Experimenting and learning with localized direct communication |
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| Authors: | Vincent Mak Rami Zwick |
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| Institution: | 1. Cambridge Judge Business School, University of Cambridge, Trumpington Street, Cambridge CB2 1AG, UK
2. Department of Management and Marketing, School of Business Administration, University of California, Riverside, CA, 92521, USA
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| Abstract: | We report an experiment in which subjects may learn from each other. Specifically, a “queue” of players who are identically informed ex ante make decisions in sequence over two lotteries. Every player except the first in the queue observes (only) his immediate predecessor’s choice and payoff before making his own decision. In equilibrium decisions are identical from the first or second player onwards in all experimental conditions. However, complete adherence to equilibrium play is seldom observed in our experiment. We further analyze our data using a quantal response equilibrium approach and test for behavioral regularities related to base rate fallacy/conservatism bias, social conformity/rebelliousness, and preference for experimentation (preferring the lottery with potentially more information spillover value). Our estimations reveal a consistent preference for experimentation across conditions, and further analysis offers some support to our surmise that this behavioral regularity is due, in part, to an attempt to influence others behind in the queue. |
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