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Revisions Requested:

Delayed Review in Repeated Relationships Revised and Resubmitted, Games and Economic Behavior

Abstract:Many theoretical results rely on delayed review of imperfect information for sustaining cooperative outcomes. This paper uses a laboratory experiment designed around a repeated prisoner's dilemma with imperfect monitoring to study what effect delay has on cooperation in practice. Information was received in every period of the game in one treatment and every other period of the game in another. While the parameters were chosen so that equilibrium welfare is higher with delay, the welfare levels in the two treatments were similar. Moreover, subjects were less likely to cooperate with than without delay in additional treatments where the game was played against a computer with an equilibrium trigger strategy. The results suggest that the cooperating-enhancing effect of exogenous delay of information may be smaller than predicted for two reasons: endogenous leniency in subjects' punishment strategies and an element of randomness in behavior.

Communication and Behavior in Centralized and Decentralized Coordination Games (with Umberto Garfagnini). Revise and Resubmit, Quantitative Economics.

Abstract:We use a laboratory experiment to study how the allocation of authority over payoff-relevant decisions affects communication and behavior in coordination games with incomplete information. Our results show close to optimal communication but systematic deviations from optimal behavior in how the communicated information is used. These deviations lead decisions to overemphasize the importance of coordination when authority is decentralized, and to underemphasize it when authority is allocated to a third party. We hypothesize that the deviations are caused by strategic uncertainty and find supporting evidence in additional treatments with complete information.

Publications:

Third-party Manipulation of Conflict: An Experiment (with Umberto Garfagnini) Forthcoming, Experimental Economics

Forward Induction: Thinking and Behavior (with Aldo Rustichini) Journal of Economic Behavior & Organization, Volume 128, August 2016, Pages 195-208.

Working Papers:

Myopic Loss Aversion or Randomness in Choice? An Experimental Investigation Update: 2/10/2017

Abstract: This paper reinterprets a well-known behavioral phenomenon, usually attributed to myopic loss aversion (MLA), through the lens of stochastic choice. First, it is argued that stochastic choice models can explain behavior in prior studies of MLA and reconcile some conflicting results in the literature. Second, the predictions of stochastic choice and MLA are contrasted in a new experiment based on simple choices between gambles and sure amounts. The results of this experiment show subjects to be more risk-averse with frequent feedback if the gamble is attractive, as in Gneezy and Potters (1997), and more risk-seeking with frequent feedback if the gamble is unattractive, as in Haisley et al. (2008). This pattern of results can be rationalized by a random utility or a random parameter model, but not MLA.

Cooperative Institutions (with David Rahman) Update: 8/13/2014

Abstract: This paper provides the first systematic experimental analysis of delay, communication and reaction lags in a repeated prisoner's dilemma with frequent actions and imperfect monitoring. We independently manipulate delay of information and the ability of subjects to engage in limited communication and find that subjects earn significantly more without delay, a result that cannot be explained by standard repeated games models. We also find that communication always improves welfare and that average payoffs in one of our treatments (with communication and no delay) are significantly greater than the upper bound on public Nash equilibrium payoffs. We explore the possibility that this is driven by bounded rationality in the form of reaction lags and find that slowing down the experiment has no significant effect on behavior.