Conditioning competitive behaviour in experimental Bertrand markets through contextual frames (original) (raw)
Related papers
Frames and Economic Behavior An Experimental Study
2000
Decision-makers are sometimes influenced by the way in which choice situations are presented to them or "framed." If such framing effects were strong and pervasive, this would imply an important challenge to the social sciences, since it would make it difficult to study human behavior in a synthetic or theoretic manner. We study the impact of frame and incentive variations
Debiasing context effects in strategic decisions
demonstrated that the cooperativeness of previously seen prisoner's dilemma games biases choices and predictions in the current game. These effects were: a) assimilation to the mean cooperativeness of the played games caused by action reinforcement, and b) perceptual contrast with the preceding games depending on the range and the rank order of their cooperativeness. We demonstrate that, when playing against choice strategies that are not biased by such factors, perceptual biases disappear and only assimilation bias caused by reinforcement persists. This suggests that reinforcement learning is a powerful source of inconsistency in strategic interaction, which may not be eliminated even if the other players are unbiased and the markets are efficient.
2008
demonstrated that the cooperativeness of previously seen prisoner's dilemma games biases choices and predictions in the current game. These effects were: a) assimilation to the mean cooperativeness of the played games caused by action reinforcement, and b) perceptual contrast with the preceding games depending on the range and the rank order of their cooperativeness. We demonstrate that, when playing against choice strategies that are not biased by such factors, perceptual biases disappear and only assimilation bias caused by reinforcement persists. This suggests that reinforcement learning is a powerful source of inconsistency in strategic interaction, which may not be eliminated even if the other players are unbiased and the markets are efficient.
Further reflections on the elimination of framing bias in strategic decision making
Strategic Management Journal, 2002
Wright and Goodwin (2002) maintain that, in terms of experimental design and ecological validity, Hodgkinson et al. (1999) failed to demonstrate either that the framing bias is likely to be of salience in strategic decision making, or that causal cognitive mapping provides an effective means of limiting the damage accruing from this bias. In reply, we show that there is ample evidence to support both of our original claims. Moreover, using Wright and Goodwin's own data set, we demonstrate that our studies did in fact attain appropriate levels of ecological validity, and that their proposed alternative to causal cognitive mapping, a decision tree approach, is far from ‘simpler.’ Wright and Goodwin's approach not only fails to eliminate the framing bias—it leads to confusion. Copyright © 2002 John Wiley & Sons, Ltd.
Experiments on strategic choices and markets
Marketing Letters, 2008
Much of experimental research in marketing has focused on individual choices. Yet in many contexts, the outcomes of one's choices depend on the choices of others. Furthermore, the results obtained in individual decision making context may not be applicable to these strategic choices. In this paper, we discuss three avenues for further advancing our understanding of strategic choices. First, there is a need to develop theories about how people learn to play strategic games. Second, there is an opportunity to enrich standard economic models of strategic behavior by allowing for different types of bounded rationality and by relaxing assumptions about utility formulation. These new models can help us to more accurately predict strategic choices. Finally, future research can improve marketing practice by designing better mechanisms and validating them using experiments.
1 Experiments on Strategic Choices and Markets
2008
Much of experimental research in marketing has focused on individual choices. Yet in many contexts, the outcomes of one’s choices depend on the choices of others. Furthermore, the results obtained in individual decision making context may not be applicable to these strategic choices. In this paper, we discuss three avenues for further advancing our understanding of strategic choices. First, there is a need to develop theories about how people learn to play strategic games. Second, there is an opportunity to enrich standard economic models of strategic behavior by allowing for different types of bounded rationality and by relaxing assumptions about utility formulation. These new models can help us to more accurately predict strategic choices. Finally, future research can improve marketing practice by designing better mechanisms and validating them using experiments.
Lecture Notes in Economics and Mathematical Systems, 2007
Decision-makers are sometimes influenced by the way in which choice situations are presented to them or "framed." This can be seen as an important challenge to the social sciences, since strong and pervasive framing effects would make it difficult to study human behavior in a synthetic or theoretic manner. We present results from experiments with dilemma games designed to shed light on the effects of several frame variations. We study, among others, the particular public bad frame used by Andreoni (1995) and two more naturalistic frames involving stories. Our results show that none of the frame manipulations have a significant effect on average behavior, but we do find some effects on extreme behavior. We also find that incentives do matter where frames do not matter.
Behavioral Heuristics and Market Patterns in a Bertrand-Edgeworth Game
Journal of Economic Behavior & Organization, 2014
This paper studies Bertrand price-setting behavior when firms face capacity constraints (Bertrand-Edgeworth game). This game is known to lack equilibria in pure strategies, while the mixed-strategy equilibria are hard to characterize. We explore families of heuristic rules for individual price-setting behavior and the resulting market patterns, through simulations of agent-based models and laboratory experiments. Overall, the individual pricing strategies observed experimentally can be represented approximately by a salesbased simple rule. In the experiments, average market prices tend to converge from above and approach a state resembling a steady state, with slow aggregate price variations and low price dispersion around an average near the competitive level. However, that configuration can be disturbed occasionally by excursions triggered by discrete price raises of some agents. Salient features of experimental results can be described by simulations where agents use sales-based heuristics with parameters calibrated from the experiments. The results obtained here suggest the existence of useful complementarities between analytical, experimental and agent-based simulation approaches.
Game Relativity: How Context Influences Strategic Decision Making
Journal of Experimental Psychology-learning Memory and Cognition, 2006
Existing models of strategic decision making typically assume that only the attributes of the currently played game need be considered when reaching a decision. The results presented in this article demonstrate that the so-called "cooperativeness" of the previously played prisoner's dilemma games influence choices and predictions in the current prisoner's dilemma game, which suggests that games are not considered independently. These effects involved reinforcement-based assimilation to the previous choices and also a perceptual contrast of the present game with preceding games, depending on the range and the rank of their cooperativeness. A. range frequency theory and H. adaptation level theory are plausible theories of relative judgment of magnitude information, which could provide an account of these context effects.
Framing And Investment Decision Making
2018
Framing is a cognitive heuristic, which suggests that people react differently to the choices they are asked to make depending on how these choices are presented. In the context of the stock market,framing is defined as the effect of different investment frames on investment decisions. The present paperis an attempt to make a comprehensive discussionof framing, both of routine everydaydecisions and also ofdecisions made in the specialized context of investment choices. In addition, it discusses methods to preventframing so that choices and decisions derive from rational processes.