Examples of Laboratory Experiments

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Presentation transcript:

Examples of Laboratory Experiments Ultimatum/Dictator Game Public Goods Game BPV_IEBE Introduction to Experimental and Behavioral Economics

Ultimatum Bargaining Game Original: Güth, Werner, Rolf Schmittberger, and Bernd Schwarze. "An experimental analysis of ultimatum bargaining." Journal of economic behavior & organization 3.4 (1982): 367-388. Two players (proposer and responder) bargain over a division of a given sum of money. proposer: makes an offer how to split the sum responder: accepts or rejects if accepted they split the money if rejected neither gets anything unique subgame perfect equilibrium the proposer suggests the responder the smallest amount possible and the responder accepts BPV_IEBE Introduction to Experimental and Behavioral Economics

Dictator Bargaining Game Original: Kahneman, Daniel, Jack L. Knetsch, and Richard H. Thaler. "Fairness and the assumptions of economics." Journal of business (1986): S285-S300. Two players (dictator and recipient) bargain over a division of a given sum of money. dictator: splits the sum recipient: is informed of endowment left by the dictator unique subgame perfect equilibrium: the dictator takes it all More about Ultimatum and Dictator Games in week 9 and 10 BPV_IEBE Introduction to Experimental and Behavioral Economics

Public Goods Game Original Marwell, Gerald, and Ruth E. Ames. "Experiments on the provision of public goods. I. Resources, interest, group size, and the free-rider problem." American Journal of sociology (1979) One of the most standard game in experimental economics. Each player contributes to common or private account. Usual: Each player gets same percentage of total private account contributions. Contributions are multiplied by a coefficient >1. The group's total payoff is maximized when everyone contributes all of their tokens to the public pool. Game equilibria is zero contribution by every player. But experimental results show a different story. Those who do not contribute are called free riders. BPV_IEBE Introduction to Experimental and Behavioral Economics

Public Goods Game Applicable on charitable giving, fundraising, transportation etc. Large contributions to public economics theory. Addaptions: Opened communication in the middle of the experiment. Possibility of punishment. People do punish (contribution => punishment) and cooperation incereases (Fehr Gächter, 2000) “Counter fire“ lowers cooperation (Nikiforakis, 2008) Stronger punishment increases contributions (Denant-Boemont, 2007) Anonymous punishment is more efficient (Denant-Boemont, 2007) More about Public Goods Game in week 7 and 8 BPV_IEBE Introduction to Experimental and Behavioral Economics