HEDGING, AMBIGUITY AND THE REVERSAL OF ORDER AXIOM
GAMES AND ECONOMIC BEHAVIOR, 2019, VOL. 117, PP. 380-387
(JOINT WITH JÖRG OECHSSLER AND ALEX ROOMETS)
We ran experiments that gave subjects a straight-forward and simple opportunity to hedge away ambiguity in an Ellsberg-style experiment. Subjects had to make bets on the combined outcomes of a fair coin and a draw from an ambiguous urn. By modifying the timing of the draw, coin flip, and decision, we are able to test the reversal-of-order axiom. Our main result is that the reversal-of-order axiom seems to hold. We also confirm low levels of ambiguity hedging despite the relative obviousness of the opportunity.
DOES MUTUAL KNOWLEDGE OF PREFERENCES LEAD TO MORE
NASH EQUILIBRIUM PLAY? EXPERIMENTAL EVIDENCE
PAPER UNDER REVIEW
(JOINT WITH CHRISTOPH BRUNNER AND FLORIAN KAUFFELDT)
Nash equilibrium often does not seem to accurately predict behavior. In experimental game theory, it is usually assumed that the monetary payoffs in the game represent subjects' utilities. However, subjects may actually play a very different game. In this case, mutual knowledge of preferences may not be satisfied. In our experiment, we first elicit subjects' preferences over the monetary payos for all players. This allows us to identify equilibria in the games that subjects actually are playing. We then examine whether revealing other subjects' preferences leads to more equilibrium play and find that this information indeed has a significant effect. Furthermore, it turns out that subjects are more likely to play maxmin and maxmax strategies than Nash equilibrium strategies. This indicates that subjects strongly rely on heuristics when selecting a strategy.
GENDER DIFFERENCES IN BARGAINING EXPERIMENTAL EVIDENCE
(JOINT WITH GRACIELA KUECHLE)
We study gender differences and gender pairing effects in a laboratory experiment with alternating-offers bargaining for a fixed pie, framed as an employer-employee interaction. We vary the degree of asymmetry in bargaining power between roles, as well as the disclosure of genders of the negotiating partners. With low asymmetry, we find no gender effects in behavior or outcomes. When there is high asymmetry and gender is known, men achieve more favorable deals than women in both roles, especially in mixed gender pairings. These differences are significant, despite gender information being transmitted only in a very subtle way. However, differences disappear, when no gender information about the bargaining partner is provided. Additionally, we examine the bargaining strategies of the players in detail. In presence of high asymmetry, men behave more aggressively in mixed gender parings, while the opposite effect is true for women.
INEQUALITY, FAIRNESS AND SOCIAL CAPITAL
(JOINT WITH DIETMAR FEHR, STEFAN TRAUTMANN AND YILONG XU)
We study the impact of unjust inequality on social trust and trustworthiness, and how it interacts with economic status in a large-scale controlled experiment. We document that unfair economic inequality is detrimental for social interactions, resulting in a significant decline in trust and trustworthiness. Probing the boundaries of this effect, we demonstrate that this erosion of social capital critically depends on the context: if an economically successful person is not directly responsible for the outcome of the unsuccessful person, we observe no negative effects on trust and trustworthiness in the aggregate. Finally, our data do not support the view that higher status or wealth leads to an erosion of pro-social attitudes: the successful are always more generous, whereas unsuccessful persons display the least efficient and generous behavior.
DO PEOPLE EXHIBIT MORE ANTISOCIAL BEHAVIOR IF THE INCOME ALLOCATING PROCESS HAS BEEN UNFAIR?
We examine whether an unfair process of income allocation leads to a higher degree of antisocial behavior. In order to test this hypothesis, we run an experiment where we vary the way players’ endowments are determined: by a fair, random, or unfair process. The initial distribution has a certain degree of inequality, which is held constant across treatments. After receiving their income, subjects can anonymously reduce the income of another player at a cost. The overall frequency and percentage of destruction is similar and not significantly different across treatments. Surprisingly, even if money is allocated in an unfair manner, subjects do not destroy more. We furthermore elicit subjects’ perceptions about the fairness of the income-generating process. They are in line with the intended treatment effect, but we find almost no correlation between subjects’ fairness evaluation and the propensity to burn money. The findings indicate that the degree of antisocial behavior is rather constant in this context and independent of the fairness of the income-allocating process. Subjects’ justifications of their decision and insights of related studies suggest that the decision to destroy other’s income depends a lot on whether other subjects can be held responsible for the initial (unfair) distribution.