2021 ESA Global Online Around-The-Clock Conference Program (FINAL)
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(Over)Confidence Predicts Escalation of Public Commitment
Journal of Experimental Social Psychology 69 (2017) 13–22 Contents lists available at ScienceDirect Journal of Experimental Social Psychology journal homepage: www.elsevier.com/locate/jesp Pride before the fall: (Over)confidence predicts escalation of public commitment Richard Ronay ⁎, Janneke K. Oostrom, Nale Lehmann-Willenbrock, Mark Van Vugt Vrije Universiteit Amsterdam, The Netherlands HIGHLIGHTS • We examined the effect of overconfidence on escalation of commitment. • In a private context, overconfidence is unrelated to escalation decisions. • In a public context, overconfidence is positively related to escalation decisions. • Individual differences in overconfidence are related to reputation sensitivity. • Reputational concerns drive publicly announced investment decision. article info abstract Article history: In four studies we examined the effect of overconfidence on escalation of commitment in investment tasks. Study Received 16 February 2016 1(N = 105) revealed a positive relationship between overconfidence and decisions to escalate. In contrast, Study Revised 15 October 2016 2(N = 121) showed that overconfidence was negatively related to escalation of commitment. The reversal of this Accepted 16 October 2016 effect appeared to emerge as a function of the public (Study 1) versus private (Study 2) context in which the in- Available online 20 October 2016 vestment decisions were made. In Study 3 (N = 108) and Study 4 (N = 380) we experimentally replicated this pattern of findings and found support for the explanatory role of reputational concerns. A meta-analysis of the Keywords: fi fi Overconfidence ndings from our four studies showed that overcon dence is positively related to escalation of commitment in Confidence public contexts, and that this relationship is absent when decisions are made privately. -
Lecture Notes
GRADUATE GAME THEORY LECTURE NOTES BY OMER TAMUZ California Institute of Technology 2018 Acknowledgments These lecture notes are partially adapted from Osborne and Rubinstein [29], Maschler, Solan and Zamir [23], lecture notes by Federico Echenique, and slides by Daron Acemoglu and Asu Ozdaglar. I am indebted to Seo Young (Silvia) Kim and Zhuofang Li for their help in finding and correcting many errors. Any comments or suggestions are welcome. 2 Contents 1 Extensive form games with perfect information 7 1.1 Tic-Tac-Toe ........................................ 7 1.2 The Sweet Fifteen Game ................................ 7 1.3 Chess ............................................ 7 1.4 Definition of extensive form games with perfect information ........... 10 1.5 The ultimatum game .................................. 10 1.6 Equilibria ......................................... 11 1.7 The centipede game ................................... 11 1.8 Subgames and subgame perfect equilibria ...................... 13 1.9 The dollar auction .................................... 14 1.10 Backward induction, Kuhn’s Theorem and a proof of Zermelo’s Theorem ... 15 2 Strategic form games 17 2.1 Definition ......................................... 17 2.2 Nash equilibria ...................................... 17 2.3 Classical examples .................................... 17 2.4 Dominated strategies .................................. 22 2.5 Repeated elimination of dominated strategies ................... 22 2.6 Dominant strategies .................................. -
Pricing Rule in a Clock Auction
Decision Analysis informs ® Vol. 7, No. 1, March 2010, pp. 40–57 issn 1545-8490 eissn 1545-8504 10 0701 0040 doi 10.1287/deca.1090.0161 © 2010 INFORMS Pricing Rule in a Clock Auction Peter Cramton, Pacharasut Sujarittanonta Department of Economics, University of Maryland, College Park, Maryland 20742 {[email protected], [email protected]} e analyze a discrete clock auction with lowest-accepted-bid (LAB) pricing and provisional winners, as Wadopted by India for its 3G spectrum auction. In a perfect Bayesian equilibrium, the provisional winner shades her bid, whereas provisional losers do not. Such differential shading leads to inefficiency. An auction with highest-rejected-bid (HRB) pricing and exit bids is strategically simple, has no bid shading, and is fully efficient. In addition, it has higher revenues than the LAB auction, assuming profit-maximizing bidders. The bid shading in the LAB auction exposes a bidder to the possibility of losing the auction at a price below the bidder’s value. Thus, a fear of losing at profitable prices may cause bidders in the LAB auction to bid more aggressively than predicted, assuming profit-maximizing bidders. We extend the model by adding an anticipated loser’s regret to the payoff function. Revenue from the LAB auction yields higher expected revenue than the HRB auction when bidders’ fear of losing at profitable prices is sufficiently strong. This would provide one explanation why India, with an expressed objective of revenue maximization, adopted the LAB auction for its upcoming 3G spectrum auction, rather than the seemingly superior HRB auction. Key words: auctions; clock auctions; spectrum auctions; behavioral economics; market design History: Received on April 16, 2009. -
Cooperative Strategies in Groups of Strangers: an Experiment
KRANNERT SCHOOL OF MANAGEMENT Purdue University West Lafayette, Indiana Cooperative Strategies in Groups of Strangers: An Experiment By Gabriele Camera Marco Casari Maria Bigoni Paper No. 1237 Date: June, 2010 Institute for Research in the Behavioral, Economic, and Management Sciences Cooperative strategies in groups of strangers: an experiment Gabriele Camera, Marco Casari, and Maria Bigoni* 15 June 2010 * Camera: Purdue University; Casari: University of Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy, Phone: +39- 051-209-8662, Fax: +39-051-209-8493, [email protected]; Bigoni: University of Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy, Phone: +39-051-2098890, Fax: +39-051-0544522, [email protected]. We thank Jim Engle-Warnick, Tim Cason, Guillaume Fréchette, Hans Theo Normann, and seminar participants at the ESA in Innsbruck, IMEBE in Bilbao, University of Frankfurt, University of Bologna, University of Siena, and NYU for comments on earlier versions of the paper. This paper was completed while G. Camera was visiting the University of Siena as a Fulbright scholar. Financial support for the experiments was partially provided by Purdue’s CIBER and by the Einaudi Institute for Economics and Finance. Abstract We study cooperation in four-person economies of indefinite duration. Subjects interact anonymously playing a prisoner’s dilemma. We identify and characterize the strategies employed at the aggregate and at the individual level. We find that (i) grim trigger well describes aggregate play, but not individual play; (ii) individual behavior is persistently heterogeneous; (iii) coordination on cooperative strategies does not improve with experience; (iv) systematic defection does not crowd-out systematic cooperation. -
Integrating the Structural Auction Approach and Traditional Measures of Market Power
Integrating the Structural Auction Approach and Traditional Measures of Market Power Emílio Tostão Department of Agricultural Economics Oklahoma State University 535 Ag. Hall, Stillwater, OK 74078-6026 Email: [email protected] Chanjin Chung Department of Agricultural Economics Oklahoma State University 322 Ag. Hall, Stillwater, OK 74078-6026 Email: [email protected] B. Wade Brorsen Department of Agricultural Economics Oklahoma State University 414 Ag. Hall, Stillwater, OK 74078-6026 Email: [email protected] Selected Paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Long Beach, California, July 23-26, 2006. Copyright by Emílio Tostão , Chanjin Chung, and B . Wade Brorsen . All rights reserved . Readers may make verbatim copies of this document for non commercial purposes by any means , provided that this copyright notice appears on all such copies . 1 Integrating the Structural Auction Approach and Traditional Measures of Market Power Abstract This study asks the question, what is the relationship between traditional models of market power and structural auction models? An encompassing model is derived that considers both price markdowns due to bid shading during an auction and price markdowns at the industry-level due to imperfect competition. Data from a cattle procurement experimental market is used to compare the appropriateness of the two alternative theories. Regression results show that while the number of firms is more important than the number of bidders on lot of cattle in explaining pricing behavior in the game, the number of bidders does contain some unique information and should be included in the model. Both the traditional NEIO and structural auction approaches overestimated the true markdowns possibly due to failure to account for the winners curse. -
Games with Delays. a Frankenstein Approach
Games with Delays – A Frankenstein Approach Dietmar Berwanger and Marie van den Bogaard LSV, CNRS & ENS Cachan, France Abstract We investigate infinite games on finite graphs where the information flow is perturbed by non- deterministic signalling delays. It is known that such perturbations make synthesis problems virtually unsolvable, in the general case. On the classical model where signals are attached to states, tractable cases are rare and difficult to identify. Here, we propose a model where signals are detached from control states, and we identify a subclass on which equilibrium outcomes can be preserved, even if signals are delivered with a delay that is finitely bounded. To offset the perturbation, our solution procedure combines responses from a collection of virtual plays following an equilibrium strategy in the instant- signalling game to synthesise, in a Frankenstein manner, an equivalent equilibrium strategy for the delayed-signalling game. 1998 ACM Subject Classification F.1.2 Modes of Computation; D.4.7 Organization and Design Keywords and phrases infinite games on graphs, imperfect information, delayed monitoring, distributed synthesis 1 Introduction Appropriate behaviour of an interactive system component often depends on events gener- ated by other components. The ideal situation, in which perfect information is available across components, occurs rarely in practice – typically a component only receives signals more or less correlated with the actual events. Apart of imperfect signals generated by the system components, there are multiple other sources of uncertainty, due to actions of the system environment or to unreliable behaviour of the infrastructure connecting the compo- nents: For instance, communication channels may delay or lose signals, or deliver them in a different order than they were emitted. -
Escalation Revisited: Investigating the Influence of Personality and Organizational Support on Escalation of Commitment
Escalation Revisited: Investigating the Influence of Personality and Organizational Support on Escalation of Commitment by Julia Walsh Howell A dissertation submitted to the Graduate Faculty of Auburn University in partial fulfillment of the requirements for the Degree of Doctor of Philosophy Auburn, Alabama August 2, 2014 Keywords: Escalation of commitment, personality, organizational support, sunk costs Copyright 2014 by Julia Walsh Howell Approved by Daniel Svyantek, Chair, Professor and Chair, Department of Psychology Ana Franco-Watkins, Associate Professor, Department of Psychology Alejandro Lazarte, Associate Professor, Department of Psychology Alan Walker, Associate Professor, Department of Management Abstract Escalation of commitment research has been narrow in its scope of influencing factors. A goal of this study was to remedy this gap by including factors at the individual, organizational, and decision context level that affect escalation. Furthermore, to my knowledge there is no other escalation research that has included both an economic and a human resources (HR) decision scenario. A significant contribution of this study was the results showing these two types of scenarios have different, and sometimes opposing, outcomes. In the economic context, sunk costs were positively related to escalation, but the relationship was inversed in the HR context. Additionally, facets of neuroticism and openness to experience were related to escalation in the economic context, but no such relationships were present in the HR context. Openness to experience moderated the relationship between organizational support and escalation. The results in the HR context have practical implications regarding how managers select, train, promote, and terminate employees. Furthermore, the differential outcomes in the economic and HR contexts provide a first step in expanding the theoretical implications of varying contexts and their influence on escalation. -
Demand Reduction and Inefficiency in Multi-Unit Auctions
The Review of Economic Studies Advance Access published July 28, 2014 Review of Economic Studies (2014) 0, 1–35 doi:10.1093/restud/rdu023 © The Author 2014. Published by Oxford University Press on behalf of The Review of Economic Studies Limited. Demand Reduction and Inefficiency in Multi-Unit Auctions Downloaded from LAWRENCE M. AUSUBEL University of Maryland http://restud.oxfordjournals.org/ PETER CRAMTON University of Maryland MAREK PYCIA UCLA MARZENA ROSTEK University of Wisconsin-Madison at University of Wisconsin-Madison Libraries on October 27, 2014 and MAREK WERETKA University of Wisconsin-Madison First version received July 2010; final version accepted April 2014 (Eds.) Auctions often involve the sale of many related goods: Treasury, spectrum, and electricity auctions are examples. In multi-unit auctions, bids for marginal units may affect payments for inframarginal units, giving rise to “demand reduction” and furthermore to incentives for shading bids differently across units. We establish that such differential bid shading results generically in ex post inefficient allocations in the uniform-price and pay-as-bid auctions. We also show that, in general, the efficiency and revenue rankings of the two formats are ambiguous. However, in settings with symmetric bidders, the pay-as-bid auction often outperforms. In particular, with diminishing marginal utility, symmetric information and linearity, it yields greater expected revenues. We explain the rankings through multi-unit effects, which have no counterparts in auctions with unit demands. We attribute the new incentives separately to multi-unit (but constant) marginal utility and to diminishing marginal utility. We also provide comparisons with the Vickrey auction. Key words: Multi-Unit Auctions, Demand Reduction, Treasury Auctions, Electricity Auctions JEL Codes: D44, D82, D47, L13, L94 1. -
Descriptive Asymmetries in Evaluative Vs Non-Evaluative Framing of the Dollar Auction Implications for Theories of Escalation of Commitment
Descriptive Asymmetries In Evaluative vs Non-Evaluative Framing of The Dollar Auction Implications for Theories of Escalation of Commitment By Samuel Wallis Rogers Middle School Dr. Charles Wallis Department of Philosophy, CSULB 1.) Introduction The dollar auction, first described by Shubik1, is a classic example of an escalation of commitment or entrapment scenario described by von Neuman2 and Campbell3. Specifically, the dollar auction is a logical game played with multiple players. The game leader auctions a dollar, and the two or more players bid on it. The winner pays their bet and gets the dollar; the second highest bidder pays their bet and gets nothing. In practice, once people begin bidding, they will escalate their commitment (increase their bids). Often, the bids build up long past the point when either player could gain anything from winning. The game model is similar to the War of Attrition game and the All-pay Auction. In escalation of commitment scenarios, decision makers initially commit resources—money, time, reputation, etc.—in order to achieve some goal or goals. After the initial resource commitment, decision makers must repeatedly choose whether to allocate further resources under uncertainty and after receiving negative feedback about prior resource allocations. Escalation of commitment eludes explanation by traditional economics since traditional microeconomics supposes that decision makers maximize expected utility, i.e., microeconomics predicts that rational decision makers will choose the option with the highest utility, where utility equals the probability of an expected outcome multiplied by the value assigned to the outcome by the decision maker. According to accounting and economics texts normative criteria for investments dictate that one should invest resources only when marginal (future) benefits exceed marginal costs. -
Repeated Games
Repeated games Felix Munoz-Garcia Strategy and Game Theory - Washington State University Repeated games are very usual in real life: 1 Treasury bill auctions (some of them are organized monthly, but some are even weekly), 2 Cournot competition is repeated over time by the same group of firms (firms simultaneously and independently decide how much to produce in every period). 3 OPEC cartel is also repeated over time. In addition, players’ interaction in a repeated game can help us rationalize cooperation... in settings where such cooperation could not be sustained should players interact only once. We will therefore show that, when the game is repeated, we can sustain: 1 Players’ cooperation in the Prisoner’s Dilemma game, 2 Firms’ collusion: 1 Setting high prices in the Bertrand game, or 2 Reducing individual production in the Cournot game. 3 But let’s start with a more "unusual" example in which cooperation also emerged: Trench warfare in World War I. Harrington, Ch. 13 −! Trench warfare in World War I Trench warfare in World War I Despite all the killing during that war, peace would occasionally flare up as the soldiers in opposing tenches would achieve a truce. Examples: The hour of 8:00-9:00am was regarded as consecrated to "private business," No shooting during meals, No firing artillery at the enemy’s supply lines. One account in Harrington: After some shooting a German soldier shouted out "We are very sorry about that; we hope no one was hurt. It is not our fault, it is that dammed Prussian artillery" But... how was that cooperation achieved? Trench warfare in World War I We can assume that each soldier values killing the enemy, but places a greater value on not getting killed. -
CONFLICT and COOPERATION WITHIN an ORGANIZATION: a CASE STUDY of the METROPOLITAN WATER DISTRICT of SOUTHERN CALIFORNIA by DAVID
CONFLICT AND COOPERATION WITHIN AN ORGANIZATION: A CASE STUDY OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA by DAVID JASON ZETLAND B.A. (University of California, Los Angeles) 1991 M.S. (University of California, Davis) 2003 DISSERTATION Submitted in partial satisfaction of the requirements for the degree of DOCTOR OF PHILOSOPHY in Agricultural and Resource Economics in the OFFICE OF GRADUATE STUDIES of the UNIVERSITY OF CALIFORNIA DAVIS Committee in Charge 2008 Electronic copy available at: http://ssrn.com/abstract=1129046 Electronic copy available at: http://ssrn.com/abstract=1129046 Abstract Back in 1995, one member of a water co- did not change to reflect this scarcity, wa- operative announced it was going to buy wa- ter continued to be treated as a club good ter from an “outside” source. Other mem- when it should have been treated as a pri- bers of the cooperative did not like this idea, vate good. Because MET did not change its and a dispute broke out. After lawsuits, lob- policies for allocating water (take as much as bying and lopsided votes, peace of a sort was you need, at a fixed price, no matter where bought with 235 million dollars of taxpayer it is delivered), inefficiency increased. Argu- money and intense political pressure. Why ments over the policies increased inefficiency did this dispute happen? Was it exceptional even further. or typical? Is it possible that cooperative According to Hart and Moore (1996), members are not cooperative? These ques- cooperatives are efficient (relative to firms) tions are intrinsically interesting to students when members have reasonably homoge- of collective action, but they are more signif- nous preferences. -
Can Group Decision-Making Mitigate Propensity of Escalating Commitment?
Front. Bus. Res. China 2008, 2(1): 33–49 DOI 10.1007/s11782-008-0003-x RESEARCH ARTICLE LIU Zhiyuan, LIU Qing Can group decision-making mitigate propensity of escalating commitment？ ―An experimental research based on the prospect theory © Higher Education Press and Springer-Verlag 2008 Abstract Escalation of commitment is a well-known investment trap, which is irrational from an economic point of view but inevitable due to psychological factors. Based on a role-playing experiment, this paper intends to analyze the impact of different effects of the prospect theory on the tendency of escalating commitment in different decision-making processes, and discusses whether certain decision-making processes can mitigate the tendency of escalating commitment. Our empirical results indicate that groups with prior individual consideration can make better decisions involving effects of the prospect theory than individuals and groups. Keywords escalation of commitment, group decision-making, prospect theory 摘要 恶性增资现象广泛存在于各种组织结构中，对社会的资源配置产生重大影响。 从经济学角度看，恶性增资是非理性，不应该发生, 但从决策者心理角度看, 有其产 生的必然因素。通过角色模拟实验, 分析前景理论的各效应在不同决策方式(个体决 策、直接集体决策和先个体后集体决策) 下对恶性增资心理倾向的不同影响, 进而探 讨采取特定的决策方式是否能够有效地对恶性增资倾向进行控制。结论表明, 先个 体后集体的决策方式可以较好地规避前景理论效应。 Translated and revised from Zhongguo gongye jingji 中国工业经济（China Industrial Economy), 2007, (4): 13–20 LIU Zhiyuan ( ) School of Business, Nankai University, Tianjin 300071, China E-mail: [email protected] LIU Qing Department of Accounting, School of Business, Nankai University, Tianjin 300071, China E-mail: [email protected] 34 LIU Zhiyuan, LIU Qing 关键词 恶性增资，集体决策，前景理论 1 Introduction Previous research(Staw, 1976, 1981; Bazerman et al., 1984) has found that individuals who are responsible for a previous decision tend to make increasing commitment to the previously chosen course of action even when the outcome of the previous decision turned out to be negative.