dc.contributor.author | Balkenborg, D | |
dc.contributor.author | Nagel, R | |
dc.date.accessioned | 2016-07-12T14:16:52Z | |
dc.date.issued | 2015-10-07 | |
dc.description.abstract | We report the experimental results on a game with an outside option where forward
induction contradicts with backward induction based on a focal, risk dominant
equilibrium. The latter procedure yields the equilibrium selected by Harsanyi and
Selten’s (1988) theory, which is hence here in contradiction with strategic stability
(Kohlberg-Mertens (1985)). We find the Harsanyi-Selten solution to be in much
better agreement with our data.
Since fairness and bounded rationality seem to matter we discuss whether recent
behavioral theories, in particular fairness theories and learning, might explain our
findings. The fairness theories by Fehr and Schmidt (1999), Bolton and Ockenfels
(2000) or Charness and Rabin (2002), when calibrated using experimental data on
dictator- and ultimatum games, indeed predict that forward induction should play no role for our experiment and that the outside option should be chosen by all
sufficiently selfish players. However, there is a multiplicity of “fairness equilibria”,
some of which seem to be rejected because they require too many levels of reasoning.
We show that learning theories based on naive priors could alternatively explain
our results, but not that of closely related experiments. | en_GB |
dc.identifier.citation | Discussion Papers in Economics 08/04 (Updated 07.10.15) | en_GB |
dc.identifier.uri | http://hdl.handle.net/10871/22530 | |
dc.language.iso | en | en_GB |
dc.publisher | University of Exeter, Department of Economics | en_GB |
dc.subject | experiments | en_GB |
dc.subject | equilibrium selection | en_GB |
dc.subject | forward induction | en_GB |
dc.subject | fairness | en_GB |
dc.subject | level k reasoning | en_GB |
dc.title | An Experiment on Forward versus Backward Induction: How Fairness and Levels of Reasoning Matter | en_GB |
dc.type | Working Paper | en_GB |
dc.date.available | 2016-07-12T14:16:52Z | |
dc.identifier.issn | 1473-3307 | |
pubs.declined | 2016-07-12T14:12:08.726+0100 | |
pubs.deleted | 2016-07-12T14:12:08.726+0100 | |
exeter.confidential | false | en_GB |