 'mixed strategy anomaly': a missed case in the sensitivity of economics to empirical evidence

In some of their papers published in the 1950s, Herbert Simonand Sidney Siegel responded to the so-called mixed strategyanomaly in ways which deserve more attention. They producednot only (i) immediate defences of the economic theory of theirown time, but also (ii) ideas and solutions that have laterturned out to be significant contributions to the developmentof the economic theory of choice and decision-making and theseparation of experimental economics from experimental psychology.These observations suggest that economics can be more responsiveto empirical anomalies than has been assumed. Furthermore, knowledgeof the desirable responsiveness to anomalies can provide meansof avoiding the non-desirable immunity to anomalies.     

Conventions and Local Interaction Structures: Experimental Evidence

We present a series of experimental coordination games with a payoff-dominant and a risk-dominant Nash equilibrium. We examine how much local interaction structures affect players' strategy choices. Our three major observations are the following: First, local interaction with open neighborhoods along a circle leads to less coordination on the payoff-dominant equilibrium than interaction in closed neighborhoods. Second, when players are allocated around a circle, the neighborhood size has, in the long run, no effect on the players' strategy choices. Third, with the same neighborhood size, players allocated on a lattice tend less than players allocated around a circle to coordinate on the payoff-dominant equilibrium. This is true even though the players are given exactly the same instructions. Journal of Economic Literature Classification Numbers: C72, C92.     

Repetition and signalling: experimental evidence from games with efficient equilibria

We report experiments where subjects generally fail to attain the efficient equilibrium of a one-shot game, but attain the efficient equilibrium of the repeated version. The results suggest that in the repeated game actions are used to signal future intentions.     

On the scope of experiments in economics: comments on Siakantaris

The problem of ‘parallelism’ or external validitycan in principle be solved; I try to show how by means of twosimple examples. I also criticise attempts to dismiss experimentaleconomics that appeal to alleged ontological differences betweenthe natural and the social realm.     

A strategic analysis of global warming: Theory and some numbers

We model the global warming process as a dynamic commons game in which the players are countries, their actions at each date produce emissions of greenhouse gases, and the state variable is the current stock of greenhouse gases. The theoretical analysis is complemented by a calibration exercise. The first set of results establishes theoretically, and then with illustrative numbers, the over-emissions due to a “tragedy of the commons.” The power of simple sanctions to lower emissions and increase welfare is then examined as is the effect of cost asymmetry. Finally, a complete theoretical charactrization is provided for the best equilibrium, and it is shown that it has a very simple structure; it involves a constant emission rate through time.     

Budget processes: Theory and experimental evidence

This paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. Ferejohn and Krehbiel [Ferejohn, J., Krehbiel, K., 1987. The budget process and the size of the budget, Amer. J. Polit. Sci. 31, 296–320] showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.     

Policy making and rent-dissipation: An experimental test

We present a transfer-seeking model of political economy that links the theory of Becker (1983) with Tullock-type models of politically contestable rents. In our model the size of the transfer is determined endogenously, and over-dissipation of rents is predicted even under conditions of risk-neutrality and perfect rationality. We implement an empirical test of this model by collecting behavioral data in a laboratory experiment. We confirm the existence of behavior that leads to over-dissipation of rents in games with both symmetric and asymmetric political power. To the extent that the transfer-seeking costs are social costs, our findings imply that the total costs of running government might be greatly underestimated if the value of the rent is used as a proxy for the rent-seeking cost. We also confirm the hypotheses that lowering the political power of one player can lead to smaller rent-seeking expenditures and to larger transfers Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification C91, D72     

Uncertainty and insurance in strategic market games

Summary. For perfectly competitive economies under uncertainty, there is a well-known equivalence between a formulation with contingent goods and one with state-specific securities followed by spot markets for goods. In this paper, I examine whether this equivalence carries over to a particular form of imperfect competition. Specifically, I look at three Shapley-Shubik strategic market games: one with contingent commodities, one with Arrow securities traded under imperfect competition and one with Arrow securities traded under perfect competition. First I compare the feasibility constraints of these three games. Then I compare their equilibrium sets. As in Peck and Shell (1989), the only common equilibria between the first and the second game are those which involve no transfer of income across states. However, if the securities markets are competitive, then the set of equilibria of the contingent commodities game and the securities game coincide. Received: June 16, 1997; revised version: April 30, 1998     

Batch queues with choice of arrivals: Equilibrium analysis and experimental study

We study the decisions agents make in two queueing games with endogenously determined arrivals and batch service. In both games, agents are asked to independently decide when to join a queue, or they may simply choose not to join it at all. The symmetric mixed-strategy equilibrium of two games in discrete time where balking is prohibited and where it is allowed are tested experimentally in a study that varies the game type (balking vs. no balking) and information structure (private vs. public information). With repeated iterations of the stage game, all four experimental conditions result in aggregate, but not individual, behavior approaching mixed-strategy equilibrium play. Individual behavior can be accounted for by relatively simple heuristics.