People use commitment devices to formalize and facilitate their goals. Self-commitments are ubiquitous and may take different forms: soft, when the commitment can be broken at a low cost, or hard, when that cost is high. The effects of soft and hard commitments have usually been studied separately. We conduct an online experiment with 1527 individuals representative of a big gambling company’s client population to study the comparative effects of hard and soft commitment devices in a risk taking game. Our (...) results show that asking for a limit leads subjects to reduce their risk-taking even when the limit turns out to be non-binding, i.e., the commitment is ex-post soft. Hard commitments lead to slightly lower levels of risk taking. (shrink)

Little is known about how ambiguity attitudes change when consequences are flipped from gains to losses, particularly in the context of natural sources. Focusing on two such sources of uncertainty - the voter participation rates in the 2019 European elections in France and the UK - we report econometric estimations that jointly capture parametric specifications of attitudes and beliefs in the gain and loss domains. For checking purposes, we also compute indexes of ambiguity attitudes proposed by Baillon et al. (2018). (...) According to our data, attitudes in the loss domain can be inferred from those in the gain domain. Our findings show no significant differences in attitudes between the two natural sources. Furthermore, we observe no differences in beliefs for both sources, regardless of the outcome sign. Our method, which focuses on matching probabilities, offers an efficient approach for investigating ambiguity attitudes and beliefs for natural sources of uncertainty across gains and losses, particularly beneficial in field studies where data collection capabilities may be limited. (shrink)

Differential marginality states that two players’ payoffs change by the same amount with respect to two games if their productivity (measured by the marginal contributions) changes by the same amount, that is, they are symmetric in the difference of these games. This principle can be applied to characterize the Owen value for games with coalition structure. In this paper we suggest two relaxations of differential marginality within unions by requiring that two players are either mutually dependent or necessary rather than (...) symmetric in the difference of two games under consideration. Similarly, we also introduce two relaxations of differential marginality between unions. Based on these weak versions of differential marginality, we provide two new characterizations of the Owen value for games with coalition structure. (shrink)

This paper explores bidding behaviour under risk and uncertainty using the Becker-DeGroot-Marschak mechanism (BDM) and second price auction (SPA). It investigates whether values elicited via the two mechanisms are consistent and whether bidding behaviour can be influenced by differences in the number and type of sources of risk and uncertainty that people face when exposed to the two mechanisms. In our experiment, subjects are exposed to non-monetary lotteries where they bid for a high-quality seafood product, but there is a chance (...) (known or unknown) that they receive a lower quality seafood product instead. Results indicate that bidding behaviour can be influenced by the number and type of sources of risk and uncertainty that subjects face and subjects’ bidding behaviour is only consistent with standard theories of decision making under risk and uncertainty when they bid on a risky product in the SPA. Despite this, BDM and SPA elicit equal values under risk and uncertainty in this study. (shrink)

This study measures the differences in ambiguity attitudes of groups and individuals in the gain and loss domains. We elicit ambiguity aversion and ambiguity-generated insensitivity for natural temperature events. We do not find significant differences between individuals and groups in our main sample, yet higher ambiguity aversion and ambiguity-generated insensitivity result for groups in the gain domain when constraining the sample to groups and individuals with a better understanding of the experiment. The group effect on the ambiguity-generated insensitivity is sign-dependent.

We generalize the notion of firm-quasi-stability to the framework of many-to-many matching with contracts under the irrelevance of rejected contracts and substitutability assumptions. We prove that a maximal element of the set of firm-quasi-stable allocations with respect to a partial order exists and is a stable allocation.

There is an extensive literature in social choice theory studying the consequences of weakening the assumptions of Arrow’s Impossibility Theorem. Much of this literature suggests that there is no escape from Arrow-style impossibility theorems, while remaining in an ordinal preference setting, unless one drastically violates the Independence of Irrelevant Alternatives (IIA). In this paper, we present a more positive outlook. We propose a model of comparing candidates in elections, which we call the Advantage-Standard (AS) model. The requirement that a collective (...) choice rule (CCR) be representable by the AS model captures a key insight of IIA but is weaker than IIA; yet it is stronger than what is known in the literature as weak IIA (two profiles alike on x, y cannot have opposite strict social preferences on x and y). In addition to motivating violations of IIA, the AS model makes intelligible violations of another Arrovian assumption: the negative transitivity of the strict social preference relation P. While previous literature shows that only weakening IIA to weak IIA or only weakening negative transitivity of P to acyclicity still leads to impossibility theorems, we show that jointly weakening IIA to AS representability and weakening negative transitivity of P leads to no such impossibility theorems. Indeed, we show that several appealing CCRs are AS representable, including even transitive CCRs. (shrink)

This paper explores a dynamic model of sequential club formation in which identical individuals join or leave clubs over time and their preferences depend solely on the number of members in the club. There exists a unique optimal-sized club which maximises per-period payoff of each individual. To study the implications of the dynamic setting, we use a benchmark game of a finite number of periods which mimics the static framework. Implied by the dynamic nature of the problem, we find a (...) new source of inefficiency that is caused by so called fear of exclusion phenomenon where individuals fear being excluded from a relatively superior sustainable club, which is not necessarily optimal. An unusual behaviour may be observed in which individuals strictly prefer to form sub-optimal sized clubs. A specific class of equilibria is analysed to examine such behaviour. (shrink)

This study investigates the impact of cheap talk on price and participant profits using a repeated Bertrand oligopoly experiment. During the first 10 rounds, participants are not allowed to communicate with each other. Twenty additional rounds are then played in which the participants can text with one another using an instant message system. Some groups are allowed to text before every round, some before every other round, some every third round, some every fourth round, and others only every fifth round. (...) On average, when texting is allowed, groups attempt to collude to raise the price after being allowed to text. In summary, success in collusion with cheap talk is correlated with a combination of how often participants can text, the subject of their texts, and whether participants actually text when they can. (shrink)

We provide an escape route from the opportunity paradox, which is described as a conflict between the ex ante and ex post perspectives on compensation by restricting the preference domain. Taste-independence is introduced as a property of preferences such that individuals’ maximized utility levels are the same regardless of their tastes for work. Using the optimal income taxation model, we obtain a compatibility theorem when individuals’ utilities are taste-independent and quasilinear in consumption.

Robustness against strategic manipulation is a crucial topic in social choice theory. Under some social ranking solutions (SRSs), namely mappings that yield candidates’ ranking from their coalitions’ ranking, candidates can sometimes improve their own social ranking by strategically degrading the coalitions to which they belong (e.g., sabotaging the coalitions to which the candidates and their competitors both belong could damage their competitors’ social rankings). This study investigates SRSs that can prevent such sabotage and promote sincere cooperation between candidates. To this (...) end, we introduce two axioms of SRSs by modifying the non-manipulability (NM) in the literature. An SRS is sabotage-proof (SP) if no candidate can improve their social ranking against anyone else through sabotage, and it is strongly sabotage-proof (SSP) if it is SP and is endowed with a sanction system against specific sabotage. We first demonstrate that the ceteris paribus majority (when there are at least four candidates) and lexicographic excellence solutions are SP but not SSP. We then propose a new characterization of dual lexicographic excellence solution as the unique linear SRS satisfying SSP and coalitional anonymity. Our axiomatic study provides a theoretical ground that lexicographic evaluation of coalitional performances is highly robust against strategic sabotage. (shrink)

Buyout options are available to bidders in certain online auctions. This study analyzes a bidder’s buyout decision following the level-k auction theory proposed by Crawford and Iriberri (2007). Specifically, we derive the optimal buyout strategy of type Lk. We have three significant findings. First, the buyout decisions of Lk and $$Lk-1$$ are strategic substitutes. If $$Lk-1$$ ’s buyout incentive is stronger (weaker, respectively) than a rational bidder’s, then Lk’s buyout incentive is weaker (stronger, respectively) than a rational bidder’s. Second, if (...) L1’s buyout incentive is identical to a rational bidder’s, so does Lk for $$k > 1$$. Third, if L1’s buyout incentive differs from a rational bidder’s, the auction revenue can be higher than the equilibrium level for some buy price. A certain bounded rationality improves auction revenues even if bidders are risk-neutral. Our findings consistently examine buyout decisions in auction experiments: accepting high buy prices and rejecting low buy prices. (shrink)

We address the issue of fairly rewarding contributors to a crowdfunded project. We develop a theoretical non-strategic model, and introduce a new reward rule: a contributor’s reward depends both on her financial contribution and on the timing of her contribution. Following the axiomatic method used in models of resource sharing, we characterize this new reward rule by a pair of natural axioms. The resulting rewards coincide with the Shapley value of a suitable cooperative game built from the crowdfunding project. This (...) allocation rule conveys a signaling effect: if two contributors make the same financial contribution, the earlier obtains a greater reward. (shrink)

This study aims to provide a manageable symmetric two-players conflict model in which, defining measures for polarization and hostility, we investigate the effects of spillovers into the properties of the sets of equilibria, into the intensity of conflict, and into the endogenous changes in polarization and hostility. We show that, without spillovers, the equilibrium efforts’ intensity is uniquely connected to the ratio of the marginal productivity of effort to (ex ante) polarization. Conversely, we show that negative spillovers in conflict technology (...) can imply the non-existence of equilibria. Then, introducing spillovers in the possible outcomes of the conflict, we connect the existence of multiple symmetric and asymmetric equilibria to the intensity of growing polarization and hostility. We then investigate the different effects of marginal productivity of effort, (ex ante) polarization and rates of growth of polarization and hostility on the intensity of conflict as well as on polarization and hostility at equilibrium. The results show the crucial role played by hostility, a factor disregarded in many conflict models. Finally, we show how the results obtained by considering partial spillover effects are confirmed when the general case is taken into account. (shrink)

We propose a framework for the analysis of choice behaviour when the latter is made explicitly in chronological order. We relate this framework to the traditional choice theoretic setting from which the chronological aspect is absent, and compare it to other frameworks that extend this traditional setting. Then, we use this framework to analyse various models of preference discovery. We characterise, via simple revealed preference tests, several models that differ in terms of (1) the priors that the decision-maker holds about (...) alternatives and (2) whether the decision-maker chooses period by period or uses her knowledge about future menus to inform her present choices. These results provide novel testable implications for the preference discovery process of myopic and forward-looking agents. (shrink)

Savage’s famous representation theorem is based on seven postulates of rational choice. We resolve some loose ends in the literature concerning the relationship between different versions of Savage’s axioms. This leads us to the present form of the representation theorem. We also discuss some issues regarding the historical development of Savage’s representation theorem.

We present a theoretical framework of individual-decision making that incorporates both moral motivations and social influence into the utility function. The main idea of the paper is that individuals face a trade-off between their material individual interests and their desire to follow moral obligation. In our model, we assume that moral motivation is weak or conditional in the sense that it may be influenced by others’ actions. Specifically, in our framework one’s moral obligation is a combination of two main components: (...) an autonomous component and a social component that captures the influence of others. Our theoretical framework is able to explain many stylized results commonly observed in the literature and suggests a different mechanism to explain economic behavior. (shrink)

The small improvement argument has been said to establish that the standard weak preference or value relation can be incomplete. We first show that the argument is one of three possible ‘small amendment arguments’, each of which would yield the same conclusion. Generalizing the analysis thus, we subsequently present a strong and a weak version of small amendment arguments and derive the exact rationality conditions under which they reveal incompleteness. The results show that the arguments (in any of their variants) (...) need not reveal a problem for the possibility of rational choice. In fact, it can be argued that they only reveal such a problem if the underlying relation is complete rather than incomplete. (shrink)