Behavioral Economics Commons^™

Three Essays On Behavioral Economics And Mechanism Design, Na Zuo

Doctoral Dissertations

My three essays on behavioral economics and mechanism design introduce two new microeconomic theoretical models.

In the first chapter, we develop an n-player theoretical model applying the concept of Virtual Bargaining to study cooperative behavior in public goods games characterizing team production. Virtual Bargaining is a modeling framework that characterizes how players may construct a tacit agreement to coordinate behavior in the absence of explicit communication. Players identify their worst-possible payoff outcome from any candidate agreement, and mutually best-respond with respect to maximization of their worst-payoff function. Players face uncertainties regarding whether other players will follow through on a candidate …

One Step At A Time: Does Gradualism Build Coordination?, Maoliang Ye, Jie Zheng, Plamen Nikolov, Sam Asher

Economics Faculty Scholarship

This study investigates a potential mechanism to promote coordination. With theoretical guidance using a belief-based learning model, we conduct a multi-period, binary-choice, and weakest-link laboratory coordination experiment to study the effect of gradualism – increasing the required levels (stakes) of contributions slowly over time rather than requiring a high level of contribution immediately – on group coordination performance. We randomly assign subjects to three treatments: starting and continuing at a high stake, starting at a low stake but jumping to a high stake after a few periods, and starting at a low stake while gradually increasing the stakes over time …

Coordination When There Are Restricted And Unrestricted Options, Shaun P. Hargreaves Heap, David Rojo Arjona, Robert Sugden

Economics Faculty Articles and Research

One might expect that, in pure coordination games, coordination would become less frequent as the number of options increases. Contrary to this expectation, we report an experiment which found more frequent coordination when the option set was unrestricted than when it was restricted. To try to explain this result, we develop a method for eliciting the general rules that subjects use to identify salient options in restricted and unrestricted sets. We find that each such rule, if used by all subjects, would generate greater coordination in restricted sets. However, subjects tend to apply different rules to restricted and unrestricted sets.

How Portable Is Level-0 Behavior? A Test Of Level-K Theory In Games With Non-Neutral Frames, Shaun Hargreaves Heap, David Rojo Arjona, Robert Sugden

Economics Faculty Articles and Research

We test the portability of level‐0 assumptions in level‐k theory in an experimental investigation of behavior in Coordination, Discoordination, and Hide and Seek games with common, non‐neutral frames. Assuming that level‐0 behavior depends only on the frame, we derive hypotheses that are independent of prior assumptions about salience. Those hypotheses are not confirmed. Our findings contrast with previous research which has fitted parameterized level‐k models to Hide and Seek data. We show that, as a criterion of successful explanation, the existence of a plausible model that replicates the main patterns in these data has a high probability of …

Binding Promises And Cooperation Among Strangers, Gabriele Camera, Marco Casari, Maria Bigoni

Economics Faculty Articles and Research

In an experiment, a group of strangers was randomly divided in pairs to play a prisoners’ dilemma; this process was indefinitely repeated. Cooperation did not increase when subjects could send public messages amounting to binding promises of future play.

Experimental Markets With Frictions, Gabriele Camera, Marco Casari, Maria Bigoni

Economics Faculty Articles and Research

Decentralized and impersonal exchange is fundamental to contemporary economies, where many interactions take place among individuals with low levels of information about their counterpart. We review the experimental literature about markets with frictions, where strangers interact in pairs formed at random in economies of indefinite duration. We focus on the impact of communication on the efficiency of the outcome and report results of a new experiment.