unsw | business school | school of economics calling the shots experimental evidence on significant...
DESCRIPTION
An experimentTRANSCRIPT
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UNSW | BUSINESS SCHOOL | SCHOOL OF ECONOMICS
Calling the shotsExperimental evidence on significant aversion
to non-existing strategic risk
Ben Greiner
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Strategic Risk “Regular” risk:
• Uncertainty about an outcome of a random event• Known or unknown (guessed, subjective) probabilities
Strategic risk:• Uncertainty about strategies/actions other people are
going to choose• Subjective probabilities
In (standard) game theory there is no strategic uncertainty• Beliefs are correct in equilibrium, and equilibrium
strategies are best responses to beliefs
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An experiment
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A
B
B
A: $??B: $??
A: $??B: $??
A: $??B: $??
A: $??B: $??
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A
B
B
A: $80B: $20
A: $0B: $0
A: $50B: $50
A: $0B: $0
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A
B
B
A: $80B: $20
A: $0B: $0
A: $50B: $50
A: $50B: $0
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A
B
B
A: 80B: 20
A: 0B: 0
A: 50B: 50
A: 50B: 0
A
B
B
A: 80B: 20
A: 0B: 0
A: 50B: 50
A: 0B: 0
Ultimatum Game Reverse Impunity Game
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A
B
B
A: € 6.40B: € 1.60
A: € 0.00B: € 0.00
A: € 4.00B: € 4.00
A: € 4.00B: € 0.00
A
B
B
A: € 6.40B: € 1.60
A: € 0.00B: € 0.00
A: € 4.00B: € 4.00
A: € 4.00B: € 4.00
Ultimatum Game Reverse Impunity Game
Experiment 1
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Experiment 1: Procedures One-shot experiment, pie size € 8, 145 participants Conducted in foyer of student restaurant:
• Students participant before lunch• Get paid after lunch
Participants decided in all (altogether 5) games and both roles (strategy method)
Payoff: 10-sided dice, thrown for 2 randomly matched subjects, each number implies a particular game and role assignment, game played out and paid out
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A
B
B
A: € 6.40B: € 1.60
A: € 0.00B: € 0.00
A: € 4.00B: € 4.00
A: € 4.00B: € 0.00
A
B
B
A: € 6.40B: € 1.60
A: € 0.00B: € 0.00
A: € 4.00B: € 4.00
A: € 4.00B: € 4.00
Ultimatum Game Reverse Impunity Game
Experiment 1
55% 28%
99.3% 99.3%
91.0% 93.8%
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Experiment 2: Beliefs 2 years after first experiment in large classroom
135 subjects were asked to predict frequencies of choices in 1st experiment
Instructions included all procedural information and original instructions of 1st experiment
Incentive compatible payment (step-function approximately following quadratic scoring rule)
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≥98.8% 96.6%99.3% 99.3%
Guessed Acceptance Rates of Equal Split ProposalsExperiment 2: Beliefs
Exp 1 observedExp 2 Average Guess
100% 100%Exp 2 Median Guess
~ Ultimatum Game Reverse Impunity Game
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>79.0% 51.6%55.2% 28.3%
Guessed Share of Unequal Split ProposalsExperiment 2: Beliefs
Exp 1 observedExp 2 Average Guess
89.5% 48.1%Exp 2 Median Guess
>
Ultimatum Game Reverse Impunity Game
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A
B
B
A: € 12.0B: € 3.0
A: € 0.0B: € 0.0
A: € 7.5B: € 7.5
A: € 7.5B: € 0.0
A
B
B
A: € 12.0B: € 3.0
A: € 0.0B: € 0.0
A: € 7.5B: € 7.5
A: € 0.0B: € 0.0
Ultimatum Game Reverse Impunity Game
Experiment 3
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Experiment 3: Play method
214 participants invited to laboratory
Role lottery Responders leave lab to next room
56 / 51 proposer-responder pairs in UG / RIG
Pen & paper
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A
B
B
A: € 12.0B: € 3.0
A: € 0.0B: € 0.0
A: € 7.5B: € 7.5
A: € 7.5B: € 0.0
A
B
B
A: € 12.0B: € 3.0
A: € 0.0B: € 0.0
A: € 7.5B: € 7.5
A: € 0.0B: € 0.0
Ultimatum Game Reverse Impunity Game
Experiment 3
64% 39%
94% 100%
70% 87%55% 28%
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A
B
B
A: $ 31B: $ 15
A: $ 10B: $ 10
A: $ 23B: $ 23
A: $ 23B: $ 23
A
B
B
A: $ 31B: $ 15
A: $ 10B: $ 10
A: $ 23B: $ 23
A: $ 0B: $ 0
Ultimatum Game Reverse Impunity Game
Experiment 4: Enter or not
ENTER THE GAME or STAY OUT?
Both ENTER: roles assigned 50/50; Both OUT: $20, $20 One enters, other stays out: ENTER= proposer, OUT= responder
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Experiment 4: Procedures 66 / 52 participants in Ultimatum / Reverse Impunity Computerized, all decisions at computer screen, zTree
Pairs of 2 participants anonymously • decided simultaneously about entering• dropped out or not• were informed about random move, if necessary• proceeded and played Ultimatum / Rev. Impunity• got paid in cash
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Experiment 4: Results
72%77%
89%75%
100%
83%56%
96%79%
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AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 0B: 0
Ultimatum Game Reverse Impunity Game
AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 50B: 0
Although• equal splits are almost never rejected• equal splits are not expected to be rejected
a non-neglible share of people behaves as if there is a non-neglible chance that an equal split will be rejected.
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AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 0B: 0
Ultimatum Game Reverse Impunity Game
AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 50B: 0
Behavior • is not compatible with a consistency between
strategies and rational beliefs• implies extreme risk aversion / pessimism when dealing
with people (strategic risk), as opposed to lotteries (regular risk)
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Thank you.
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AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 0B: 0
Ultimatum Game Reverse Impunity Game
AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 50B: 0
Behavior is not compatible with a consistency between strategies and rational beliefs Social preferences Errors Risk Aversion
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AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 0B: 0
Ultimatum Game Reverse Impunity Game
AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 50B: 0
Maximin *behavior*? Von Neumann & Morgenstern: “...the rules of rational behaviour
must provide definitely for the possibility of irrational conduct on the part of others”
Selten (2001): vNM “do not pin down what to be expected from other players”, in vNM’s pre-Nash concept “players concentrate on what can be assured in a game”
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AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 0B: 0
Ultimatum Game Reverse Impunity Game
AB
B
A: 80B: 20A: 0B: 0A: 50B: 50A: 50B: 0
Strategic ambiguity aversion• Gilboa, Schmeidler – non-additive beliefs / capacities• Chateauneuf, Eichberger & Grant (2007) –
non-extreme-outcome additive capacities
• Eichberger, Kelsey (, Schipper) (2010, 2008, 2009) – compare to empirical / experimental data
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