Roberto A. Weber

‘Learning’ with no feedback in a competitive guessing game

Abstract An assumption underlying current models of learning in games is that learning takes place only through repeated experience of outcomes. This paper experimentally tests this assumption using Nagels (1995, Amer. Econ. Rev. 85, 1313–1326) competitive guessing game. The experiment consists of several periods of repeated play under alternative feedback conditions, including no-feedback conditions in which players receive no information between periods. If learning takes place only through reinforcement resulting from experienced outcomes, choices in the no-feedback conditions should not converge towards the Nash equilibrium. While less than under full information, there is convergence towards the equilibrium prediction in the no-feedback conditions. Varying priming given to subjects between periods does not affect the results.

Timing and Virtual Observability in Ultimatum Bargaining and “Weak Link” Coordination Games

Previous studies have shown that simply knowing one player moves first can affect behavior in games, even when the first-movers moves are known to be unobservable. This observation violates the game-theoretic principle that timing of unobserved moves is irrelevant, but is consistent with virtual observability, a theory of how timing can matter without the ability to observe actions. However, this previous research only shows that timing matters in games where knowledge that one player moved first can help select that players preferred equilibrium, presenting an alternative explanation to virtual observability. We extend this work by varying timing of unobservable moves in ultimatum bargaining games and “weak link” coordination games. In the latter, the equilibrium selection explanation does not predict any change in behavior due to timing differences. We find that timing without observability affects behavior in both games, but not substantially.

The econometrics and behavioral economics of escalation of commitment: a re-examination of Staw and Hoang’s NBA data

We examine the phenomenon of escalation from an economists perspective, emphasizing explanations which do not rule out rational behavior on the part of firms or agents. We argue that escalation cannot be established as a separate phenomenon unless these possible alternative explanations are properly accounted for. We present Staw and Hoangs (1995) study of NBA data as an instance of where evidence of escalation might be overturned upon more careful analysis. After performing several tests of our alternative explanations, we find that evidence of escalation persists, although it is weaker both in duration and magnitude.

Assessing the Robustness of Power Posing No Effect on Hormones and Risk Tolerance in a Large Sample of Men and Women

In a growing body of research, psychologists have studied how physical expression influences psychological processes (see Riskind & Gotay, 1982; Stepper & Strack, 1993, for early contributions to this literature). A recent strand of literature within this field has focused on how physical postures that express power and dominance (power poses) influence psychological and physiological processes, as well as decision making (e.g., Carney, Cuddy, & Yap, 2010; Cesario & McDonald, 2013; Yap, Wazlawek, Lucas, Cuddy, & Carney, 2013). Carney et al. found that power posing affected levels of hormones such as testosterone and cortisol, financial risk taking, and self-reported feelings of power in a sample of 42 participants (randomly assigned to hold poses suggesting either high or low power). We conducted a conceptual replication study with a similar methodology as that employed by Carney et al. but using a substantially larger sample (N = 200) and a design in which the experimenter was blind to condition. Our statistical power to detect an effect of the magnitude reported by Carney et al. was more than 95% (see the Supplemental Material available online). In addition to the three outcome measures that Carney et al. used, we also studied two more behavioral tasks (risk taking in the loss domain and willingness to compete). Consistent with the findings of Carney et al., our results showed a significant effect of power posing on self-reported feelings of power. However, we found no significant effect of power posing on hormonal levels or in any of the three behavioral tasks.

The Effects of Payoff Magnitude and Heterogeneity on Behavior in 2 x 2 Games with Unique Mixed Strategy Equilibria

The Logit version of Quantal Response Equilibrium predicts that equilibrium behavior in games will vary systematically with payoff magnitudes, if all other factors are held constant (including the Nash equilibria of the game). We explore this in the context of a set of asymmetric 2x2 games with unique totally mixed strategy equilibria. The data provide little support for the payoff magnitude predictions of the Logit Equilibrium model. We extend the theoretical Quantal Response Equilibrium model to allow for heterogeneity, and find that the data fit the heterogeneous version of the theory significantly better.

Seeking the Roots of Entrepreneurship: Insights from Behavioral Economics

There is a growing body of evidence that many entrepreneurs seem to enter and persist in entrepreneurship despite earning low risk-adjusted returns. This has lead to attempts to provide explanations—using both standard economic theory and behavioral economics—for why certain individuals may be attracted to such an apparently unprofitable activity. Drawing on research in behavioral economics, in the sections that follow, we review three sets of possible interpretations for understanding the empirical facts related to the entry into, and persistence in, entrepreneurship. Differences in risk aversion provide a plausible and intuitive interpretation of entrepreneurial activity. In addition, a growing literature has begun to highlight the potential importance of overconfidence in driving entrepreneurial outcomes. Such a mechanism may appear at face value to work like a lower level of risk aversion, but there are clear conceptual differences—in particular, overconfidence likely arises from behavioral biases and misperceptions of probability distributions. Finally, nonpecuniary taste-based factors may be important in motivating both the decisions to enter into and to persist in entrepreneurship.

Solving Coordination Failure with All-or-None Group-Level Incentives

Coordinating activity among members is an important problem faced by organizations. When firms, or units within firms, are stuck in bad equilibria, managers may turn to the temporary use of simple incentives - flat punishments or rewards - in an attempt to transition the firm or unit to a more efficient equilibrium. We investigate the use of incentives in the context of the minimum-effort, or weak-link, coordination game. We allow groups to reach the inefficient equilibrium and then implement temporary, flat, all-or-none incentives to encourage coordination on more efficient equilibria. We vary whether the incentives are positive (rewards) or negative (penalties), whether they have substantial or nominal monetary value, and whether they are targeted to a specific outcome (the efficient equilibrium) or untargeted (and apply to more than one outcome). Overall, incentives of all kinds are effective at improving coordination while they are in place, and we find that substantial and targeted incentives are most effective. However, there is little long-term persistent benefit of incentives - once the incentives are removed, groups tend to return to the inefficient outcome.

Legitimacy, Communication, and Leadership in the Turnaround Game

We study the effectiveness of leaders for inducing coordinated organizational change to a more efficient equilibrium, i.e., a turnaround. We compare communication from leaders to incentive increases and also compare the effectiveness of randomly selected and elected leaders. Although all interventions yield shifts to more efficient equilibria, communication from leaders has a greater effect than incentives. Moreover, leaders who are elected by followers are significantly better at improving their groups outcome than randomly selected leaders. The improved effectiveness of elected leaders results from sending more performance-relevant messages. Our results are evidence that the way in which leaders are selected affects their legitimacy and the degree to which they influence followers. Finally, we observe that a combination of factors-specifically, incentive increases and communication from elected leaders-yields near-universal turnarounds to full efficiency. This paper was accepted by Uri Gneezy, behavioral economics.

Whom do you distrust and how much does it cost? An experiment on the measurement of trust

We advance the measurement of trust in economics in two ways. First, we highlight the importance of clearly identifying the target of trust, particularly for obtaining concordance between attitudinal and behavioral measures of trust. Second, we introduce a novel behavioral measure of (dis)trust, based on individualsʼ willingness to pay to avoid being vulnerable to the target of trust. We conduct an experiment in which we vary the target of trust among passersby at several locations around a city, measuring both behavioral distrust and trust attitudes towards these varying targets. We find that subjects discriminate based on perceived characteristics of different targets in determining whether to trust, in a manner consistent with trust elicited using attitudinal measures and with actual trustworthiness. Risk aversion and altruism do not correlate highly with our measure of distrust.

Behavior and Learning in the “Dirty Faces” Game

This paper examines the Dirty Faces problem as a Bayesian game. The equilibrium in the general form of the game requires the extreme assumption of common knowledge of rationality. However, for any finite number of players, the exact number of steps of iterated rationality necessary for the equilibrium to arise depends on the number of players of a particular type, allowing the game to be used to bound the number of steps satisfied by actual players. The game differs from other games used to study iterated rationality in that all players are better off when common knowledge of rationality is satisfied. While behavior in experiments is inconsistent with the game-theoretic prediction at the group level, individual level behavior shows a greater degree of consistency with theory and with previous results on iterated rationality. Finally, there is some evidence of learning in repeated play.