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Loss avoidance as selection principle: Evidence from simple stag-hunt games

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  • Rydval, Ondrej
  • Ortmann, Andreas

Abstract

We investigate experimentally the conjecture that loss avoidance solves the tension in stag-hunt games for which payoff dominance and risk dominance make conflicting predictions. Contrary to received textbook wisdom, money-losing outcomes do shift behavior, albeit not strongly, toward the payoff-dominant equilibrium.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 88 (2005)
Issue (Month): 1 (July)
Pages: 101-107

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Handle: RePEc:eee:ecolet:v:88:y:2005:i:1:p:101-107

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  1. Jacob K Goeree & Charles A Holt, 2004. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," Levine's Working Paper Archive 618897000000000900, David K. Levine.
  2. Schmidt, Ulrich & Traub, Stefan, 2002. " An Experimental Test of Loss Aversion," Journal of Risk and Uncertainty, Springer, vol. 25(3), pages 233-49, November.
  3. Bertrand, Marianne & Mullainathan, Sendhil, 2003. "Enjoying the Quiet Life? Corporate Governance and Managerial Preferences," Scholarly Articles 3429713, Harvard University Department of Economics.
  4. Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May.
  5. Ballinger, T Parker & Wilcox, Nathaniel T, 1997. "Decisions, Error and Heterogeneity," Economic Journal, Royal Economic Society, vol. 107(443), pages 1090-1105, July.
  6. Cachon, Gerard P & Camerer, Colin F, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 165-94, February.
  7. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  8. Glenn W. Harrison & Eric Johnson & Melayne M. McInnes & E. Elisabet Rutstr´┐Żm, 2005. "Risk Aversion and Incentive Effects: Comment," American Economic Review, American Economic Association, vol. 95(3), pages 897-901, June.
  9. Ondrej Rydval & Andreas Ortmann, 2004. "Loss avoidance as selection principle: evidence from simple stag-hunt games," CERGE-EI Working Papers wp245, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  10. Van Huyck, John B. & Gillette, Ann B. & Battalio, Raymond C., 1992. "Credible assignments in coordination games," Games and Economic Behavior, Elsevier, vol. 4(4), pages 606-626, October.
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