Mary Rigdon

Positive reciprocity and intentions in trust games

Abstract Several recent theories in behavioral game theory seek to explain the behavior of subjects in experimental bargaining games. These models can be partitioned into two classes: outcome-based and intention-based. Outcome-based models treat the intentions that players attribute to one another as unnecessary for predicting behavior. Intention-based approaches, and in particular the trust and reciprocity (TR) hypothesis, rely on this attribution of intentions in an essential way. We report laboratory data from simple two-person trust games which is inconsistent with outcome-based models, but predicted by the trust and reciprocity hypothesis.

SUSTAINING COOPERATION IN TRUST GAMES

It is well-known in evolutionary game theory that population clustering in Prisoners Dilemma games allows some cooperative strategies to invade populations of stable defecting strategies. We adapt this idea of population clustering to a two-person trust game. Without knowing it, players are typed based on their recent track record as to whether or not they are trusting (Players 1) and whether or not they are trustworthy (Players 2). They are then paired according to those types: trustors with trustworthy types, and similarly non-trustors with untrustworthy types. In the control comparisons, Players 1 are randomly repaired with Players 2 without regard to type. We ask: are there natural tendencies for people to cooperate more frequently in environments in which they experience more cooperation in comparison with controls?

Trust and reciprocity in incentive contracting

Principals can attempt to get agents to perform certain actions preferable to the principal by using ex post punishments or rewards to align incentives. Field data are mixed on whether, and to what extent, such informal incentive contracting (paradoxically) crowds out efficient solutions to the agency problem. This paper explores, via a novel set of laboratory experiments, the impact of ex post incentives on informal contracts between principals and agents in bargaining environments in which there are gains from exchange and when there is an opportunity for the principal to relay a no-cost demand of the division of those gains. Incentive contracting in these environments does not crowd-out off-equilibrium cooperation, and at high incentive levels cooperation is crowded in.

Market design and motivated human trading behavior in electricity markets

The paper is based on a series of controlled experiments in the trading of wholesale electricity that expands substantially the scope of the research program reported previously (S. Backerman S. Rassenti and V. Smith, 1998; S. Backerman, M. Denton, S. Rassenti and V. Smith, 1998; M. Denton et al., 1998). The experiments employed cash motivated students and rented computer laboratory facilities of the University of Arizona. The primary objective of these experiments was to compare two alternative institutional arrangements for the trading of electric power. The first employed day-ahead sealed bid trading of energy for all periods in the subsequent day; the second employed simultaneous continuous double auctions for bilateral trading of energy up to the hour before delivery. All trading was executed on an eight-node network with limited transmission capacity. Each node was to be thought of as a control area, with one large wholesale generator company and one large distribution company resident there.

Plausible Deniability and Cooperation in Trust Games

What motivates agents to choose pro-social but dominated actions in principal-agent interactions like the trust game? We investigate this by exploring the role higher-order beliefs about payoffs play in an incentivized laboratory experiment. We find that when there are asymmetries in such higher order information that generates “plausible deniability�?, agents exploit that: otherwise trustworthy types are tempted into defecting.