Posters

PhD students of the course "Psychological Game Theory" get the chance to present their ongoing research projects in a poster session on Saturday 29-06-2019 from 12.00-13.30. Please find below the titles and abstracts:

• Title: It’s not about the money. It’s about sending a message!” - Belief-based motives behind punishment (Andras Molnar)

Abstract: We argue that belief-based preferences play a crucial role in punishment decisions, independently of distributive and retributive motives. In a novel experiment we show that people punish transgressors more likely when transgressors eventually learn why they are punished, as opposed to when they remain ignorant, even though the welfare consequences are the same in both cases. We also demonstrate that this desire to affect beliefs is often prioritized over distributive and retributive preferences: people who would otherwise enact harsh punishments, are willing to punish less severely, if by doing so they can tell the transgressor why they are punishing them.

• Title: The differential effect of narratives on prosocial behavior (Adrian Hillenbrand and Eugenio Verrina)

Abstract: We study how positive narratives (stories in favor of a prosocial action) and negative narratives (stories in favor of a selfish action) influence prosocial behavior. Our main findings are that positive narratives increase giving of selfish types substantially, compared to a baseline with no narratives. Negative narratives, on the other hand, have a differential effect. Prosocial types decrease their giving, while selfish types give more than in the baseline. We discuss two potential explanations for this effect: one based on the enhanced saliency of normative behavior through narratives, and another based on a social comparison argument.

• Title: Because I (don't) deserve it: merit as a justification for lying (Daniel Parra and Tilman Fries)

Abstract: This paper investigates whether earned income changes people's willingness to lie. In our experiment, participants roll a six-sided die in private and report the outcome. From their endowment, participants lose a number of euros equal to the reported number. We compare the lying behavior of participants whose endowment was determined by merit with participants whose endowment was determined by a random draw. When subjects lie to keep money earned through effort, those who provided more effort lie more than those who provided less effort. Compared to subjects who randomly earned income, subjects who earned a low income through merit lie less. These effects are mediated through beliefs that subjects hold about their relative performance in the task: Participants who hold a high beliefs lie more if and only if they earned their endowment through real effort. We argue that, by influencing the capabilities of subjects to justify an unethical action, merit increases the lying cost of low performers.

• Title: What Is the Worst That Could Happen? A Story of Fear and Risk (Lina Andersson)

Abstract: Our risk attitude steers our daily behavior: Which stocks to invest in, whether to renew an insurance, which job to apply for, which education, if any, to get. An individual's risk preferences can vary over time (and age), and they can also vary with the individual's emotional state of mind. The emotion most closely associated with risk preferences is fear, with fearful individuals being more risk averse. This paper presents a model of decision making where the players can become fearful. The players are assumed to hold beliefs regarding the state of the world and future outcomes. They can become fearful if something occurs which is (i) surprising, and (ii) decreases an expected future utility. The players' preferences over actions at a given node depend on material payoffs and the player's degree of experienced fear. The higher the degree of fear the more risk averse the players become.

• Title: Do we all coordinate in the long-run? (Sebastian Tebbe)

Abstract: Coordination failures arise in a multitude of economic contexts. Examples include the field of development economics (big push theories, O-ring model), macroeconomics (sunspot equilibria, bank runs) and microeconomics (organizational structure). Coordination failures lead to Pareto-inferior market equilibria and suggest an efficiency-enhancing role for policy interventions. However, in the context of a weak-link coordination game, Berninghaus & Ehrhart (1998) demonstrate that coordination problems may be resolved by simply increasing the number of repetitions while keeping the total stakes constant (and hence decreasing per-period stakes). This paper investigates whether the longer horizon or lower per-period stakes drive their findings. In stark contrast to their results, we find no convergence to a Pareto dominant equilibrium neither for a long time horizon nor for high stakes. We attribute the conflicting evidence to the coordinating behavior of minimum and non-minimum players. In our experimental setting, non-minimum players are more willing to adjust their effort level towards the effort level of minimum player resulting in inefficient equilibria. In addition, we provide evidence that new group constellations increase coordination only in the short-run. Finally, in contrast to Engelmann & Normann (2010), our results do not indicate any significant differences in equilibrium selection across socio-demographic groups.

• Title: Self-Esteem and Rational Self-Handicapping (Rachel Madison Mannahan)

Abstract: People may prefer to believe that they have higher rather than lower ability. Agents with these preferences may opt out of situations that allow them to learn about their ability, or take actions to attribute their failures to external sources, in order to maintain their self-esteem. Psychologists refer to this phenomenon as self-handicapping. Using psychological game theory, I model agents with self-esteem preferences and show that self-handicapping arises as a rational response to threats to the self-esteem portion of their payoffs. In a variety of games, players with self-esteem preferences may respond to incentives differently than players who are motivated solely by material payoffs. I consider several scenarios in which the behavior of players with these preferences diverges from classical predictions and discuss the implications.

• Title: Loss Aversion and Random Contract (Hoa Ho)

Abstract: I adjust principal-agent model to capture the notion that agents are expectation-based loss averse according to Koszegi and Rabin (2006, 2007). I examine the existence and characteristics of the optimal random contract under moral hazard and loss aversion. I find that random contract strictly dominates deterministic contract if the agent is sufficiently loss averse. For general model with unbounded agent’s utility, first-best equilibrium can be approximated closely, but not attained, by random contract that mimics fixed wage contract. I apply the model to rationalize team contract in which wages are contingent on noisy team signals.

• Title: Affects, belief management, and choices (Elisabetta Leni)

Abstract: Affects are general feelings of pleasure or displeasure accompanied by arousing or quieting bodily activation. As neuroscience and cognitive psychology data suggest, affects are relevant for decision-making even when unrelated to the judgement at hand (i.e., they are incidental). Few researchers in economics have studied the influence of incidental affects on decision-making. Some studies found an impact on altruism, trust, generosity and performance. A fundamental question – not yet addressed in the literature – is whether incidental affects also perturb the way people manage their beliefs. This research explores this crucial yet unexplored idea using a lab experiment where participants receive an exogenous shock to their affective state after they enter the lab. Then, I measure how the shock influences choices and beliefs in a dictator game and in an effort task. I collected data for 313 participants. The analysis reveals a significant effect of incidental affects on choices and beliefs. Moreover, the data show that people with different ability to recognise their internal emotional states – as measured by the Trait Emotional Intelligence - Emotionality Scale (TEI-ES) (Petrides, 2009) - react differently to the exogenous shock in affects.

• Title: Loss Aversion in Social Image Concerns (Vasilisa Petrishcheva)

Abstract: Loss aversion is widely studied in the monetary domain as well as with respect to material goods. However, little is known about its relevance in the non-material domain. We conduct a laboratory experiment to explore whether the concept of loss aversion applies to social image concerns, a non-material good. Social image concerns are important in individual decision-making since people typically care about their reputation. We analyze whether an exogenous improvement or harm to one's reputation follows the same utility pattern as gaining and losing money or material goods. Our experimental design quantifies the effect of loss aversion in social image concerns via the scope of lying. We first establish a within-subject reference point in reputation and then induce an exogenous reputational gain or loss, before we observe how much subjects lie in a potentially image-improving task.

• Title: Insurance Advice as a Signalling Device in Markets: Evidence from a Lab Experiment (Ben Grodeck, Franziska Tausch, Erte Xiao)

Abstract: We design and test a novel advice mechanism aimed at promoting trust and cooperation in markets with asymmetric information. Sellers are given the option to advise buyers whether to purchase third-party insurance against the potential losses from sellers’ noncooperative behavior. A Bayesian model suggests that both cooperative and noncooperative sellers will advise buyers not to purchase the insurance. Once this advice has been given, noncooperative sellers are less likely to pursue self-interest due to guilt aversion. Experimental data from a buyer-seller game shows that, compared to a market where there is no opportunity to give advice, in the market that contains the advice mechanism, sellers are more likely to cooperate and buyers are more likely to purchase the product from the sellers who advise not to purchase the insurance. The number of sellers who advise not to purchase the insurance increases over time. As a result, more efficient transactions take place when the advice mechanism is implemented.

• Title: Reciprocity with Uncertainty About Others (Jin Sohn and Wenhao Wu )

Abstract: Psychological motivation is generally private information which generates fundamental uncertainty about others' psychological sensitivity. We incorporate uncertainty about others' reciprocal motivation into existing models of reciprocity (Dufwenberg and Kirchsteiger, 2004; Rabin, 1993) and propose an equilibrium concept, called Bayesian reciprocity equilibrium. We prove that an equilibrium exists. Then, we apply the theory to solve the prisoners' dilemma. In this example, we show that a small amount of uncertainty in reciprocal motivation can eliminate cooperation via iterated elimination of dominated strategies, unlike the complete information case in which cooperation is supported as an equilibrium outcome.