Antoni Bosch-Domènech

Imitation of successful behaviour in cournot markets

In an experimental standard Cournot oligopoly we test the importance of models of behaviour characterised by imitation of successful behaviour, in particular when the environment becomes more complex. We find that the players do not rely more on imitation in more demanding environments. We explain that the different pattern of output decisions in such environments seems predominantly related to a general disorientation of the players, and more specifically to a significant decrease of best-responses. Copyright 2003 Royal Economic Society.

Tracking the Invisible Hand: Convergence of Double Auctions toCompetitive Equilibrium

Economics is the science of want and scarcity. Weshow that want and scarcity, operating within a simpleexchange institution (double auction), can besufficient for an economy consisting of multipleinter-related markets to attain competitiveequilibrium (CE). We generalize Gode and Sunders(1993a,b) single-market finding to multi-marketeconomies, and explore the role of the scarcityconstraint in convergence of economies to CE. When thescarcity constraint is relaxed by allowingarbitrageurs in middle markets to enter speculativetrades, prices still converge to CE, but allocativeefficiency of the economy declines.Optimization by individual agents, often used toderive competitive equilibria, is unnecessary for anactual economy to approximately attain suchequilibria. From the failure of humans to optimize incomplex tasks, one need not conclude that theequilibria derived from the competitive model aredescriptively irrelevant. We show that even incomplex economic systems which are highly inefficient,such equilibria can be attained under a range ofsurprisingly weak assumptions about agent behavior.

Economies of scale, location, age, and sex discrimination in household demand

Abstract Upper limits to household equivalence scales are computed, using data from a survey of more than 23,000 Spanish households, to establish: the existence of economies of location, cost differentials due to age, and sex discrimination. The results question the use of some common measurements of income distribution and poverty, and should be taken into account in setting the standards for public welfare payments.

Credit Constraints in General Equilibrium: Experimental Results

Our work attempts to investigate the influence of credit tightness or expansion on activity and prices in a multimarket set-up. We report on some doubleauction, two-market experiments where subjects had to satisfy an inequality involving the use of credit. The experiments display two regimes. characterized by high and low credit availability. The critical vakre of credit at the common boundary of the two regimes has a compelling interpretation as the maximal credit use at the Arrow-Debreu equilibrium of the abstract economy naturally associated to our experimental environment. Our main results are that changes in the availability of credit: (a): have minor and unsystematic effects on real and nominal variables in the high-credit regime; (b): have substantial effects, both real and nominal, in the low-credit regime.

Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman

Prospect Theory asserts that people display risk attraction in high-probability losses. But our subjects tend to avoid fair risks for large ([euro]30 to [euro]90), high-probability (80%) real losses, vindicating Bernoullis view that risk aversion is the dominant attitude.

Prosocial Capabilities in Alzheimer's Patients

OBJECTIVES To examine the decision making of Alzheimers patients in a simple, classic game focusing on their capabilities to implement social norms and common social preferences. METHODS Patients with Stage I (very mild and mild) Alzheimers disease (AD) were asked to participate in a dictator game, a type of game in which a subject has to decide how to allocate a certain amount of money between himself and another person. RESULTS When we compared the results of treatments involving AD patients (at an early stage) with those of identical treatments involving patients with mild cognitive impairment or healthy elderly controls, with similar ages and social backgrounds, we did not find statistically significant differences. DISCUSSION This finding suggests that Stage I AD patients are as capable of making decisions involving basic social norms and preferences as other individuals of their age. Whatever brain structures are affected by the disease, they do not appear to influence, at this early stage, the neural basis for cooperation-enhancing social interactions.

Risk Aversion and Embedding Bias

In Selten (1967) “Strategy Method,” the second mover in the game submits a complete strategy. This basic idea has been exported to nonstrategic experiments, where a participant reports a complete list of contingent decisions, one for each situation or state in a given sequence, out of which one and only one state, randomly selected, will be implemented. In general, the method raises the following concern. If S0 and S1 are two different sequences of states, and state s is in both S0 and S1, would the participant make the same decision in state s when confronted with S0 as when confronted with S1? If not, the experimental results are suspect of suffering from an “embedding bias.” We check for embedding biases in elicitation methods of Charles Holt and Susan Laury (Laury and Holt, 2000, and Holt and Laury, 2002), and of the present authors (Bosch-Domenech and Silvestre, 1999, 2002, 2006a, b) by appropriately chosen replications of the original experiments. We find no evidence of embedding bias in our work. But in Holt and Laury’s method participants tend to switch earlier to the riskier option when later pairs of lotteries are eliminated from the sequence, suggesting the presence of some embedding bias.

Finite mixture analysis of beauty-contest data from multiple samples

This paper develops a finite mixture distribution analysis of Beauty-Contest data obtained from diverse groups of experiments. ML estimation using the EM approach provides estimates for the means and variances of the component distributions, which are common to all the groups, and estimates of the mixing proportions, which are specific to each group. This estimation is performed without imposing constraints on the parameters of the composing distributions. The statistical analysis indicates that many individuals follow a common pattern of reasoning described as iterated best reply (degenerate), and shows that the proportions of people thinking at different levels of depth vary across groups.

Chapter 18 The Classical Experiments on Cournot Oligopoly

Publisher Summary The oligopolistic market used in Fouraker and Siegels experiments is as simple as it can be, the purpose – comparing the results of two treatments – is clearly stated, while the problems confronted and the solutions applied are not different from todays. It is instructive to note how in a matter of a few years, simplification is preferred to realism. In Fouraker and Siegel, firms are identical one-person onedecision units, and the inverse demand function is linear in current quantities. Clearly, the purpose of Fouraker and Siegels experiments was to study human behavior, not to decipher the complexities of oligopolistic markets or the behavior of complex organizations. Fouraker and Siegel view oligopolies as an example of human conflict between cooperation and defection. Their goal is to infer useful generalizations from the experiments of the effects of information conditions on the resolution of this conflict. While Fouraker and Siegel also consider Bertrand competition, we focus here on their symmetric Cournot games, with subjects – randomly and anonymously matched at the start of the experiment – deciding the amount of output they bring to the market. The market is characterized by a linear demand function, while marginal costs are zero at all output levels, and there are no fixed costs.

Social Capabilities in Alzheimer's Patients

Patients with stage-I (very mild and mild) Alzheimer’s disease were asked to participate in a Dictator Game, a type of game in which a subject has to decide how to allocate a certain amount of money between himself and another person. The game enables the experimenter to examine the influence of social norms and social preferences on the decision-making process. When the results of treatments involving Alzheimer’s disease patients were compared with those of identical treatments involving patients with mild cognitive impairment or healthy control subjects, with similar ages and social backgrounds, no statistically significant difference was found. This finding suggests that stage-I Alzheimer’s disease patients may be as capable of making decisions involving social norms and preferences as other individuals of their age. Whatever brain structures are affected by the disease, they do not appear to influence, at this early stage, the neural basis for cooperation-enhancing social interactions.