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Hypothetical Thinking and Information Extraction in the Laboratory

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  • Ignacio Esponda Jr.
  • Emanuel Vespa Jr.

Abstract

In several common-value environments (e.g., auctions or elections), players should make informational inferences from opponents' strategies under certain hypothetical events (e.g., winning the auction or being pivotal). We design a voting experiment that identifies whether subjects make these inferences and distinguishes between hypothetical thinking and information extraction. Depending on feedback, between 50 and 80 percent of subjects behave non-optimally. More importantly, these mistakes are driven by difficulty in extracting information from hypothetical, but not from actual, events. Mistakes are robust to experience and hints, and also arise in more general settings where players have no private information.

Suggested Citation

  • Ignacio Esponda Jr. & Emanuel Vespa Jr., 2014. "Hypothetical Thinking and Information Extraction in the Laboratory," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 180-202, November.
    • Handle: RePEc:aea:aejmic:v:6:y:2014:i:4:p:180-202
    Note: DOI: 10.1257/mic.6.4.180
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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