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Full-Text Articles in Other Economics

Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss Jan 2019

Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss

ESI Working Papers

The theory of money assumes decentralized bilateral exchange and excludes centralized multilateral exchange. However, endogenizing the exchange process is critical for understanding the conditions that support the use of money. We develop a “travelling game” to study the emergence of decentralized and centralized exchange, theoretically and experimentally. Players located on separate islands can either trade locally, or pay a cost to trade elsewhere, so decentralized and centralized markets can both emerge in equilibrium. The former minimize trade costs through monetary exchange; the latter maximizes overall surplus through non-monetary exchange. Monetary trade emerges when coordination is problematic, while centralized trade emerges ...


One Step At A Time: Does Gradualism Build Coordination?, Maoliang Ye, Jie Zheng, Plamen Nikolov, Sam Asher Jan 2019

One Step At A Time: Does Gradualism Build Coordination?, Maoliang Ye, Jie Zheng, Plamen Nikolov, Sam Asher

Economics Faculty Scholarship

This study investigates a potential mechanism to promote coordination. With theoretical guidance using a belief-based learning model, we conduct a multi-period, binary-choice, and weakest-link laboratory coordination experiment to study the effect of gradualism – increasing the required levels (stakes) of contributions slowly over time rather than requiring a high level of contribution immediately – on group coordination performance. We randomly assign subjects to three treatments: starting and continuing at a high stake, starting at a low stake but jumping to a high stake after a few periods, and starting at a low stake while gradually increasing the stakes over time (the Gradualism ...


Coordination And Evolutionary Dynamics: When Are Evolutionary Models Reliable?, Daniel Graydon Stephenson Oct 2018

Coordination And Evolutionary Dynamics: When Are Evolutionary Models Reliable?, Daniel Graydon Stephenson

ESI Publications

This study reports a continuous-time experimental test of evolutionary models in coordinated attacker–defender games. It implements three experimental treatment conditions: one with strong coordination incentives, one with weak coordination incentives, and one with zero coordination incentives. Each treatment exhibits identical equilibrium predictions but distinct evolutionary predictions. Observed behavior was tightly clustered around equilibrium under both the zero coordination treatment and the weak coordination treatment but widely dispersed from equilibrium under the strong coordination treatment. This result was anticipated by explicitly dynamic models but not by conventional stability criteria. In contrast to the widely maintained assumption of sign-preservation, subjects frequently ...


Partners Or Strangers? Cooperation, Monetary Trade, And The Choice Of Scale Of Interaction, Maria Bigoni, Gabriele Camera, Marco Casari Aug 2018

Partners Or Strangers? Cooperation, Monetary Trade, And The Choice Of Scale Of Interaction, Maria Bigoni, Gabriele Camera, Marco Casari

ESI Working Papers

We show that monetary exchange facilitates the transition from small to large-scale economic interactions. In an experiment, subjects chose to play an “intertemporal cooperation game” either in partnerships or in groups of strangers where payoffs could be higher. Theoretically, a norm of mutual support is sufficient to maximize efficiency through large-scale cooperation. Empirically, absent a monetary system, participants were reluctant to interact on a large scale; and when they did, efficiency plummeted compared to partnerships because cooperation collapsed. This failure was reversed only when a stable monetary system endogenously emerged: the institution of money mitigated strategic uncertainty problems.


Clarity Trumps Content: An Experiment On Information Acquisition In Beauty Contests, Sanjay Banerjee, Hong Qu, Ran Zhao Mar 2018

Clarity Trumps Content: An Experiment On Information Acquisition In Beauty Contests, Sanjay Banerjee, Hong Qu, Ran Zhao

Accounting Faculty Articles and Research

We provide experimental evidence that under strong beauty contest incentives, players ignore signals from an information source with high content if the source has low clarity. Instead, they acquire equally costly signals from a source with higher clarity despite its lower content. Content measures how precisely an information source identifies an economic situation, whereas clarity measures how precisely the source content is commonly interpreted. Low clarity impairs players' ability to coordinate. When signals are provided exogenously, our experimental results are less severe than theoretical predictions, but consistent with level-2 reasoning in a cognitive behavioral model. When players acquire signals endogenously ...


Monitoring Institutions In Indefinitely Repeated Games, Gabriele Camera, Marco Casari Mar 2017

Monitoring Institutions In Indefinitely Repeated Games, Gabriele Camera, Marco Casari

ESI Working Papers

Does monitoring past conduct facilitate intertemporal cooperation? We designed an experiment characterized by strategic uncertainty and multiple equilibria where coordinating on the efficient outcome is a challenge. Participants, interacting anonymously in a group, could pay a cost either to obtain information about their counterparts, or to create a freely available public record of individual conduct. Both monitoring institutions were actively employed. However, groups were unable to attain higher levels of cooperation compared to a treatment without monitoring. Information about past conduct alone thus appears to be ineffective in overcoming coordination challenges.


Coordination When There Are Restricted And Unrestricted Options, Shaun P. Hargreaves Heap, David Rojo Arjona, Robert Sugden Feb 2017

Coordination When There Are Restricted And Unrestricted Options, Shaun P. Hargreaves Heap, David Rojo Arjona, Robert Sugden

Economics Faculty Articles and Research

One might expect that, in pure coordination games, coordination would become less frequent as the number of options increases. Contrary to this expectation, we report an experiment which found more frequent coordination when the option set was unrestricted than when it was restricted. To try to explain this result, we develop a method for eliciting the general rules that subjects use to identify salient options in restricted and unrestricted sets. We find that each such rule, if used by all subjects, would generate greater coordination in restricted sets. However, subjects tend to apply different rules to restricted and unrestricted sets.


Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss Aug 2016

Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss

ESI Working Papers

The theory of money assumes decentralized bilateral exchange and excludes centralized multilateral exchange. However, endogenizing the exchange process is critical for understanding the conditions that support the use of money. We develop a “travelling game” to study the spontaneous emergence of decentralized and centralized exchange, theoretically and experimentally. Players located on separate “islands” can either trade locally, or pay a cost to trade elsewhere, so decentralized and centralized markets can both emerge in equilibrium. The latter maximize trade meetings and are socially efficient; the former minimize trade costs through the use of money. In the laboratory, centralized exchange more frequently ...


Asymmetric And Endogenous Within-Group Communication In Competitive Coordination Games, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang Jan 2015

Asymmetric And Endogenous Within-Group Communication In Competitive Coordination Games, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang

ESI Working Papers

Within-group communication in competitive coordination games has been shown to increase competition between groups and lower efficiency. This study further explores potentially harmful effects of communication, by addressing the questions of (i) asymmetric communication and (ii) the endogenous emergence of communication. Our theoretical analysis provides testable hypotheses regarding the effect of communication on competitive behavior and efficiency. We test these predictions using a laboratory experiment. The experiment shows that although asymmetric communication is not as harmful as symmetric communication, it leads to more aggressive competition and lower efficiency relative to the case when neither group can communicate. Moreover, groups vote ...


An Experiment On Retail Payments Systems, Gabriele Camera, Marco Casari, Stefania Bortolotti Jan 2015

An Experiment On Retail Payments Systems, Gabriele Camera, Marco Casari, Stefania Bortolotti

ESI Working Papers

We develop a novel theoretical and experimental framework to study adoption and use of cash versus electronic payments in retail transactions. The design allows us to assess the behavioral impact of sellers’ service fees and buyers’ rewards from using electronic payments. In the experiment, buyers and sellers faced a coordination problem, independently choosing a payment method before trading. Sellers readily adopted electronic payments but buyers did not. Eliminating service fees or introducing rewards significantly increased adoption and use of electronic payments. Buyers’ economic incentives played a pivotal role in the diffusion of electronic payments but cannot fully explain their adoption ...


How Portable Is Level-0 Behavior? A Test Of Level-K Theory In Games With Non-Neutral Frames, Shaun Hargreaves Heap, David Rojo Arjona, Robert Sugden Jun 2014

How Portable Is Level-0 Behavior? A Test Of Level-K Theory In Games With Non-Neutral Frames, Shaun Hargreaves Heap, David Rojo Arjona, Robert Sugden

Economics Faculty Articles and Research

We test the portability of level‐0 assumptions in level‐k theory in an experimental investigation of behavior in Coordination, Discoordination, and Hide and Seek games with common, non‐neutral frames. Assuming that level‐0 behavior depends only on the frame, we derive hypotheses that are independent of prior assumptions about salience. Those hypotheses are not confirmed. Our findings contrast with previous research which has fitted parameterized level‐k models to Hide and Seek data. We show that, as a criterion of successful explanation, the existence of a plausible model that replicates the main patterns in these data has a ...


Responses To The Assurance Game In Monkeys, Apes, And Humans Using Equivalent Procedures, Sarah F. Brosnan, Audrey E. Parrish, Michael J. Beran, Timothy Flemming, Lisa Heimbauer, Catherine F. Talbot, Susan P. Lambeth, Steven J. Schapiro, Bart J. Wilson Jan 2011

Responses To The Assurance Game In Monkeys, Apes, And Humans Using Equivalent Procedures, Sarah F. Brosnan, Audrey E. Parrish, Michael J. Beran, Timothy Flemming, Lisa Heimbauer, Catherine F. Talbot, Susan P. Lambeth, Steven J. Schapiro, Bart J. Wilson

ESI Publications

There is great interest in the evolution of economic behavior. In typical studies, species are asked to play one of a series of economic games, derived from game theory, and their responses are compared. The advantage of this approach is the relative level of consistency and control that emerges from the games themselves; however, in the typical experiment, procedures and conditions differ widely, particularly between humans and other species. Thus, in the current study, we investigated how three primate species, capuchin monkeys, chimpanzees, and humans, played the Assurance (or Stag Hunt) game using procedures that were, to the best of ...