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Invariance of equilibrium to the strategy method II: experimental evidence

Published online by Cambridge University Press:  17 January 2025

Daniel L. Chen Open the ORCID record for Daniel L. Chen [Opens in a new window]  and
Martin Schonger
Daniel L. Chen*
Affiliation:
Toulouse School of Economics, Institute for Advanced Study in Toulouse, University of Toulouse Capitole, Toulouse, France
Martin Schonger
Affiliation:
Center for Law and Economics, ETH Zurich, Zurich, Switzerland
*
e-mail: [email protected]
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Abstract

The strategy method (SM) is, in practice, subject to a possibly severe economic-theoretical bias. Although many studies utilize SM to examine responses to rare or off-equilibrium behaviors unattainable through direct elicitation (DE), they ignore the fact that the strategic equivalence between SM and DE holds for the monetary payoff game but not the game participants actually play, which is in terms of utilities. We report three results. First, failing to account for estimation bias when decisions at one information set can influence utility at another may result in significant differences in decision-making. Second, the magnitude of this bias can be substantial, comparable to other measured treatment effects. Third, minor interventions targeting salience can amplify these differences similarly, causing treatment effects to differ significantly between SM and DE, even reversing in direction. These findings emphasize the need for reconsideration of the SM’s reliability for economic research.

Keywords

Theory of experimentsStrategy methodSocial preferencesIntentionsDeontological motivations

JEL classification

D64: Altruism • Philanthropy • Intergenerational Transfers A13: Relation of Economics to Social Values C90: General
Type
Original Paper
Information
Journal of the Economic Science Association , Volume 10 , Issue 1 , June 2024 , pp. 31 - 43
Copyright
Copyright © The Author(s), under exclusive licence to Economic Science Association 2023.

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