Experimental Evidence of Magical Thinking in Public Goods Experiments
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The Logic of Costly Punishment Reversed: Expropriation of Free-Riders and Outsiders∗,†
The logic of costly punishment reversed: expropriation of free-riders and outsiders∗ ,† David Hugh-Jones Carlo Perroni University of East Anglia University of Warwick and CAGE January 5, 2017 Abstract Current literature views the punishment of free-riders as an under-supplied pub- lic good, carried out by individuals at a cost to themselves. It need not be so: often, free-riders’ property can be forcibly appropriated by a coordinated group. This power makes punishment profitable, but it can also be abused. It is easier to contain abuses, and focus group punishment on free-riders, in societies where coordinated expropriation is harder. Our theory explains why public goods are un- dersupplied in heterogenous communities: because groups target minorities instead of free-riders. In our laboratory experiment, outcomes were more efficient when coordination was more difficult, while outgroup members were targeted more than ingroup members, and reacted differently to punishment. KEY WORDS: Cooperation, costly punishment, group coercion, heterogeneity JEL CLASSIFICATION: H1, H4, N4, D02 ∗We are grateful to CAGE and NIBS grant ES/K002201/1 for financial support. We would like to thank Mark Harrison, Francesco Guala, Diego Gambetta, David Skarbek, participants at conferences and presentations including EPCS, IMEBESS, SAET and ESA, and two anonymous reviewers for their comments. †Comments and correspondence should be addressed to David Hugh-Jones, School of Economics, University of East Anglia, [email protected] 1 Introduction Deterring free-riding is a central element of social order. Most students of collective action believe that punishing free-riders is costly to the punisher, but benefits the community as a whole. -
Recency, Records and Recaps: Learning and Non-Equilibrium Behavior in a Simple Decision Problem*
Recency, Records and Recaps: Learning and Non-equilibrium Behavior in a Simple Decision Problem* DREW FUDENBERG, Harvard University ALEXANDER PEYSAKHOVICH, Facebook Nash equilibrium takes optimization as a primitive, but suboptimal behavior can persist in simple stochastic decision problems. This has motivated the development of other equilibrium concepts such as cursed equilibrium and behavioral equilibrium. We experimentally study a simple adverse selection (or “lemons”) problem and find that learning models that heavily discount past information (i.e. display recency bias) explain patterns of behavior better than Nash, cursed or behavioral equilibrium. Providing counterfactual information or a record of past outcomes does little to aid convergence to optimal strategies, but providing sample averages (“recaps”) gets individuals most of the way to optimality. Thus recency effects are not solely due to limited memory but stem from some other form of cognitive constraints. Our results show the importance of going beyond static optimization and incorporating features of human learning into economic models. Categories & Subject Descriptors: J.4 [Social and Behavioral Sciences] Economics Author Keywords & Phrases: Learning, behavioral economics, recency, equilibrium concepts 1. INTRODUCTION Understanding when repeat experience can lead individuals to optimal behavior is crucial for the success of game theory and behavioral economics. Equilibrium analysis assumes all individuals choose optimal strategies while much research in behavioral economics -
Public Goods Agreements with Other-Regarding Preferences
NBER WORKING PAPER SERIES PUBLIC GOODS AGREEMENTS WITH OTHER-REGARDING PREFERENCES Charles D. Kolstad Working Paper 17017 http://www.nber.org/papers/w17017 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 May 2011 Department of Economics and Bren School, University of California, Santa Barbara; Resources for the Future; and NBER. Comments from Werner Güth, Kaj Thomsson and Philipp Wichardt and discussions with Gary Charness and Michael Finus have been appreciated. Outstanding research assistance from Trevor O’Grady and Adam Wright is gratefully acknowledged. Funding from the University of California Center for Energy and Environmental Economics (UCE3) is also acknowledged and appreciated. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2011 by Charles D. Kolstad. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Public Goods Agreements with Other-Regarding Preferences Charles D. Kolstad NBER Working Paper No. 17017 May 2011, Revised June 2012 JEL No. D03,H4,H41,Q5 ABSTRACT Why cooperation occurs when noncooperation appears to be individually rational has been an issue in economics for at least a half century. In the 1960’s and 1970’s the context was cooperation in the prisoner’s dilemma game; in the 1980’s concern shifted to voluntary provision of public goods; in the 1990’s, the literature on coalition formation for public goods provision emerged, in the context of coalitions to provide transboundary pollution abatement. -
The Impact of Beliefs on Effort in Telecommuting Teams
The impact of beliefs on effort in telecommuting teams E. Glenn Dutcher, Krista Jabs Saral Working Papers in Economics and Statistics 2012-22 University of Innsbruck http://eeecon.uibk.ac.at/ University of Innsbruck Working Papers in Economics and Statistics The series is jointly edited and published by - Department of Economics - Department of Public Finance - Department of Statistics Contact Address: University of Innsbruck Department of Public Finance Universitaetsstrasse 15 A-6020 Innsbruck Austria Tel: + 43 512 507 7171 Fax: + 43 512 507 2970 E-mail: [email protected] The most recent version of all working papers can be downloaded at http://eeecon.uibk.ac.at/wopec/ For a list of recent papers see the backpages of this paper. The Impact of Beliefs on E¤ort in Telecommuting Teams E. Glenn Dutchery Krista Jabs Saralz February 2014 Abstract The use of telecommuting policies remains controversial for many employers because of the perceived opportunity for shirking outside of the traditional workplace; a problem that is potentially exacerbated if employees work in teams. Using a controlled experiment, where individuals work in teams with varying numbers of telecommuters, we test how telecommut- ing a¤ects the e¤ort choice of workers. We …nd that di¤erences in productivity within the team do not result from shirking by telecommuters; rather, changes in e¤ort result from an individual’s belief about the productivity of their teammates. In line with stereotypes, a high proportion of both telecommuting and non-telecommuting participants believed their telecommuting partners were less productive. Consequently, lower expectations of partner productivity resulted in lower e¤ort when individuals were partnered with telecommuters. -
Paranormal, Superstitious, Magical, and Religious Beliefs
Paranormal, superstitious, magical, and religious beliefs Kia Aarnio Department of Psychology University of Helsinki, Finland Academic dissertation to be publicly discussed, by due permission of the Faculty of Behavioural Sciences at the University of Helsinki in Auditorium XII, Fabianinkatu 33, on the 19th of October, 2007, at 12 o’clock UNIVERSITY OF HELSINKI Department of Psychology Studies 44: 2007 2 Supervisor Marjaana Lindeman, PhD Department of Psychology University of Helsinki Finland Reviewers Professor Stuart Vyse Department of Psychology Connecticut College USA Timo Kaitaro, PhD Department of Law University of Joensuu Finland Opponent Professor Pekka Niemi Department of Psychology University of Turku Finland ISSN 0781-8254 ISBN 978-952-10-4201-0 (pbk.) ISBN 978-952-10-4202-7 (PDF) http://www.ethesis.helsinki.fi Helsinki University Printing House Helsinki 2007 3 CONTENTS ABSTRACT.......................................................................................................................... 6 TIIVISTELMÄ ....................................................................................................................... 7 ACKNOWLEDGMENTS....................................................................................................... 8 LIST OF ORIGINAL PUBLICATIONS ................................................................................ 10 1 INTRODUCTION ............................................................................................................. 11 1.1. Defining paranormal beliefs 12 1.1.1. -
Noisy Directional Learning and the Logit Equilibrium*
CSE: AR SJOE 011 Scand. J. of Economics 106(*), *–*, 2004 DOI: 10.1111/j.1467-9442.2004.000376.x Noisy Directional Learning and the Logit Equilibrium* Simon P. Anderson University of Virginia, Charlottesville, VA 22903-3328, USA [email protected] Jacob K. Goeree California Institute of Technology, Pasadena, CA 91125, USA [email protected] Charles A. Holt University of Virginia, Charlottesville, VA 22903-3328, USA [email protected] PROOF Abstract We specify a dynamic model in which agents adjust their decisions toward higher payoffs, subject to normal error. This process generates a probability distribution of players’ decisions that evolves over time according to the Fokker–Planck equation. The dynamic process is stable for all potential games, a class of payoff structures that includes several widely studied games. In equilibrium, the distributions that determine expected payoffs correspond to the distributions that arise from the logit function applied to those expected payoffs. This ‘‘logit equilibrium’’ forms a stochastic generalization of the Nash equilibrium and provides a possible explanation of anomalous laboratory data. ECTED Keywords: Bounded rationality; noisy directional learning; Fokker–Planck equation; potential games; logit equilibrium JEL classification: C62; C73 I. Introduction Small errors and shocks may have offsetting effects in some economic con- texts, in which case there is not much to be gained from an explicit analysis of stochasticNCORR elements. In other contexts, a small amount of randomness can * We gratefully acknowledge financial support from the National Science Foundation (SBR- 9818683U and SBR-0094800), the Alfred P. Sloan Foundation and the Dutch National Science Foundation (NWO-VICI 453.03.606). -
4 Social Interactions
Beta September 2015 version 4 SOCIAL INTERACTIONS Les Joueurs de Carte, Paul Cézanne, 1892-95, Courtauld Institute of Art A COMBINATION OF SELF-INTEREST, A REGARD FOR THE WELLBEING OF OTHERS, AND APPROPRIATE INSTITUTIONS CAN YIELD DESIRABLE SOCIAL OUTCOMES WHEN PEOPLE INTERACT • Game theory is a way of understanding how people interact based on the constraints that limit their actions, their motives and their beliefs about what others will do • Experiments and other evidence show that self-interest, a concern for others and a preference for fairness are all important motives explaining how people interact • In most interactions there is some conflict of interest between people, and also some opportunity for mutual gain • The pursuit of self-interest can lead either to results that are considered good by all participants, or sometimes to outcomes that none of those concerned would prefer • Self-interest can be harnessed for the general good in markets by governments limiting the actions that people are free to take, and by one’s peers imposing punishments on actions that lead to bad outcomes • A concern for others and for fairness allows us to internalise the effects of our actions on others, and so can contribute to good social outcomes See www.core-econ.org for the full interactive version of The Economy by The CORE Project. Guide yourself through key concepts with clickable figures, test your understanding with multiple choice questions, look up key terms in the glossary, read full mathematical derivations in the Leibniz supplements, watch economists explain their work in Economists in Action – and much more. -
Section 3-Dynamic Gamesand Intellectual Property
ECON 522 - SECTION 3-DYNAMIC GAMES AND INTELLECTUAL PROPERTY I Dynamic Games Dynamic games are just like static games, except players move sequentially rather than simulta- neously. The definition of Nash equilibrium is still the same (everyone is playing a best response), but now we can end up with NE that don’t make a lot of sense. In the example from class, a start up firm has to choose “enter” or “do not enter,” and the incumbent firm must choose to “fight” or “accommodate.” However, we end up with a strange NE in which the new firm chooses not to enter and the incumbent chooses fight, even though the first firm should figure that a rational incumbent firm would never actually fight should the first firm enter the market. Thus we intro- duced the idea of sequential rationality: everyone believes everyone will behave rationally at every point in time. This leads to a “refinement” of Nash equilibrium, which we call subgame perfect equilibrium (SPE), which is just a NE in which everyone is behaving sequentially rationally. We solve these games using backwards induction, which just means we start from the end of the game and see what choices people would make if they ever reach those end situations, and we work our way back up to the beginning. You can use this method to solve a lot of strategic interactive games, such as tic-tac-toe, or checkers. I.1 Back to a static game- the Public Goods Game from class p Setup: There are 100 people with identical preferences represented by: u = 10 X − x, where X is the total amount of money (including what that individual contributes) donated for a public park, and x is the amount donated by the individual. -
Success Rates in Simplified Threshold Public Goods Games - a Theoretical Model
Success rates in simplified threshold public goods games - a theoretical model by Christian Feige No. 70 | JUNE 2015 WORKING PAPER SERIES IN ECONOMICS KIT – University of the State of Baden-Wuerttemberg and National Laboratory of the Helmholtz Association econpapers.wiwi.kit.edu Impressum Karlsruher Institut für Technologie (KIT) Fakultät für Wirtschaftswissenschaften Institut für Volkswirtschaftslehre (ECON) Schlossbezirk 12 76131 Karlsruhe KIT – Universität des Landes Baden-Württemberg und nationales Forschungszentrum in der Helmholtz-Gemeinschaft Working Paper Series in Economics No. 70, June 2015 ISSN 2190-9806 econpapers.wiwi.kit.edu Success rates in simplied threshold public goods games a theoretical model Christian Feigea,¦ aKarlsruhe Institute of Technology (KIT), Institute of Economics (ECON), Neuer Zirkel 3, 76131 Karlsruhe, Germany Abstract This paper develops a theoretical model based on theories of equilibrium selection in order to predict success rates in threshold public goods games, i.e., the probability with which a group of players provides enough contri- bution in sum to exceed a predened threshold value. For this purpose, a prototypical version of a threshold public goods game is simplied to a 2 ¢ 2 normal-form game. The simplied game consists of only one focal pure strat- egy for positive contributions aiming at an ecient allocation of the threshold value. The game's second pure strategy, zero contributions, represents a safe choice for players who do not want to risk coordination failure. By calculat- ing the stability sets of these two pure strategies, success rates can be put in explicit relation to the game parameters. It is also argued that this approach has similarities with determining the relative size of the strategies' basins of attraction in a stochastic dynamical system (cf. -
Magical Thinking: Outcome Bias Affects Children’S Evaluation of Testimony
Magical Thinking: Outcome Bias Affects Children’s Evaluation of Testimony Iris Oved Gail Heyman David Barner ([email protected]) ([email protected]) ([email protected]) Department of Psychology, 9500 Gilman Drive San Diego, CA 92093 USA Abstract informants based on factors like their age (Jaswal & Neely, 2006; VanderBorght, & Jaswal, 2009), and their previous In a series of three experiments we examined how preschool children assess testimony in relation to the relative desirability of history of accuracy (Birch, Vauthier, & Bloom, 2008; the outcome for themselves and for the individual providing the Corriveau & Harris, 2009; Jaswal & Neely, 2006), and that testimony. The first two experiments reveal evidence for an they sometimes weigh the testimony over their own direct outcome bias: children are more likely to believe an extraordinary perceptual experience (Jaswal, 2010). claim when they have little to lose in doing so (Exp.1), and when There are also other factors that influence how humans they stand to gain if the claim is true (Exp. 2). The final evaluate testimony when forming beliefs. In some cases, experiment (Exp. 3) showed that children are less likely to believe beliefs that are fundamental to how we understand the world extraordinary claims when the person making the claim has are formed in direct contravention with expert testimony ulterior motives (e.g., stands to potentially gain from the child’s and despite considerable physical evidence to the contrary belief). These data show that children’s beliefs acquired from testimony are subject to outcome bias, and that children are (e.g., climate change, evolution). In these cases many claims capable of exercising skepticism when the source of testimony is are assessed on the basis of prior convictions, in conformity likely to have ulterior motives. -
Public Goods Games and Psychological Utility: Theory and Evidence
School of Business Economics Division Public goods games and psychological utility: Theory and evidence Sanjit Dhami, University of Leicester Mengxing Wei, University of Leicester Ali al-Nowaihi, University of Leicester Working Paper No. 16/17 Public goods games and psychological utility: Theory and evidence. Sanjit Dhami Mengxing Weiy Ali al-Nowaihiz 10 November 2016 Abstract We consider a public goods game which incorporates guilt-aversion/surprise- seeking and the attribution of intentions behind these emotions (Battigalli and Dufwenberg, 2007; Khalmetski et al., 2015). We implement the induced beliefs method (Ellingsen et al., 2010) and a within-subjects design using the strategy method. Previous studies mainly use dictator games - whose results may not be robust to adding strategic components. We find that guilt-aversion is far more im- portant than surprise-seeking; and that the attribution of intentions behind guilt- aversion/surprise-seeking is important. Our between-subjects analysis confirms the results of the within-subjects design. Keywords: Public goods games; psychological game theory; surprise-seeking/guilt- aversion; attribution of intentions; induced beliefs method; strategy method; within- subjects design. JEL Classification: D01 (Microeconomic Behavior: Underlying Principles); D03 (Be- havioral Microeconomics: Underlying Principles); H41 (Public Goods). Corresponding author. Division of Economics, School of Business, University of Leicester, Uni- versity Road, Leicester. LE1 7RH, UK. Phone: +44-116-2522086. Fax: +44-116-2522908. E-mail: [email protected]. yDivision of Economics, School of Business, University of Leicester, University Road, Leicester, LE1 7RH. Fax: +44-116-2522908. Email: [email protected] zDivision of Economics, School of Business, University of Leicester, University Road, Leicester. -
Magical Thinking and Religious Thinking
E-Theologos, Vol. 3, No. 2 DOI 10.2478/v10154-012-0017-6 Magical Thinking and Religious Thinking Marcin Cholewa - Marek Gilski The Pontifical University of John Paul II in Kraków Although one would think that the development of science and technology promotes the elimination of magical practices and magical thinking, yet observation of contemporary culture seems to contradict this. Symptoms of magical approach to reality are becoming more noticeable: well-stocked esoteric bookshops, TV channels devoted to the subject in question, fortune-tellers' offices, authors writing about the return of magic 1. The development of science and technology and at the same time the return to the practice of magic and magical thinking is only a seeming paradox. Goethe once aptly wrote that aiming toward magic is the result of a specific contact of the human mind with science and technology. It is about an encounter that leads to disappointment, helplessness emerging from improperly set cognitive goals. In this way the belief is created that human reason is helpless, that it has been defeated, despite being able to develop and popularise science and technology. This attitude was adopted by Doctor Faust 2: Ah! Now I’ve done Philosophy, I’ve finished Law and Medicine, And sadly even Theology: Taken fierce pains, from end to end. Now here I am, a fool for sure! No wiser than I was before: [...] And see that we can know - nothing! It almost sets my heart burning. 1 M. INTROVIGNE, Powrót magii , Kraków 2005. 2 See J. Goethe, Faust , translation Poetryintranslation . January 7 2012.