Raymond C. Battalio

Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games

Deductive equilibrium analysis often fails to provide a unique equilibrium solution in many situations of strategic interdependence. Consequently, a theory of equilibrium selection would be a useful complement to the theory of equilibrium points. A salient equilibrium selection principle would allow decision makers to implement a mutual best response outcome. This paper uses the experimental method to examine the salience of payoff-dominance, security, and historical precedents in related average opinion games. The systematic and, hence, predictable behavior observed in the experiments suggests that it should be possible to construct an accurate theory of equilibrium selection.

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.

Optimization Incentives and Coordination Failure in Laboratory Stag Hunt Games

This paper reports an experiment comparing three stag hunt games that have the same best-response correspondence and the same expected payoff from the mixed equilibrium, but differ in the incentive to play a best response rather than an inferior response. In each game, risk dominance conflicts with payoff dominance and selects an inefficient pure strategy equilibrium. We find statistically and economically significant evidence that the differences in the incentive to optimize help explain observed behavior.

Credible assignments in coordination games

Abstract This paper uses the experimental method to examine an arbiters ability to determine the outcome of two-person coordination games. All of the arbiters assignments in the experiments were strict equilibrium points, but some assignments violated payoff-dominance or symmetry. An assignment that corresponds to the games outcome is a credible assignment. The experiments test the hypothesis that an assignment to a strict equilibrium is a credible assignment. Our subjects did not find the individual rationality and mutual consistency of an equilibrium assignment to be sufficient reason for implementing the assignment when doing so conflicts with payoff-dominance or symmetry.

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.

Adaptive behavior and coordination failure

Abstract We use the experimental method to study peoples adaptive behavior in a generic game with multiple Pareto ranked equilibria. The experiment was designed to discover if behavior diverged at the separatrix predicted by the fictitious play dynamic. The equilibrium selected was sensitive to small differences in initial conditions as predicted. The experiment provides some striking examples of coordination failure growing from small historical accidents.

Demand Curves for Animal Consumers

Results are reported from experiments showing that both income-compensated and ordinary (uncompensated) demand curves for nonhuman consumers are negatively sloped. Essential commodities are determined to be gross complements, while nonessential goods are independent or gross substitutes. The experiments extend the concepts underlying value theory to nonhumans and provide a basis for intensive experimental investigations of additional aspects of the theory.

Strategic Similarity and Emergent Conventions: Evidence from Similar Stag Hunt Games

Abstract This paper reports evidence on the origin of convention in laboratory cohorts confronting similar but not identical strategic situations repeatedly. The experiment preserves the action space of the game, while randomly perturbing the payoffs and scrambling the action labels in an effort to blunt the salience of retrospective selection principles. Hence, the similarity between stage games is reduced to certain strategic details, like efficiency, security, and risk dominance. Nevertheless, we do observe conventions emerging in half of the laboratory cohorts. When a convention emerges subjectss behavior conforms to the selection principles of efficiency rather than security or risk dominance. Journal of Economic Literature Classification Numbers: C72, C78, C92, D83.

Selection Dynamics, Asymptotic Stability, and Adaptive Behavior

Selection dynamics are often used to distinguish stable and unstable equilibria. This is particularly useful when multiple equilibria prevent a priori comparative static analysis. This paper reports an experiment designed to compare the accuracy of the myopic best-response dynamic and an inertial selection dynamic. The inertial selection dynamic makes more accurate predictions about the observed mutual best-response outcomes.

On the Origin of Convention: Evidence from Coordination Games

We report the results of a coordination game experiment. The experiment carefully distinguishes between conventions based on labels and conventions based on populations. Our labels treatments investigate the abstraction assumptions that underlie the concept of a strategy, while our population treatments investigate the attraction of alternative mutually consistent ways to play under adaptive behaviour. We observe conventions emerging in communities with one population and labels and with two populations and no labels, but the most effective treatment is two labelled populations. We estimate logistic response learning models for individual subject behaviour. Of the models considered, a version of exponential fictitious play fits our data best.