4- In Search of Homo Economicus

Question 1

Which paper makes a statement about backward induction? What does it say?

What happens after backwards induction is introduced?

What can be said about subjects’ ability to look ahead?

Answer 1

Johnson et al. (2002)

provides evidence that backward induction is simply unnatural

offers came closer to equilibrium

most subjects concentrated on the current round when making decisions and looked ahead insufficiently

Question 2

In Ho et al. (1998):

how does group size influence the closeness of choices to equilibrium?

how do results change when games consist of experienced vs inexperienced players?

Answer 2

Choices closer to equilibrium for large (N=7) groups rather than small (N=3) groups

No real difference in results for experienced vs. inexperienced players - but convergence is quicker

Question 3

Which economic game was introduced in Güth et al. (1982)?

Answer 3

Ultimatum game

Question 4

Briefly describe the offers observed in Güth et al. (1982)

Answer 4

Most offers tend to be around 40% of the pie

low offers (i.e. less than 20%) are often rejected

Question 5

Which topic are you studying?

Answer 5

In Search of Homo Economicus

Question 6

Which paper compares behavior in BCGs with n=2 and n=18 using both students and academics?

What is a special feature of the 2 person BCG?

Answer 6

Grosskopf and Nagel (2008)

special feature of the 2-person BCG is that zero is a weakly dominant strategy and is always the winning number regardless of the choice of the other player

Question 7

What does the dictator game outlined in Forsythe et al. (1994) aim to do?

Answer 7

isolate strategic behaviour as a reason for rejection
(I send cause I anticipate low offers to be rejected. This is self-regarding behaviour but with the knowledge that others might be other-regarding)

Question 8

In Grosskopf and Nagel (2008), what does the finding that both academics and students play the n=2 and n>2 games in a similar way suggest?

Answer 8

suggests that people don’t understand the great impact their decision has in the n=2 case

Question 9

In the first period of Nagel (1995), how does the result compare to the game theoretic solution?

Answer 9

deviates strongly

Question 10

Name the counter-intuitive result from Grosskopf and Nagel (2008).

Why might this have occurred?

Answer 10

for both students and academics guesses are lower for n>2 if anything

10 times higher incentives given in the n>2 case
(to compensate subjects for the lower chance of winning)

Question 11

When was Ho et al. published?

Answer 11

1998

Question 12

Which paper looks at the problem ‘Someone who chooses a number consistent with 2 steps of reasoning might be able to reason all the way, but not expect others to be able to do so’?

Answer 12

Grosskopf and Nagel (2008)

Question 13

Which paper was published in 2008?

Answer 13

Grosskopf and Nagel

Question 14

Two papers were published in 1994, what were they?

Answer 14

Forsythe et al. and Hoffman et al.

Question 15

When was Johnson et al. published?

Answer 15

2002

Question 16

Name 3 reasons why the sender might send any money at all when playing the dictator game?

Answer 16

inequity aversion

altruism

strategic behavior
(I send cause I anticipate low offers to be rejected. This is self-regarding behaviour but with the knowledge that others might be other-regarding)

Question 17

Which factors out of repetition, high stakes and cultural/ market institutions affect offers in the ultimatum game?

Which papers explore these further?

Answer 17

all have no significant effect:
repetition- Cooper & Dutcher (2011)
high stakes- Cameron (1999)

cultural and market institutions- Henrich et al. (2002)
(entitlement- Hoffman et al. (1994) also matters)

Question 18

In Güth et al. (1982)?, rejections cannot be due to confusion. What does their occurrence suggest?

What evidence supports this?

Answer 18

the assumption of self-regarding preferences is incorrect

responders do not only care about their monetary reward; self-regarding assumption appears wrong

Question 19

What type of game is used in Johnson et al. (2002)? Describe each stage.

Answer 19

Alternating-order bargaining game

1 bargaining with other players
2 with robots and instructions
3 mixing trained and untrained subjects

Question 20

What year was Nagel published in?

Answer 20

1995

Question 21

How does the dictator game used in Forsythe et al. (1994) differ from the ultimatum game?

Answer 21

‘Responder’ can no longer reject division’- now called receiver

Question 22

Name a simple finding in Nagel (1995)

Answer 22

we can often fail to play simple games optimally

Question 23

What does Hoffman et al. (2004) tell us about the effect of entitlement of offers in the ultimatum game?

Answer 23

entitlement lowers offers

Question 24

Nagel (1995) uses a guess game with different treatments p = (0.5, 0.67, 1.33), do the distributions over [0,100] differ significantly with treatment?

Answer 24

Yes

Question 25

What are likely reasons for rejection in the ultimatum game and which papers explore these further?

Are these reasons always aligned?

Answer 25

Inequity aversion - Fehr and Schmidt (1999)

Negative reciprocity- Rabin (1993)

sometimes, not always aligned

Question 26

Which paper tries to answer the question: ‘Would behaviour follow Nash equilibrium if fewer steps (than infinity) were required?’

Answer 26

Ho et al. (1998)

Question 27

Describe convergence of choices over time in Ho et al. (1998)

Do choices in games with infinite thresholds (p<1) lie closer to equilibrium than in those with finite thresholds (p>1)?

Answer 27

Choices converge toward Equilibrium over time

No, it is the other way around

Question 28

Give 3 bottom line results regarding the ultimatum game? (from Güth et al. (1982) + subsequent research)

Answer 28

Results are not lab artefacts

Some individuals are not self-regarding

UG can be (perhaps) used to measure social preferences

Question 29

What questions arise regarding the robustness of results in Nagel (1995)? (4 points)

Answer 29

Assumes common knowledge of rationality - does this hold?

Do students think like other people?

Do the stakes in the game matter?

Could subjects not calculate the p-average?

Question 30

Which results summarise findings in this section? (anonymity + self-regarding behaviours)

Answer 30

anonymity is a real issue to be considered in experimental design

Some subjects are quite self-regarding but they can also behave in a pro-social manner in some environments- but they seem to care about those who were unfair to them (NEGATIVE RECIPROCITY)