BEEM109 Experimental Economics and Finance. How selfish are people?

Transcription

1 BEEM19 Experimental Economics and Finance How selfish are people?

2 Potential entry Potential entrant incumbant monopolist L (enter market) (-1,-1) l (fight entrant) (accommodate entry) r (2,2) R (,3) Subgame perfect Nash equilibrium: (L,r)

3 Other Nash equilibria? L 1 R -1 l 2 r ** 3 * 3 Schelling, Selten: (L,l) is not a credible Nash equilibrium because if 2 would have to move he would play R.

4 The scorpion and the frog scorpion l (sting) (-1,5) frog L (carry) r (5,3) R (,) (do not carry, sting) Incredible promise?

5 The trust game Berg, Dickhaut and McCabe Investor invest T and keeps X-T Allocator splits (1+r)T between himself and the investor Subgame perfect equilibrium? Average repayment around 95%, except in Bulgaria Fehr, Kirchsteiger, Reidl: gift exchange game, labour markets

6 Ultimatum Bargaining Güth, Schmittberger, Schwarz (1982) 1 to divide Proposer specifies a division Responder has to accept division or reject In case of rejection, both get zero

7 Ultimatum Bargaining Subgame perfect Nash-equilibrium: Proposer leaves a penny Actual (typical) result: Proposers offer between 5% and 6% Responders reject demands above 7% with probability 4% -66%

8 Camerer:

9 Dictator game 1 to divide Proposer specifies a division This is automatically accepted Subgame perfect Nash-equilibrium: Proposer leaves zero

10 Dictator games Theory: dictator takes all Experiments: this is indeed often the case Still, in some experiments around 2% split 5%-5%

11 Variables Methodological variables Stakes (Cameron) Roth / Aumann, List and Cherry: 25% reject $1 out of $4; Andreoni and Miller: The price of altruism Anonymity and Experimenter Blindness Demographic variables Gender: mild evidence that woman reject less often and offer more to men. Third party punishment: Female punish more and are better shoppers, more than 5% RawAcademic major (education or selfselection?) Age, height! Brains, biology and beauty

12 The trust game Berg, Dickhaut and McCabe Investor invest T and keeps X-T Allocator splits (1+r)T between himself and the investor Subgame perfect equilibrium? Average repayment around 95%, except in Bulgaria (+), and Kenia (-) Video taped experiments Fehr, Kirchsteiger, Reidl: gift exchange game, labour markets

13 Fairness The results contradict selfishness, but not rationality Fehr / Schmidt; Bolten / Ockenfels: fairness preferences Key: different fairness attitude of players Game with incomplete information Shaked s critique

14 Fehr / Schmidt preferences x: my monetary payment, y: your monetary payment My utility: if x<y: u(x,y)=x-α*(y-x) (e.g. envy, spite) if x>=y: u(x,y)=y-β(x-y) (e.g. guilt) inequity aversion, not altruism! α, β vary among individuals

15 The Dalek game 88% O 7 4 I II L 2% 1% 5% 5% U A C E 9 3 L I R l R I II L r 1/2 6 6 R 1% 3% 1% 86% U A C E 9 3 L 1/2 R l I II L r 6 6 R

16 Falk Fehr Fischbacher I % 56.6% 8 2 l r l r II II L R I

17 Falk Fehr Fischbacher II % 73.3% 8 2 l r l r II II L R I

18 Neuroeconomics: The consilience of Brain and Decision The manifesto by Glimcher and Rustichini Three methodologies: St Peterburg and expected utility Framing / heuristics Reward for birds Linking the Decision Sciences Subjective desirability / Utility No definite nerve path, posterior parietal cortex Lotteries with monkeys fmri (humans)

19 Strategic thinking Inspection game Neuron that represent expected utility Beyond classical concepts The Ellsberg paradox, amiguity, ventromental prefrontal cortex The somatic marker hypothesis: emotional mechanism that stores and signals the value of future consequences of an action Strategic cooperation Sanfey: refusal of offers correlated with activity in parts of the brain relevant for disgust, goal maintenance and detection of cognitive conflict Trust game McCabe, region with interpreting and monitoring the mental states of other (empathy)

20 Their coclusions Economics, psychology and neuroscience are converging into a single, unified field