IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The compromise game: Two-sided adverse selection in the laboratory

Listed author(s):
  • Carrillo, Juan D.
  • Palfrey, Thomas R.

We analyze a game of two-sided private information characterized by extreme adverse selection, and study a special case in the laboratory. Each player has a privately known "strength" and can decide to fight or compromise. If either chooses to fight, there is a conflict; the stronger player receives a high payoff and the weaker player receives a low payoff. If both choose to compromise, conflict is avoided and each receives an intermediate payoff. The only equilibrium in both the sequential and simultaneous versions of the game is for players to always fight, independent of their own strength. In our experiment, we observe among other things (i) frequent compromise, (ii) little evidence of learning, and (iii) different behaviour between first, second and simultaneous movers. We explore several models in an attempt to understand the reasons underlying these anomalous choices, including quantal response equilibrium, cognitive hierarchy, and cursed equilibrium.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.hss.caltech.edu/SSPapers/sswp1259.pdf
Download Restriction: no

Paper provided by California Institute of Technology, Division of the Humanities and Social Sciences in its series Working Papers with number 1259.

as
in new window

Length: 44 pages
Date of creation: Dec 2006
Handle: RePEc:clt:sswopa:1259
Contact details of provider: Postal:
Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125

Phone: 626 395-4065
Fax: 626 405-9841
Web page: http://www.hss.caltech.edu/ss
Email:

Order Information: Postal: Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Philippe Jehiel & Frederic Koessler, 2005. "Revisiting Games of Incomplete Information with Analogy-Based Expectations," THEMA Working Papers 2005-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  2. Colin F. Camerer & Thomas R. Palfrey & Brian W. Rogers, 2006. "Heterogeneous Quantal Response Equilibrium," Levine's Bibliography 321307000000000193, UCLA Department of Economics.
  3. Dekel, E. & Piccione, M., 1999. "Sequential Voting Procedures in Symmetric Binary Elections," Papers 3-99, Tel Aviv.
  4. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
  5. Erik Eyster & Matt Rabin, 2003. "Cursed Equilibrium," Method and Hist of Econ Thought 0303002, EconWPA.
  6. Vincent P. Crawford & Nagore Iriberri, 2005. "Level-k Auctions: Can a Non-Equilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?," Levine's Bibliography 784828000000000604, UCLA Department of Economics.
  7. Vincent P. Crawford & Miguel A. Costa-Gomes, 2006. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 96(5), pages 1737-1768, December.
  8. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2004. "Regular quantal response equilibrium," Working Papers 1203, California Institute of Technology, Division of the Humanities and Social Sciences.
  9. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
  10. Alessandra Casella & Andrew Gelman & Thomas R. Palfrey, 2003. "An Experimental Study of Storable Votes," NBER Working Papers 9982, National Bureau of Economic Research, Inc.
  11. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
  12. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
  13. Robert Forsythe & R. Mark Isaac & Thomas R. Palfrey, 1989. "Theories and Tests of "Blind Bidding" in Sealed-Bid Auctions," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 214-238, Summer.
  14. Ernst Fehr & Klaus M. Schmidt, "undated". "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  15. Philippe Jehiel, 2005. "Analogy-Based Expectation Equilibrium," Levine's Bibliography 784828000000000106, UCLA Department of Economics.
  16. Richard Mckelvey & Thomas Palfrey, 1998. "Quantal Response Equilibria for Extensive Form Games," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 9-41, June.
  17. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
  18. Dale O. Stahl & Paul W. Wilson, 2010. "On Players' Models of Other Players: Theory and Experimental Evidence," Levine's Working Paper Archive 542, David K. Levine.
  19. Colin F. Camerer & Teck-Hua Ho & Juin-Kuan Chong, 2004. "A Cognitive Hierarchy Model of Games," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 861-898.
  20. Holt, Charles A & Sherman, Roger, 1994. "The Loser's Curse," American Economic Review, American Economic Association, vol. 84(3), pages 642-652, June.
  21. Morris, Stephen, 1994. "Trade with Heterogeneous Prior Beliefs and Asymmetric Information," Econometrica, Econometric Society, vol. 62(6), pages 1327-1347, November.
Full references (including those not matched with items on IDEAS)

This item is featured on the following reading lists or Wikipedia pages:

  1. The Compromise Game: Two-Sided Adverse Selection in the Laboratory (AEJ:MI 2009) in ReplicationWiki

When requesting a correction, please mention this item's handle: RePEc:clt:sswopa:1259. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victoria Mason)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.