Simultaneous Decision-Making in Competitive and Cooperative Environments

Savikhin, Anya and Sheremeta, Roman (2012): Simultaneous Decision-Making in Competitive and Cooperative Environments. Published in: Economic Inquiry No. 51 (2013): pp. 1311-1323.

Abstract

We experimentally investigate simultaneous decision-making in two contrasting environments: one that encourages competition (lottery contest) and one that encourages cooperation (public good game). We find that simultaneous participation in the public good game affects behavior in the contest, decreasing sub-optimal overbidding. Contributions to the public good are not affected by participation in the contest. The direction of behavioral spillover is explained by differences in strategic uncertainty and path-dependence across games. Our design allows us to compare preferences for cooperation and competition. We find that in early periods, there is a negative correlation between decisions in competitive and in cooperative environments.

• Item Type: MPRA Paper
• Language: English
• Keywords: cooperation, competition, public goods, contests, experiments, behavioral spillover
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior

References

Ahn, T. K., Ostrom, E., Schmidt, D., Shupp, R., & Walker, J. 2001. Cooperation in PD Games: Fear, Greed, and History of Play. Public Choice, 106(1), 137-155.

Anderson, S.P., Goeree, J.K., & Holt, C.A., 1998. A Theoretical Analysis of Altruism and Decision Error in Public Goods Games. Journal of Public Economics, 70, 297-323.

Andreoni, J., 1995. Cooperation in public goods experiments: kindness or confusion. American Economic Review, 85, 891–904.

Bartling, B., Fehr, E., MarÈchal, M. A., & Schunk, D. 2009. Egalitarianism and Competitiveness. American Economic Review, 99(2), 93-98.

Bednar, J., Chen, Y., Liu, T. X., & Page, S. 2012. Behavioral Spillovers and Cognitive Load in Multiple Games: An Experimental Study. Games and Economic Behavior, 74(1), 12-31.

Bernasconi, M., Corazzini, L., Kube, S., & Marechal, M. 2009. Two are better than one! Individuals’ contributions to “unpacked” public goods. Economic Letters, 104, 31-33.

Biele, G., Rieskamp, J., Czienskowski, U. 2008. Explaining cooperation in groups: Testing models of reciprocity and learning. Organizational Behavior and Human Decision Processes, 106, 89-105.

Blanco, M., Engelmann, D., and Normann, H.T. 2011. A within-subject analysis of other-regarding preferences. Games and Economic Behavior, 72, 321-338.

Brandts, J. and Cooper, D.J. 2007. It’s what you say, not what you pay: An experimental study of manager-employee relationships in overcoming coordination failure. Journal of the European Economic Association, 5, 1223-1268.

Camerer, C.F. 2003. Behavioral Game Theory: Experiments on Strategic Interaction. Princeton: Princeton University Press.

Cason, T., Savikhin, A. & Sheremeta, R. 2012. Behavioral Spillovers in Coordination Games. European Economic Review, 56, 233-245.

Cherry , T.L., & Shogren, J.F. 2007. Rationality crossovers. Journal of Economic Psychology, 28(2), 261-277.

Cherry, T.L., & Dickinson. 2008. Voluntary contributions with multiple public goods, in T.L. Cherry, S. Kroll and J.F. Shogren (Eds.), Environmental Economics, Experimental Methods: Routledge, 184-193.

Cherry, T.L., Crocker, T.D., & Shogren, J.F. 2003. Rationality spillovers. Journal of Environmental Economics and Management, 45(1), 63-84.

Cooper, D.J. and Kagel, J.H. 2008. Learning and Transfer in Signaling Games. Economic Theory, 34(3), 415-439.

Davis, D., & Reilly, R. 1998. Do many cooks always spoil the stew? An experimental analysis of rent seeking and the role of a strategic buyer. Public Choice, 95, 89-115.

Devetag, G. 2005. Precedent transfer in coordination games: An experiment. Economics Letters, 89(2), 227-232.

Dickinson, D.L. & Oxoby, R.J. 2011. Cognitive dissonance, pessimism, and behavioral spillover effects. Journal of Economic Psychology, 32(3), 295-306.

Dohmen, T., & Falk, A. 2011. Performance Pay and Multi-dimensional Sorting - Productivity, Preferences and Gender, American Economic Review, 101, 556–590.

Falk, A., Fehr, E., & Fischbacher, U. 2005. Driving forces behind informal sanctions. Econometrica, 2017-2030.

Falk, A., Fischbacher, U., Gachter, S., & Effects, S.I. 2012. Living in two neighborhoods – social interaction effects in the lab. Economic Inquiry, forthcoming.

Fehr, E., & Gaechter, S. 2000. Cooperation and Punishment in Public Goods Experiments. American Economic Review, 90, 980-994.

Fehr, E., & Schmidt, K. 1999. A theory of fairness, competition, and cooperation. Quarterly Journal of Economics, 114, 817-868.

Fellner, G., & Lunser, G. 2008. Cooperation in Local and Global Groups. Vienna University of Economics, Working Paper No. 122.

Fischbacher, U. 2007. Z-tree: Zurich toolbox for ready-made economic experiments. Experimental Economics, 10, 171-178.

Fischbacher, U., Gächter, S., & Fehr, E. 2001. Are people conditionally cooperative? Evidence from a public goods experiment. Economics Letters, 71, 397-404.

Groves, T., & Ledyard, J. 1977. Optimal Allocation of Public Goods: A solution to the Free Rider Problem. Econometrica, 45, 783-809.

Grund, C., & Sliwka, D. 2005. Envy and Compassion in Tournaments. Journal of Economics and Management Strategy, 14, 187-207.

Hehenkamp, B., Leininger, W. & Possajennikov, A. 2004. Evolutionary equilibrium in Tullock contests: spite and overdissipation. European Journal of Political Economy, 20(4), 1045-1057.

Herrmann, B., & Orzen, H. 2008. The appearance of homo rivalis: social preferences and the nature of rent seeking. University of Nottingham, Working Paper.

Huck, S., Jehiel, P., & Rutter, T. 2011. Feedback spillover and analogy-based expectations: A multi-game experiment. Games and Economic Behavior, 71(2), 351-365.

Kagel, J.H. 1995. Cross-Game Learning: Experimental Evidence from First-Price and English Common Value Auctions. Economics Letters, 49(2), 163-170.

Knez, M., & Camerer, C. 2000. Increasing Cooperation in Prisoner's Dilemmas by Establishing a Precedent of Efficiency in Coordination Games. Organizational Behavior and Human Decision Processes, 82(2), 194-216.

Ledyard, J. 1995. Public Goods: A Survey of Experimental Research. In J. Kagel and A.E. Roth (Eds.) Handbook of Experimental Economics, Princeton, NJ.

Mago, S.D., Savikhin, A.C., & Sheremeta, R.M. 2012. Facing Your Opponents: Social Identification and Information Feedback in Contests. Chapman University, Working Paper.

Millner, E.L., & Pratt, M.D. 1989. An experimental investigation of efficient rent-seeking. Public Choice, 62, 139-151.

Millner, E.L., & Pratt, M.D. 1991. Risk Aversion and Rent-Seeking: An Extension and Some Experimental Evidence, Public Choice, 69, 81-92.

Morgan, J., Orzen, H., & Sefton, M. 2012. Endogenous Entry in Contests. Economic Theory, forthcoming.

Page, S. E. 2006. Path dependence. Quarterly Journal of Political Science, 1(1), 87-115.

Potters, J.C., De Vries, C.G., & Van Linden, F. 1998. An experimental examination of rational rent seeking. European Journal of Political Economy, 14, 783-800.

Samuelson, L. 2001. Analogies, adaptation, and anomalies. Journal of Economic Theory, 97, 320-366.

Schotter, A. 1998. Worker Trust, System Vulnerability, and the Performance of Work Groups. In A. Ben-Ner and L.G. Putterman (Eds.) Economics, Values and Organization: Cambridge University Press, 364-407.

Sheremeta, R.M. 2010. Expenditures and Information Disclosure in Two-Stage Political Contests. Journal of Conflict Resolution, 54, 771–798.

Sheremeta, R.M. 2010. Experimental Comparison of Multi-Stage and One-Stage Contests. Games and Economic Behavior, 68, 731-747.

Sheremeta, R.M. 2011. Contest Design: An Experimental Investigation. Economic Inquiry, 49, 573–590.

Sheremeta, R.M., & Zhang, J. 2010. Can Groups Solve the Problem of Over-Bidding in Contests? Social Choice and Welfare, 35, 175–97.

Teyssier, S. 2009. Experimental Evidence on Inequity Aversion and Self-Selection between Incentive Contracts. Working Paper.

Tullock, G. 1980. Efficient Rent Seeking. In James M. Buchanan, Robert D. Tollison, Gordon Tullock, (Eds.), Toward a theory of the rent-seeking society. College Station, TX: Texas A&M University Press, pp. 97-112.

Van Huyck, J. B., Battalio, R.C., & Beil, R.O. 1990. Tacit coordination games, strategic uncertainty, and coordination failure. American Economic Review, 80(1), 234-48.

Van Huyck, J.B., Battalio, R.C., & Beil, R.O. 1991. Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games. Quarterly Journal of Economics, 106, 885-910.