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

  • Basu, Kaushik

    (Cornell University)

  • Becchetti, Leonardo

    (University of Rome-Tor Vergata)

  • Stanca, Luca

    (University of Milan Bicocca)

This paper investigates behavior in the Traveler's Dilemma game and isolates deviations from textbook predictions caused by differences 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 find that the change in own bonus-penalty alone entirely explains the effect 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 significant negative effect on claims when the own bonus-penalty is low, whereas it does not have a significant effect when the own bonus-penalty is high. We also find that expected claims are inconsistent with actual claims in the asymmetric treatments. Focusing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are largely explained by risk aversion.

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Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 08-07.

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Date of creation: Oct 2008
Date of revision:
Handle: RePEc:ecl:corcae:08-07
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  1. Theo Offerman & Joep Sonnemans & Gijs Van De Kuilen & Peter P. Wakker, 2009. "A Truth Serum for Non-Bayesians: Correcting Proper Scoring Rules for Risk Attitudes ," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1461-1489.
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  6. Basu, Kaushik, 2003. "Prelude to Political Economy: A Study of the Social and Political Foundations of Economics," OUP Catalogue, Oxford University Press, number 9780199261857.
  7. Jacob K. Goeree & Charles A. Holt, 2000. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," Virginia Economics Online Papers 333, University of Virginia, Department of Economics.
  8. Miguel A. Costa-Gomes & Georg Weizs�cker, 2008. "Stated Beliefs and Play in Normal-Form Games," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 729-762.
  9. Croson, Rachel T. A., 2000. "Thinking like a game theorist: factors affecting the frequency of equilibrium play," Journal of Economic Behavior & Organization, Elsevier, vol. 41(3), pages 299-314, March.
  10. Kaushik Basu & Leonardo Becchetti & Luca Stanca, 2011. "Experiments with the Traveler’s Dilemma: welfare, strategic choice and implicit collusion," Social Choice and Welfare, Springer, vol. 37(4), pages 575-595, October.
  11. Simon Gaechter & Elke Renner, 2010. "The effects of (incentivized) belief elicitation in public goods experiments," Discussion Papers 2010-12, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  12. Susana Cabrera & C. Monica Capra & Rosario Gomez, 2005. "Introspection in One-shot Traveler's Dilemma Games," Emory Economics 0504, Department of Economics, Emory University (Atlanta).
  13. Miguel A. Costa-Gomes & Georg Weizsäcker, 2004. "Stated Beliefs and Play in Normal-Form Games," ISER Discussion Paper 0614, Institute of Social and Economic Research, Osaka University.
  14. Terrance Hurley & Jason Shogren, 2005. "An Experimental Comparison of Induced and Elicited Beliefs," Journal of Risk and Uncertainty, Springer, vol. 30(2), pages 169-188, January.
  15. C. Monica Capra, 1999. "Anomalous Behavior in a Traveler's Dilemma?," American Economic Review, American Economic Association, vol. 89(3), pages 678-690, June.
  16. Pfajfar, D. & Zakelj, B., 2014. "Experimental evidence on inflation expectation formation," Other publications TiSEM f337739d-e15a-4461-a461-8, Tilburg University, School of Economics and Management.
  17. 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.
  18. Susana Cabrera & C. Capra & Rosario Gómez, 2007. "Behavior in one-shot traveler’s dilemma games: model and experiments with advice," Spanish Economic Review, Springer, vol. 9(2), pages 129-152, June.
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  24. repec:bla:restud:v:76:y:2009:i:4:p:1461-1489 is not listed on IDEAS
  25. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  26. 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.
  27. Bhatt, Meghana & Camerer, Colin F., 2005. "Self-referential thinking and equilibrium as states of mind in games: fMRI evidence," Games and Economic Behavior, Elsevier, vol. 52(2), pages 424-459, August.
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