General Procedures at the Cologne Laboratory for Economic Research
Experiments are conducted in a larger room with 32 computers terminals for subject use and a control room for the experimenter’s use. Students have individual cubicals and since they work in small groups of, typically, of 3 or 4, which are randomly assigned, they have essentially no contact with others in their group except through their computer terminals.
Experiments typically last about an hour and students are paid roughly 10€ on average, in cash, right after the experiment. But of course, their actual payment depends on the outcome of the game. For example, in a climate game, if they all choose to free ride and not abate, their payments will be low. And if one decides to be altruistic and abates the maximum, she will receive even less. The actual payments reflect the payoffs in the theoretical game being tested.
Unlike sociology and political-science experiments, students are never deceived. In fact much of the time in the lab is spent letting them become familiar with the rules which are documented in detail and with great care. This process allows them to practice and to test strategies. They can ask questions, but the answer is always, “Please re-read this section of the instructions.” All of this is designed to minimize the effect of mistakes on outcomes.
- Is is possible that students are “trying to ‘do better than the others” rather than “do the best for themselves”?
- In fact, the opposite is also possible. Subjects quite often display behaviors that bring them down closer to the average. E.g. in the Dictator game,(1)In a dictator game, I am given $10, and you nothing. Then I give you any portion of the $10 and the game is over. the dictator often makes a gratuitous payment to the player who has received nothing.
- Nonetheless, relative-outcome motivations can clearly play an important role in a game’s outcome. For example, in the $10 Ultimatum game,(2)In an ultimatum game, I am given $10 and you nothing. Then I give you $0 to $10. Then you can accept or reject. If you reject neither of us gets anything. if the proposers offers $2 to the responder, the responder is quite likely to reject this (in which case no one gets anything). Clearly the responder is trying to do better relative to the other at a cost to himself.
- This phenomenon is a problem for neoclassical economic theory, but not for behavioral economics which simple seeks to observe and explain actual behavior.
- When students are proxy’s for national bargaining teams, do relative-outcome motivations invalidate the results for predicting bargaining-team behavior?
- There is every reason to believe that countries also consider their relative outcomes and not only their absolute outcomes. So the existence of relative motivations does not invalidate results.
- Do students care about relative payoffs in a way that is similar to how national bargaining teams care about relative payoffs.?
- This is difficult to answer. But anecdotal evidence indicates that climate negotiations may be more about relative payoffs (fairness) than about absolute payoffs. In any case, there is no evidence that experiments that prevent such concerns would teach us more, and most observers appear to feel the opposite is true.
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|1.||↥||In a dictator game, I am given $10, and you nothing. Then I give you any portion of the $10 and the game is over.|
|2.||↥||In an ultimatum game, I am given $10 and you nothing. Then I give you $0 to $10. Then you can accept or reject. If you reject neither of us gets anything.|