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The Investment Game With Asymmetric Information

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  • Giorgio Coricelli
  • Luis González Morales
  • Amelie Mahlstedt

Abstract

We analyze the effects of introducing asymmetric information and expectations in the investment game (Berg et al., Games and Economic Behavior, 1995, 10, 122–42). In our experiment, only the trustee knows the size of the surplus. Subjects’ expectations about each other's behavior are also elicited. Our results show that average payback levels increase with the average amount sent. Asymmetric information does not reduce the amounts sent and returned, as compared with previous experimental studies. The first movers’ choices increase with their expectations about the second movers’ payback, whose choices depend in turn on the difference between expected and actual amounts received.

Suggested Citation

  • Giorgio Coricelli & Luis González Morales & Amelie Mahlstedt, 2006. "The Investment Game With Asymmetric Information," Metroeconomica, Wiley Blackwell, vol. 57(1), pages 13-30, February.
    • Handle: RePEc:bla:metroe:v:57:y:2006:i:1:p:13-30
    DOI: 10.1111/j.1467-999X.2006.00231.x
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    2. Kiridaran Kanagaretnam & Stuart Mestelman & S. M. Khalid Nainar & Mohamed Shehata, 2012. "Trust and Reciprocity, Empowerment and Transparency," Department of Economics Working Papers 2012-12, McMaster University.
    3. Giovanni Bartolomeo & Stefano Papa, 2016. "Trust and reciprocity: extensions and robustness of triadic design," Experimental Economics, Springer;Economic Science Association, vol. 19(1), pages 100-115, March.
    4. Giovanni Di Bartolomeo & Stefano Papa, 2016. "Some Determinants of Trust Formation and Pro-social Behaviours in Investment Games: An Experimental Study," Studies in Microeconomics, , vol. 4(1), pages 13-26, June.
    5. Vladimír Gazda & Marek Gróf & Július Horváth & Matúš Kubák & Tomáš Rosival, 2012. "Agent based model of a simple economy," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 7(2), pages 209-221, October.
    6. Sokolovskyi, Dmytro & Sokolovska, Olena, 2013. "The problem of arising the Pareto inefficient norm in relations “investor – government” type," MPRA Paper 44745, University Library of Munich, Germany.
    7. Bonein, Aurélie & Serra, Daniel, 2009. "Gender pairing bias in trustworthiness," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(5), pages 779-789, October.
    8. Di Bartolomeo Giovanni & Papa Stefano, 2012. "The triadic design to identify trust and reciprocity: Extensions and robustness," wp.comunite 0096, Department of Communication, University of Teramo.
    9. Kiridaran Kanagaretnam & Stuart Mestelman & S. M. Khalid Nainar & Mohamed Shehata, 2013. "Transparency, Empowerment, Disempowerment and Trust in an Investment Environment," Department of Economics Working Papers 2013-09, McMaster University, revised Oct 2013.
    10. Rattaphon Wuthisatian & Mark Pingle & Mark Nichols, 2017. "To support trust and trustworthiness: punish, communicate, both, neither?," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 1(1), pages 61-68, February.
    11. Di Bartolomeo Giovanni & Papa Stefano & Bellomo Saverio, 2012. "Yoga beyond wellness: Meditation, trust and cooperation," wp.comunite 0095, Department of Communication, University of Teramo.
    12. Di Bartolomeo Giovanni & Papa Stefano, 2016. "Miscommunication in an investment game with one-way messages," wp.comunite 00123, Department of Communication, University of Teramo.

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    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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