Guillaume R. Fréchette

How Robust is Laboratory Gift Exchange

The gift-exchange game is a form of sequential prisoners dilemma, developed by Fehr et al. (1993), and popularized in a series of papers by Ernst Fehr and co-authors. While the European studies typically feature a high degree of gift exchange, the few U.S. studies provide some conflicting results. We find that the degree of gift exchange is surprisingly sensitive to an apparently innocuous change—whether or not a comprehensive payoff table is provided in the instructions. We also find significant and substantial time trends in responder behavior.

Bargaining in Legislatures: An Experimental Investigation of Open versus Closed Amendment Rules

We investigate the differential effects of open versus closed amendment rules within the framework of a distributive model of legislative bargaining. The data show that there are longer delays in distributing benefits and a more egalitarian distribution of benefits under the open amendment rule, the proposer gets a larger share of the benefits than coalition members under both rules, and play converges toward minimal winning coalitions under the closed amendment rule. However, there are important quantitative differences between the theoretical model underlying the experiment (Baron and Ferejohn 1989) and data, as the frequency of minimal winning coalitions is much greater under the closed rule (the theory predicts minimal winning coalitions under both rules for our parameter values) and the distribution of benefits between coalition members is much more egalitarian than predicted. The latter are consistent with findings from shrinking pie bilateral bargaining game experiments in economics, to which we relate our results.Research support from the Economics Division and the DRMS Divisions of NSF and the University of Pittsburgh is gratefully acknowledged. We have benefited from comments by David Cooper, Massimo Morelli, Jack Ochs, and seminar participants at Carnegie Mellon University, École des Hautes Études Commerciales, Harvard University, Indiana University, ITAM, Université de Montreal, Universite du Québec a Montréal, University of Pittsburgh, Joseph L. Rotman School, University of Toronto, Ohio State University, Texas \widehat{{\rm A}{\&}{\rm M}} University, Tilburg University CENTER, Western Michigan University, The Wharton School, University of Pennsylvania, the 2000 Public Choice Meetings, the 2000 Summer Institute in Behavioral Economics, the 2000 Econometric Society World Congress meetings, and the CEA 35th Annual Meetings. We are responsible for all remaining errors.

Laboratory Experiments: Professionals Versus Students

This paper reviews experiments that include two types of subjects: professionals and students. The typical subject pool for economic experiments is composed of students. Professionals are loosely defined as people working in an industry where the game under study is thought to be relevant. The experiments considered in the review had to use standard experimental procedures. Furthermore, only experiments where the authors gave theoretical predictions are included. Overall, results from those studies lead to similar conclusions (with respect to how the behavior of subjects conform to the comparative static predictions of the theory) for both the usual subject pool and for professionals.

Gamson's Law versus non-cooperative bargaining theory

We compare Gamson’s Law, a popular empirical model of legislative bargaining, with two noncooperative bargaining models in three players divide the dollar games in which no player has enough votes to form a winning coalition on their own. Both of the game theoretic models better organize the comparative static data resulting from changes in nominal bargaining power than does Gamson’s Law. We also identify deviations from the point predictions of the non-cooperative bargaining models. Namely, proposer power is not nearly as strong as predicted under the Baron–Ferejohn model, and a significant number of bargaining rounds tend to take more than two steps under demand bargaining and more than one stage under Baron–Ferejohn, counter to the models’ predictions. Regressions using the experimental data provide results similar to the field data, but fail to do so once one accounts for predictions regarding coalition composition under Gamson’s Law.

Session-Effects in the Laboratory

In experimental economics, where subjects participate in different sessions, observations across subjects of a given session might exhibit more correlation than observations across subjects in different sessions. The main goal of this paper is to clarify what are session-effects: what can cause them, what forms they can take, and what are the potential problems. It will be shown that standard solutions are at times inadequate, and that their properties are sometimes misunderstood.

Endogenous transfers in the Prisoner's Dilemma game: An experimental test of cooperation and coordination

We study experimentally a two-stage compensation mechanism for promoting cooperation in prisoners dilemma games. In stage 1, players simultaneously choose binding non-negative amounts to pay their counterparts for cooperating in a given prisoners dilemma game, and then play the prisoners dilemma game in stage 2 with knowledge of these amounts. For the asymmetric prisoners dilemma games we consider, all payment pairs consistent with mutual cooperation in subgame-perfect equilibrium transform these prisoners dilemma games into coordination games, with both mutual cooperation and mutual defection as Nash equilibria in the stage-2 game. We find considerable empirical support for the mechanism, as cooperation is much more common when these endogenous transfer payments are feasible. We identify patterns among transfer pairs that affect the likelihood of cooperation. Mutual cooperation is most likely when the payments are identical; it is also substantially more likely with payment pairs that bring the payoffs from mutual cooperation closer together than with payment pairs that cause them to diverge. We also find that transfers are effective in sustaining cooperation even when they are imposed and not chosen.

Unraveling Yields Inefficient Matchings: Evidence from Post-Season College Football Bowls

Many markets have “unraveled” and experienced transactions at dispersed and apparently inefficiently early times. Often these markets develop institutions to coordinate and delay the timing of transactions. However it has proved difficult to gather data that allows the efficiency gains to be identified and measured. The present paper considers a market for which such data can be gathered. Prior to 1992, college football teams were matched for post-season play, in “bowl” games, up to several weeks before the end of the regular football season. Since 1992, the market has undergone a series of reorganizations that postpone this matching until the end of the regular season. We show that this has promoted more efficient matching of teams, as measured by the resulting television viewership. The chief driver has been the increased ability of later matching to produce “championship” games.

Infinitely Repeated Games in the Laboratory: Four Perspectives on Discounting and Random Termination

While infinitely repeated games with payoff discounting are theoretically isomorphic to randomly terminated repeated games without payoff discounting, in practice, they correspond to very different environments. The standard method for implementing infinitely repeated games in the laboratory follows the second interpretation and uses random termination (proposed by Roth and Murnighan [1978]), which links the number of expected repetitions of the stage game to the discount factor. However, we know little about whether or not people treat situations where the future is less valuable than the present in the same way as interactions that might exogenously terminate. This paper compares behavior under four different implementations of infinitely repeated games in the laboratory: the standard random termination method and three other methods that de-couple the expected number of rounds and the discount factor. Two of these methods involve a fixed number of repetitions with payoff discounting, followed by random termination (proposed by Cabral, Ozbay, and Schotter [2011]) or followed by a coordination game (proposed by Cooper and Kuhn [2011]). We also propose a new method - block random termination - in which subjects receive feedback about termination in blocks of rounds. We find that behavior is consistent with the presence of dynamic incentives only with methods using random termination, with the standard method generating the highest level of cooperation. The other two methods display two advantages: a higher level of stability in cooperation rates and less dependence on past experience. We also estimate the strategies used by subjects under each method. Those estimates reveal that the average number of interactions, even when the discount rate is the same, affects strategic choices: interactions expected to be longer increase defection and decrease the use of the Grim strategy.

Strategy Choice in the Infinitely Repeated Prisoners’ Dilemma

We use a novel experimental design to identify subjects’ strategies in an infinitely repeated prisoners’ dilemma experiment. We ask subjects to design strategies that will play in their place. We find no clear evidence that eliciting strategies affected subjects’ behavior, supporting the validity of this method. We find the chosen strategies include some well-known ones such as Always Defect, Tit-For-Tat and Grim trigger. However, other strategies that are considered to have desirable properties, such as Win-Stay-Lose-Shift, are not prevalent. A majority of subjects use simple strategies that only condition on the previous period’s outcome. We also find that the strategies used to support cooperation change with the parameters of the game. We use the elicited strategies to test our ability to recover strategies using observed cooperate-defect choices and find that we can do so under certain conditions.

Cooperation in the Finitely Repeated Prisoner's Dilemma

More than half a century after the first experiment on the finitely repeated prisoner’s dilemma, evidence on whether cooperation decreases with experience–as suggested by backward induction–remains inconclusive. This paper provides a meta-analysis of prior experimental research and reports the results of a new experiment to elucidate how coop- eration varies with the environment in this canonical game. We describe forces that affect initial play (formation of cooperation) and unraveling (breakdown of cooperation). First, contrary to the backward induction prediction, the parameters of the repeated game have a significant effect on initial cooperation. We identify how these parameters impact the value of cooperation–as captured by the size of the basin of attraction of Always Defect–to account for an important part of this effect. Second, despite these initial differences, the evolution of behavior is consistent with the unraveling logic of backward induction for all parameter combinations. Importantly, despite the seemingly contradictory results across studies, this paper establishes a systematic pattern of behavior: subjects converge to use threshold strategies that conditionally cooperate until a threshold round; and conditional on establishing cooperation, the first defection round moves earlier with experience. Simulation results generated from a learning model estimated at the subject level provide insights into the long-term dynamics and the forces that slow down the unraveling of cooperation.