Can a single theory explain coordination? An experiment on alternative modes of reasoning and the conditions under which they are used

Date: 2016-01-18
By: Marco Faillo (University of Trento)
Alessandra Smerilli (PFSE-Auxilium)
Robert Sugden (University of East Anglia)
We investigate experimentally the conditions under which bounded best response and collective optimality reasoning are used in coordination games. Using level-k and team reasoning theories as exemplars, we study games with three pure-strategy equilibria, two of which are mutually isomorphic. The third is always team-optimal, but whether it is predicted by level-k theory differs across games. We find that collective optimality reasoning is facilitated if the collectively optimal equilibrium gives more equal payoffs than the others, and is inhibited if that equlibrium is Pareto-dominated by the others, considered separately. We suggest that coordination cannot be explained by a single theory.
Keywords: team reasoning, level-k theory, coordination games
JEL: C7 C9

The impact of group identity on coalition formation

Date: 2015-09-03
By: Denise Laroze (University of Essex)
David Hugh-Jones (University of East Anglia)
Arndt Leininger (Hertie School of Governance)
Bargaining and coalition building is a central part of modern politics. Typically, game-theoretic models cannot predict a unique equilibrium. One possibility is that coalitions are formed on the basis of social identity loyalty to a gender, ethnic or political in-group. We test the effect of gender, race and ideological distance on coalition formation in a majority-rule bargaining experiment. Despite the absence of any incentives to do so, we find that ideological distance significantly affects offers made to potential coalition partners. As a result, coalitions tend to be ideologically coherent, even though there is no ideological policy output. We conclude that social identity considerations can determine equilibria in coalition formation.
Keywords: coalition formation, laboratory experiments, Baron and Ferejon model, legislative bargaining, social identity

Emergence of networks and market institutions in a large virtual economy

Date: 2015
By: Kephart, Curtis
Friedman, Daniel
Baumer, Matt
A complete set of transactions, more than 40 million within a 1.8 year span, allows us to track the evolution of the trader network and the goods network in an on-line trading community. The computer platform was designed to make barter exchange as attractive as possible; money was not part of the design and all players were created equal. Yet, within weeks, several specific goods began to emerge as media of exchange, and not long after that various sorts of specialized traders began to appear. We track their progress using network-theoretic metrics such as node strength, assortativity, betweenness and closeness. By the end of our sample, virtually all trade was money-mediated and market makers played a major role.
Keywords: Multiple Money as Medium of Exchange,Market Makers,Virtual Economy,Market Efficiency,Network Analysis
JEL: B41 C45 D49 E42

Privacy, trust and social network formation

Date: 2015
By: Gaudeul, Alexia
Giannetti, Caterina
We study in the laboratory the impact of private information revelation on the selection of partners when forming individual networks. Our experiment combines a “network game" and a “public-good game". In the network game, individuals decide with whom to form a link with, while in the public-good game they decide whether or not to contribute. The variations in our treatments allow us to identify the effect of revealing one´s name on the probability of link formation. Our main result suggests that privacy mechanisms affect partner selection and the consequent structure of the network: when individuals reveal their real name, their individual networks are smaller but their profits are higher. This indicates that the privacy costs of revealing personal information are compensated by more productive links.
Keywords: privacy,social networks,public goods,trust
JEL: D12 D85

An experimental study of sorting in group contests

Date: 2015-12
By: Philip Brookins (Department of Economics, Florida State University)
John P. Lightle (Department of Economics, Virginia Commonwealth University)
Dmitry Ryvkin (Department of Economics, Florida State University)
We experimentally explore the effects of sorting and communication in lottery contests between groups of heterogeneous players whose within-group efforts are perfect complements. Subjects are assigned a type — A, B, C or D — that determines their cost of effort, with A having the lowest cost and D the highest cost, and are then assigned to one of the two two-player groups competing in the contest. Theory predicts that aggregate contest output increases in the variation in abilities between groups, i.e., the output is maximized by the most unbalanced sorting of players into groups — (A,B) vs. (C,D) — and minimized by the most balanced sorting — (A,D) vs. (B,C). That is, the equilibrium prediction goes against the “competitive balance" heuristic. In the absence of communication, this prediction is directionally confirmed, although the effect is not statistically significant. In the presence of within-group communication, however, we find that total output is 33% higher under the balanced sorting as compared to the unbalanced sorting — a reversal of the prediction, but in line with the heuristic. This result is driven by an increase in output by (B,C) groups under the balanced sorting and a strong decrease in output by the underdog (C,D) groups under the unbalanced sorting, relative to no communication. These results are at odds with previous studies that find that within-group communication always increases output, and suggest that the effect of communication depends strongly on the configuration of heterogeneity between and within groups. Competitive balance is confirmed as a robust sorting heuristic for sustaining competition and high effort provision in group contests.
Keywords: group contest, sorting, complementarity, heterogeneous players, experiment
JEL: C72 C91 D72 M54

Expert Information and Majority Decisions

==notes by yinung==
又出現有關 group decision 的研究:
* 專家意見的影響 (在人數多的委員會不佳)
Date: 2015-09-23
By: Kohei Kawamura
Vasileios Vlaseros
This paper shows theoretically and experimentally that hearing expert opinions can be a double-edged sword for collective decision making. We present a majoritarian voting game of common interest where committee members receive not only private information, but also expert information that is more accurate than private information and observed by all members. In theory, there are Bayesian Nash equilibria where the committee members’ voting strategy incorporates both types of information and access to expert information enhances the efficiency of the majority decision. However, there is also a class of potentially inefficient equilibria where a supermajority always follow expert information and the majority decision does not aggregate private information. In the laboratory, the majority decisions and the subjects’ voting behaviour were largely consistent with those in the class of inefficient equilibria. We found a large efficiency loss due to the presence of expert information especially when the committee size was large. We suggest that it may be desirable for expert information to be revealed only to a subset of committee members.
Keywords: committee decision making, voting experiment, expert information, strategic voting
JEL: C92 D72 D82

Private Contracts in Two-Sided Markets

Date: 2015-09
By: Gaston Llanes (Escuela de Administracion, Pontificia Universidad Catolica de Chile)
Francisco Ruiz-Aliseda (Escuela de Administracion, Pontificia Universidad Catolica de Chile)
We study a two-sided market in which a platform connects consumers and sellers, and signs private contracts with sellers. We compare this situation with a two-sided market with public contracts. We find that the platform provider sets positive (negative) royalties to sellers and earns a negative (positive) markup on consumers when contracts are private (public). Thus, private contracting has a significant effect on the price structure. Private contracting leads to lower platform profits, consumer surplus, and social welfare. We study the welfare effects of most-favored-nation clauses, price-forcing contracts, and integration with sellers; and relate our results with the agency model of sales. Our results indicate that enhancing the market power of a dominant platform over sellers may increase welfare because it acts as a commitment device for inducing lower seller prices, mitigating the hold-up problem borne by consumers when they cannot observe sellers’ contracts.
Keywords: Two-Sided Markets; Platforms; Vertical Relations; Most-Favored Nation; Price-Forcing Contracts; Resale Price Maintenance; Integration; Agency Model of Sales
JEL: L12 L14 L42

Risk taking and information aggregation in groups

==notes by yinung==
reverse confirmation bias:
* 決策者對於來自於其他人的且和自己所獲看法相同之私有訊息, 所放的權重較少; 反之, 對和自己所獲看法「衝突」之私有訊息, 所放的權重較多。
they place less weight on information from others that agrees with their private signal and more weight on conflicting information.
* 在 group 分享訊息但不溝通的決策情境中, 此現象會減少…
Date: 2015
By: Spiro Bougheas
Jeroen Nieboer
Martin Sefton
We report a controlled laboratory experiment examining risk-taking and information aggregation in groups facing a common risk. The experiment allows us to examine how subjects respond to new information, in the form of both privately observed signals and signals reported from others. We find that a considerable number of subjects exhibit ‘reverse confirmation bias’: they place less weight on information from others that agrees with their private signal and more weight on conflicting information. We also find a striking degree of consensus when subjects make decisions on behalf of the group under a random dictatorship procedure. Reverse confirmation bias and the incidence of consensus are considerably reduced when group members can share signals but not communicate.
Keywords: Group behaviour; teams; decision making; risk; experiment
JEL: C91 C92 D71 D80

Econometrics of network models

Date: 2015-09
By: Áureo de Paula (Institute for Fiscal Studies and University College London)
In this article I provide a (selective) review of the recent econometric literature on networks. I start with a discussion of developments in the econometrics of group interactions. I subsequently provide a description of statistical and econometric models for network formation and approaches for the joint determination of networks and interactions mediated through those networks. Finally, I give a very brief discussion of measurement issues in both outcomes and networks. My focus is on identification and computational issues, but estimation aspects are also discussed.

Public Goods in Endogenous Networks

Date: 2015-10-21
By: Markus Kinateder (​University of Navarra)
Luca Paolo Merlino (Universit e libre de Bruxelles)
In this paper we study a local public good game in an endogenous network with heterogeneous agents. We consider two specifications, in which different networks arise. When agents differ in the cost of acquiring the public good, active agents form hierarchical complete multipartite graphs; yet, better types need not have more neighbors. When agents have heterogeneous benefits from the public good, nested split graphs in which investment need not be monotonic in type emerge. In large societies, few agents are active and the network dampens inequality.
Keywords: public goods,
JEL: C72 D00 D85 H41