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A behavioral model for mechanism design: Individual evolutionary learning

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  • Arifovic, Jasmina
  • Ledyard, John

Abstract

Abstract We are interested in how Groves-Ledyard mechanisms perform when used repeatedly in a sequence of one-shot games where agents know only their own preferences. In particular, how fast do the mechanisms converge to the stage game Nash equilibrium and how does that speed of convergence depend on the mechanism parameter [gamma]. Prior theoretical and experimental work provide little guidance. Neither do existing behavioral models designed for small games with a small finite number of strategies. For example, even though experience weighted attraction learning is very successful in modeling behavior in one-shot games with very small, finite strategy spaces, it is not successful in modeling behavior in repeated games with a continuum strategy space unless one wants to be involved in fine tuning. We provide a behavioral model, individual evolutionary learning. The time to first convergence is predicted to be smooth and U-shaped in [gamma]. These predictions are robust to a wide range of parameter values. To test the IEL predictions, we ran our own experiments at the California Institute of Technology. Qualitatively, the data from those experiments are consistent with the IEL predictions about convergence and the U-shaped curve. Quantitatively, the human subjects are a little faster, a little less stable, and slightly less efficient than IEL. But for [gamma]Â =Â 50 and 100, the differences between humans and IEL are very small.

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  • Arifovic, Jasmina & Ledyard, John, 2011. "A behavioral model for mechanism design: Individual evolutionary learning," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 374-395, May.
  • Handle: RePEc:eee:jeborg:v:78:y:2011:i:3:p:374-395
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jasmina Arifovic & John Ledyard, 2012. "Individual Evolutionary Learning, Other-regarding Preferences, and the Voluntary Contributions Mechanism," Discussion Papers wp12-01, Department of Economics, Simon Fraser University.
    2. Dietrichson, Jens, 2013. "Coordination Incentives, Performance Measurement and Resource Allocation in Public Sector Organizations," Working Papers 2013:26, Lund University, Department of Economics.
    3. Mikhail Anufriev & Jasmina Arifovic & John Ledyard & Valentyn Panchenko, 2013. "Efficiency of continuous double auctions under individual evolutionary learning with full or limited information," Journal of Evolutionary Economics, Springer, vol. 23(3), pages 539-573, July.
    4. Jasmina Arifovic & John Duffy & Janet Hua Jiang, 2017. "Adoption of a New Payment Method: Theory and Experimental Evidence," Staff Working Papers 17-28, Bank of Canada.
    5. Jasmina Arifovic & John Duffy & Janet Jiang, 2017. "Adoption of a New Payment System: Theory and Experimental Evidence," Working Papers 171801, University of California-Irvine, Department of Economics.
    6. Giulio Bottazzi & Pietro Dindo, 2013. "Evolution and market behavior in economics and finance: introduction to the special issue," Journal of Evolutionary Economics, Springer, vol. 23(3), pages 507-512, July.
    7. Liu, Jia & Riyanto, Yohanes Eko & Zhang, Ruike, 2017. "How Large Should the “Bullets” be? Dissecting the Role of Unilateral and Tie Punishment in the Provision of Public Goods," MPRA Paper 80388, University Library of Munich, Germany.
    8. Arifovic, Jasmina & Ledyard, John, 2012. "Individual evolutionary learning, other-regarding preferences, and the voluntary contributions mechanism," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 808-823.
    9. Gars, Jared & Ward, Patrick S., 2016. "The role of learning in technology adoption: Evidence on hybrid rice adoption in Bihar, India," IFPRI discussion papers 1591, International Food Policy Research Institute (IFPRI).
    10. Healy, Paul J. & Mathevet, Laurent, 2012. "Designing stable mechanisms for economic environments," Theoretical Economics, Econometric Society, vol. 7(3), September.
    11. Xiaochuan Huang & Takehito Masuda & Yoshitaka Okano & Tatsuyoshi Saijo, 2014. "Cooperation among behaviorally heterogeneous players in social dilemma with stay or leave decisions," Working Papers SDES-2014-7, Kochi University of Technology, School of Economics and Management, revised Feb 2015.
    12. Alejandro Lee-Penagos, 2016. "Modelling Contributions in Public Good Games with Punishment," Discussion Papers 2016-15, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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