Browsing UA Faculty Research by Subjects
Now showing items 1-4 of 4
Contests with money and time: Experimental evidence on overbidding in all-pay auctionsCompetition for a prize frequently takes the form of dedicating time toward winning a contest. Those who spend more time become more likely to obtain the prize. We model this competition as an all-pay auction under incomplete information, and report an experiment in which expenditures and rewards are in terms of time. In the experiment, subjects must stay in the laboratory doing nothing for an initially prespecified length of time. However, they can bid, in terms of time, to leave early. The auction has an all-pay structure, so that if an individual does not submit the highest bid within her group, she must stay for the additional time that she bid. We correlate behavior in this game with behavior in an isomorphic all-pay auction played with money bids. We also consider how two measures of sophistication, the Cognitive Reflection Test (CRT) score, and performance on a probability calibration task, correlate with behavior. We find strong similarities in overall behavior between the auctions conducted with money and with time. Bidding greater than equilibrium levels is typical, and as a consequence, average earnings are negative in both auctions. Thus, the result that there is overdissipation of rent in all-pay auctions extends to competition in terms of time. (C) 2020 Elsevier B.V. All rights reserved.
Do people maximize quantiles?Quantiles are used for decision making in investment analysis and in the mining, oil and gas industries. However, it is unknown how common quantile-based decision making actually is among typical individual decision makers. This paper describes an experiment that aims to (1) compare how common is decision making based on quantiles relative to expected utility maximization, and (2) estimate risk attitude parameters under the assumption of quantile preferences. The experiment has two parts. In the first part, individuals make pairwise choices between risky lotteries, and the competing models are fitted to the choice data. In the second part, we directly elicit a decision rule from a menu of alternatives. The results show that a quantile preference model outperforms expected utility for 32%–55%, of participants, depending on the metric. The majority of individuals are risk averse, and women are more risk averse than men, under both models.
Strategic retailers and myopic consumers: Competitive pricing of perishable goodsWe present an experimental study of dynamic pricing in which two retailers compete to sell perishable goods over a finite horizon. Consumers arrive at the market one at a time and remain there for a single period. Each consumer compares the two simultaneously posted prices, one by each retailer, and then decides probabilistically whether to purchase the good from Retailer 1, from Retailer 2, or not purchase it at all. The competing retailers are assigned to one of three between-subject experimental conditions. In one condition they start each session with equal inventories and in two other conditions with unequal inventories. Following a short learning period, equilibrium best-response solutions, which serve as benchmarks for our analysis, account well for the mean posted prices; however, small but systematic deviations from equilibrium play significantly diminish the retailers’ profits. These deviations decrease considerably in size with experience.
When a few undermine the whole: A class of social dilemmas in ridesharingWe investigate a class of social dilemmas that arise when a heterogeneous group of agents potentially benefit from a joint enterprise such as ridesharing. Participation in the enterprise incurs positive externalities to other participants; social welfare is maximized with full participation. However, if some agents find it a dominant strategy to opt out, then the potential benefit from the enterprise will decrease, leading to more members opting out. This iterated disincentivizing effect could result in massive welfare losses. We construct a game-theoretical model to implement these social dilemmas and report experimental evidence for their existence and welfare impact. (C) 2019 Elsevier B.V. All rights reserved.