Tamar Kugler

Individual and group decisions in the centipede game: Are groups more rational players?

Two experiments compared the Centipede game played either by 2 individuals or by 2 (3-person) groups. The 2 competitors alternate in deciding whether to take the larger portion of an increasing (or constant) pile of money, and as soon as one “takes” the game ends. Assuming that both sides are concerned only with maximizing their own payoffs (and that this is common knowledge), the game theoretic solution, derived by backward induction, is for the first mover to exit the game at the first decision node. Both experiments found that although neither individuals nor groups fully complied with this solution, groups did exit the game significantly earlier than individuals. The study of experimental games has uncovered many instances in which individuals deviate systematically from the game theoretic solution. This study is in accord with other recent experiments in suggesting that game theory may provide a better description of group behavior.

Orthographic structure versus morphological structure: principles of lexical organization in a given language.

Most models of visual word recognition in alphabetic orthographies assume that words are lexically organized according to orthographic similarity. Support for this is provided by form-priming experiments that demonstrate robust facilitation when primes and targets share similar sequences of letters. The authors examined form-orthographic priming effects in Hebrew, Arabic, and English. Hebrew and Arabic have an alphabetic writing system but a Semitic morphological structure. Hebrew morphemic units are composed of noncontiguous phonemic (and letter) sequences in a given word. Results demonstrate that form-priming effects in Hebrew or Arabic are unreliable, whereas morphological priming effects with minimal letter overlap are robust. Hebrew bilingual subjects, by contrast, showed robust form-priming effects with English material, suggesting that Semitic words are lexically organized by morphological rather than orthographic principles. The authors conclude that morphology can constrain lexical organization even in alphabetic orthographies and that visual processing of words is first determined by morphological characteristics.

Choice of Routes in Congested Traffic Networks: Experimental Tests of the Braess Paradox

The Braess Paradox consists of showing that, in equilibrium, adding a new link that connects two routes running between a common origin and common destination may raise the travel cost for each network user. We report the results of two experiments designed to study whether the paradox is behaviorally realized in two simulated traffic networks that differ from each other in their topology. Both experiments include relatively large groups of participants who independently and repeatedly choose travel routes in one of two types of traffic networks, one with the added links and the other without them. Our results reject the hypothesis that the paradox is of marginal value and its force diminishes with experience. Rather, they strongly support the alternative hypothesis that with experience in traversing the networks financially motivated players converge to choosing the equilibrium routes in the network with added capacity despite sustaining a sharp decline in earnings.

BEHAVIORALLY OPTIMAL AUCTION DESIGN: EXAMPLES AND OBSERVATIONS

This paper begins to explore behavioral mechanism design, replacing equilibrium by a model based on “level-k” thinking, which has strong support in experiments. In representative examples, we consider optimal sealed-bid auctions with two symmetric bidders who have independent private values, assuming that the designer knows the distribution of level-k bidders. We show that in a first-price auction, level-k bidding changes the optimal reserve price and often yields expected revenue that exceeds Myerson’s (1981) bound; and that an exotic auction that exploits bidders’ non-equilibrium beliefs can far exceed the revenue bound. We close with some general observations about level-k auction design. (JEL: C72, C92)

Markets versus negotiations: An experimental investigation

We consider the consequences of competition between two types of experimental exchange mechanisms, a “decentralized bargaining” market, and a “centralized” market. It is shown that decentralized bargaining is subject to a process of “unraveling” in which relatively high value traders (buyers with a high willingness to pay and sellers with low costs) continuously find trading in the centralized markets more attractive until few opportunities for mutually beneficial trade remain outside the centralized marketplace.

Back to the basics: how feelings of anger affect cooperation

Purpose The authors propose that angry individuals are much more likely to consider the emotional state of their partner than are neutral individuals. They then apply a lay theory dictating that anger decreases cooperation and react accordingly by lowering their own level of cooperation. Design/methodology/approach The authors report four experiments involving different samples, manipulations, payment schemes and interfaces. The methodological approach was to capitalize on the positives of experimental research (e.g. establishing causality) while also trying to conceptually replicate the findings in different settings. Findings The authors found evidence for a lay theory (i.e. expectation) that anger decreases cooperation, but that actual cooperation was lowest when angry individuals were paired with other angry individuals, supporting the hypotheses. Research limitations/implications Anger can spill over from unrelated contexts to affect cooperation, and incidental anger by itself is not enough to decrease cooperation. However, the findings are limited to anger and cannot necessarily be used to understand the effects of other emotions. Practical implications Before entering into a context that requires cooperation, such as a negotiation, be wary of the emotional state of both yourself and of your partner. This paper suggests that only if both parties are angry, then the likelihood of cooperation is low. Originality/value To the best of the authors’ knowledge, they are the first researchers to address the question of how incidental anger affects single-round cooperation. By going back to the basics, the authors believe that the findings fill a gap in existing research and offer a building block for future research on anger and cooperation.