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

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  • Kaushik Basuy
  • Leonardo Becchetti
  • Luca Stanca

    ()

Abstract

This paper investigates behavior in the Traveler's Dilemma game and isolates deviations from textbook predictions caused by di®erences 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 ¯nd that the change in own bonus-penalty alone entirely explains the e®ect 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 signi¯cant negative e®ect on claims when the own bonus-penalty is low, whereas it does not have a signi¯cant e®ect when the own bonus-penalty is high. We also ¯nd that expected claims are inconsistent with actual claims in the asymmetric treatments. Focus- ing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are to a large extent explained by risk aversion.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper147.pdf
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 147.

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Length: 37 pages
Date of creation: Oct 2008
Date of revision: Oct 2008
Handle: RePEc:mib:wpaper:147

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References

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  7. Kaushik Basuy & Leonardo Becchetti & Luca Stanca, 2008. "Experiments with the Traveler's Dilemma: Welfare, Strategic Choice and Implicit Collusion," Working Papers 147, University of Milano-Bicocca, Department of Economics, revised Oct 2008.
  8. Miguel A. Costa-Gomes & Georg Weizsäcker, 2004. "Stated Beliefs and Play in Normal Form Games," Levine's Bibliography 122247000000000236, UCLA Department of Economics.
  9. 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.
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  22. Zambrano Eduardo, 2004. "Counterfactual Reasoning and Common Knowledge of Rationality in Normal Form Games," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 4(1), pages 1-25, November.
  23. Pfajfar, D. & Zakelj, B., 2009. "Experimental Evidence on Inflation Expectation Formation (Replaced by CentER DP 2011-091)," Discussion Paper 2009-007, Tilburg University, Center for Economic Research.
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Citations

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Cited by:
  1. Basu, Kaushik & Becchetti, Leonardo & Stanca, Luca, 2008. "Experiments with the Traveler's Dilemma: Welfare, Strategic Choice and Implicit Collusion," Working Papers 08-07, Cornell University, Center for Analytic Economics.
  2. Andrea Morone & Piergiuseppe Morone, 2012. "Individual and Group Behaviours in the Traveller's Dilemma: An Experimental Study," Working Papers 2012/09, Economics Department, Universitat Jaume I, Castellón (Spain).
  3. Rodrigo Moro & Esteban Freidin & Fernando Tohmé & Marcelo Auday, 2011. "La teoría de juegos conductual, el dilema del viajero alternativo y la maximización de pagos," Estudios de Economia, University of Chile, Department of Economics, vol. 38(2 Year 20), pages 457-473, December.

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