Essays in Experimental Methodology

Abstract

This thesis focuses on questions about experimental methodology, examining novel treatments and subjects’ understanding of experimental environments. The first chapter examines differences between the traditional discounted model of repeated Prisoner’s Dilemmas used in the theory, and the random termination model used in the laboratory. Under relatively general assumptions, the threshold δ ∗ -value, above which cooperation can be supported as a subgame perfect equilibrium, varies based on subject’s specific utility function under random termination, but not under discounting. To test this, a new experimental design was created that captures features of the infinite horizon discounting model absent in random termination Using a between-subject, subjects played six repeated Prisoner’s Dilemmas at δ = 0.98, and either the new treatment or random termination. Cooperation rates were higher in the random termination treatment. Maximum likelihood estimation was used to determine what repeated games strategies subjects used during this experiment. Subjects in the discounted treatment tended to use more defective, yet forgiving strategies, while subjects in the random termination treatment used more cooperative yet less forgiving strategies. This finding suggests that more work needs to be done to understand the differences between random termination and discounting The second chapter further examines the differences between these two treatments. One specific channel that could created a difference in behavior between random termination and discounting is subject’s risk attitude. Using the theory model from chapter one, the threshold δ ∗ -value, above which cooperation can be supported as a subgame perfect equilibrium, varies based on subject’s risk attitude in random termination, but is independent of subject’s risk attitude under discounting. Using a within-subject design, subjects played 32 unique supergames. Each supergame featured either this new treatment or random termination, one of eight distinct δ-values, and one of two different game matrices. This experiment was used to determine if risk attitude caused subjects’ decision making to differ between the two settings. First period cooperation rates did not differ between the two treatments, even though differences were predicted by the risk attitudes elicited. Subjects’ behavior did vary in more complex ways, though risk attitude did not explain these differences. The final chapter examines the influence of pre-experiment tasks on subject understanding. This experiment used a 2x2 design varying the type of instructions and whether or not the pre-experiment quiz was incentivized. One set of instructions was based on instructions used in prior studies. The other was written using techniques from the Multi-Media Learning literature, which aims to find ways to maximize subject understanding from instruction. After the pre-experiment procedures, subjects participated in ten modified BDM selling markets with induced values. High ability subjects in this experiment showed higher understanding of the BDM mechanism after receiving Multi- Media Learning instructions compared to Standard instructions. This was true in both the first market, and across all markets. Incentivizing the quiz had a negligible impact on subject understanding.