Hypothetical Thinking and Information Extraction in the Laboratory

In several common-value environments (e.g., auctions or elections), players should make informational inferences from opponents' strategies under certain hypothetical events (e.g., winning the auction or being pivotal). We design a voting experiment that identifies whether subjects make these i...

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Bibliographic Details
Published inAmerican economic journal. Microeconomics Vol. 6; no. 4; pp. 180 - 202
Main Authors Esponda, Ignacio, Vespa, Emanuel
Format Journal Article
LanguageEnglish
Published Pittsburgh American Economic Association 01.11.2014
AEA
Subjects
Analysis
Auctions
Bids
Economic value
Experiment design
Experiments
Feedback
Game theory
Games
Information economics
Information relevance
Laboratories
Microeconomics
Strategic behavior
Studies
Voting
Voting behavior
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Summary:In several common-value environments (e.g., auctions or elections), players should make informational inferences from opponents' strategies under certain hypothetical events (e.g., winning the auction or being pivotal). We design a voting experiment that identifies whether subjects make these inferences and distinguishes between hypothetical thinking and information extraction. Depending on feedback, between 50 and 80 percent of subjects behave nonoptimally. More importantly, these mistakes are driven by difficulty in extracting information from hypothetical, but not from actual, events. Mistakes are robust to experience and hints, and also arise in more general settings where players have no private information.
Bibliography:SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:1945-7669
1945-7685
DOI:10.1257/mic.6.4.180