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What drives failure to maximize payoffs in the lab? A test of the inequality aversion hypothesis

  • Nicolas Jacquemet

    ()

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II)

  • Adam Zylbersztejn

    ()

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Experiments based on the Beard and Beil (1994) two-player coordination game robustly show that coordination failures arise as a result of two puzzling behaviors: (i) subjects are not willing to rely on others' self-interested maximization, and (ii) self-interested maximization is not ubiquitous. Such behavior is often considered to challenge the relevance of subgame perfectness as an equilibrium selection criterion, since weakly dominated strategies are actually used. We report on new experiments investigating whether inequality in payoffs between players, maintained in most lab implementations of this game, drives such behavior. Our data clearly show that the failure to maximize personal payoffs, as well as the fear that others might act this way, do not stem from inequality aversion. This result is robust to varying the saliency of decisions, repetition-based learning and cultural differences between France and Poland.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-01026080.

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Date of creation: 2014
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Publication status: Published, Review of Economic Design, 2014, Forthcoming
Handle: RePEc:hal:cesptp:halshs-01026080
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-01026080
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  1. Gary Charness & Brit Grosskopf, 1999. "Relative payoffs and happiness: An experimental study," Economics Working Papers 436, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2000.
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  5. Nicolas Jacquemet & Adam Zylbersztejn, 2010. "Learning, words and actions : experimental evidence on coordination-improving information," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00505164, HAL.
  6. Blanco, Mariana & Engelmann, Dirk & Normann, Hans-Theo, 2010. "A within-subject analysis of other-regarding preferences," DICE Discussion Papers 06, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  7. Chou, Eileen & McConnell, Margaret & Nagel, Rosemarie & Plott, Charles R., 2007. "The control of game form recognition in experiments: Understanding dominant strategy failures in a simple two person “Guessing” game," Working Papers 1274, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
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  10. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  11. Rosenthal, Robert W., 1981. "Games of perfect information, predatory pricing and the chain-store paradox," Journal of Economic Theory, Elsevier, vol. 25(1), pages 92-100, August.
  12. Nicolas Jacquemet & Stephane Luchini & Robert-Vincent Joule & Jason Shogren, 2008. "Earned Wealth, Engaged Bidders? Evidence from a second price auction," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00277283, HAL.
  13. Willinger, Marc & Keser, Claudia & Lohmann, Christopher & Usunier, Jean-Claude, 2003. "A comparison of trust and reciprocity between France and Germany: Experimental investigation based on the investment game," Journal of Economic Psychology, Elsevier, vol. 24(4), pages 447-466, August.
  14. Nicolas Jacquemet & Robert-Vincent Joule & Stephane Luchini & Jason Shogren, 2009. "Earned wealth, engaged bidders? Evidence from a second price auction," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00429894, HAL.
  15. Engelmann Dirk & Strobel Martin, 2002. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," Research Memorandum 015, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  16. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2007. "Bootstrap-Based Improvements for Inference with Clustered Errors," NBER Technical Working Papers 0344, National Bureau of Economic Research, Inc.
  17. Jeffrey M. Wooldridge, 2003. "Cluster-Sample Methods in Applied Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 133-138, May.
  18. Nicolas Jacquemet & Adam Zylbersztejn, 2013. "Learning, Words and Actions: Experimental Evidence on Coordination-Improving Information," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00845123, HAL.
  19. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  20. Chmura, Thorsten & Kube, Sebastian & Pitz, Thomas & Puppe, Clemens, 2005. "Testing (beliefs about) social preferences: Evidence from an experimental coordination game," Economics Letters, Elsevier, vol. 88(2), pages 214-220, August.
  21. Beard, T Randolph & Beil, Richard O, Jr & Mataga, Yoshiharu, 2001. "Reliant Behavior in the United States and Japan," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 270-79, April.
  22. repec:hal:cesptp:halshs-00845123 is not listed on IDEAS
  23. Jacquemet, Nicolas & Joule, Robert-Vincent & Luchini, Stéphane & Shogren, Jason F., 2009. "Earned wealth, engaged bidders? Evidence from a second-price auction," Economics Letters, Elsevier, vol. 105(1), pages 36-38, October.
  24. Jacquemet Nicolas & Zylbersztejn Adam, 2013. "Learning, Words and Actions: Experimental Evidence on Coordination-Improving Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 33, July.
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