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Experiments with the Traveler's Dilemma: Welfare, Strategic Choice and Implicit Collusion

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Author Info
Basu, Kaushik (Cornell University)
Becchetti, Leonardo (University of Rome-Tor Vergata)
Stanca, Luca (University of Milan Bicocca)

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Abstract

This paper investigates behavior in the Traveler's Dilemma game and isolates deviations from textbook predictions caused by differences in welfare perceptions and strategic miscalculations. It presents the results of an experimental analysis based on a 2x2 design where the own and the other subject's bonus-penalty parameters are changed independently. We find that the change in own bonus-penalty alone entirely explains the effect on claims of a simultaneous change in one's own and the other's bonus-penalty. An increase in the other subject's bonus-penalty has a significant negative effect on claims when the own bonus-penalty is low, whereas it does not have a significant effect when the own bonus-penalty is high. We also find that expected claims are inconsistent with actual claims in the asymmetric treatments. Focusing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are largely explained by risk aversion.

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Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 08-07.

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Date of creation: Oct 2008
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Handle: RePEc:ecl:corcae:08-07

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  1. Ariel Rubinstein, 2006. "Dilemmas of an Economic Theorist," Econometrica, Econometric Society, vol. 74(4), pages 865-883, 07. [Downloadable!] (restricted)
  2. Tilman Becker & Michael Carter & Jörg Naeve, 2005. "Experts Playing the Traveler's Dilemma," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 252/2005, Department of Economics, University of Hohenheim, Germany. [Downloadable!]
  3. C. Monica Capra et al., 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June. [Downloadable!] (restricted)
  4. Susana Cabrera & C. Capra & Rosario Gómez, 2007. "Behavior in one-shot traveler’s dilemma games: model and experiments with advice," Spanish Economic Review, Springer, vol. 9(2), pages 129-152, June. [Downloadable!] (restricted)
  5. Susana Cabrera & C. Mónica Capra & Rosario Gómez, 2005. "Introspection in one-shot traveler’s dilemma games," Emory Economics 0504, Department of Economics, Emory University (Atlanta). [Downloadable!]
  6. C. Monica Capra & Susana Cabrera & Rosario Gómez, 2003. "The Effects of Common Advice on One-shot Traveler’s Dilemma Games: Explaining Behavior through an Introspective Model with Errors," Economic Working Papers at Centro de Estudios Andaluces E2003/17, Centro de Estudios Andaluces. [Downloadable!]
  7. Basu, Kaushik, 1994. "The Traveler's Dilemma: Paradoxes of Rationality in Game Theory," American Economic Review, American Economic Association, vol. 84(2), pages 391-95, May. [Downloadable!] (restricted)
  8. Jacob K. Goeree & Charles A. Holt, 2000. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," Virginia Economics Online Papers 333, University of Virginia, Department of Economics. [Downloadable!]
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  9. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June. [Downloadable!] (restricted)
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