What motivates bandwagon voting behavior: Altruism or a desire to win?

This paper surveys the literature on psychological and strategic mental processes of bandwagon behavior, discusses the literature of bandwagon behavior in the context of the two different types, bandwagon vote choices and bandwagon abstention effects, and examines the rationality of other-regarding bandwagon vote choices. Key experimental results are reported to investigate the extent that bandwagon behavior can be explained by other-regarding preferences in contrast to a psychological desire to simply support a winner. We find support for purely psychological non-other-regarding bandwagon behavior but primarily when subjects have information about the distribution of voter choices in previous elections but individual choices are private. Interestingly, when voting is public this type of bandwagon behavior disappears and bandwagon behavior that could be other-regrading is much higher. Given that observability increases other-regarding behavior in other contexts, our results suggest that some of the observed bandwagon behavior may be explained by other-regarding preferences as well.     

Environmental Policy Theory Given Bounded Rationality and Other-regarding Preferences

Established environmental policy theory is based on the assumption of homo economicus. This means that people are seen as fully rational and acting in a self-regarding manner. In line with this, economics emphasizes efficient policy solutions and the associated advantages of price incentives. Behavioral economics offers alternative, more realistic views on individual behavior. In this paper we investigate opportunities to integrate bounded rationality and other-regarding preferences into environmental policy theory to arrive at recommendations for more effective policies. For this purpose, we will address decisions made under risk and uncertainty, intertemporal choice, decision heuristics, other-regarding preferences, heterogeneity, evolutionary selection of behaviors, and the role of happiness. Three aspects of environmental policy are considered in detail, namely sustainable consumption, environmental valuation and policy design. We pay special attention to the role of non-pecuniary, informative instruments and illustrate the implications for climate policy.     

EXTERNALITIES AGGREGATION IN NETWORK GAMES

We generalize the results on the monotonicity of equilibria for network games with incomplete information. We show that not only the distinction between strategic complements and strategic substitutes is important in determining the nature of the Bayesian Nash equilibria, but the nature of the statistic itself is also determinant. We show that understanding the underlying forces behind people's choices may be of fundamental importance for a policymaker that wants to incentivize efficient behavior.     

Chores

We analyze situations where the provision of each of c public goods must be voluntarily assumed by exactly one of n private agents in the absence of transfer schemes or binding contracts. We model this problem as a complete information, potentially infinite horizon game where n agents simultaneously wage c wars of attrition. Providing a public good commits an agent not to take on the provision of another public good for a fixed period. We explore the strategic trade-offs that this commitment ability and the multiplicity of tasks provide. Subgame perfect equilibria (SPEs) are characterized completely for games with two agents and two public goods. For games with two identical agents and c > 1 identical public goods, we establish that an equilibrium that yields a surplus-maximizing outcome always exists and we provide sufficient conditions under which it is the unique equilibrium outcome. We show that under mild conditions, the surplus-maximizing SPE is the unique symmetric SPE. Journal of Economic Literature Classification Number: H41, C72, D13.     

Kindness,confusion, or … ambiguity?

Other-regarding preferences or decision errors are the main explanations put forward to justify contributions exceeding the non-cooperative optimum in VCM games. An alternative rationale relies on ambiguity aversion. Ambiguity aversion increases the perceived marginal benefit of own contributions, which in equilibrium will exceed the Nash level. We present a series of experiments testing this hypothesis. To control for other-regarding preferences, we run a two-player game in which a human player plays with a virtual agent. Players are assigned either to a risky setting (known probabilities of opponent’s choices) or to an ambiguity setting (probabilities of opponent’s contribution are vague). Results show that ambiguity affects contributions. However, attitude to ambiguity appears to be affected by the location of the aggregate Nash optimum inside the decision space.     

Dissertation abstract: Reputational benefits of altruism and altruistic punishment

Recent studies in experimental economics have shown that many people have other-regarding preferences, potentially including preferences for altruism, reciprocity, and fairness. It is useful to investigate why people possess such preferences and what functional purpose they might serve outside the laboratory, because evolutionary and social learning perspectives both predict that cooperative sentiments should only exist if they bring benefits that outweigh the costs of other-regarding behavior. Theories of costly signaling suggest that altruistic acts may function (with or without intention) as signals of unobservable qualities such as resources or cooperative intent, and altruists may benefit (possibly unintentionally) from the advertisement of such qualities. After reviewing the theories that could potentially account for the evolution of altruism (Chapter 1), I test some predictions about cooperation derived from costly signaling theory. In Chapter 2, I show that participants in experimental public goods games were more cooperative when they had cues that they could benefit from having a good reputation, and that there was apparently some competition to be the most generous group member. Furthermore, in subsequent trust games, people tended to trust high public goods contributors more than low contributors. Chapter 3 failed to find evidence that granting high status to people makes them more likely to contribute to public goods or punish free-riders, but there was suggestive evidence that physical proximity to the experimenter affected contributions and punishment. In Chapter 4, I found that people tended to trust others who were willing to incur costs to punish those who free-ride on group cooperation provided that such punishment was justified, and men were more punitive than women. In Chapter 5, I show that women find altruistic men more desirable than neutral men for long-term relationships. Together, these results suggest that humans do treat altruism as a signal of willingness to be cooperative. These findings are discussed with respect to the adaptive design of cooperative sentiments as well as the current debate over group selection. Dissertation: Department of Psychology, Neuroscience & Behaviour, McMaster University, Hamilton, Ontarion Currently: Post-Doc, Department of Neurobiology & Behavior, Cornell University     

An economic theory of altruism based on rankings in a stable social hierarchy

In order to fully understand the interaction between selfish and non-selfish actors, social scientists need rigorous formal models of other-regarding preferences. While the current models clearly present progress relative to the self-interest approach, the evidence also makes it clear that further theoretical progress is warranted. There is ample opportunity for improving our understanding of other-regarding behavior. This paper develops a theory of economic altruism entirely compatible with self-interest utility maximization by rational individuals. Sympathy arises when someone is interested in improving somebody else’s condition, and this will also enhance the utility of the one who acts. Construed in that way, sympathetic behavior is essentially self-interested behavior. A question addressed in this paper is whether a sympathetic population of individuals will exert their income-producing labor differently than a population of egoistic individuals. Two parameters suffice to characterize the altruistic conduct of an individual: a parameter governing the individual’s ranking in a social hierarchy and a parameter determining the sensitivity of an individual’s sympathy for others at different social ranks. The main testable implication of the theory is that in a large population, where each individual has a concave utility function embodying sympathy, the altruistic behavior of any specific individual is determined by his rank in the social hierarchy. A second implication is that in a horizontal social hierarchy, the most altruistic people in the population are those in the middle of it.     

The external validity of giving in the dictator game

We investigate the external validity of giving in the dictator game by using the misdirected letter technique in a within-subject design. First, subjects participated in standard dictator games (double blind) conducted in labs in two different studies. Second, after four to five weeks (study 1) or two years (study 2), we delivered prepared letters to the same subjects. The envelopes and the contents of the letters were designed to create the impression that they were misdirected by the mail delivery service. The letters contained 10 Euros (20 Swiss Francs in study 2) corresponding to the endowment of the in-lab experiments. We observe in both studies that subjects who showed other-regarding behavior in the lab returned the misdirected letters more often than subjects giving nothing, suggesting that in-lab behavior is related to behavior in the field.     

Higher-order risk preferences in social settings

We study prudence and temperance (next to risk aversion) in social settings. Previous experimental studies have shown that these higher-order risk preferences affect the choices of individuals deciding privately on lotteries that only affect their own payoff. Yet, many risky and financially relevant decisions are made in the social settings of households or organizations. We elicit higher-order risk preferences of individuals and systematically vary how an individual’s decision is made (alone or while communicating with a partner) and who is affected by the decision (only the individual or the partner as well). In doing so, we can isolate the effects of other-regarding concerns and communication on choices. Our results reveal that the majority of choices are risk averse, prudent, and temperate across social settings. We also observe that individuals are influenced significantly by the preferences of a partner when they are able to communicate and choices are payoff-relevant for both of them.     

A Model of Behavior in Coordination Game Experiments

This paper constructs a structural model for behavior in expeiments where subjects play a simple coordination game repeatedly under a rotating partner scheme. The model assumes subjects' actions are stochastic best responses to beliefs about opponents' choices, and these beliefs update as subjects observe actual choices during the experiment. The model accounts for heterogeneity across subjects by regarding prior beliefs as random effects and estimating their distribution. Maximum likelihood estimates from experimental data suggest that distributions of initial beliefs vary across games, but in all games studied imply a convergence dynamic toward risk-dominant equilibrium.     

Parental background and other-regarding preferences in children

Other-regarding preferences are important for establishing and maintaining cooperative outcomes. In this paper, we study how the formation of other-regarding preferences during childhood is related to parental background. Our subjects, aged 4–12 years, are classified into other-regarding types based on simple binary-choice dictator games. The main finding is that the children of parents with low education are less altruistic, more selfish, and more likely to be weakly spiteful. This link is robust to controlling for a rich set of children’s characteristics and class fixed effects. It also stands out against the overall development of preferences, as we find children to become more altruistic, less selfish, and less likely to be weakly spiteful with increasing age. The results, supported by a complementary analysis of World Values Survey data, suggest an important role of socialization in the formation of other-regarding preferences.     

Utility from anticipation and personal equilibrium

I develop a dynamic model of individual decisionmaking in which the agent derives utility from physical outcomes as well as from rational beliefs about physical outcomes (“anticipation”), and these two payoff components can interact. Beliefs and behavior are jointly determined in a personal equilibrium by the requirement that behavior given past beliefs must be consistent with those beliefs. I explore three phenomena made possible by utility from anticipation, and prove that if the decisionmaker’s behavior is distinguishable from a person’s who cares only about physical outcomes, she must exhibit at least one of these phenomena. First, the decisionmaker can be prone to self-fulfilling expectations. Second, she might be time-inconsistent even if her preferences in all periods are identical. Third, she might exhibit informational preferences, where these preferences are intimately connected to her attitudes toward disappointments. Applications of the framework to reference-dependent preferences, impulsive behaviors, and emotionally difficult choices are discussed.     

Anonymous yes–no voting with abstention and multiple levels of approval

Symmetric (3,2) simple games serve as models for anonymous voting systems in which each voter may vote “yes,” abstain, or vote “no,” the outcome is “yes” or “no,” and all voters play interchangeable roles. The extension to symmetric (j,2) simple games, in which each voter chooses from among j ordered levels of approval, also models some natural decision rules, such as pass–fail grading systems. Each such game is determined by the set of (anonymous) minimal winning profiles. This makes it possible to count the possible systems, and the counts suggest some interesting patterns. In the (3,2) case, the approach yields a version of May's Theorem, classifying all possible anonymous voting rules with abstention in terms of quota functions. In contrast to the situation for ordinary simple games these results reveal that the class of simple games with 3 or more levels of approval remains large and varied, even after the imposition of symmetry.     

Individual characteristics and behavior in repeated games: an experimental study

Using a laboratory experiment, we investigate whether a variety of behaviors in repeated games are related to an array of individual characteristics that are popular in economics: risk attitude, time preference, trust, trustworthiness, altruism, strategic skills in one-shot matrix games, compliance with first-order stochastic dominance, ability to plan ahead, and gender. We do find some systematic relationships. A subject’s compliance with first-order stochastic dominance as well as, possibly, patience, gender, and altruism have some systematic effects on her behavior in repeated games. At the level of a pair of subjects who are playing a repeated game, each subject’s gender as well as, possibly, patience and ability to choose an available dominant strategy in a one-shot matrix game systematically affect the frequency of the cooperate–cooperate outcome. However, overall, the number of systematic relationships is surprisingly small.     

Random belief equilibrium in normal form games

In defining random belief equilibrium (RBE) in finite, normal form games we assume a player's beliefs about others' strategy choices are randomly drawn from a belief distribution that is dispersed around a central strategy profile, the focus. At an RBE: (1) Each chooses a best response relative to her beliefs. (2) Each player's expected choice coincides with the focus of the other players' belief distributions. RBE provides a statistical framework for estimation which we apply to data from three experimental games. We also characterize the limit-RBE as players' beliefs converge to certainty. When atoms in the belief distributions vanish in the limit, not all limit-RBE (called robust equilibria) are trembling hand perfect Nash equilibria and not all perfect equilibria are robust.     

Coordination between a sophisticated and fictitious player

Successful coordination is a common and important social problem. Achieving it relies on the players’ ability to accurately anticipate future choices from known information. Individuals may not only lack this cognitive ability, but differ in it. Fictitious Play is an adaptive behavior where a myopic best response to the historical play of an opponent is selected. I consider the interaction between a fictitious player and a sophisticated player in 2 × 2 coordination games. The existence of coordination, the selection of equilibria, and the payoffs generated are analyzed.     

理性选择向非理性选择转化的行为分析

本文针对不确定条件下的人类选择行为提出一个新的可供研究的观点:人的非理性选择在很大程度上是由理性选择转化而来的。文章首先简要评说了早期行为经济学的动物实验和认知心理学,认为人的选择行为是理性和非理性的同构;继而,通过解析丹尼尔·卡尼曼等人创立的前景理论所蕴涵的理性向非理性选择转化的思想,构建了这种转化的抽象模型;最后,作为对本文分析观点的一种联系实际的论证,研究了金融市场中的非理性选择以说明这种转化现象的客观存在。本文的分析可视为对行为经济学非理性选择理论之深邃见解的一种挖掘。     

On ‘Informationally Robust Equilibria’ for Bimatrix Games

Informationally robust equilibria (IRE) are introduced in Robson (Games Econ Behav 7: 233–245, 1994) as a refinement of Nash equilibria for strategic games. Such equilibria are limits of a sequence of (subgame perfect) Nash equilibria in perturbed games where with small probability information about the strategic behavior is revealed to other players (information leakage). Focusing on bimatrix games, we consider a type of informationally robust equilibria and derive a number of properties they form a non-empty and closed subset of the Nash equilibria. Moreover, IRE is a strict concept in the sense that the IRE are independent of the exact sequence of probabilities with which information is leaked. The set of IRE, like the set of Nash equilibria, is the finite union of polytopes. In potential games, there is an IRE in pure strategies. In zero-sum games, the set of IRE has a product structure and its elements can be computed efficiently by using linear programming. We also discuss extensions to games with infinite strategy spaces and more than two players. The authors would like to thank Marieke Quant for her helpful comments.     

Aggregate comparative statics

In aggregative games, each playerʼs payoff depends on her own actions and an aggregate of the actions of all the players. Many common games in industrial organization, political economy, public economics, and macroeconomics can be cast as aggregative games. This paper provides a general and tractable framework for comparative static results in aggregative games. We focus on two classes of games: (1) aggregative games with strategic substitutes and (2) nice aggregative games, where payoff functions are continuous and concave in own strategies. We provide simple sufficient conditions under which positive shocks to individual players increase their own actions and have monotone effects on the aggregate. The results are illustrated with applications to public good provision, contests, Cournot competition and technology choices in oligopoly.     

Equilibrium selection through incomplete information in coordination games: an experimental study

We perform an experiment on a pure coordination game with uncertainty about the payoffs. Our game is closely related to models that have been used in many macroeconomic and financial applications to solve problems of equilibrium indeterminacy. In our experiment, each subject receives a noisy signal about the true payoffs. This game (inspired by the “global” games of Carlsson and van Damme, Econometrica, 61, 989–1018, 1993) has a unique strategy profile that survives the iterative deletion of strictly dominated strategies (thus a unique Nash equilibrium). The equilibrium outcome coincides, on average, with the risk-dominant equilibrium outcome of the underlying coordination game. In the baseline game, the behavior of the subjects converges to the theoretical prediction after enough experience has been gained. The data (and the comments) suggest that this behavior can be explained by learning. To test this hypothesis, we use a different game with incomplete information, related to a complete information game where learning and prior experiments suggest a different behavior. Indeed, in the second treatment, the behavior did not converge to equilibrium within 50 periods in some of the sessions. We also run both games under complete information. The results are sufficiently similar between complete and incomplete information to suggest that risk-dominance is also an important part of the explanation.