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Resolute Choice in interaction: a qualitative experiment

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  • Lotito, Gianna

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Abstract

The purpose of this paper is that of extending the model of Resolute Choice (McClennen 1990) to a situation of interaction and comparing its performance with the Sophisticated-subgame perfect equilibrium model in an experiment. A non-cooperative game in which two players with different preference orderings over outcomes move sequentially is adopted as a framework to compare the two models. I consider those combinations of the players' preference structures which generate the different plans and find those game situations where either one or two outcomes Pareto-dominant over Sophisticated Choice exist. Two definitions of Resolute Choice are therefore tested, which allow to discriminate choice between two different Pareto dominant outcomes. In the experiment three games with the same structure but different payoffs are played. The design allows preliminary group discussion among the players about the decisions to be taken, which is taped and transcribed. The results show support for Resolute Choice as Pareto dominance, while the ability of Resolute Choice as Nash bargaining to explain behaviour is quite limited. The subjects' motivations are very useful in interpreting the results. They show that choice for a Pareto dominant outcome is mainly driven by the idea of Pareto optimality itself. Motivations differ slightly according to which strategy is chosen to reach one of the Pareto dominant outcomes. A result to be noted is the relevance of the different payoffs of the games in motivating choice. The method used in the experiment to elicit the subjects' responses is the strategy method. A direct consequence is that the results are all in terms of strategies chosen by subjects. In view of this, an alternative way to look at the experiment results has been tried, which consists in a simulation of the outcomes of the games that would have resulted from direct interaction among the players. The results have then been compared to the ones from the experiment.

Suggested Citation

  • Lotito, Gianna, 2007. "Resolute Choice in interaction: a qualitative experiment," POLIS Working Papers 94, Institute of Public Policy and Public Choice - POLIS.
  • Handle: RePEc:uca:ucapdv:94
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    File URL: http://polis.unipmn.it/pubbl/RePEc/uca/ucapdv/lotito104.pdf
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    References listed on IDEAS

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    1. Hammond, Peter J, 1977. "Dynamic Restrictions on Metastatic Choice," Economica, London School of Economics and Political Science, vol. 44(176), pages 337-350, November.
    2. Hammond, Peter J, 1989. "Consistent Plans, Consequentialism, and Expected Utility," Econometrica, Econometric Society, vol. 57(6), pages 1445-1449, November.
    3. Paul A. Grout, 1982. "Welfare Economics of Decision Making with Changing Preferences," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 83-90.
    4. Hammond, P.J. & , ., 1987. "Consequentialist foundations for expected utility," CORE Discussion Papers 1987016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Peter J. Hammond, 1976. "Changing Tastes and Coherent Dynamic Choice," Review of Economic Studies, Oxford University Press, vol. 43(1), pages 159-173.
    6. Edi Karni & Zvi Safra, 1989. "Dynamic Consistency, Revelations in Auctions and the Structure of Preferences," Review of Economic Studies, Oxford University Press, vol. 56(3), pages 421-433.
    7. Timothy N. Cason & Vai-Lam Mui, 1998. "Social Influence in the Sequential Dictator Game," Monash Economics Working Papers archive-37, Monash University, Department of Economics.
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    Cited by:

    1. Stefania Ottone & Ferruccio Ponzano, 2011. "How people perceive the Welfare State: a real-effort experiment," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 58(2), pages 165-183, June.
    2. Privileggi, Fabio, 2007. "The cutoff policy of taxation when CRRA taxpayers differ in risk aversion coefficients and income: a proof," POLIS Working Papers 99, Institute of Public Policy and Public Choice - POLIS.
    3. Ticchi, Davide & Vindigni, Andrea, 2007. "War and endogenous democracy," POLIS Working Papers 97, Institute of Public Policy and Public Choice - POLIS.
    4. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2010. "A Theory of Military Dictatorships," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 1-42, January.
    5. Marchese, Carla, 2008. "The limits to growth then and now," POLIS Working Papers 105, Institute of Public Policy and Public Choice - POLIS.
    6. Montefiori, Marcello & Resta, Marina, 2008. "Social influence and neighbourhood effects in the health care market," POLIS Working Papers 98, Institute of Public Policy and Public Choice - POLIS.
    7. Piero Cavaleri & Michael Keren & Giovanni B. Ramello & Vittorio Valli, 2009. "Publishing an E-Journal on a Shoe String: Is It a Sustainable Project?," Economic Analysis and Policy, Elsevier, vol. 39(1), pages 89-101, March.

    More about this item

    Keywords

    dynamic decision making; myopia; sophistication; resoluteness; non-cooperative game;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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