We investigate the effects of order-of-play (simultaneous, unobserved sequential and fully observed sequential play) and form of presentation (extensive vs. normal) in three simple two person games: battle-of-the-sexes with and without outside option and a three strategy game which differentiates between virtual observability (VO) and iterated elimination of dominated strategies as principles of equilibrium selection. VO predicts that knowledge of the order of play alone will affect the distribution of strategies chosen. We contrast this with the predictions of iterated elimination of dominated strategies. We report results from 1800 one-shot games conducted in 6 sessions with 120 subjects and analysed as panel data. The form of presentation strongly affects the distribution of outcomes and strategies. Information about order of play shifts the distribution of strategies away from the distribution in simultaneous play and towards the distribution in fully observed play, especially in the less complicated games presented in normal order. Order-of-play effects are less evident as complexity of the game increases. Extensive form presentation appears to induce sequential thinking even in simultaneously played games.

In this paper, we study the behavior of individuals when facing two different, but incentive-wise identical, institutions. We pair the first price auction with an equivalent lottery. Once a subject is assigned a value for the auctioned object, the first price auction can be modeled as a lottery in which the individual faces a given probability of winning a certain payoff. This set up allows us to explore to what extent the misperception of the probability of winning in the auction is responsible for bidders in a first price auction to bidding above the risk neutral Nash equilibrium prediction. The first result we obtain is that individuals, even though facing the same choice over probability/payoff pairs, behave differently depending on the type of choice they are called to make. When facing an auction, subjects with high values tend to bid significantly above the bid they choose in the corresponding lottery environment. We further find that in both the lottery and the auction environments, subjects tend to bid in excess of the bid predicted by the risk neutral model, at least for intermediate range values. Finally, we find that the difference between the lottery behavior and the auction behavior is substantially, but not totally, eliminated by showing the subjects the probability of winning the auction.

The analysis in this paper searches for individual and group determinants of learning behavior in Monty Hall's Three Door problem examined in Friedman (1998, American Economic Review. 88, 933-946). The results show that the size of monetary incentives, individuals’ initial abilities, and social interactions with others are all important determinants of initial choices and subsequent learning in this problem: (i) More able students have a greater initial propensity to make the right choice than less able students, and their learning curves are initially steeper; (ii) Individual learning can also be enhanced through social interactions; (iii) Interestingly, less able students benefit more than more able students from social interactions in the sample. These findings support the argument that learning models that take into account individuals’ abilities and that allow for social interactions where agents can exchange information hold a great deal of promise for enhancing our understanding of actual learning environments, learning processes, and the formation of rationality.

We report on experimental duopoly markets with heterogeneous goods. In these markets, sellers first choose capacities and then prices. While capacities remain fixed for either five or ten periods, prices have to be chosen in every period. The experiments starts with two sets of exogenously predetermined capacities. Independently of the distribution of capacities is, a unique pure-strategy in prices is subgame perfect. In equilibrium, capacities should correspond to the Cournot prediction. Given capacities, price-setting behavior is in general consistent with the theory. Average capacities converge above the Cournot level. Capacities converge at the industry level but are somewhat dispersed. Sellers rarely manage to cooperate.

Demands in the Ultimatum Game in its traditional form with one proposer and one responder are compared with demands in an Ultimatum Game with responder competition. In this modified form one proposer faces three responders who can accept or reject the split of the pie. Initial demands in both ultimatum games are quite similar, however in the course of the experiment, demands in the ultimatum game with responder competition are significantly higher than in the traditional case with repeated random matching. Individual round-to-round changes of choices that are consistent with directional learning are the driving forces behind the differences between the two learning curves and cannot be tracked by an adjustment process in response to accumulated reinforcements. The importance of combining reinforcement and directional learning is addressed. Moreover, learning transfer between the two ultimatum games is analyzed.

This paper reports the results of an experiment on how team heterogeneity in terms of productivity influences both the revenue sharing proposed by the principal to the team and the employees’ performance. Experimental evidence shows that when the team is heterogeneous, the principal does not try to motivate the agents through her sharing offer. Regardless of the level of team-based compensation, a large amount of free riding occurs since each agent is mainly influenced by his teammate's behavior. In contrast, when the team is homogeneous, agents are better able to cooperate, reciprocating the principal's offer.

The nonparametric Wilcoxon-Mann-Whitney test is commonly used by experimental economists for detecting differences in central tendency between two samples. This test is only theoretically appropriate under certain assumptions concerning the population distributions from which the samples are drawn, and is often used in cases where it is unclear whether these assumptions hold, and even when they clearly do not hold. Fligner and Pollicello's (1981, Journal of the American Statistical Association. 76, 162-168) robustrank-ordertestis a modification of the Wilcoxon-Mann-Whitney test, designed to be appropriate in more situations than Wilcoxon-Mann-Whitney. This paper uses simulations to compare the performance of the two tests under a variety of distributional assumptions. The results are mixed. The robust rank-order test tends to yield too many false positive results for mediumsized samples, but this liberalness is relatively invariant across distributional assumptions, and seems to be due to a deficiency of the normal approximation to its test statistic's distribution, rather than the test itself. The performance of the Wilcoxon-Mann-Whitney test varies hugely, depending on the distributional assumptions; in some cases, it is conservative, in others, extremely liberal. The tests have roughly similar power. Overall, the robust rank-order test performs better than Wilcoxon-Mann-Whitney, though when critical values for the robust rank-order test are not available, so that the normal approximation must be used, their relative performance depends on the underlying distributions, the sample sizes, and the level of significance used.

Herding describes the phenomenon in decision-making where an economic agent disregards his own private information to follow the actions of his predecessors as in Banerjee (1992). With later decision-makers simply copying earlier decisions their private information cannot be inferred by other decision-makers and will be forever lost. There is some experimental evidence on simple sequential herding of this type in the literature, notably Anderson and Holt (1997). This paper differs by allowing subjects to delay their decision-making in order to benefit from observing others’ actions as in more recent herding models such as Chamley and Gale (1994). The results in this paper suggest that subjects will indeed delay when their private information is not sufficiently strong. Despite this ability to wait, as predicted in the theoretical literature, cascades remained ubiquitous and more worrying still, reverse-cascades occurred in which incorrect decisions made by early decision-makers produced informational cascades on the wrong action. In an alternative design, informing subjects that they had made incorrect choices only made matters worse as subjects moved further away from rational behavior.

We present experimental results on a repeated coordination game with Pareto-ranked equilibria in which a payoff from choosing an action is positive only if a critical mass of players choose that action. We design a baseline version of the game in which payoffs remain constant for values above the critical mass, and an increasing returns version in which payoffs keep increasing for values above the critical mass. We test the predictive power of security and payoff-dominance under different information treatments. Our results show that convergence to the payoff- dominant equilibrium is the modal limit outcome when players have full information about others’ previous round choices, while this outcome never occurs in the remaining treatments. The paths of play in some groups reveal a tacit dynamic coordination by which groups converge to the efficient equilibrium in a step-like manner. Moreover, the frequency and speed of convergence to the payoff-dominant equilibrium are higher, ceteris paribus, when increasing returns are present. Finally, successful coordination seems to crucially depend on players’ willingness to signal to others the choice of the action supporting the efficient equilibrium.

Learning models predict that the relative speed at which players in a game adjust their behavior has a critical influence on long term behavior. In an ultimatum game, the prediction is that proposers learn not to make small offers faster than responders learn not to reject them. We experimentally test whether relative speed of learning has the predicted effect, by manipulating the amount of experience accumulated by proposers and responders. The experiment allows the predicted learning by responders to be observed, for the first time.

Objective: To use meta-analysis techniques to assess the impact of various factors on the extent of cooperation in standard linear public goods experiments using the voluntary contributions mechanism.

Data Sources: Potentially relevant experiments were identified through searches of EconLit, the Internet Documents in Economics Access Service (IDEAS), and a survey article.

Review Methods: A total of 349 potentially relevant studies were identified. Of these, 27 (representing a total of 711 groups of participants) met the inclusion criteria. Data were abstracted from these studies using a standardized protocol. Results were analyzed using weighted ordinary least squares. Average group efficiency was the dependent variable.

Results: The marginal per capita return, communication, constant group composition over the session (“partners”), positive framing, and the use of children as subjects had a positive and significant effect (p < 0.05) on the average level of contribution to the public good. Heterogeneous endowments to subjects, experienced participants, and soliciting subjects’ beliefs regarding other participants’ behaviour prior to the start of the session/period had a negative and significant effect. A number of other factors were not identified as significant.

Conclusion: The meta-analysis results parallel several key findings from previous literature reviews. In addition, they offer parameter estimates and an analysis of significance based on the totality of the available research evidence. More consistent reporting of the results of experiments would greatly improve the ability to conduct this type of research.

In this paper, the strategy method's impact on behavior in sequential bargaining games is investigated. Besides the decision procedure (hot versus cold), we varied the second mover punishment costs (high versus low). Significant impacts of both treatment variables were observed. For example, second movers punished significantly more often in the hot version of the low cost game. Furthermore, first mover behavior was significantly different in the hot and cold versions of both games. In the hot games, first mover behavior suggests an expectation of decreased rewards and/or punishments from second movers. We observed, however, no decrease in reward and an increase in punishment. The hot cold variable only informs first movers that the decision procedure used by second movers has changed. Therefore, first mover behavior must be shaped by their perceived assessment concerning how second movers make decisions. We argue that first mover behavior can be explained by the interaction of two well-known psychological effects: the consensus and positive self-image effects.

We describe a common pool resource game in which players choose how much of the stock to extract in a sequential manner. There are two choices and one represents taking a larger proportion of the stock than the other. After a player makes a choice, the remaining stock grows at a constant rate. We consider a game with a finite number of alternating moves. It is shown that changes in the larger proportion of the stock that the players are allowed to take and the growth rate affect equilibrium, but have little effect on behavior in the laboratory. In addition to observing more cooperation than predicted, we observe that parameters that are strategically irrelevant affect behavior. The results of this research might help policy makers in developing adequate policies to prevent overexploitation of some natural renewable resources.

This paper reports an experiment designed to assess the effects of a rotation in the marginal cost curve on convergence in a repeated Cournot triopoly. Increasing the cost curve's slope both reduces the serially-undominated set to the Nash prediction, and increases the peakedness of earnings. We observe higher rates of Nash equilibrium play in the design with the steeper marginal cost schedule, but only when participants are also rematched after each decision. Examination of response patterns suggests that the treatment with a steeper marginal cost curve and with a re-matching of participants across periods induces the selection of Nash Consistent responses.

We describe Bayes factor, an explicit measure of the strength of the evidence, the extent to which the data increase or decrease the odds a given hypothesis or model is true. Issues and techniques for deriving a Bayes factor are outlined. We illustrate the technique with data from an ultimatum game experiment that looked for an experimenter observation effect. We show that the evidence increases the odds of an effect, but not by enough to convince someone with a skeptical prior.

The intergroup prisoner's dilemma game was suggested by Bornstein (1992, Journal of Personality and Social Psychology. 7, 597-606) for modelling intergroup conflicts over continuous public goods. We analyse data of an experiment in which the game was played for 150 rounds, under three matching conditions. The objective is to study differences in the investment patterns of players in the different groups. A repeated measures analysis was conducted by Goren and Bornstein (1999, Games and Human Behaviour: Essays in Honor of Amnon Rapoport, pp. 299-314), involving data aggregation and strong distributional assumptions. Here we introduce a nonparametric approach based on permutation tests. Two new measures, the cumulative investment and the normalised cumulative investment, provide additional insight into the differences between groups. The proposed tests are based on the area under the investment curves. They identify an overall difference between the groups as well as pairwise differences. A simultaneous confidence band for the mean difference curve is used to detect the games which account for any pairwise difference.