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on Game Theory |
| By: | Gambarova, Z.; Glycopantis, D. |
| Abstract: | We consider zero-sum and a non zero-sum games of two players with generalized, not necessarily linear, utility functions and infinite, compact pure strategy spaces. Emphasis is given to comparisons with results obtained in mathematical theorems. The games chosen make specific points in relation to the conditions of the theorems. The idea of δ functions is exploited to construct mixed strategies. We interpret their significance in joining pure strategies and show the application in confirming NE. Uniqueness of NE is looked at. An issue is also how far an analogy can be drawn from the case of the finite matrix games. The usually discussed game theory problems are easy to analyze but they do not cover the whole range of possibilities. |
| Keywords: | Nash Equilibrium (NE); Infinite games; Compact set of strategies; Reaction functions; Dirac δ function; Mixed strategies; Quasi-concave utility function; Nash-von Neumman-Debreu-Fan-Glisberg theorems; multiple Nash equilibria; minimax theorem; saddle point; games with perfect recall; behavioural strategies |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:21/02&r= |
| By: | Cao, Haoyang (Center for Mathematical Economics, Bielefeld University); Dianetti, Jodi (Center for Mathematical Economics, Bielefeld University); Ferrari, Giorgio (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We study stationary mean field games with singular controls in which the representative player interacts with a long-time weighted average of the population through a discounted and an erodic performance criterion. This class of games finds natural applications in the context of optimal productivity expansion in dynamic oligopolies. We prove existence and uniqueness of the mean field equilibria for the discounted and the ergodic games by showing the validity of an Abelian limit. The latter allows also to approximate Nash equilibria of - so far unexplored - symmetric N-player ergodic singular control games through the mean field equilibrium of the discounted game. Numerical examples finally illustrate in a case study the dependency of the mean field equilibria with respect to the parameters of the games. |
| Keywords: | stationary mean field games, singular control, discounted and ergodic criterion, one-dimensional Itô-diffusion, Abelian limit, optimal productivity expansion, ε-Nash equilibrium |
| Date: | 2021–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:650&r= |
| By: | Besner, Manfred |
| Abstract: | Central to this study is the concept of disjointly productive players. Two players are disjointly productive if there is no synergy effect if one of these players joins a coalition containing the other. Our first new axiom states that the payoff to a player does not change when another player, disjointly productive with that player, is removed from the game. The second new axiom means that if we merge two disjointly productive players into a new player, the payoff to a third player in a game with the merged player does not change. These two axioms, along with efficiency, characterize the Shapley value and can lead to improved run times for computing the Shapley value in games with some disjointly productive players. |
| Keywords: | Cooperative game; Shapley value; Disjointly productive players; Merged (disjointly productive) players game |
| JEL: | C7 C71 |
| Date: | 2021–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108241&r= |
| By: | Hinnosaar, Toomas |
| Abstract: | The standard model of sequential capacity choices is the Stackelberg quantity leadership model with linear demand. I show that under the standard assumptions, leaders' actions are informative about market conditions and independent of leaders' beliefs about the arrivals of followers. However, this Stackelberg independence property relies on all standard assumptions being satisfied. It fails to hold whenever the demand function is non-linear, marginal cost is not constant, goods are differentiated, firms are non-identical, or there are any externalities. I show that small deviations from the linear demand assumption may make the leaders' choices completely uninformative. |
| Keywords: | Oligopolies; Sequential Games; Stackelberg leadership model |
| JEL: | C72 C73 D43 L13 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14978&r= |
| By: | Willinger, Marc (CEE-M, Univ Montpellier, CNRS, INRAE, SupAgro, Montpellier, France); Rhouma, Oussama (Université de Jendouba); Puzon, Klarizze Anne (CERE - the Center for Environmental and Resource Economics) |
| Abstract: | We propose a five-player common-pool resource (CPR) game with endogenous coalition formation. We show that the level of extraction from the CPR depends on the size of each coalition that is formed and on the final coalition structure. These predictions are tested in a laboratory experiment. We consider two treatments: dictator vs. veto. In the dictator treatment, at each stage of the coalition formation game, a randomly chosen player imposes the coalition size and selected members cannot refuse to become a member. In the veto treatment, players have the right to refuse joining the current coalition if they want to and make counter-proposals. We observe that the formation of the grand coalition is more frequent in the dictator treatment. However, with the repetition of the coalition formation game, the grand coalition becomes more frequent under both treatment, and past experience of a grand coalition increases the likelihood that the current coalition structure is the grand coalition. Finally, the possibility to form coalitions is beneficial at reducing CPR extractions, compared to the singleton structure, in both treatments |
| Keywords: | coalition formation; laboratory experiment; veto power; common pool resource |
| JEL: | C71 C92 H41 Q01 |
| Date: | 2021–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:slucer:2021_009&r= |
| By: | Le Breton, Michel; Shapoval, Alexander; Weber, Shlomo |
| Abstract: | In this paper we examine a game-theoretical generalization of the landscape theory introduced by Axelrod and Bennett (1993). In their two-bloc setting each player ranks the blocs on the basis of the sum of her individual evaluations of members of the group. We extend the Axelrod-Bennett setting by allowing an arbitrary number of blocs and expanding the set of possible deviations to include multi-country gradual deviations. We show that a Pareto optimal landscape equilibrium which is immune to profitable gradual deviations always exists. We also indicate that while a landscape equilibrium is a stronger concept than Nash equilibrium in pure strategies, it is weaker than strong Nash equilibrium. |
| Keywords: | blocs; gradual deviation; hedonic games; landscape equilibrium; Landscape theory; potential functions |
| JEL: | C72 D74 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14993&r= |
| By: | Ennio Bilancini; Leonardo Boncinelli; Sebastian Ille; Eugenio Vicario |
| Abstract: | We study the long-run dynamics of a repeated non-symmetric Haw-Dove type interaction between agents of two different populations. Agents choose a strategy based on their previous experience with the other population by sampling from a collective memory of past interactions. We assume that the sample size differs between populations and define a measure of harshness of conflict in the Hawk-Dove interaction. We then show how the properties of the long-run equilibrium depend on the harshness of conflict and the relative length of the sample. In symmetric interactions, if conflict is harsh, the population which samples relatively more past interactions is able to appropriate a higher payoff in the long-run, while the population with a relatively smaller sample do so if conflict is mild. These results hold subject to constraints on the sample size which we discuss in detail. We further extend our results to non-symmetric Hawk-Dove games. |
| Keywords: | conflict, memory, hawk dove, evolution, stochastic stability |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2021_13.rdf&r= |
| By: | Anmina Murielle Djiguemde (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Dimitri Dubois (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Alexandre Sauquet (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Tidball Mabel (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We study the impact of discrete versus continuous time on the behavior of agents in the context of a dynamic common pool resource game. To this purpose, we consider a linear quadratic model in which agents exploit a renewable resource with an infinite horizon and conduct a lab experiment. We use a differential game for continuous time and derive its discrete time approximation. When the agent is the sole owner of the resource, we fail to detect on a battery of indicators any difference between discrete and continuous time. Conversely, in the two-player setting, significantly more agents can be classified as myopic and end up with a low resource level in discrete time. Continuous time seems to allow for better cooperation and thus greater sustainability of the resource than does discrete time. Also, payoffs are more equally distributed in the continuous time setting. |
| Keywords: | Common Pool Resource,Differential Games,Experimental Economics,Continuous Time,Discrete Time |
| Date: | 2021–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-03214973&r= |
| By: | Miguel Borrero (University of Valencia); Santiago J. Rubio (University of Valencia) |
| Abstract: | This paper studies how the investment in adaptation can influence the participation in an international environmental agreement (IEA) when countries decide in adaptation before they choose their levels of emissions. Two types of agreements are studied, a complete agreement for which countries coordinate their decisions on adaptation and emissions, and an adaptation agreement for which there is only coordination when countries decide their levels of adaptation. In both cases, we assume that the degree of effectiveness of adaptation is bounded from above, in order words, adaptation can alleviate the environmental problem, but it cannot solve it by itself leading the vulnerability of the country to almost zero. Our results show that the grand coalition could be stable for both types of agreement, but for extremely high degrees of effectiveness of adaptation. If this condition is not satisfied, the model predicts low levels of membership. The standard result of three countries for the complete agreement. For the adaptation agreement participation can be higher than three, but not higher than six countries. In any case, we can conclude that under reasonable values for the degree of effectiveness of adaptation, in our model adaptation does not promote participation in an IEA. |
| Keywords: | International Environmental Agreements, Adaptation-Mitigation Game, Vulnerability, Effectiveness of Adaptation, Complete Agreement, Adaptation Agreement |
| JEL: | D62 F53 H41 Q54 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2021.16&r= |
| By: | Victor Klockmann (Goethe University Frankfurt, Theodor-W.-Adorno-Platz 4, 60323 Frankfurt, Germany. Center for Humans & Machines, Max Planck Institute for Human Development, Lentzeallee 94, 14195 Berlin, Germany); Alicia von Schenk (Goethe University Frankfurt, Theodor-W.-Adorno-Platz 4, 60323 Frankfurt, Germany. Center for Humans & Machines, Max Planck Institute for Human Development, Lentzeallee 94, 14195 Berlin, Germany.); Marie Claire Villeval (Univ Lyon, CNRS, GATE UMR 5824, 93 Chemin des Mouilles, F-69130, Ecully, France. IZA, Bonn, Germany) |
| Abstract: | Humans shape the behavior of artificially intelligent algorithms. One mechanism is the training these systems receive through the passive observation of human behavior and the data we constantly generate. In a laboratory experiment with a sequence of dictator games, we let participants’ choices train an algorithm. Thereby, they create an externality on future decision making of an intelligent system that affects future participants. We test how information on training artificial intelligence affects the prosociality and selfishness of human behavior. We find that making individuals aware of the consequences of their training on the well-being of future generations changes behavior, but only when individuals bear the risk of being harmed themselves by future algorithmic choices. Only in that case, the externality of artificially intelligence training induces a significantly higher share of egalitarian decisions in the present. |
| Keywords: | Artificial Intelligence, Morality, Prosociality, Generations, Externalities |
| JEL: | C49 C91 D10 D62 D63 O33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:2110&r= |
| By: | Yukihiko Funaki (Waseda University); Emmanuel Sol (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marc Willinger (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We study experimentally a three player sequential and symmetric coalition formation game with empty core. In each round a randomly chosen proposer must choose between a two players coalition or a three players coalition and decide about the payoff division among the coalition members. Players who receive a proposition can accept or reject it. In case of acceptance the game ends. If it is rejected, a new proposer is randomly selected. The game was played repeatedly, with randomly rematched groups. We observe that over 86% of the realized coalitions are two-players coalitions. Three players coalitions are often observed in early rounds but are frequently rejected. Equal splits are the most frequently observed divisions among coalition members, and their frequency increases sharply over time. We propose an extension of von Neumann and Morgenstern (1944)'s notion of stable set to account for our results. |
| Date: | 2021–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-03227388&r= |
| By: | Jérôme Mathis (Université Paris-Dauphine, PSL Research University, and LEDa.); Marcello Puca (Università di Bergamo, CSEF and Webster University Geneva); Simone M. Sepe (University of Arizona, Toulouse School of Economics, and ECGI) |
| Abstract: | We derive necessary and sufficient conditions to achieve efficiency in common interest deliberative games. Our model explicitly characterizes a large class of deliberative institutions where privately informed agents strategically deliberate before taking a decision. Under the model's information structure, the transmission of information may require interpretation from agents with specific knowledge. The dynamics of interpretation are suggestive of a variety of frictions in information transmission. Private information is aggregated, and efficient decisions are taken at equilibrium, if and only if deliberative institutions enable the agents to extend deliberation (consensual extension) and freely interact with one another (freedom of reach). When, instead, these conditions do not hold, deliberation is incomplete and “anything goes”: no general conclusion can be drawn as efficiency depends on the details of the deliberative extended-form game. We substantiate some of the implications of this indeterminacy result through detailed examples. |
| Keywords: | Dynamic group communication, Collective choice, Strategic deliberation. |
| JEL: | D71 D82 D83 |
| Date: | 2021–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:614&r= |
| By: | Gérard Mondello (Université Côte d'Azur, France; GREDEG CNRS) |
| Abstract: | This paper analyzes the impact of strict liability on imperfect competition and shows first that it is not an obstacle to achieving a socially optimal level of care. Second, this result is compromised when firms face a scarce generic asset. Under this asset limitation, this paper shows that competition (here a Cournot-Nash duopoly) leads to a lower level of prevention even if more product at lower price is supplied at the equilibrium. Introducing standards linked to operating permits improves the economy's safety level but may lead firms to exit. |
| Keywords: | Tort Law, Strict Liability, Negligence Rule, Imperfect Competition, Oligopoly, Cournot Competition |
| JEL: | D43 L13 L52 K13 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2021-24&r= |
| By: | Johannes Münster (Department of Economics, University of Cologne); Markus Reisinger (Department of Economics, Frankfurt School of Finance & Management) |
| Abstract: | In bilateral negotiations between a principal and two agents, we show that the agents' bargaining strengths are crucial for the determination of the bargaining sequence and the efficiency of decisions. In a general framework with externalities between agents, we find that the surplus is highest if the principal negotiates with the stronger agent first, regardless of externalities being positive or negative. The principal chooses the efficient sequence with negative externalities, but often prefers the inefficient sequence with positive externalities. We show that our results extend to a general number of agents and provide conditions for simultaneous negotiations to be optimal. |
| Keywords: | C72, C78, D62, L14 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:096&r= |
| By: | Luis Santos Pinto |
| Abstract: | This paper investigates whether an overconfident player is more likely to win a competition against a rational player. The two players are identical, except that the overconfident player overestimates his productivity of effort and, as a consequence, his probability of winning. The competition can take the form of either a tournament or a contest. The paper shows that the overconfident player is the Nash winner (loser) of a tournament with monotonic best responses when his effort and overconfidence are complements (substitutes). The overconfident player is the Nash winner (loser) of a tournament with non-monotonic best responses when he is slightly (significantly) overconfident. In contrast, the overconfident player is always the Nash loser of a contest. The paper also discusses the welfare implications of overconfidence. |
| Keywords: | Overconfidence, Tournaments, Contests, Welfare |
| JEL: | D60 D69 D91 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:21.06a&r= |
| By: | Géraldine Bouveret (NTU - Nanayang Technological University - Nanayang Technological University); Antoine Mandel (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We investigate the containment of epidemic spreading in networks from a normative point of view. We consider a susceptible/infected model in which agents can invest in order to reduce the contagiousness of network links. In this setting, we study the relationships between social efficiency, individual behaviours and network structure. First, we characterise individual and socially efficient behaviour using the notions of communicability and exponential centrality. Second, we show, by computing the Price of Anarchy, that the level of inefficiency can scale up to linearly with the number of agents. Third, we prove that policies of uniform reduction of interactions satisfy some optimality conditions in a vast range of networks. In setting where no central authority can enforce such stringent policies, we consider as a type of second-best policy the implementation of cooperation frameworks that allow agents to subsidise prophylactic investments in the global rather than in the local network. We then characterise the scope for Pareto improvement opened by such policies through a notion of Price of Autarky, measuring the ratio between social welfare at a global and a local equilibrium. Overall, our results show that individual behaviours can be extremely inefficient in the face of epidemic propagation but that policy can take advantage of the network structure to design welfare improving containment policies. |
| Keywords: | Network,Price of Anarchy,Epidemic Spreading,Public Good |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-03165772&r= |
| By: | Margarita Kirneva (CREST, CNRS, Ecole Polytechnique); Matias Nunez (CREST, CNRS, Ecole Polytechnique) |
| Abstract: | We design voting mechanisms in which every Nash equilibrium is coalition proof, preventing the well known coordination failures of usual voting systems. In each of these simultaneous mechanisms, each voter has the right to select a list of alternatives to veto, and the winner is selected randomly from the nonvetoed alternatives. For each specification of the veto rights, we show that each of these mechanisms implements a veto by random priority rule introduced by Moulin[1981]. We then discuss necessary conditions for arbitrary mechanisms to satisfy implementation in both Nash and coalition proof and show that the existence of veto rights in the mechanism is unavoidableto achieve this demanding implementation notion. |
| Keywords: | Implementation, Voting, Vetoes, Coalition Formation, Efficiency. |
| JEL: | D71 D72 |
| Date: | 2021–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2021-08&r= |
| By: | Santiago Forero-Alvarado; Nicolás Moreno-Arias; Juan J. Ospina-Tejeiro |
| Abstract: | Externalities and private information are key characteristics of an epidemic like the Covid-19 pan-demic. We study the welfare costs stemming from the incomplete information environment that these characteristics foster. We develop a framework that embeds a game theory approach into a macro SIR model to analyze the role of information in determining the extent of the health-economy trade-o of a pandemic. We apply the model to the Covid-19 epidemic in the US and find that the costs of keeping health information private are between USD 5:9 trillion and USD 6:7 trillion. We then find an optimal policy of disclosure and divulgation that, combined with testing and containment measures, can improve welfare. Since it is private information about individuals' health what produces the greatest welfare losses, finding ways to make such information known as precisely as possible, would result in significantly fewer deaths and significantly higher economic activity. **** RESUMEN: Las presencia de externalidades y de información privada son características esenciales de una pandemia como la de la COVID-19. En este paper estudiamos los costos de bienestar de un ambiente de información incompleta fomentado por estas características. Desarrollamos una estructura analítica que introuduce un enfoque de teoría de juegos a un modelo Macro-SIR para analizar el rol de la información en la determinación del tamaño del trade-off entre economía y salud en una pandemia. Aplicamos el modelo a la pandemia de COVID-19 en EE.UU y encontramos que los costos de mantener privada la información de salud están entre USD 5,9 billones y USD 6,7 billones. Luego encontramos la política óptima de divulgación que, junto con Testeo y Confinamientos, pueden mejorar el bienestar. Debido a que la información privada sobre los estados de salud de los individuos genera las mayores pérdidas de bienestar en la pandemia, elaborar políticas que hagan pública esta información al máximo nivel de desagregación y precisión posible, resultaría en reducciones significativas de las muertes y un desempeño económico significativamente superior. |
| Keywords: | COVID-19, epidemic, game theory, information assymetries, macroeconomics, testing, containment policies, disclosure, divulgation, optimal policies, epidemia, teoría de juegos, asimetrías de información, macroeconomía, testeo, políticas de contención, cuarentenas, divulgación, políticas óptimas |
| JEL: | C7 E1 H0 I1 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:1160&r= |
| By: | Garance Genicot (Department of Economics, Georgetown University) |
| Abstract: | Individuals typically differ in their identities---the behaviors that they deem ideal for themselves and for the members of their network---and in their tolerance for behaviors that deviate from their own ideals.This paper studies the possibility of compromise, i.e., departures from one's ideal points in order to be accepted by others. I show that an individual's compromise in equilibrium is bounded by the difference between her tolerance level and the lowest tolerance level in society. Heterogeneity in tolerance is necessary for compromise. Relatively intolerant individuals, who can serve as ``bridges'', are critical for the reciprocated compromise of more tolerant individuals. The joint distribution of tolerance levels and identities matters for the equilibrium patterns of compromise. When individuals with extreme identities are systematically less tolerant, societies become more polarized. In contrast, intolerance among moderates encourages cohesion. Classification-D85, L14, O12, Z13 |
| Keywords: | Compromise, Social Networks, Social Capital, Tolerance, Homophily, Identity |
| Date: | 2021–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~21-21-14&r= |
| By: | Luis Santos Pinto; Paola Colzani |
| Abstract: | We use a laboratory experiment to study the causal impact of self-confidence on bargaining with joint production. We exogenously manipulate the self-confidence of subjects regarding their relative performance by employing easy and hard tasks. Subjects are randomly matched into pairs and each pair bargains over a joint surplus which can be either high or low. The size of the joint surplus depends on the pair’s relative performance on the task. Our main experimental findings are as follows. First, the percentage of bargaining failures when subjects perform the easy task is more than triple than when they perform the hard task. Second, there is a remarkably high percentage of bargaining failures when subjects perform the easy task and bargain over a low surplus. Third, when subjects perform the easy task and bargain over a high surplus, all pairs reach an agreement and most settle on the equal split. Our findings shed light on the conditions and mechanisms under which overconfidence causes bargaining failures. |
| Keywords: | Overconfidence, Bargaining, Joint Production, Laboratory Experiment |
| JEL: | C79 C91 C92 D91 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:21.07&r= |