THE EAST END, THE WEST END, AND KING'S CROSS: ON CLUSTERING IN THE FOUR-PLAYER HOTELLING GAME

We study experimentally a standard four-player Hotelling location game with a uniform density of consumers and inelastic demand. The pure strategy Nash equilibrium configuration consists of two firms located at one quarter of the "linear city," and the other two at three quarters. We do not observe convergence to such an equilibrium. In our experimental data we find three clusters. Besides the direct proximity of the two equilibrium locations, this concerns the focal midpoint. Moreover, we observe that whereas this midpoint appears to become more notable over time, other focal points fade away. We explain how these observations are related to best-response dynamics, and to the fact that the players rely on best-responses in particular when they are close to the equilibrium configuration.     

The evolution of awareness

We consider an evolutionary approach to how awareness is determined in games where players are not necessarily aware of all possible strategies. We begin with the standard notion of evolutionarily stable equilibrium, in which potential players pursue a fixed strategy. This constitutes a minimal level of awareness, since players are not required to know anything about the game or to reason about their opponents. We then consider the introduction of players with greater awareness.     

Common fate motivates cooperation: The influence of risks on contributions to public goods

In order to study whether common fate induced by shared risk can promote cooperation, I introduce two types of risks into a public goods game: risk that is common among all group members (the COM treatment), and risk that is independent across individuals (the IND treatment). In both treatments, zero contributions is the only equilibrium. In contrast to the equilibrium analysis, contributions to the public goods in the experiment approach zero under the independent risk but remain at high levels when the common risk is present. Analysis of the data reveals that different reactions to beliefs are fundamental to this treatment effect. While beliefs and contributions in the first periods, as well as the belief formation processes, are similar across treatments, subjects in the IND treatment are significantly less cooperative than those in the COM treatment with the same beliefs. A large variation in group contributions is observed in the COM treatment. Further analysis shows that initial beliefs can explain most of the variation in the long-run contribution level, implying the importance of beliefs in shaping the players’ experience and establishing group norms.     

Testing psychological forward induction and the updating of beliefs in the lost wallet game

This paper studies psychological forward induction and the updating of beliefs in the lost wallet game (Dufwenberg & Gneezy, 2000), which is required to derive a prediction for guilt averse agents. Our experiment tests whether the second movers psychologically induct forward and update their beliefs after observing their paired first mover's decision by eliciting beliefs with different second mover knowledge of first mover decision, depending on treatment. We find that second movers do update their beliefs conditional on receiving information on the first mover’s action, supporting psychological forward induction.     

Games of Capacity Manipulation in Hospital-intern Markets

In this paper, we analyze capacity manipulation games in hospital-intern markets inspired by the real-life entry-level labor markets for young physicians who seek residencies at hospitals. In a hospital-intern market, the matching is determined by a centralized clearinghouse using the preferences revealed by interns and hospitals and the number of vacant positions revealed by hospitals. We consider a model in which preferences of hospitals and interns are common knowledge. Hospitals play a capacity-reporting game. We analyze the equilibria of the game-form under the two most widely used matching rules: hospital-optimal and intern-optimal stable rules. We show that (i) there may not be a pure strategy equilibrium in general; and (ii) when a pure strategy equilibrium exists, every hospital weakly prefers this equilibrium outcome to the outcome of any larger capacity profile. Finally, we present conditions on preferences to guarantee the existence of pure strategy equilibria.     

CAN SUBGAME PERFECT EQUILIBRIUM THREATS FOSTER COOPERATION? AN EXPERIMENTAL TEST OF FINITE‐HORIZON FOLK THEOREMS

This paper considers extended prisoners' dilemma games in which a second pure strategy equilibrium in the stage game allows for mutual cooperation in all but the last round of the finitely repeated game as an equilibrium outcome. We distinguish a strict and a weak extension of the prisoners' dilemma game in a long and a short horizon treatment. A comparison with the corresponding finitely repeated prisoners' dilemma games shows that the strict additional equilibrium increases cooperation rates while the weak does not. This result is robust to the variation of the time horizon. (JEL C73, C91)     

Team versus individual behavior in the minimum effort coordination game

We compare coordination success of individuals and teams in the minimum effort coordination game. The game is played by groups of either five individuals or five two-person teams with either fixed or random re-matching protocols. When groups are fixed, teams perform at least as well as individuals, if not better, in terms of coordinating to the payoff dominant outcome. But with random re-matching, teams experience pervasive coordination failures. A public recommendation to a strategy or a performance bonus exhorting players to coordinate to the payoff-dominant equilibrium has similar impact on coordination for both individuals and teams playing with fixed matching. However, coordination is far more difficult to achieve with teams playing under random re-matching. Our results have implications for the design of work-groups in organizations.     

Illusory Control, Gambling, and Video Gaming: An Investigation of Regular Gamblers and Video Game Players

There is a paucity of empirical research examining the possible association between gambling and video game play. In two studies, we examined the association between video game playing, erroneous gambling cognitions, and risky gambling behaviour. One hundred and fifteen participants, including 65 electronic gambling machine (EGM) players and 50 regular video game players, were administered a questionnaire that examined video game play, gambling involvement, problem gambling, and beliefs about gambling. We then assessed each groups' performance on a computerised gambling task that involved real money. A post-game survey examined perceptions of the skill and chance involved in the gambling task. The results showed that video game playing itself was not significantly associated with gambling involvement or problem gambling status. However, among those persons who both gambled and played video games, video game playing was uniquely and significantly positively associated with the perception of direct control over chance-based gambling events. Further research is needed to better understand the nature of this association, as it may assist in understanding the impact of emerging digital gambling technologies.     

Simple and complex gift exchange in the laboratory

We examine an experimental gift exchange game in which the players can improve on the unique no-gifts equilibrium by two different types of gift exchange: simple and complex exchange, respectively. Complex exchange gives higher payoffs than simple exchange, but it requires not only mutual trust, like with simple exchange, but also a substantial degree of coordination. We examine whether players are able to conclude simple and complex exchanges and how this is affected by the move and matching structure of the game. We find that the so-called partners treatment is a precondition for the occurrence of complex exchange.     

On the adjudication of conflicting claims: an experimental study

This paper reports an experimental study on three well-known solutions for problems of adjudicating conflicting claims: the constrained equal awards, the proportional, and the constrained equal losses rules. We first let subjects play three games designed such that the unique equilibrium allocation coincides with the recommendation of one of these three rules. In addition, we let subjects play an additional game that has the property that all (and only) strategy profiles in which players coordinate on the same rule constitute a strict Nash equilibrium. While in the first three games subjects’ play easily converges to the unique equilibrium rule, in the last game the proportional rule overwhelmingly prevails as a coordination device, especially when we frame the game as an hypothetical bankruptcy situation. We also administered a questionnaire to a different group of students, asking them to act as impartial arbitrators to solve (among others) the same problems played in the lab. Also in this case, respondents were sensitive to the framing of the questions, but the proportional rule was selected by the vast majority of respondents.     

Asset Markets and Equilibrium Selection in Public Goods Games with Provision Points: An Experimental Study

We report experimental results on the effects that auctioning the right to play a public goods game with a provision point may have on equilibrium selection and individual behavior. Auctioning off such a right among a larger population of players strikingly enhances public good provision. Once public good provision is obtained, the auction price at the preliminary stage increases to its upper limit, dissipating all players' gains associated with the provision of the public good. Individual deviations from the equilibrium strategy are neither able to force lower market prices nor to affect provision of the public good in subsequent periods. (JEL C72 , C92 , H41 )     

Endogenous agenda formation in three-person committees

This paper analyzes a 3-person voting game in which two or three players have the ability to choose alternatives to be considered. Once the set of possible alternatives and the structure of the voting procedure are known, the players can solve for the outcome. Thus, the actual choice over outcomes takes place in the choice of alternatives to be voted on, i.e., the agenda. An equilibrium to this agenda-formation game in shown to exist under different assumptions about the information relative to the order of the players in the voting game. Further, this equilibrium is computed and found to possess certain features which are attractive from a normative point of view.Prepared for delivery at the 1985 Annual Meeting of the American Political Science Association, The New Orleans Hilton, August 29–September 1, 1985. We would like to thank Richard McKelvey, Norman Schofield and two anonymous referees for valuable comments and suggestions. We retain responsibility for remaining errors.     

BELIEFS ABOUT OTHER-REGARDING PREFERENCES IN A SEQUENTIAL PUBLIC GOODS GAME

Experimental evidence is used to deduce players' beliefs about their opponents' concern for others. The experiment is a sequential public good provision game with a provision point and two different refund rules. A theory is constructed to show how early contributions should change with the refund rule depending on the first mover's beliefs about subsequent players' other-regarding preferences. The evidence rejects the hypothesis that early players believe that their opponents are inequality averse and also rejects the hypothesis that early players are concerned with security. The evidence is consistent with beliefs in spite, reciprocity, or a concern for security. (JEL H41 , C90 , D63 , D64 )     

Losses Disguised as Wins Affect Game Selection on Multiline Slots

Multiline slots are exciting games that contain features which make them alluring. One such feature is a loss disguised as a win (LDW); wherein, players win less than they wager (e.g., bet 2 dollars, win back 50 cents), but this net loss is disguised by flashing graphics and winning sounds. Research to date concludes that LDWs are both rewarding and reinforcing. Here, we investigated whether LDWs affect players’ game selection. Thirty-two undergraduate students with experience playing slot machines played 100 spins on four games—two had positive payback percentages (115%) and two had negative payback percentages (85%) after 100 spins. For each payback percentage condition, there was a game with no LDWs and a game with a moderate number of LDWs. For the 100 spins, players could choose to play whichever game they wished. They then rated their preference for each game following the 100-spins and chose a game to continue playing. The majority of players preferred playing the positive payback percentage game with LDWs and chose to continue playing this game over the three other games. We conclude that in addition to LDWs being reinforcing and rewarding, LDWs do in fact influence game selection. We conclude that responsible gambling initiatives should educate players about LDWs.     

COMMUNICATION AND COORDINATION IN A TWO‐STAGE GAME

We study the impact of communication on behavior in a two‐stage coordination game with asymmetric payoffs. We test experimentally whether individuals can avoid a head‐to‐head confrontation by means of coordinated strategies. In particular we analyze whether and how quickly a conflict‐avoidance take turn strategy can emerge. First, our results show that players learn to solve the conflict by choosing opposite options at both stages of the game. Second, many adopt a take turn strategy to sustain coordination over time and alleviate the inequality induced by the asymmetry of payoffs. Third, communication increases the likelihood of conflict resolution regardless of whether communication is unilateral or bilateral. (JEL C91, D74, L15, H71)     

On existence of pure strategy equilibrium with endogenous income

It is well known that in a voting-over-income-taxation game, there exists no pure strategy equilibrium when voters’ incomes are exogenous (i.e., when individual voters make only consumption choices). I prove that in an environment with endogenous income (i.e., where individual voters make labor-leisure choices, in addition to consumption choices) and candidates propose marginally progressive taxes, it is possible to get existence of a pure-strategy equilibrium tax schedule.     

THEORY AND EXPERIMENTS ON SPATIAL COMPETITION

We present theoretical and experimental results on spatial competition between two firms. Firms choose locations simultaneously along a line representing a linear market. Identical consumers with non-increasing demand functions are uniformly distributed along this line. We solve for symmetric equilibrium payoffs in an infinitely repeated game for the case of linear demand and an arbitrary discount factor. The set of equilibriums found includes both competitive and collusive payoffs. In laboratory experiments in which the final period was unknown to the players in advance, we observed both competitive and collusive outcomes. Non-binding communication led to collusion.     

Incomplete information and incentives to free ride

We study private provision of a continuous public good in an incomplete information repeated game. The analysis generates the following predictions in the form of Perfect Bayesian equilibria. When the discount factor is low, the game played by increasingly optimistic players may collapse into a war of attrition: delay may occur and one player may bear the burden of providing the public good while the other free rides forever. On the other hand, if the discount factor is high, or low but prior beliefs are “pessimistic”, the inclusion of incomplete information has no impact on the pattern of contributions.     

An Observational Investigation of Poker Style and the Five-Factor Personality Model

Little empirical investigation has been made of the relationship between personality and gambling play style. In an observation of on-table poker behavior, this study classified 44 players competing in an amateur league (43 male; mean age 32) according to two main dimensions of play style; tight or loose and aggressive or passive. Superstitious beliefs towards the game were additionally measured. The NEO-PI-R questionnaire (Costa and McCrae, Revised NEO personality inventory (NEO-PI-R) and NEO-five factor inventory (NEO-FFI) professional manual, 1992) was used to measure personality according to the five-factor model. Results showed players with superstitious beliefs to be significantly higher in neuroticism and lower in conscientiousness and than those with no superstitious beliefs. Results approaching significance showed players adopting an aggressive style to be higher in extraversion than passive players and superstitious players to be lower in extraversion than non-superstitious players. Analysis of play style according to age of player revealed a significantly higher mean age among loose compared to tight players. Implications of results concerning validity of these style classifications and potential development in future work are discussed.     

TO DETER OR TO MODERATE? ALLIANCE FORMATION IN CONTESTS WITH INCOMPLETE INFORMATION

We consider two players' choice about the formation of an alliance ahead of conflict in a framework with incomplete information about the strength of the potential ally. When deciding on alliance formation, players anticipate the self‐selection of other players and the informational value of own and other players' choices. In the absence of these signaling effects, strong players have an incentive to stand alone, which leads to a separating equilibrium. This separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices. Weak players may find it attractive to appear strong in order to deter competitors from positive effort choices. Strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort. Moreover, appearing weak allows players to free‐ride when alliances are formed. (JEL D72, D74)