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

Listed author(s):
  • Ensthaler, Ludwig
  • Huck, Steffen
  • Leutgeb, Johannes

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.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Economics of Change with number SP II 2016-305.

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Date of creation: 2016
Handle: RePEc:zbw:wzbeoc:spii2016305
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  1. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, January.
  2. 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.
  3. 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.
  4. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
  5. Andrea Prat & Aldo Rustichini, 2003. "Games Played Through Agents," Econometrica, Econometric Society, vol. 71(4), pages 989-1026, July.
  6. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
  7. Bordignon, Massimo & Colombo, Luca & Galmarini, Umberto, 2008. "Fiscal federalism and lobbying," Journal of Public Economics, Elsevier, vol. 92(12), pages 2288-2301, December.
  8. 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.
  9. Per Fredriksson & Daniel Millimet, 2007. "Legislative Organization and Pollution Taxation," Public Choice, Springer, vol. 131(1), pages 217-242, April.
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