Behavioural game theory

Pro-social preferences and strategic interactions

 

 

 

Instructor:      Christophe Heintz

Office Hours: Hattyu u. 14, room: 416.

By appt. (e-mail: christophe.heintz@gmail.com); or just pop in!

 

Type:                 CogSci research course, fall term, 2014

Class:                   Thursdays 13:30 – 15:10

                                    Hattyu u. 14, 3th floor

 

 

The syllabus includes the course description and a specification of the course requirements.

 

 

COURSE SCHEDULE

 

Part 1: Issues in behavioural economics

 

1.       Decision theory: a crash course

 

Goal: introduce the model of rational decision making, or homo economicus and specify the interest of the model for psychologists. We will review the following issues:

Š          The role of incentives and cost-benefit analysis

Š          Theory of revealed preferences: explicit goals, implicit motivations, or mere dispositions (evolutionary function)?

Š          Taking risks into account

 

Main readings:

p.15-33 from:

Levitt and Dubner (2005) Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. New York: William Morrow.

 

Chapter 1 of:

Frank, Robert H. (2008) Microeconomics and Behavior. McGraw-Hill.

 

To go further:

Any introductory textbook on micro-economics. Including:

Frank, Robert H. (2008) Microeconomics and Behavior. McGraw-Hill.

 

 

Handout 1

 

Exercises to do for the following weeks (exercise 1 is due on week 2, exercise 2 is due on week 4)

 

 

2.       Some results in behavioural economics

 

Goal: Illustrate the work of behavioural economics with a set of examples showing “predictable irrationality” and ways to test and theorise such departures from rational choice.

 

Main reading

Chapter 3 of:

Ariely, Dan (2008). Predictably Irrational: The Hidden Forces that Shape Our Decisions. New York: HarperCollins Publishers.

 

To go further

Ariely, Dan (2008). Predictably Irrational: The Hidden Forces that Shape Our Decisions. New York: HarperCollins Publishers.

 

Handout 2

 

Solution to exercise 1 of homework 1

 

 

Part 2: Social preferences---an account of pro-social behaviour?

 

3.       Models of social preferences: inequity aversion, social welfare, competition

 

Goal: introducing the standard methods for investigating pro-social preferences, and the main models specifying these preferences with utility functions.

 

Main reading

Fehr E., Fischbacher U. (2002) Why social preferences matter - The impact of non-selfish motives on competition, cooperation and incentives. The Economic Journal, 112, p. 1-33

 

 

Supplementary readings:

Charness G., Rabin M. (2002) Understanding social preferences with simple tests. Quarterly Journal of Economics, 117 (3), p. 817-869.

 

Engel, C. (2010) Dictator games: a meta-study. MPI Collective Goods Preprint No. 2010/07

 

First part of Guala, F. (2005) The Methodology of Experimental Economics, Cambridge University Press.

 

Camerer (2003) p. 43 to 101     

 

 

Handout 3a on Fehr and Fischbacher (2002) : how social preferences impact key economic interactions

 

Handout 3b on Charness and Rabin (2002) : experiments for calibrating the utility function of pro-social choices

 

 

4.       Reciprocity

 

Main reading

E Fehr, U Fischbacher and S. Gätcher (2002) Strong reciprocity, human cooperation, and the enforcement of social norms. Human nature, vol. 13, num. 1, pp. 1--25

 

Supplementary readings

Oucome vs. intention-based preferences

Falk A., Fehr E., Fischbacher u. (2008) Testing theories of fairness. Intentions matter. Games and Economic Behavior, 62, p. 287-303

 

McCabe K., Rigdon M., Smith V.L. (2003) Positive reciprocity and intentions in trust games. Journal of Economic Behavior & Organization, 52, p. 267-275.

 

Bolton, G. and Ockenfels, A. (2000) A theory of equity, reciprocity and competition. American Economic Review, vol. 90, p. 166—196.

 

Strong vs. weak reciprocity

E. Fehr, S. Gächter (2002) Altruistic punishment in humans. Nature, vol. 415, pp. 137—140

 

Guala, F. (2011) “Reciprocity: Weak or Strong? What Punishment Experiments Do (and Do Not) Demonstrate”, DEAS Working Paper 2010-23.BBS .

 

Evolutionary considerations

Fehr, E. & Henrich, J., (2003) Is Strong Reciprocity a Maladaptation. In Genetic and Culture Evolution of Cooperation edited by Peter Hammerstein. MIT Press.

 

Gintis, H. (2000) Strong reciprocity and human sociality. Journal of Theoretical Biology. Vo. 206, pp. 169--179.

 

 

5.       Guilt aversion, aversion to disappointing

 

Main reading

Heintz, C., Celse, J., Giardini, F., Max, S. (2014) Facing others’ expectations: those that we prefer to fulfil and those that we ignore. Working paper.

 

Supplementary readings

Dana, J., Cain, D. M., & Dawes, R. M. (2006). What you don’t know won't hurt me: Costly (but quiet) exit in dictator games. Organizational Behavior and Human Decision Processes, 100, 193–201.

 

Dana, J., Weber, R. a., & Kuang, J. X. (2007). Exploiting moral wiggle room: experiments demonstrating an illusory preference for fairness. Economic Theory, 33(1), 67–80.

 

Ockenfels, A., & Werner, P. (2012). “Hiding behind a small cake” in a newspaper dictator game. Journal of Economic Behavior & Organization, 82(1), 82–85.

 

Vranceanu, R., Sutan, A., & Dubart, D. (2010). Trust and Financial Trades: Lessons from an Investment Game Where Reciprocators Can Hide Behind Probabilities. Business.

 

Broberg, T., Ellingsen, T., & Johannesson, M. (2007). Is generosity involuntary? Economics Letters, 94(1), 32–37.

 

To go further: models

Bénabou, R., & Tirole, J. (2005). Incentives and prosocial behavior. Retrieved from http://www.nber.org/papers/w11535

 

Bénabou, R., & Tirole, J. (2009). Inrinsic and Extrinsic Motivations. The Review of Economic Studies, 70(3), 489–520.

 

Handout

 

6.       Eyes cues and other framing effects

 

 

Main readings

Haley K., Fessler D. (2005) Nobody's watching? Subtle cues affect generosity in an anonymous economic game, Evolution and Human Behavior, 26, p. 245-256.

 

Supplementary readings

On eye-cues

Fehr E., Schneider F. (2009) Eyes are on us, but nobody cares: Are eye cues relevant for strong reciprocity? Proceedings of the Royal Society B: Biological Sciences, 277(1686), p. 1315-1323

 

Ernest-Jones M., Nettle D., Bateson M. (2011) Effects of eye images on everyday cooperative behavior: a field experiment, Evolution and Human Behavior, 32, 172-178.

 

Bateson M., Nettle D., Roberts G. (2006) Cues of being watched enhance cooperation in a real world setting, Biology Letters, 2, p. 412-414

 

Shariff, A.F., & Norenzayan, A. (2007). God is watching you: Supernatural agent concepts increase prosocial behavior in an anonymous economic game. Psychological Science, 18, 803-809.

 

How much is due to framing?

Bardsley, N. (2007). Dictator game giving: altruism or artefact? Experimental Economics, 11(2), 122–133. Retrieved from http://dx.doi.org/10.1007/s10683-007-9172-2.

Burton-Chellew, Maxwell N., and Stuart A. West. "Prosocial preferences do not explain human cooperation in public-goods games." Proceedings of the National Academy of Sciences 110.1 (2013): 216-221.

 

7.       Cultural variation and the construction of pro-social preferences

 

 

Main readings

Henrich et. Al. (2005) “Economic man” in cross-cultural perspective: Behavioral experiments in 15 small-scale societies. BBS.

 

Supplementary readings

Herrmann B., Thöni C., Gächter S. (2008) Antisocial punishment across societies, Science, 319(5868), p.1362-7.

 

S. Lamba, R. Mace (2011) Demography and ecology drive variation in cooperation across human populations. Proceedings of the National Academy of Sciences 108 (35) p. 14426-14430

 

Heintz, C. (2013). What can’t be inferred from cross-cultural experimental games. Current Anthropology, 54(2), 165–166.

 

Heintz, C., & Bardsley, N. (2010). The implication of social cognition for experimental economics. Mind & Society, 9(2), 113–118. doi:10.1007/s11299-010-0082-1

 

Granovetter M (1985) Economic action and social structure: the problem of embeddedness. Am J Sociol 91(3):481–510

 

 

Part 3: Game theory and strategic interactions

 

8.       Game theory: a crash course

 

Goal: as the name indicates, we’ll try to acquire the main notions and techniques of game theory in just one session...

 

-           Example of games

-           Dominance-solvable games

-           Mixed strategy

-           Nash equilibria

 

Reading: any textbook in game theory. For instance:

 

Binmore, K. (2007). Game Theory: A Very Short Introduction. Art History. Oxford University Press.

 

Online videos

 

Some exercises (=homework)

 

 

9.       Beliefs in social interactions

 

Main reading

Molnár, A., and C. Heintz (2014) Prior beliefs about others’ social choices: People evaluate how prosocial others are and overestimate selfishness. Working paper.

 

Further readings

Chapter 6 of Camerer, C. F. (2003). Behavioral Game Theory: Experiments in Strategic Interaction (Roundtable Series in Behaviorial Economics) (p. 584). Princeton University Press.

 

10.   Eductive reasoning

 

Main reading

Sutan, A., & Willinger, M. (2009). Guessing with negative feedback: An experiment. Journal of Economic Dynamics and Control, 33(5), 1123–1133.

 

To go further

Nagel, R. (1995). Unraveling in guessing games: An experimental study. The American Economic Review, 85(5), 1313–1326.

 

Camerer, C., Ho, T., & Chong, J. (2004). A cognitive hierarchy model of games. The Quarterly Journal of Economics.

 

Ohtsubo, Y., & Rapoport, A. (2006). Depth of reasoning in strategic form games. The Journal of Socio-Economics.

 

 

11.   How to coordinate: Shelling games

 

 

Main reading

Mehta, J, Starmer, C., & Sugden, R. (1994). The nature of salience: An experimental investigation of pure coordination games. The American Economic Review.

 

Further readings

Mehta, Judith, Starmer, C., & Sugden, R. (1994). Focal points in pure coordination games: An experimental investigation. Theory and Decision, 36(2), 163–185.

 

Bardsley, N., Mehta, J., Starmer, C., & Sugden, R. (2006). The nature of salience revisited: cognitive hierarchy theory versus team reasoning. Economic Journal.

 

Crawford, V. (2008). The power of focal points is limited: even minute payoff asymmetry may yield large coordination failures. The American Economic Review, 98(4), 1443–1458.

 

Janssen, M. (2001). Rationalizing focal points. Theory and Decision, 50, 119–148.

 

Sugden, R. (1995). A theory of focal points. The Economic Journal.

 

 

12.   Group decision-making

 

Main reading

Hugo Mercier, Emmanuel Trouche, Hiroshi Yama, Christophe Heintz, Vittorio

Girotto (2014) Experts and laymen grossly underestimate the beneřts of argumentation. Thinking and Reasoning.

 

To go further

Charness, G. and Sutter, M. (2012) Groups Make Better Self-Interested Decisions. The Journal of Economic Perspectives. Vol. 26, No. 3,  pp. 157-176.