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Games played through agents in the laboratory: A test of Prat & Rustichini's model

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  • Ensthaler, Ludwig
  • Huck, Steffen
  • Leutgeb, Johannes

Abstract

From the regulation of sports to lawmaking in parliament, in many situations one group of people ("agents") makes decisions that affect payoffs of others ("principals") who are inactive. As the principals have a stake in the agents' decisions they face an incentive to offer payments in order to sway their decisions. Prat and Rustichini (2003) characterize pure-strategy equilibria of such Games Played Through Agents, in which principals commit to action-contingent transfers to agents. Specifically, they predict the equilibrium outcome in pure strategies to be efficient under some conditions. With field data hard to come by, we test the theory in a series of experimental treatments with human principals and computerized agents. The theory explains the data remarkably well. Subjects predominantly offer payments that implement efficient outcomes. In some treatments offers fall short of equilibrium predictions though. These minor deviations from equilibrium behavior are explored in a quantal response equilibrium framework.

Suggested Citation

  • Ensthaler, Ludwig & Huck, Steffen & Leutgeb, Johannes, 2016. "Games played through agents in the laboratory: A test of Prat & Rustichini's model," Discussion Papers, Research Unit: Economics of Change SP II 2016-305, Social Science Research Center Berlin (WZB).
  • Handle: RePEc:zbw:wzbeoc:spii2016305
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    References listed on IDEAS

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    1. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2002. "Quantal Response Equilibrium and Overbidding in Private-Value Auctions," Journal of Economic Theory, Elsevier, vol. 104(1), pages 247-272, May.
    2. Toke S. Aidt & Uk Hwang, 2008. "On the Internalization of Cross-National Externalities through Political Markets: The Case of Labour Standards," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 509-533, September.
    3. Andrea Prat & Aldo Rustichini, 2003. "Games Played Through Agents," Econometrica, Econometric Society, vol. 71(4), pages 989-1026, July.
    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.
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    More about this item

    Keywords

    games played through agents; experiment; quantal response equilibrium;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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