Peter Ockenfels | Goethe-Universität Frankfurt am Main (original) (raw)

Uploads

Papers by Peter Ockenfels

Research paper thumbnail of Two-Level Ultimatum Bargaining with Incomplete Information: an Experimental Study

The Economic Journal, 1996

Research paper thumbnail of Speculative Attacks and Financial Architecture: Experimental Analysis of Coordination Games with Public and Private Information

SSRN Electronic Journal, 2000

Research paper thumbnail of Measuring Ambiguity Aversion: A Systematic Experimental Approach

SSRN Electronic Journal, 2000

ABSTRACT This paper provides a systematic analysis of individual attitudes towards ambiguity, bas... more ABSTRACT This paper provides a systematic analysis of individual attitudes towards ambiguity, based on laboratory experiments. The design of the analysis allows to capture individual behavior across various levels of ambiguity, ranging from low to high. Attitudes towards risk and attitudes towards ambiguity are disentangled, providing pure measures of ambiguity aversion. Ambiguity aversion is captured in several ways, i.e. as a discount factor net of a risk premium, and as an estimated parameter in a generalized utility function. We find that ambiguity aversion varies across individuals, and with the level of ambiguity, being most prominent for intermediate levels. Around one third of subjects show no aversion, one third show maximum aversion, and one third show intermediate levels of ambiguity aversion, while there is almost no ambiguity seeking. While most theoretical work on ambiguity builds on maxmin expected utility, our results provide evidence that MEU does not adequately capture individual attitudes towards ambiguity for the majority of individuals. Instead, our results support models that allow for intermediate levels of ambiguity aversion. Moreover, we find risk aversion to be statistically unrelated to ambiguity aversion on average. Taken together, the results support the view that ambiguity is an important and distinct argument in decision making under uncertainty.

Research paper thumbnail of Strategic Risk and Co-Operative Relationships: Experimental Evidence

SSRN Electronic Journal, 2000

ABSTRACT We test infinitely repeated prisoner's dilemma games with random continuation in... more ABSTRACT We test infinitely repeated prisoner's dilemma games with random continuation in the laboratory to capture the effect of strategic risk on co-operation. We propose a criterion building on Harsanyi and Selten's (1988) risk dominance concept and motivate it by three heuristic principles. Our criterion depends on the often disregarded "sucker's payoff" - the payoff of a co-operating player meeting a defector - and results in a critical discount factor delta* strictly larger than delta, the traditional criterion, above which co-operation is supported by Pareto-undominated equilibrium strategies and which has often been used in applications. We find that changes in the frequency of subjects' co-operation in the lab are predicted far better by delta* than by the Pareto-dominance criterion reflected in delta. Our experiments, in particular, show that for parameter changes where the two criteria predict co-operation frequency changes in opposite directions, our alternative criterion delta* is the one that predicts correctly.

Research paper thumbnail of Measuring Strategic Uncertainty in Coordination Games

Review of Economic Studies, 2009

This paper proposes a method to measure strategic uncertainty by eliciting certainty equivalents ... more This paper proposes a method to measure strategic uncertainty by eliciting certainty equivalents analogous to measuring risk attitudes in lotteries. We apply this method by conducting experiments on a class of one-shot coordination games with strategic complementarities and choices between simple lotteries and sure payoff alternatives, both framed in a similar way. Despite the multiplicity of equilibria in the coordination games, aggregate behaviour is fairly predictable. The pure or mixed Nash equilibria cannot describe subjects' behaviour. We present two global games with private information about monetary payoffs and about risk aversion. While previous literature treats the parameters of a global game as given, we estimate them and show that both models describe observed behaviour well. The global-game selection for vanishing noise of private signals offers a good recommendation for actual players, given the observed distribution of actions. We also deduce subjective beliefs and compare them with objective probabilities.

Research paper thumbnail of Co-operation in Infinitely Repeated Games: Extending Theory and Experimental Evidence

A proper understanding of the determinants of co-operation is crucial for the social sciences. In... more A proper understanding of the determinants of co-operation is crucial for the social sciences. In this paper we propose a novel theoretical tool that enhances this understanding. Accordingly we present experimental evidence designed to differentiate clearly among the prevailing theories based mostly on repeated games non-deviation constraints and our theoretical tool. Our theory intuitively takes into account the often neglected "sucker's payoff "i n infinitely repeated prisoner's dilemma games. This yields a new cutoff level for the discount factor, δ∗ ,c ompared to the more traditional cutoff level δ below which co-operation is not supportable as an equilibrium. We simulate infinitely repeated prisoner's dilemma games in the laboratory with random continuation and matching rules and many experimental subjects, and find that changes in the frequency of co-operation are predicted much better by our novel indicator δ∗ as by δ. We finally estimate experimental...

Research paper thumbnail of On durable goods monopolies an experimental study of intrapersonal price competition and price discrimination over time

Journal of Economic Psychology, 1995

ABSTRACT In a durable monopoly market a single seller can offer his product for sale in subsequen... more ABSTRACT In a durable monopoly market a single seller can offer his product for sale in subsequent periods. A customer, however, will buy at most once. Solutions to such games have been derived in another study (Güth and Ritzberger, 1992), both for finitely and infinitely many sales periods. We report on classroom experiments with two or three potential sales periods and different constellations of discount factors. Game theory predicts for those cases either intrapersonal price competition (Coase-conjecture) or price discrimination (Pacman-conjecture). An experimental variation is that one group of participants was introduced to the theory of durable goods monopolies, whereas another group was completely unfamiliar with this theory and game theory in general.

Research paper thumbnail of Cooperation based on trust. An experimental investigation

Journal of Economic Psychology, 1997

We consider the most basic sequential game, called the ‘game of trust’, in which the first mover ... more We consider the most basic sequential game, called the ‘game of trust’, in which the first mover starts by deciding between cooperation and non-cooperation, whereas the second mover can only react in case of cooperation by either exploiting the other player or by dividing the rewards equally. The unique subgame perfect equilibrium predicts non-cooperation although this is payoff-dominated by fair

Research paper thumbnail of Efficiency by trust in fairness? multiperiod ultimatum bargaining experiments with an increasing cake

International Journal of Game Theory, 1993

... Efficiency by Trust in Fairness? Multiperiod Ultimatum Bargaining Experiments With an Increas... more ... Efficiency by Trust in Fairness? Multiperiod Ultimatum Bargaining Experiments With an Increasing Cake 1 WERNER G~TH, PETER OCKENFELS, and Markus WENDEL Johann Wolfgang Goethe University, PO Box 111932, 6000 Frankfurt am Main, Germany ...

Research paper thumbnail of The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information

Econometrica, 2004

The theory of global games has shown that coordination games with multiple equilibria may have a ... more The theory of global games has shown that coordination games with multiple equilibria may have a unique equilibrium if certain parameters of the payoff function are private information instead of common knowledge. We report the results of an experiment designed to test the predictions of this theory. Comparing sessions with common and private information, we observe only small differences in behavior. For common information, subjects coordinate on threshold strategies that deviate from the global game solution towards the payoff-dominant equilibrium. For private information, thresholds are closer to the global game solution than for common information. Variations in the payoff function affect behavior as predicted by comparative statics of the global game solution. Predictability of coordination points is about the same for both information conditions.

Research paper thumbnail of Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence

American Economic Journal: Microeconomics, 2011

We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated... more We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated symmetric Prisoner's Dilemma. Our axioms characterize a unique selection criterion S * predicting whether players cooperate or not. S * depends on all model primitives -in particular on the "sucker's payoff" of a cooperating player meeting a defecting one. Selection criterion S * is also useful as a tool for applied comparative statics exercises as it results in a critical discount factor δ * strictly larger than δ, the standard criterion often used in applications.

Research paper thumbnail of Prisoners' Dilemma as a game with incomplete information

Journal of Economic Psychology, 1990

ABSTRACT The Prisoners' Dilemma is reformulated as a game (with incomplete information) b... more ABSTRACT The Prisoners' Dilemma is reformulated as a game (with incomplete information) between players of different ‘moral standards’. Equilibrium solutions are computed for games with simultaneous choices and for games with sequential choices. Cooperation should occur more frequently in the latter. Experiments are conducted with both types of games. The results can neither be explained by (linear) altruistic utility functions nor by a revaluation of the cooperative choices. They can be explained, however, by a revaluation of the cooperative result. In this case we get an extreme distribution of the ‘moral standards’. Expressed as monetary values and compared with the monetary rewards of the game there seems to be one class of persons with rather high standards, another class of persons with rather low standards, and practically no intermediate cases. The rejection of altruistic utility functions as well as the rejection of certain norms of behavior have important consequences for the implementation of altruism, norms and morals in formal models of decision making.

Research paper thumbnail of Two-Level Ultimatum Bargaining with Incomplete Information: an Experimental Study

The Economic Journal, 1996

Research paper thumbnail of Speculative Attacks and Financial Architecture: Experimental Analysis of Coordination Games with Public and Private Information

SSRN Electronic Journal, 2000

Research paper thumbnail of Measuring Ambiguity Aversion: A Systematic Experimental Approach

SSRN Electronic Journal, 2000

ABSTRACT This paper provides a systematic analysis of individual attitudes towards ambiguity, bas... more ABSTRACT This paper provides a systematic analysis of individual attitudes towards ambiguity, based on laboratory experiments. The design of the analysis allows to capture individual behavior across various levels of ambiguity, ranging from low to high. Attitudes towards risk and attitudes towards ambiguity are disentangled, providing pure measures of ambiguity aversion. Ambiguity aversion is captured in several ways, i.e. as a discount factor net of a risk premium, and as an estimated parameter in a generalized utility function. We find that ambiguity aversion varies across individuals, and with the level of ambiguity, being most prominent for intermediate levels. Around one third of subjects show no aversion, one third show maximum aversion, and one third show intermediate levels of ambiguity aversion, while there is almost no ambiguity seeking. While most theoretical work on ambiguity builds on maxmin expected utility, our results provide evidence that MEU does not adequately capture individual attitudes towards ambiguity for the majority of individuals. Instead, our results support models that allow for intermediate levels of ambiguity aversion. Moreover, we find risk aversion to be statistically unrelated to ambiguity aversion on average. Taken together, the results support the view that ambiguity is an important and distinct argument in decision making under uncertainty.

Research paper thumbnail of Strategic Risk and Co-Operative Relationships: Experimental Evidence

SSRN Electronic Journal, 2000

ABSTRACT We test infinitely repeated prisoner's dilemma games with random continuation in... more ABSTRACT We test infinitely repeated prisoner's dilemma games with random continuation in the laboratory to capture the effect of strategic risk on co-operation. We propose a criterion building on Harsanyi and Selten's (1988) risk dominance concept and motivate it by three heuristic principles. Our criterion depends on the often disregarded "sucker's payoff" - the payoff of a co-operating player meeting a defector - and results in a critical discount factor delta* strictly larger than delta, the traditional criterion, above which co-operation is supported by Pareto-undominated equilibrium strategies and which has often been used in applications. We find that changes in the frequency of subjects' co-operation in the lab are predicted far better by delta* than by the Pareto-dominance criterion reflected in delta. Our experiments, in particular, show that for parameter changes where the two criteria predict co-operation frequency changes in opposite directions, our alternative criterion delta* is the one that predicts correctly.

Research paper thumbnail of Measuring Strategic Uncertainty in Coordination Games

Review of Economic Studies, 2009

This paper proposes a method to measure strategic uncertainty by eliciting certainty equivalents ... more This paper proposes a method to measure strategic uncertainty by eliciting certainty equivalents analogous to measuring risk attitudes in lotteries. We apply this method by conducting experiments on a class of one-shot coordination games with strategic complementarities and choices between simple lotteries and sure payoff alternatives, both framed in a similar way. Despite the multiplicity of equilibria in the coordination games, aggregate behaviour is fairly predictable. The pure or mixed Nash equilibria cannot describe subjects' behaviour. We present two global games with private information about monetary payoffs and about risk aversion. While previous literature treats the parameters of a global game as given, we estimate them and show that both models describe observed behaviour well. The global-game selection for vanishing noise of private signals offers a good recommendation for actual players, given the observed distribution of actions. We also deduce subjective beliefs and compare them with objective probabilities.

Research paper thumbnail of Co-operation in Infinitely Repeated Games: Extending Theory and Experimental Evidence

A proper understanding of the determinants of co-operation is crucial for the social sciences. In... more A proper understanding of the determinants of co-operation is crucial for the social sciences. In this paper we propose a novel theoretical tool that enhances this understanding. Accordingly we present experimental evidence designed to differentiate clearly among the prevailing theories based mostly on repeated games non-deviation constraints and our theoretical tool. Our theory intuitively takes into account the often neglected "sucker's payoff "i n infinitely repeated prisoner's dilemma games. This yields a new cutoff level for the discount factor, δ∗ ,c ompared to the more traditional cutoff level δ below which co-operation is not supportable as an equilibrium. We simulate infinitely repeated prisoner's dilemma games in the laboratory with random continuation and matching rules and many experimental subjects, and find that changes in the frequency of co-operation are predicted much better by our novel indicator δ∗ as by δ. We finally estimate experimental...

Research paper thumbnail of On durable goods monopolies an experimental study of intrapersonal price competition and price discrimination over time

Journal of Economic Psychology, 1995

ABSTRACT In a durable monopoly market a single seller can offer his product for sale in subsequen... more ABSTRACT In a durable monopoly market a single seller can offer his product for sale in subsequent periods. A customer, however, will buy at most once. Solutions to such games have been derived in another study (Güth and Ritzberger, 1992), both for finitely and infinitely many sales periods. We report on classroom experiments with two or three potential sales periods and different constellations of discount factors. Game theory predicts for those cases either intrapersonal price competition (Coase-conjecture) or price discrimination (Pacman-conjecture). An experimental variation is that one group of participants was introduced to the theory of durable goods monopolies, whereas another group was completely unfamiliar with this theory and game theory in general.

Research paper thumbnail of Cooperation based on trust. An experimental investigation

Journal of Economic Psychology, 1997

We consider the most basic sequential game, called the ‘game of trust’, in which the first mover ... more We consider the most basic sequential game, called the ‘game of trust’, in which the first mover starts by deciding between cooperation and non-cooperation, whereas the second mover can only react in case of cooperation by either exploiting the other player or by dividing the rewards equally. The unique subgame perfect equilibrium predicts non-cooperation although this is payoff-dominated by fair

Research paper thumbnail of Efficiency by trust in fairness? multiperiod ultimatum bargaining experiments with an increasing cake

International Journal of Game Theory, 1993

... Efficiency by Trust in Fairness? Multiperiod Ultimatum Bargaining Experiments With an Increas... more ... Efficiency by Trust in Fairness? Multiperiod Ultimatum Bargaining Experiments With an Increasing Cake 1 WERNER G~TH, PETER OCKENFELS, and Markus WENDEL Johann Wolfgang Goethe University, PO Box 111932, 6000 Frankfurt am Main, Germany ...

Research paper thumbnail of The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information

Econometrica, 2004

The theory of global games has shown that coordination games with multiple equilibria may have a ... more The theory of global games has shown that coordination games with multiple equilibria may have a unique equilibrium if certain parameters of the payoff function are private information instead of common knowledge. We report the results of an experiment designed to test the predictions of this theory. Comparing sessions with common and private information, we observe only small differences in behavior. For common information, subjects coordinate on threshold strategies that deviate from the global game solution towards the payoff-dominant equilibrium. For private information, thresholds are closer to the global game solution than for common information. Variations in the payoff function affect behavior as predicted by comparative statics of the global game solution. Predictability of coordination points is about the same for both information conditions.

Research paper thumbnail of Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence

American Economic Journal: Microeconomics, 2011

We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated... more We propose an axiomatic approach for equilibrium selection in the discounted, infinitely repeated symmetric Prisoner's Dilemma. Our axioms characterize a unique selection criterion S * predicting whether players cooperate or not. S * depends on all model primitives -in particular on the "sucker's payoff" of a cooperating player meeting a defecting one. Selection criterion S * is also useful as a tool for applied comparative statics exercises as it results in a critical discount factor δ * strictly larger than δ, the standard criterion often used in applications.

Research paper thumbnail of Prisoners' Dilemma as a game with incomplete information

Journal of Economic Psychology, 1990

ABSTRACT The Prisoners' Dilemma is reformulated as a game (with incomplete information) b... more ABSTRACT The Prisoners' Dilemma is reformulated as a game (with incomplete information) between players of different ‘moral standards’. Equilibrium solutions are computed for games with simultaneous choices and for games with sequential choices. Cooperation should occur more frequently in the latter. Experiments are conducted with both types of games. The results can neither be explained by (linear) altruistic utility functions nor by a revaluation of the cooperative choices. They can be explained, however, by a revaluation of the cooperative result. In this case we get an extreme distribution of the ‘moral standards’. Expressed as monetary values and compared with the monetary rewards of the game there seems to be one class of persons with rather high standards, another class of persons with rather low standards, and practically no intermediate cases. The rejection of altruistic utility functions as well as the rejection of certain norms of behavior have important consequences for the implementation of altruism, norms and morals in formal models of decision making.