Research - Abstracts

Journal Articles (hide abstracts)

Risk aversion and information aggregation in asset markets
(with Filippin), 2021, Quantitative Economics (forthcoming)
We investigate how risk aversion (RA) shapes the informative content of prices in an experimental asset market, where traders are sorted according to their RA. RA should induce steeper individual demands and drive equilibrium prices closer to revealing the state. Results support the prediction on individual demands, but disprove the prediction on prices, which do not vary with RA and are close to the risk-neutral benchmark. This purported conflict is due to traders, particularly the more risk-averse ones, conveying into prices only part of their information. We claim this attitude may represent a suboptimal way to express one's RA.
see paper, replication package
Strategic Complexity and Cognitive Skills affect Brain Response in Interactive Decision-Making
(with Reverberi, Pischedda, Heynes and Rustichini), 2022, Scientific Reports
Deciding the best action in social settings requires decision-makers to consider their and others’ preferences, since the outcome depends on the actions of both. Numerous empirical investigations have demonstrated variability of behavior across individuals in strategic situations. While prosocial, moral, and emotional factors have been intensively investigated to explain this diversity, neuro-cognitive determinants of strategic decision-making and their relation with intelligence remain mostly unknown. This study presents a new model of the process of strategic decision-making in repeated interactions, first providing a precise measure of the environment's complexity, and then analyzing how this complexity affects subjects’ performance and neural response. The results confirm the theoretical predictions of the model. The frequency of deviations from optimal behavior is explained by a combination of higher complexity of the strategic environment and cognitive skills of the individuals. Brain response correlate with strategic complexity, but only in the subgroups with higher cognitive skills. Furthermore, neural effects were only observed in a fronto-parietal network typically involved in single-agent tasks (the Multiple Demand Network), thus suggesting that neural processes dealing with cognitively demanding individual tasks also have a central role in interactive decision-making. Our findings contribute to understanding how cognitive factors shape strategic decision-making, and may provide the neural pathway of the reported association between strategic sophistication and fluid intelligence.
see paper, replication package
Preferences and strategic behavior in public good games
(with Grandjean and Lefebvre), 2022, Journal of Economic Behavior and Organization
In finitely repeated public goods games, contributions are initially high, and gradually decrease over time. Two main explanations are consistent with this pattern: (i) the population is composed of free-riders, who never contribute, and conditional cooperators, who contribute if others do so as well; (ii) strategic players contribute to sustain mutually beneficial future cooperation, but reduce their contributions as the end of the game approaches. This paper analyzes experimentally these explanations, by manipulating group composition to form homogeneous groups on both the preference and the strategic ability dimensions. Our results highlight the role of strategic ability in sustaining contributions, and suggest that the interaction between the two dimensions also matters: we find that groups that sustain high levels of cooperation are composed of members who share a common inclination toward cooperation and also have the strategic abilities to recognize and reap the benefits of enduring cooperation.
see paper, replication package
Aiding applicants: leveling the playing field within the immediate acceptance mechanism
(with Basteck), 2021, Review of Economic Design
In school choice problems, the widely used manipulable Immediate Acceptance mechanism (IA) disadvantages unsophisticated applicants, but may ex-ante Pareto dominate any strategy-proof alternative. In these cases, it may be preferable to aid applicants within IA, rather than to abandon it. In a laboratory experiment, we first document a substantial gap in strategy choices and outcomes between subjects of higher and lower cognitive ability under IA.We then test whether disclosing information on past applications levels the playing field. The treatment is effective in partially reducing the gap between applicants of above- and below-median cognitive ability and in curbing ability segregation across schools, but may leave the least able applicants further behind.
see paper, replication package
Representation effects in the centipede game
(with Crosetto), 2018, PLOS one
We explore the effects on strategic behavior of alternative representations of a centipede game that differ in terms of complexity. In a laboratory experiment, we manipulate the way in which payoffs are presented to subjects in two different ways. In both cases, information is made less accessible relative to the standard representation of the game. Results show that these manipulations shift the distribution of take nodes further away from the equilibrium prediction. The evidence is consistent with the view that failures of game-form recognition and the resulting limits to strategic reasoning are crucial for explaining non-equilibrium behavior in the centipede game.
see paper
Cognitive ability and games of school choice
(with Basteck), 2018, Games and Economic Behavior
We take school admission mechanisms to the lab to test whether the widely-used manipulable Immediate Acceptance mechanism disadvantages students of lower cognitive ability and whether this leads to ability segregation across schools. Results show this to be the case: lower ability participants receive lower payoffs and are over-represented at the worst school. Under the strategy-proof Deferred Acceptance mechanism, payoff differences are reduced, and ability distributions across schools harmonised. Hence, we find support for the argument that a strategy-proof mechanism ``levels the playing field''. Finally, we document a trade-off between equity and efficiency in that average payoffs are larger under Immediate than under Deferred Acceptance.
see paper
Communication structure and coalition-proofness - Experimental evidence
(with Grandjean, Mauleon and Vannetelbosch), 2017, European Economic Review
The paper analyzes the role of the structure of communication—i.e. who is talking with whom—in a coordination game. We run an experiment in a three-player game with Pareto ranked equilibria, where a pair of players has a profitable joint deviation from the Pareto-superior equilibrium. We show that specific communication structures lead to different ‘coalition-proof’ equilibria in this game. Results match the theoretical predictions. Subjects communicate and play the Pareto-superior equilibrium when communication is public. When pairs of players exchange messages privately, subjects play the Pareto-inferior equilibrium. Even in these latter cases, however, players’ beliefs and choices tend to react to messages, despite the fact that these are not credible.
see paper, web appendix,
Limited farsightedness in network formation
(with Kirchsteiger, Mauleon and Vannetelbosch), 2016, Journal of Economic Behavior and Organization
Pairwise stability [Jackson and Wolinsky, 1996] is the standard stability concept in network formation. It is a myopic notion in the sense that it only considers the immediate benefits of the players. A different perspective investigates perfect farsightedness, proposing related stability concepts. We design a simple network formation experiment to test these extreme theories, but find evidence against both of them: both myopically and farsightedly stable networks fail to emerge when they are not immune to limitedly farsighted deviations. The selection among multiple pairwise stable networks (and the performance of farsighted stability) crucially depends on the level of farsightedness needed to sustain them, and not on efficiency or cooperative considerations.
see paper

Working papers (hide abstracts)

Taboo tradeoffs and moral preferences in the time of Coronavirus
(with Filippin), 2022, submitted
Covid-19 brought to the forefront of the political agenda the trade-off between health and economic activities. Leveraging theoretical and empirical tools from economics, we estimate moral preferences over fatalities and jobs losses due to the pandemic in Italy, the UK and the US. The exercise is based on a choice experiment spanning these preferences in a wide space of possible combinations of the two outcomes. This exercise allows us to estimate how people respond to the severity of the economic and/or health toll. On average, about 95% of the weight in the participants’ utility function goes to health, and respondents’ stable traits (such as political orientation or risk aversion) influence attitudes more than their personal experiences with the consequences of the pandemic. Most importantly, policy responses look misaligned with estimated preferences. Italy adopted more stringent containment measures, while Italian respondents display a relatively weaker prohealth attitude. We stress-test this result and find it is robust: it does not stem either from a reaction to the policies adopted or from differences in fundamentals, such as labor market conditions and health costs.
see paper
Social Responsibility under market and non-market institutions
2022, submitted
Limited foresight in sequential games: an experiment
2016, submitted
The paper presents an experimental test of limited foresight in sequential games. Under limited foresight players take decisions according to what they forecast others will do at close-by nodes only. To isolate limited foresight I modify the Race Game—which features one final target in its standard form—by adding an intermediate target. Results show most players think strategically only on close-by nodes, solving for the intermediate target first. A small fraction of subjects play close to equilibrium, while few others try to exploit the limited foresight of their opponent. These results are at odds not only with equilibrium analysis, but also with most popular models of strategic thinking, as (dynamic) level-k. They suggest that a different out-of-equilibrium model for dynamic environment would be a valuable development.
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Work in progress (hide abstracts)

Experimental minorities
Electing moderates
(with Basteck)
Determinants of price accuracy in prediction markets: Experimental evidence
(with Filippin)