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

  • Kaushik Basuy
  • Leonardo Becchetti
  • Luca Stanca

    ()

This paper investigates behavior in the Traveler's Dilemma game and isolates deviations from textbook predictions caused by di®erences 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 ¯nd that the change in own bonus-penalty alone entirely explains the e®ect 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 signi¯cant negative e®ect on claims when the own bonus-penalty is low, whereas it does not have a signi¯cant e®ect when the own bonus-penalty is high. We also ¯nd that expected claims are inconsistent with actual claims in the asymmetric treatments. Focus- ing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are to a large extent explained by risk aversion.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper147.pdf
File Function: First version, 2008
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 147.

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Length: 37 pages
Date of creation: Oct 2008
Date of revision: Oct 2008
Handle: RePEc:mib:wpaper:147
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  1. 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.
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  11. 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.
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  16. Blanco, Mariana & Engelmann, Dirk & Koch, Alexander K. & Normann, Hans-Theo, 2008. "Belief Elicitation in Experiments: Is there a Hedging Problem?," IZA Discussion Papers 3517, Institute for the Study of Labor (IZA).
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  27. repec:bla:restud:v:76:y:2009:i:4:p:1461-1489 is not listed on IDEAS
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