Experimental Studies on Individual Decision-Making and Game Theory

Date

2021-03-12

ORCID

Journal Title

Journal ISSN

Volume Title

Publisher

item.page.doi

Abstract

Chapter 1 presents a laboratory experiment that measures the effects of social status on a joint decision under risk. In our experiment, we compare individual risk preferences and joint decisions using the Bomb Risk Elicitation Task by Crosseto & Flippin (2013). As the result of this comparison in our first treatment, individuals exhibit a risky shift in joint decisions associated with the relatively more risk-averse players in pairs. We further study the effects of self-status and the status differential on the risky shifts in joint decisions. Thus, we manipulated the status by the scores in an unrelated real-effort task by Erkal et al. (2011) and assigned “High” and “Low” status to individuals. Then we randomly paired individuals within the same-status and across the different-status groups in two treatments. Our main results show that high-status pairing mitigates the risky shift of relatively more risk-averse players. Moreover, we find that the status differential has an additional decreasing effect on the risky shifts of relatively more risk-averse players. Finally, we present empirical evidence on the effects of riskiness position and social status on joint decisions’ outcomes. In particular, we use the departure from the maximum expected utility as the indicator of the joint decision’s outcome. Our results suggest that the burden of the risky joint decision-making, in terms of departure from the maximum expected utility, is less for high-status players than low-status players. Among low-status players, this burden is even more significant when they are relatively more risk-averse. Finally, we cannot find any evidence that the status differential in pairs impacts the deviations in the expected utilities. Four strategic form games have proper names owing to their ubiquity as social situations: the Prisoner’s Dilemma, Chicken, Battle of the Sexes, and Stag Hunt. The names themselves stem from underlying stories associated with the structure of the games’ payoffs. Yet game theorist and social psychologist use different motivating stories for the same games. In Chapter 2, we experimentally test whether subjects can associate a name or story with its game. Our findings show that they cannot associate names with the games better than chance. Subjects are better at associating a story with a game, with the (in)ability to do so depending upon the game and the story. Subjects’ failure to consistently make matches undermines the usefulness of game-theory-by-analogy for the purposes of informing policy or business decision making, and for predicting patterns of socioeconomic interaction.

Description

Keywords

Experimental economics, Social status, Group decision making, Game theory, Risk, Vignettes

item.page.sponsorship

Rights

Citation