Research

Abstract

This paper investigates the impact of reciprocal preferences and countries’ fairness-based expectations of each other in the context of international agreements aimed at providing global public goods. Reciprocal countries reward kindness (positive reciprocity) while retaliating against unkind behavior (negative reciprocity). We introduce a model where countries decide not only whether to participate on a coalition but also determine the extent of their effort. We demonstrate that reciprocal preferences can exert both positive and negative effects on the effort of both signatories and non-signatories of a treaty, depending on their expectations of others. In the non-cooperative game, there are three possible Nash equilibria, which depends on the degree of reciprocal concerns and expectations: no contribution, full contribution by all, and an interior solution. In the coalition formation game, if countries have limited yet sufficiently strong reciprocal concerns and low expectations, the grand coalition – where all countries sign the treaty (and exert efficient effort levels) – becomes stable. Interestingly, we find that signatories positively influence non-signatories’ efforts. Anticipating this response, signatories have an additional strategic incentive to increase their efforts, thereby enhancing the overall level of cooperation.

Abstract

Do people acquire the same information when asked in accuracy or sampling size terms? Rational inattention models often treat information choice as choosing an accuracy level, yet the same choice can also be represented as choosing a sampling size. Theory treats these representations as equivalent, so revealed information-cost structure should be stable across them. We design a laboratory environment to test whether it is. Subjects choose from the same feasible information set, either by accuracy level or by the corresponding sampling size. We vary priors, rewards, and representation of information and evaluate behavior using the two major classes of models—Prior-Invariant (PI) and Uniformly Posterior-Separable (UPS) costs. Furthermore, we let subjects select the information from their preferred representation. Both classes of models are empirically valid in either representation of information, with PI observed more often in the sampling representation and UPS in the accuracy representation. Behavior is consistent: 60% of subjects are best fit by the same model in either representation. Even when consistent, different representations can reduce overall information. Representation choice is also consistent: 75% of subjects choose a single representation more often, with a majority choosing the sampling-size representation, contrasting with the modeling approach of Rational Inattention. Theoretically equivalent representations need not be behaviorally equivalent. The results invite future study about transporting revealed information costs across elicitation environments.

Individuals may be uncertain about their own future preferences, which can generate a demand for flexible menus. At the same time, the presence of a tempting option, especially when accompanied by a recommendation, may induce a preference for commitment to a smaller menu. This paper studies menu choice in an environment where these two forces arise simultaneously. In a lab experiment, I elicit subjects' ex-ante menu preferences and observe their ex-post random choices from the assigned menu to examine the relationship between menu demand and stochastic choice behavior. More specifically, the experiment identifies the extent to which ex-post randomized choice is driven by preference for flexibility or by temptation-induced preference for commitment, and whether these motives can coexist within the same individual. The results contribute to the literature on menu choice by showing how flexibility and commitment jointly shape random choice behavior when future preferences are uncertain and temptation is present.