Job Market Paper

Individual Heterogeneity in Traveler's Dilemma

We study individual heterogeneity in behaviors and in beliefs about a naive player (an anchor player) in the Traveler’s Dilemma game. In our within-subject design, subjects make choices in three blocks of ten of the Traveler’s Dilemma game without feedback. The novelty of our design lies in the treatment variation. We vary the game parameters - the upper bound, the lower bound, and the reward/penalty in a systematic way. In line with previous studies, we find a statistical negative effect of the reward/penalty on subject’s average claims. Second, there are three spikes in the relative frequency of choices at the upper bound, the middle and the lower bound, which account for around 50% of the total number of choices. Third, Quantal Response Equilibrium, some variations of Level-k and Noisy Introspection do not fit the aggregate data well, the best fitting models are Nash, Level-k and Noisy Introspection with the anchor as the top. Fourth, we compare the performance of leading models from behavioural game theory at the individual level. Half of our subjects are best fitted by Noisy Introspection with a naive player playing the top and a quarter of our subjects are best fitted by Nash.