An Experimental Study of Uncertainty in Coordination Games

Date: 2015-09-23
By: Ioannou, Christos A.
Makris, Miltiadis
Global games and Poisson games have been proposed to address equilibrium indeterminacy in Coordination games. The former assume that agents face idiosyncratic uncertainty about economic fundamentals to capture disperse information, whereas the latter model the number of actual players as a Poisson random variable to capture population uncertainty in large games. Given that their predictions differ, it is imperative to understand which type of uncertainty drives empirical behavior in macroeconomic environments with strategic complementarities. Recent experimental literature finds mixed results on whether subjects’ behavior is similar in Global and Common Knowledge Coordination games, and hence on whether idiosyncratic uncertainty about economic fundamentals is an important determinant of subjects’ behavior. Poisson Coordination games have not been investigated experimentally. We fill this gap. Our findings suggest that uncertainty about the number of actual players may influence subjects’ behavior. Crucially, such behavior is consistent with the theoretical prediction of Poisson Coordination games.

A Fine Rule From a Brutish World? An Experiment on Endogenous Punishment Institution and Trust

==notes by yinung==

想法: 集體懲罰 (連坐法, 本文稱之為 collective punishment mechanism) versus 集體獎勵 對集體決策和個體決策之影響?

可以適用在小朋友身上? 或球隊成員身上 ==> 對幼童教育、企業組織、軍隊等不同主體之影響?

Q: 作者說, 連坐法顯著 increase trustworthiness, 且 to a lesser extent also trust; 不知 trustworthiness 和 trust 之間定義有何差異?

Date: 2015-09
By: H. Sun
M. Bigoni
By means of a laboratory experiment, we study the impact of the endogenous adoption of a collective punishment mechanism within a one-shot binary trust game. The experiment comprises three games. In the first one, the only equilibrium strategy is not to trust, and not to reciprocate. In the second we exogenously introduce a sanctioning rule that imposes on untrustworthy second-movers a penalty proportional to the number of those who reciprocate trust. This generates a second equilibrium where everybody trusts and reciprocates. In the third game, the collective punishment mechanism is adopted through majority-voting. In line with the theory, we find that the exogenous introduction of the punishment mechanism significantly increases trustworthiness, and to a lesser extent also trust. However, in the third game the majority of subjects vote against it: subjects seem to be unable to endogenously adopt an institution which, when exogenously imposed, proves to be efficiency enhancing.
JEL: C72 C92 D72

An Experimental Study of Voting with Costly Delay

Date: 2015-09
By: Kwiek, Maksymilian (University of Southampton)
Marreiros, Helia (University of Southampton)
Vlassopoulos, Michael (University of Southampton)
A conclave is a voting mechanism in which a committee selects an alternative by voting until a sufficient supermajority is reached. We study experimentally welfare properties of simple three-voter conclaves with privately known preferences over two outcomes and waiting costs. The resulting game is a form of multiplayer war of attrition. Our key finding is that, consistent with theoretical predictions, when voters are ex ante heterogeneous in terms of the intensity of their preferences the conclave leads to efficiency gains relative to simple majority voting. We also compare welfare properties of a static versus a dynamic version of a conclave. When social cost of waiting is taken into account, the dynamic conclave is superior in terms of welfare than its static version.
Keywords: voting, supermajority, intensity of preferences, war of attrition
JEL: C78 C92 D72 D74

Communication and coordination: Experimental evidence from farmer groups in Senegal:

Date: 2015
By: Aflahagah, Fo Kodjo Dzinyefa
Bernard, Tanguy
Viceisza, Angelino
Coordination failures are at the heart of development traps. Although communication can reduce such failures, to date experimental evidence has primarily been lab based. This paper studies the impact of communication in stag hunt coordination games played by members of Senegalese farmer groups—a setting where collective commercialization has suffered from coordination failure, as in many rural contexts. We find that communication increases coordination only in larger experimental groups, where it matters most from the standpoint of poverty traps. We also find that these effects are driven by communication’s impact on perceptions of strategic uncertainty. Some policy implications are discussed.
Keywords: coordination, communication, cooperatives, field experimentation, development, strategic uncertainty,

Saving Face and Group Identity

==notes by yinung==
很有趣的保留面子 (saving face) 的實驗?
Date: 2015
By: Tor Eriksson (Department of economics – University of Aarhus)
Lei Mao (GATE Lyon Saint-Étienne – Groupe d’analyse et de théorie économique – ENS Lyon – École normale supérieure – Lyon – UL2 – Université Lumière – Lyon 2 – UCBL – Université Claude Bernard Lyon 1 – Université Jean Monnet – Saint-Etienne – PRES Université de Lyon – CNRS, Central University of Finance and Economics)
Marie Claire Villeval (GATE Lyon Saint-Étienne – Groupe d’analyse et de théorie économique – ENS Lyon – École normale supérieure – Lyon – UL2 – Université Lumière – Lyon 2 – UCBL – Université Claude Bernard Lyon 1 – Université Jean Monnet – Saint-Etienne – PRES Université de Lyon – CNRS)
Are people willing to sacrifice resources to save one’s and others’ face? In a laboratory experiment, we study whether individuals forego resources to avoid the public exposure of the least performer in their group. We show that a majority of individuals are willing to pay to preserve not only their self-but also other group members’ image. This behavior is frequent even in the absence of group identity. When group identity is more salient, individuals help regardless of whether the least performer is an in-group or an out-group. This suggests that saving others’ face is a strong social norm.

Evolution of Fairness and Group Formation in Multi-Player Ultimatum Games

Date: 2015-08
By: NISHIMURA, Takeshi
OKADA, Akira
SHIRATA, Yasuhiro
Group formation is a fundamental activity in human society. Humans often exclude others from a group and divide the group benefit in a fair way only among group members. Such an allocation is called in-group fair. Does natural selection favor an in-group fair allocation? We investigate the evolution of fairness and group formation in a three-person Ultimatum Game (UG) in which the group value depends on its size. In a stochastic model of the frequency-dependent Moran process, natural selection favors the formation of a two-person subgroup in the low mutation limit if its group value exceeds a high proportion (0.7) of that of the largest group. Stochastic evolutionary game theory provides theoretical support to explain the behavior of human subjects in economic experiments of a three-person UG.

Network Form and Performance. The Case of Multi-Unit Franchising

==notes by yinung==
以前的實證文獻多指向 MUF 優於 SUF (single-unit franchising).
兩種 MUF 授權方式 (franchising): 區域 & 循序
Two types of multi-unit franchising are distinguished: area development franchising and sequential multi-unit franchising (Kaufmann and Dant, 1996; Grünhagen and Mittelstaedt, 2005)
  • Area development franchising is based on a contract that allows a franchisee to run several outlets at a certaintime in a specified geographical area. It is often associated with a territorial exclusivity right.
  • Sequential multi-unit franchising refers to a contract that transfers to the franchisee the right to open a new unit in addition to the existing one.
Date: 2015-03-09
By: Muriel Fadairo (GATE Lyon Saint-Étienne – Groupe d’analyse et de théorie économique – CNRS – UCBL – Université Claude Bernard Lyon 1 – UL2 – Université Lumière – Lyon 2 – Université Jean Monnet – Saint-Etienne – PRES Université de Lyon – ENS Lyon – École normale supérieure – Lyon)
Cintya Lanchimba (GATE Lyon Saint-Étienne – Groupe d’analyse et de théorie économique – CNRS – UCBL – Université Claude Bernard Lyon 1 – UL2 – Université Lumière – Lyon 2 – Université Jean Monnet – Saint-Etienne – PRES Université de Lyon – ENS Lyon – École normale supérieure – Lyon)
Josef Windsperger (University of Vienna [Vienna])
(定義) Multi-unit franchising (MUF) is a governance form inside franchising networks where the franchisor transfers to the franchisees the right to own and operate more than one outlet. While previous empirical literature has revealed various advantages of MUF as compared to single-unit franchising (SUF), we study the impact of this governance form on the network performance, taking into account different contexts. Our results from propensity score matching show that MUF leads to higher performance. However, non-parametric estimations highlight thresholds suggesting that a mix of SUF and MUF is a more efficient governance form than a pure MUF network.

Experimental evidence on the effects of innovation contests

Date: 2015
By: Brueggemann, Julia
Meub, Lukas
Economic research on innovation has long discussed which policy instruments best foster innovativeness in individuals and organizations. One of the instruments easily accessible to policy-makers is innovation contests; however, there is ambiguous empirical evidence concerning how such contests should be designed. Our experimental study provides evidence by analyzing the effects of two different innovation contests on subjects´ innovativeness: a prize for the aggregate innovativeness and a prize for the best innovation. We implement a creative real effort task simulating a sequential innovation process, whereby subjects determine royalty fees for their created products, which also serve as a measure of cooperation. We find that both contest conditions reduce the willingness to cooperate between subjects compared to a benchmark condition without an innovation contest. However, the total innovation activity is not influenced by introducing innovation contest schemes. From a policy perspective, the implementation of state-subsidized innovation contests in addition to the existing intellectual property rights system should be questioned.
Keywords: innovation prizes,competition,laboratory experiment,real effort task,creativity,innovation policy
JEL: C91 D89 O31

Natural Experiments in Macroeconomics

Date: 2015-05
By: Fuchs-Schündeln, Nicola
Hassan, Tarek
A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the use of natural experiments across these different applications and summarize what they have taught us about such diverse subjects as the validity of the Permanent Income Hypothesis, the size of the fiscal multiplier, and about the effects of institutions, social structure, and culture on economic growth. We also outline challenges for future work in each of these fields, give guidance for identifying useful natural experiments, and discuss the strengths and weaknesses of the approach.
Keywords: Civic Capital; Fiscal Multiplier; Institutions; Multiple Equilibria; Networks; Permanent Income Hypothesis; Social Structure; Social Ties; Trust
JEL: C1 C9 E21 E62 H31 O11 O14 O43 O50

Enhanced Gravity Model of trade: reconciling macroeconomic and network models

Date: 2015-06
By: Assaf Almog
Rhys Bird
Diego Garlaschelli
The bilateral trade relations between world countries form a complex network, the International Trade Network (ITN), which is involved in an increasing number of worldwide economic processes, including globalization, integration, industrial production, and the propagation of shocks and instabilities. Characterizing the ITN via a simple yet accurate model is an open problem. The classical Gravity Model of trade successfully reproduces the volume of trade between two connected countries using known macroeconomic properties such as GDP and geographic distance. However, it generates a network with an unrealistically homogeneous topology, thus failing to reproduce the highly heterogeneous structure of the real ITN. On the other hand, network models successfully reproduce the complex topology of the ITN, but provide no information about trade volumes. Therefore macroeconomic and network models of trade suffer from complementary limitations but are still largely incompatible. Here, we make an important step forward in reconciling the two approaches, via the introduction of what we denote as the Enhanced Gravity Model (EGM) of trade. The EGM combines the maximum-entropy nature of network models with the established econometric structure of the Gravity Model. Using a single, unified and principled mechanism that is transparent enough to be generalized to other economic networks, the EGM allows trade probabilities and trade volumes to be separately controlled via any combination of dyadic and country-specific macroeconomic variables. We show that the EGM successfully reproduces both the topology and the weights of the ITN, finally reconciling the conflicting approaches. Moreover, it provides a general and simple theoretical explanation for the failure of economic models that do not explicitly focus on network topology: namely, their lack of topological invariance under a change of units.