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Ex ante asymmetry or unfairness between competitors may generate an additional motive for them to work harder in competition. We identify motives such as shame and fame and theoretically and experimentally investigate how asymmetry in... more
Ex ante asymmetry or unfairness between competitors may generate an additional motive for them to work harder in competition. We identify motives such as shame and fame and theoretically and experimentally investigate how asymmetry in competition induces shame and fame, which, in turn, affect individual players’ equilibrium effort levels. Using the simple framework of two-player asymmetric contests, we show that when players are relatively more (less) sensitive to shame than to fame, a player who is favored exerts more (less) effort in the asymmetric contest than when she is not favored in the symmetric contest and that a player who is handicapped exerts less (more) effort in the asymmetric contest than when she is not handicapped in the symmetric contest. The data obtained from laboratory real-efforts game experiments that are designed to induce a reasonably high shame sensitivity are consistent with the theoretical predictions; participants in the role of Goliath in the asymmetric...
We first discuss two caveats to the identification of higher-order rationality presented in Kneeland [9, Econometrica, 83, (2015), 2065‐2079]. We then propose an alternative identification approach, which not only does not require an... more
We first discuss two caveats to the identification of higher-order rationality presented in Kneeland [9, Econometrica, 83, (2015), 2065‐2079]. We then propose an alternative identification approach, which not only does not require an assumption but also delivers the same identification outcome as in Kneeland [9]. Finally, our identification approach can be implemented using the chain game, which is considerably simpler than Kneeland’s ring game [9].
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We experimentally investigate information transmission in which two biased senders communicate with a receiver on state of the world that consists of two components. The theoretical literature of cheap-talk communication begins with... more
We experimentally investigate information transmission in which two biased senders communicate with a receiver on state of the world that consists of two components. The theoretical literature of cheap-talk communication begins with environments in which a single sender transmits information to a receiver over a unidimensional state space (Crawford and Sobel, 1982). The analytical picture there is clear: among other things, no full revelation of information can be achieved unless the sender and the receiver share a common interest. The picture changes drastically when a higher dimensional state space and/or additional sender are introduced. The departure from the single-sender-single-dimension regime not only admits the possibility of full information revelation, but it also brings into the research agenda the searches for robust equilibria, which traditionally are not a concern of cheap-talk models. A small but growing literature has singled out various robustness criteria under wh...
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Despite their predictable and regular incomes, Filipino domestic workers in Hong Kong, China commonly finance large expenses through interest-bearing loans rather than savings. Our analysis of survey data and records of a credit... more
Despite their predictable and regular incomes, Filipino domestic workers in Hong Kong, China commonly finance large expenses through interest-bearing loans rather than savings. Our analysis of survey data and records of a credit cooperative for migrant workers suggests that this cannot be explained by their inability to save, financial illiteracy, short time horizon, or limited liability. Instead, we speculate that the strict schedules and high interest rates of these loans create a disciplining effect that these individuals find desirable. This may help them avoid unnecessary consumption or demands from their social network. However, interventions should also consider that these workers often receive nonmonetary reciprocal benefits from members of their social network.
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We design experimental games that admit Battaglini’s (2002) construction of fully revealing equilibrium in multidimensional cheap talk. Two senders transmit information to a receiver over a 2 ˆ 2 state space. Despite overall misaligned... more
We design experimental games that admit Battaglini’s (2002) construction of fully revealing equilibrium in multidimensional cheap talk. Two senders transmit information to a receiver over a 2 ˆ 2 state space. Despite overall misaligned interests, in equilibrium senders truthfully revealing on distinct dimensions provides each other with incentives to do so. Subjects behaved as prescribed by equilibrium when the ideal actions of each sender and the receiver, though misaligned, shared common dimensional components. Lower adherence was observed when such dimensional alignments of interests were removed for some states. Even in this case, restricting senders ’ access to messages, under which out-of-equilibrium messages never arise, substantially brought behavior back in line with equilibrium. When out-of-equilibrium messages could not be eliminated and the equilibrium required implausible supporting beliefs, however, restricting message spaces lost its effects. Our findings highlight th...
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Experimental data. Each excel file is for each experimental session.
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Abstract We consider an environment in which bidders decide whether to jump bids in a simple two-bidder ascending auction with independent private values. We compare two types of equilibria, one that involves jump bidding and another that... more
Abstract We consider an environment in which bidders decide whether to jump bids in a simple two-bidder ascending auction with independent private values. We compare two types of equilibria, one that involves jump bidding and another that does not. We show that the revenue in the jump bidding equilibrium dominates that in the no-jump equilibrium when bidders are risk averse. Isolating the revenue impact of jump bidding from that of overbidding, our experimental design allows us to demonstrate that sellers’ revenue increases due to jump bidding but only insignificantly so.
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This paper investigates theoretically and experimentally the social benefits and cost to have an endogenous punishment-enforcing authority in public goods game. An authority is chosen among members of a society via an imperfectly... more
This paper investigates theoretically and experimentally the social benefits and cost to have an endogenous punishment-enforcing authority in public goods game. An authority is chosen among members of a society via an imperfectly discriminating contest prior to a public goods game. Once chosen the authority has a large degree of discretion to inflict punishment. Our theoretical result shows that an efficiency gain from having the endogenous authority always comes with a social cost from competing for being the authority. The larger the society is, however, the bigger the efficiency gain and the smaller the rent dissipation. The completely efficient outcome can be approximated as the size of society tends to infinity. The experimental results confirm that the presence of endogenous authority for a given group size increases the public goods contributions and the efficiency gain is significantly bigger in a larger group.
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We experimentally investigate the informational theory of legislative committees (Gilligan and Krehbiel 1989). Two committee members provide policy-relevant information to a legislature under alternative legislative rules. Under the open... more
We experimentally investigate the informational theory of legislative committees (Gilligan and Krehbiel 1989). Two committee members provide policy-relevant information to a legislature under alternative legislative rules. Under the open rule, the legislature is free to make any decision; under the closed rule, the legislature chooses between a member’s proposal and a status quo. We find that even in the presence of biases, the committee members improve the legislature’s decision by providing useful information. We obtain evidence for two additional predictions: the outlier principle, according to which more extreme biases reduce the extent of information transmission; and the distributional principle, according to which the open rule is more distributionally efficient than the closed rule. When biases are less extreme, we find that the distributional principle dominates the restrictive-rule principle, according to which the closed rule is more informationally efficient. Overall, ou...
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This paper reports findings from an experimental study of voluntary participation games, as considered by Dixit and Olson (2000). The voluntary participation game consists of two stages: a non-cooperative participation decision followed... more
This paper reports findings from an experimental study of voluntary participation games, as considered by Dixit and Olson (2000). The voluntary participation game consists of two stages: a non-cooperative participation decision followed by Coasian bargaining on public goods provision only among those who choose to participate. Our experimental findings show that, consistent with the theoretical findings of Dixit and Olson, the outcome of this game falls short of full efficiency. However, we find that voluntary participation undermines the Coase Theorem to a lesser extent than predicted by Dixit and Olson, particularly with larger numbers of players. We also investigate the effect of pre-play communication on the public goods provision and find little evidence that cheap talk helps subjects coordinate on the efficient outcome of coalition formation in the laboratory.
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This paper experimentally explores how compositional grammars in artificial codes emerge and are sustained. In a pure coordination game with no conflict of interest, the sender sends a message that is an arbitrary string from available... more
This paper experimentally explores how compositional grammars in artificial codes emerge and are sustained. In a pure coordination game with no conflict of interest, the sender sends a message that is an arbitrary string from available symbols with no prior meaning to indicate an abstract geometrical figure to the receiver. We find strong evidence from the laboratory for the emergence of compositional grammars in the subjects' common codes that facilitate learning efficiency. Moreover, when there is a scarcity of symbols in the repertoire, some groups in our experiments developed languages with positional compositionality, meaning the same symbol has different interpretations depending on its position in a string, whereas other groups developed language structures that are not compositional but still efficient in communication.
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Page 1. Quantal response equilibrium in contest games: Theoretical predictions and an experimental test of the effects of group size ∗ Wooyoung Lim The Hong Kong University of Science and Technology Alexander Matros Moore School of... more
Page 1. Quantal response equilibrium in contest games: Theoretical predictions and an experimental test of the effects of group size ∗ Wooyoung Lim The Hong Kong University of Science and Technology Alexander Matros Moore School of Business ...
This paper reports ndings from an experimental study of voluntary participation games, as considered by Dixit and Olson [\Does voluntary participation undermine the Coase Theorem?" Journal of Public Economics, (2000), 76: 309-335].... more
This paper reports ndings from an experimental study of voluntary participation games, as considered by Dixit and Olson [\Does voluntary participation undermine the Coase Theorem?" Journal of Public Economics, (2000), 76: 309-335]. The voluntary participation game consists of two stages: a non-cooperative participation decision followed by Coaseian bargaining on public good provision only among those who choose to participate. Our experimental ndings show that, consistent with the theoretical ndings of Dixit and Olson, the outcome of this game falls short of full eciency. However, we nd that voluntary participation undermines the Coase Theorem to a lesser extent than predicted by Dixit and Olson, particularly with larger numbers of players. We also investigate the eect of pre-play communication on the public good provision and nd little evidence that cheap talk helps subjects coordinate on the ecient outcome of coalition formation in the laboratory.
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ABSTRACT This paper examines the bargaining over authority in principal–agent relationships in which a non-contractible decision must be made but decision rights are contractible and transferrable. An informed but self-interested agent... more
ABSTRACT This paper examines the bargaining over authority in principal–agent relationships in which a non-contractible decision must be made but decision rights are contractible and transferrable. An informed but self-interested agent makes a price offer to buy decision-making authority from an uninformed principal, who then decides to either accept or reject the offer. No matter how large the difference is between the parties’ preferences, there exists a continuum of perfect Bayesian equilibria in which authority is transferred with a probability of 1. In these equilibria, no information is transmitted, even though the informed agent's price offers could have been used as a signaling device. However, we also construct an infinite sequence of informative equilibria that approximates the full revelation of information in any state of nature in the limit.
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Lottery and raffle mechanisms have a long history as economic institutions for raising funds. In a series of laboratory experiments we find that total spending in raffles is higher than Nash equilibrium predicts. Moreover, this... more
Lottery and raffle mechanisms have a long history as economic institutions for raising funds. In a series of laboratory experiments we find that total spending in raffles is higher than Nash equilibrium predicts. Moreover, this overspending is persistent as the number of participants in the raffle increases. Using learning direction theory as a guide, we find that as the group size increases, subjects strategically adjust their spending levels less frequently in response to previous outcomes. Quantal response equilibrium organizes the ...
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Page 1. Quantal response equilibrium in contest games: Theoretical predictions and an experimental test of the effects of group size ∗ Wooyoung Lim The Hong Kong University of Science and Technology Alexander Matros Moore School of... more
Page 1. Quantal response equilibrium in contest games: Theoretical predictions and an experimental test of the effects of group size ∗ Wooyoung Lim The Hong Kong University of Science and Technology Alexander Matros Moore School of Business ...