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on Experimental Economics |
| By: | Pedro Rey-Biel (Universidad Autónoma Barcelona) |
| Abstract: | We report experimental results on one-shot two person 3x3 constant sum games played by non-economists without previous experience in the laboratory. Although strategically our games are very similar to previous experiments in which game theory predictions fail dramatically, 80% of actions taken in our experiment coincided with the unique Nash equilibrium in pure strategies and 73% of actions were best responses to elicited beliefs. We argue how social preferences, presentation effects and belief elicitation procedures may influence the way subjects play in simple but non trivial games and explain differences with previous work. |
| Keywords: | Experiments Constant Sum Games Stated Beliefs |
| JEL: | C9 |
| Date: | 2005–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpex:0512003&r=exp |
| By: | Peter Dürsch; Albert Kolb; Jörg Oechssler; Burkhard C. Schipper |
| Abstract: | We use an experiment to explore how subjects learn to play against computers which are programmed to follow one of a number of standard learning algorithms. The learning theories are (unbeknown to subjects) a best response process, fictitious play, imitation, reinforcement learning, and a trial & error process. We test whether subjects try to influence those algorithms to their advantage in a forward-looking way (strategic teaching). We find that strategic teaching occurs frequently and that all learning algorithms are subject to exploitation with the notable exception of imitation. The experiment was conducted, both, on the internet and in the usual laboratory setting. We find some systematic differences, which however can be traced to the different incentives structures rather than the experimental environment |
| Keywords: | learning; fictitious play; imitation; reinforcement; trial & error; strategic teaching; Cournot duopoly; experiments; internet |
| JEL: | C72 C91 C92 D43 L13 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse31_2005&r=exp |
| By: | John Janmaat (Acadia University) |
| Abstract: | The ultimatum game experiment has a long history in experimental economics. In-vivo ultimatum like strategic settings often involve uncertain rejection and payoff reversals. This paper presents the results of an ultimatum like experiment extended to reflect characteristics of a shared international river, in particular where a downstream nation has the potentially payoff reversing strategy option of a military strike. Subjects implicitly split an endowment between water consuming and security enhancing investments, where relative security investments determine the probability of the payoff reversal, with one subject being able to purchase a gamble to reverse the payoffs. Maximin, folk, and Nash solutions are compared, with results suggesting that behavior is responding to folk theorem like incentives. Dynamic analyses support this by showing no significant relationship between the gamble choice and its single period rationality. |
| Keywords: | Resource Economics, Peace Economics, Experimental Economics, Applied Game Theory |
| JEL: | C7 C9 N4 Q2 |
| Date: | 2005–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpex:0512004&r=exp |
| By: | Edward J. Lopez (San Jose State University); W. Robert Nelson (Center for Study of Public Choice) |
| Abstract: | Previous tests of the endowment effect have usually observed WTA-WTP disparities. Here, a public good experiment is employed. Both account framing and duration framing treatments are introduced to alter subjects’ perceived control over an initial endowment. Results do not indicate that preferences shift in a way consistent with the endowment effect. |
| Keywords: | endowment effect, public good, willingness to pay |
| JEL: | C91 D1 H41 |
| Date: | 2005–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpex:0512001&r=exp |
| By: | Gerlinde Fellner; Matthias Sutter |
| Abstract: | Myopic loss aversion (MLA) has been established as one prominent explanation for the equity premium puzzle. In this paper we address two issues related to the effects of MLA on risky investment decisions. First, we assess the relative impact of feedback frequency and investment flexibility (via the investment horizon) on risky investments. Second, given that we observe higher investments with a longer investment horizon, we examine conditions under which investors might endogenously opt for a longer investment horizon in order to avoid the negative effects of MLA on investments. We find in our experimental study that investment flexibility seems to be at least as relevant as feedback frequency for the effects of myopic loss aversion. When subjects are given the choice to opt for a long or short investment horizon, there is no clear preference for either. Yet, if subjects face a default horizon (either long or short), there is rather little switching from the one to the other horizon, showing that a default might work to attenuate the effects of MLA. However, if subjects switch, they are more often willing to switch from the long to the short horizon than vice versa, suggesting a preference for higher investment flexibility. |
| Keywords: | loss aversion, risk, investment, experiment |
| JEL: | C91 D80 G11 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse16_2005&r=exp |
| By: | Georgia Kosmopoulou (University of Oklahoma); Dakshina G. De Silva (Texas Tech University) |
| Abstract: | This paper explores, through a series of experiments, the effect of shill bidding upon revenues and prices in auctions. We study the practice of shill bidding in a common value framework. Our findings are consistent with the theoretical prediction that, if bidders are aware of the possibility of seller participation in an auction, shill bidding lowers profits on average. Shill bidding can alleviate the problem of the winner's curse by lowering the price and it can, thus, provide benefits to the bidders. Finally, even though there were too many bidders that submitted bids in these auctions, the number of entrants was not affected by the possibility of seller participation, which is also consistent with the theory. |
| Keywords: | Auctions, Experiment, Shill Bidding, Entry |
| JEL: | C91 D44 |
| Date: | 2005–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpex:0512002&r=exp |
| By: | John Janmaat (Acadia University) |
| Abstract: | The Hayek Hypothesis holds that prices contain enough information to direct the resources in the economy to their most efficient use. In a series of experiments, Vernon Smith (1992) found that, with the right trading institutions, a market with agents that know only their own valuations of a good will converge quite rapidly to the competitive equilibrium price and trading volume. In the series of experiments reported here, the extension of the Hayek Hypothesis to an economy with production is explored. When agents can choose between autarkic production and specialization, they have the opportunity to hedge against market risk. A coordination problem is also created, interfering with the ability of the system to converge on the theoretical Ricardian equilibrium. |
| Keywords: | tim.dimock@acadiau.ca |
| JEL: | C9 D8 F1 |
| Date: | 2005–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpex:0512005&r=exp |
| By: | Reinhard Selten; Thorsten Chmura |
| Abstract: | Four stationary concepts for completely mixed 2x2 games are experimentally compared: Nash equilibrium, quantal response equilibrium, sample-7 equilibrium and impulse balance equilibrium. Experiments on 12 games, 6 constant sum games and 6 non-constant sum games were run with 12 independent subject groups for each constant sum game and 5 independent subject groups for each nonconstant sum game. Each independent subject group consisted of 4 payers 1 and four players 2 interacting anonymously over 200 periods with random matching. The games were selected to yield a reasonably wide distribution over the parameter space. The comparison of the four theories shows that the order of performance from best to worst is as follows: impulse balance equilibrium, sample-7 equilibrium, quantal response equilibrium, Nash equilibrium. The new concepts of sample-7 equilibrium and impulse balance equilibrium are explained in the text. |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:bonedp:bgse33_2005&r=exp |
| By: | Ronald M. Harstad (Department of Economics, University of Missouri-Columbia) |
| Abstract: | Entry for William Vickrey, prepared for the Dictionary of Scientific Biography |
| Keywords: | Vickrey's Contributions, Vickrey Auction, Public Economics, Asymmetric Information |
| JEL: | B31 D82 |
| Date: | 2005–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:0519&r=exp |