John H. Kagel

Maximization theory in behavioral psychology

Maximization theory, which is borrowed from economics, provides techniques for predicing the behavior of animals - including humans. A theoretical behavioral space is constructed in which each point represents a given combination of various behavioral alternatives. With two alternatives - behavior A and behavior B - each point within the space represents a certain amount of time spent performing behavior A and a certain amount of time spent performing behavior B. A particular environmental situation can be described as a constraint on available points (a circumscribed area) within the space. Maximization theory assumes that animals always choose the available point with the highest numerical value. The task of maximization theory is to assign to points in the behavioral space values that remain constant across various environmental situations; as those situations change, the point actually chosen is always the one with the highest assigned value. Maximization theory is an alternative to reinforcement theory as a description of steady-state behavior. Situations to which reinforcement theory has been directly applied (such as reinforcement of rats pressing levers and pigeons pecking keys in Skinner boxes) and situations to which reinforcement theory has occasionally been extended (such as human economic behavior and human self-control) can be described by maximization theory. This approach views behavior as a quantitative outcome of the interaction of the putative instrumental response, the reinforcer, and the other activities available in the situation. It provides new insight into these situations and, because it takes context into account, has greater predictive power than reinforcement theory.

Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study

In affiliated private value auctions, each bidder has perfect information regarding own value for the object at auction, but higher values of the item for one bid der make higher values for rivals more likely. The authors report on a series of experiments examining the following predictions: (1) in a first-price auction, public information about rivals valuations incr eases expected revenue, (2) an English auction institution increases expected revenue, (2) an English auction institution increases expect ed revenue compared to a first-price auction, and (3) a second-price auction is isomorphic to an English auction institution. Predictive a dequacy of several ad hoc bidding models are compared with Nash equil ibrium predictions. Copyright 1987 by The Econometric Society.

Independent Private Value Auctions: Bidder Behaviour in First-, Second- and Third-Price Auctions with Varying Numbers of Bidders

The symmetric equilibrium of third-price auctions is characterized. It makes a number of contrasting predictions relative to firms and second-price auctions: bids exceed private values, the marginal effects on bids of an increase in private values is greater than one, increasing numbers of bidders reduces bids, and risk aversion requires bidding below the risk neutral Nash equilibrium. In the experiment, bidders do not always satisfy the point predictions of the theory. However, the game theoretic models correctly anticipate, at least directionally, the important effects of the price rule changes. Copyright 1993 by Royal Economic Society.

Testing Between Alternative Models of Choice Under Uncertainty: Some Initial Results

Experiments have identified a number of well-known violations of expected utility theory, giving rise to alternative models of choice under uncertainty, all of which are able to explain these violations. In this article, predictions of several prominent rival formulations are examined. No single alternative consistently organizes choices. Among the more important inconsistencies, we identify conditions generating systematic fanning in of indifference curves in the unit probability triangle, and find risk-loving over a number of gambles with all positive payoffs, in cases where prospect theory predicts risk aversion.

When foragers discount the future: constraint or adaptation?

Abstract Foraging currencies based on average rates of energy gain often fail to predict observed behaviour when an animal must choose between a smaller, more immediate reward and a larger, more delayed reward. We review experiments demonstrating that a foragers choice may depend on the ratio of reward sizes, the difference in pursuit times, and the magnitude of the average pursuit time. The most telling result is that of Green et al. (1981), who showed that foragers prefer the smaller, more immediate reward when both pursuit times are relatively small, but they prefer the larger, more delayed reward when both pursuit times are relatively large. This paper proposes a new theoretical explanation by modifying a standard economic model for discounting future rewards. Our model of a variable time bias specification can explain the observed, temporally inconsistent preferences. Discounting future rewards might be an adaptive response to uncertainty in an animals natural environment, but we cannot reject the possibility that preference for immediacy is a behavioural constraint on foraging efficiency.

The Dynamics of Reorganization in Matching Markets: A Laboratory Experiment Motivated by a Natural Experiment

We create an environment in which congestion forces agents to match inefficiently early. We then introduce one of two centralized clearinghouse mechanisms. One of these has been successfully used to halt this kind of unraveling in a number of labor markets, while the other has failed. When it is costly for firms and workers to be mismatched compared with the costs of matching early, the experimental observations reproduce the field observations. Furthermore, the experiment permits us to observe the transition between a decentralized and a centralized market, both when the centralized market fails to control unraveling and when it succeeds, at a level of detail unavailable in field data.

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.

Effects of monetary rebates, feedback, and information on residential electricity conservation.

In this study, conducted during the summer months in Texas, 129 volunteer participant households were assigned to one of five experimental conditions: a high monetary rebate condition in which participants received conservation information, weekly written feedback on their electricity use, and monetary rebates amounting to a 240% price change in electricity; a low monetary rebate condition with the same structure as the high rebates except payments amounted to a 50% price change; a weekly feedback condition in which participants also received information but no rebates; an information condition; and a control condition. The dependent measure was percentage reduction in electricity use based on actual weekly meter readings by the research staff. Only the high rebate condition significantly curtailed electricity use by about 12% over the course of the study. Elasticity estimates suggested limited responsiveness in electricity consumption to price changes. Questionnaire data showed a pattern in which actual reduction in electricity was associated with planning a conservation program, attending to feedback, and modifying air conditioning use. 16 references, 3 tables.

Equilibrium bid functions for auctions with an uncertain number of bidders

Abstract The number of rivals may be unknown when a bidding strategy is formulated in an auction. In a symmetric model with risk-neutral bidders holding independent information, we obtain explicit equilibrium bidding functions for first-price and second-price auctions with uncertainty about the number of rivals. Five auctions are revenue-equivalent: first-price and second-price auctions, each with the number of bidders known or uncertain, and English auctions.