An Experiment on Partnership Protocols for Bilateral Trade with Incomplete Information

Date: 2013-01-18
By: Barry Sopher (Rutgers University)
Revan Sopher (Rutgers University)
We study experimentally “partnership protocols” of the sort proposed by Kalai and Kalai (2010), for bilateral trade games with incomplete information. We utilize the familiar game analyzed by Chatterjee and Samuelson (1983) and Myerson and Sattherwaite (1983), with a buyer and seller with value and cost independently distributed uniformly on (0,100). The usual rules of the game are for the buyer and seller to submit price bids and asks, and for trade to occur if and only if the buyer’s bid price exceeds the seller’s ask price, in which case trade occurs at the average of the bid and the ask price. We compare the efficiency of trade and the nature of bid functions in this standard game to those in other versions of the game, including games in which cheap talk is allowed prior to trade (either before or after the traders know their own information, but without knowing each others’ information), games with the formal mechanisms proposed by Kalai and Kalai available as an option for the traders to use, and games with both the mechanisms and cheap talk available. We consider both ex ante and interim mechanisms. That is, traders simultaneously choose whether to opt in to the mechanism either prior to knowing their own information, or after knowing their own information. In the last two versions of the game, cheap talk takes place prior to the opt-in decision. We find that the formal mechanisms significantly increase the efficiency of trade in both the ex ante and interim cases. Specifically, in the baseline game, traders captured 73% of the available surplus (compared to a theoretical maximum of 84% possible with optimal strategies). Efficiency rises to 87% and 82% for the ex ante and interim mechanisms, respectively, and further rises to 90% and 84% when cheap talk is also allowed with the mechanisms. When only cheap talk is allowed, traders capture 81% (for ex ante talk), but only 70% (for interim talk). On average, 55% of trading pairs opt in to mechanisms when they are available.
Keywords: Experiments, Bilateral Trade, Protocols

The Role of Emotions on Risk Aversion: A prospect theory experiment

Date: 2013-03
By: Campos-Vazquez, Raymundo M.
Cuilty, Emilio
This study measures risk and loss aversion using Prospect Theory and the impact of emotions on those parameters. Our controlled experiment at two universities in Mexico City, using uncompensated students as research subjects, found results similar to those obtained by Tanaka et al. (2010). In order to study the role of emotions, we provided subjects with randomly varied information on rising deaths due to drug violence in Mexico and also on youth unemployment. In agreement with previous studies, we find that risk aversion on the gains domain decreases with age and income. We also find that loss aversion decreases with income and is less for students in public universities. With regard to emotions, risk aversion increases with sadness and loss aversion is negatively influenced by anger. On the loss domain, anger dominates sadness. On average, anger reduces loss aversion by half.
Keywords: Risk Aversion; Emotions; Prospect Theory; Experiment; Mexico
JEL: C93

Loss Aversion, Stochastic Compensation, and Team Incentives

Date: 2013-07
By: Kohei Daido (School of Economics, Kwansei Gakuin University)
Takeshi Murooka (Department of Economics, University of California, Berkeley)
We investigate moral-hazard problems with limited liability where agents have expectation-based reference-dependent preferences. We show that stochastic compensation for low performance can be optimal. Because of loss aversion, the agents have first-order risk aversion to wage uncertainty. This causes the agents to work harder when their low performance is stochastically compensated. We also examine team incentives for credibly employing such stochastic compensation. In an optimal contract, low- and high-performance agents are equally rewarded if most agents achieve high performance. Team incentives can be optimal even when there are only two agents and the degree of loss aversion is not large.
Keywords: Moral Hazard, Loss Aversion, Stochastic Compensation, Team Incentives,Reference-Dependent Preferences
JEL: D03

Myopic Loss Aversion under Ambiguity and Gender Effects

Date: 2013-07
By: Iñigo Iturbe-Ormaetxe Kortajarene (Universidad de Alicante)
Giovanni Ponti (Universidad de Alicante)
Josefa Tomás (Universidad de Alicante)
Experimental evidence suggests that the frequency with which individuals get feedback information on their investments has an effect on risk-taking behavior. In particular, when they are given information sufficiently often, they take fewer risks compared with a situation in which they are informed less frequently. In this paper we find that this result still holds when subjects do not know the probabilities of the lotteries they are betting upon. We also detect significant gender effects, in that the frequency with which information is disclosed mostly affects men’s betting behavior, rather than women’s, and that men are much more risk-seeking after experiencing a loss.
Keywords: Myopic loss aversion, evaluation periods, ambiguity, gender effects
JEL: C91

Individual Learning and Cooperation in Noisy Repeated Games

Date: 2013-07-06
By: Yuichi Yamamoto (Department of Economics, University of Pennsylvania)
We investigate whether two players in a long-run relationship can maintain cooperation when the details of the underlying game are unknown. Specifically, we consider a new class of repeated games with private monitoring, where an unobservable state of the world influences the payoff functions and/or the monitoring structure. Each player privately learns the state over time but cannot observe what the opponent learned. We show that there are robust equilibria in which players eventually obtain payoffs as if the true state were common knowledge and players played a “belief-free” equilibrium. We also provide explicit equilibrium constructions in various economic examples
Keywords: repeated game, private monitoring, incomplete information, belief-free equilibrium, ex-post equilibrium, individual learning
JEL: C72


Experimental Business Research

此系列共有四冊, 是研討會論文的合輯, 有興趣在經濟以為的領域, 以行為實驗進行研究者, 這些合輯中的論文主題是很好的參考範例

定義 (source:

Experimental Business Research adopts laboratory based experimental economics methods to study an array of business and policy issues spanning the entire business domain including accounting, economics, finance, information systems, marketing and management and policy.

“Experimental economics" is an established term that refers to the use of controlled laboratory-based procedures to test the implications of economic hypotheses and models and discover replicable patterns of economic behavior. We have coined the term “Experimental Business Research" in order to broaden the scope of “experimental economics" to encompass experimental finance, experimental accounting, and more generally the use of laboratory-based procedures to test hypotheses and models arising from research in other business related areas, including information systems, marketing and management and policy.

Experimental Business Research: Volume II: Economic and Managerial Perspectives

Table of contents

Experimental Business Research: Volume III: Marketing, Accounting and Cognitive Perspectives

A Guided Tour to (Real-Life) Social Network Elicitation

Date: 2013
By: Pablo Branas-Garza (Middlesex University London)
Ramon Cobo-Reyes (Universidad de Granada)
Natalia Jimenez (Universidad de Granada)
Giovanni Pontiy (Universidad de Alicante and LUISS Guido Carli, Roma)
Limited attention has been devoted on how (real-life) social networks are elicited and mapped, even less from the viewpoint of mechanism design. This paper surveys the few mechanisms that have been proposed by the experimental literature to this purpose. These mechanisms differ in their incentive structure, as well as in the means of reward they employ. We compare these elicitation devices on the basis of the estimated differences in the characteristics of the induced networks, such as the number of (mutual) links, correspondence and accuracy. Our main conclusion is that the elicited network architecture is itself dependent on the nature (and the structure) of the incentives. This, in turn, should provide the social scientist with guidelines on the most appropriate device to use, depending on the research objectives.
Keywords: Social Networks, Experimental Economics
JEL: C93

Level-k reasoning and time pressure in the 11–20 money request game

Lindnera, Florian, and Matthias Sutter. “Level-k reasoning and time pressure in the 11–20 money request game." Economics Letters (2013). PDF (359 K) form Economics Letters ; working paper version: 提供的 [PDF];

==Notes by yinung==

什麼是 11–20 money request game

兩人一組player 1 and player 2, 每人選一個數字 x1, x2  ~ [11,20]。每人將得到 x_i, i=1, 2; 但如果 x_i < x_j 且 x_i +1 = x_j (即所選的數字比對手恰好少 1), 則 player i 將額外獲得 20 的 bonus.

The 11–20 money request game of AR (Arad and Rubinstein (2012a)) is a simultaneous move game in which two players request a number of points between 11 and 20, which they receive for sure. One player may receive 20 extra points if he/she requests one point less than the other player does.


一般人通常是 level-0 到 level-k 的思考.

重覆 game 並不會有 learning 的現象

時間有壓力 (只有 15 sec.  v.s. 3 min.), 結果更接近理論值 (思考快, 直覺上會有更深的 level thinking)

Selected experimental results

Treatment 的設計

BASE: 重覆 AR (2012, AER)
BASE-T: 和 TIME 一樣, 但是時間給 3 min ( v.s. 15 秒)
TIME: (有時間壓力) 遊戲開始才知道要選 [11,20]、bonus =20 和其條件。 決策時間只有 15 秒

R-BASE、R-BASE-T、R-TIME 是以上的 one-shot game, 重覆玩5回合 (每回合3 min, 除了 R-TIME 是 15秒)

Table 1. Relative frequencies of actions in different treatments.
Action 11 (%) 12 (%) 13 (%) 14 (%) 15 (%) 16 (%) 17 (%) 18 (%) 19 (%) 20 (%) N
Equilibrium 25 25 20 15 10 5
AR (2012) 4 0 3 6 1 6 32 30 12 6 108
BASE 1 3 4 6 3 6 20 38 14 6 80
BASE-T 4 1 1 8 6 5 15 34 19 8 80
TIME 3 3 11 5 20 5 18 17 11 8 65
Table 2. Actions in the repeated game.
Action 11 (%) 12 (%) 13 (%) 14 (%) 15 (%) 16 (%) 17 (%) 18 (%) 19 (%) 20 (%) N
Equilibrium 25 25 20 15 10 5
R-BASE 0 1 2 2 7 11 20 24 21 13 400
R-BASE-T 1 3 2 4 8 9 21 22 18 12 400
R-TIME 3 3 3 5 8 11 18 24 12 13 325


Arad and Rubinstein (2012a) have designed a novel game to study level-k

reasoning experimentally. Just like them, we find that the depth of reasoning is very limited and clearly different from that in equilibrium play. We show that such behavior is even robust to repetitions; hence there is, at best, little learning. However, under time pressure, behavior is, perhaps coincidentally, closer to that in equilibrium play. We argue that time pressure evokes intuitive reasoning and reduces the focal attraction of choosing higher (and per se more profitable) numbers in the game.

JEL classification

  • C91;
  • C72

References (from EL)

    • Greiner, 2004, Ben. Greiner, An online recruitment system for economic experiments, Kurt Kremer, Volker Macho (Eds.), Forschung und Wissenschaftliches Rechnen 2003, Gesellschaft für Wissenschaftliche Datenverarbeitung Göttingen, Göttingen (2004), pp. 79–93.View Record in Scopus| Cited By in Scopus (1)
    • Nagel, 1995, Rosemarie Nagel, Unraveling in guessing games: an experimental study, American Economic Review, 85 (5) (1995), pp. 1313–1326.
    • Roth and Ockenfels, 2002, Alvin E. Roth, Axel Ockenfels, Last-minute bidding and the rules for ending second-price auctions: evidence from eBay and Amazon auctions on the internet, American Economic Review, 92 (5) (2002), pp. 1138–1151.
    • Stahl and Wilson, 1995, Dale O. Stahl, Paul W. Wilson, On players’ models of other players: theory and experimental evidence, Games and Economic Behavior, 10 (1) (1995), pp. 213–254.

Behavioral game theory: Experiments in strategic interaction

Camerer, Colin. Behavioral game theory: Experiments in strategic interaction. Princeton University Press, 2003.

==notes by yinung==

Camerer  (Caltech ) 的書

===有關 beauty contest===

在這個遊戲中,每一個人要猜一個介於 0 – 100 的數字。
誰猜的數字,最接近所有數字之「平均數 x p 」者獲勝

在文獻中 p = 2/3, 或 0.7  。

理論 (p.210), 以 p=2/3 例 (p=0.7 下之點為 100, 70, 49, 34, 24, 17,12,8, 5.76 , 4.03

如果每一個人的選擇, 是均等分配於 0-100, 則平均數 = 50

因此 level-1 thinking 者應該選 50*2/3 = 33 (one-step of reasoning)

因此 level-2 thinking 者應該選 33*2/3 = 22 (two-step of reasoning)

因此 level-3 thinking 者應該選 22*2/3 = 14.8

… 以此類推

選的數字 (67, 100]  (表示預期其它所有人皆選 100) violate first-order iterated dominance

選 (45,67] 符合 a player obeying one step of dominance, but not two.

選 (29,44] 符合 a player obeying two step of dominance, but not three.

Slonim (2001) 有 new player 進來的實驗:

… It turns out that the experienced players use their experience wisely… they choose higher numbers when the new players arrive, and win almost all the time. But their edge disappears after one period.


最早的實驗 Nagel (1995, AER)

第一篇重覆實驗 Ho, Camerer and Weigelt (1998, AER)

很聰明地將 p<1, 再加上 p>1 的實驗進行比對, 難怪可以上 AER (當然不只如此)

文獻回顧類 Nagel (1999) (yinung: 在一本書中)

  • Ho, Teck-Hua, Colin Camerer, and Keith Weigelt. “Iterated dominance and iterated best response in experimental" p-beauty contests"." The American Economic Review 88.4 (1998): 947-969. 提供的 [PDF]

Balancing the Power to Appoint Officers

Date: 2013-05
By: Salvador Barberà
Danilo Coelho
Rules of k names are frequently used methods to appoint individuals to office. They are two-stage procedures where a first set of agents, the proposers, select k individuals from an initial set of candidates, and then another agent, the chooser, appoints one among those k in the list. In practice, the list of k names is often arrived at by letting each of the proposers screen the proposed candidates by voting for v of them and then choose those k with the highest support. We then speak of v-rules of k names. Our main purpose in this paper is to study how different choices of the parameters v and k affect the balance of power between the proposers and the choosers. From a positive point of view, we analyze a strategic game where the proposers interact to determine what list of candidates to submit. From a normative point of view, we study the performance of different rules in expected terms, under different informational assumptions. The choice of v and k is then analyzed from the perspectives of efficiency, fairness and compromise.
Keywords: voting rules, constitutional design, Strong Nash equilibrium, rule of k names
JEL: D02