Discussion Paper No. 464
November 27, 2023
Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism
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Abstract:
For reward-based crowdfunding, we introduce the strategy-proof Generalized Moulin-Shenker mechanism (GMS) and compare its performance to the prevailing All-Or-Nothing mechanism (AON). Theoretically, GMS outperforms AON in equilibrium profit and funding success. We test these predictions experimentally, distinguishing between a sealed-bid and a dynamic version of GMS. We find that the dynamic GMS outperforms the sealed-bid GMS. It performs better than AON when the producer aims at maximizing funding success. For crowdfunding in practice, this suggests that the current standard of financing projects may be improved upon by implementing a crowdfunding mechanism that is similar to the dynamic GMS.
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Discussion Paper No. 460
November 21, 2023
Cournot Meets Bayes-Nash: A Discontinuity in Behavior in Finitely Repeated Duopoly Games
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We conduct a series of Cournot duopoly market experiments with a high number of repetitions and fixed matching. Our treatments include markets with (a) complete cost symmetry and complete information, (b) slight cost asymmetry and complete information, and (c) varying cost asymmetries and incomplete information. For the case of complete cost symmetry and complete information, our data confirm the well-known result that duopoly players achieve, on average, partial collusion. However, as soon as any level of cost asymmetry or incomplete information is introduced, observed average individual quantities are remarkably close to the static Bayes-Nash equilibrium predictions.
Keywords:
Cournot; Bayesian game; Bayes-Nash equilibrium; repeated games; collusion; cooperation; experimental economics;
JEL-Classification:
D43; L13; C72; C92;
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Discussion Paper No. 410
July 18, 2023
Does Unfairness Hurt Women? The Effects of Losing Unfair Competitions
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How do men and women differ in their persistence after experiencing failure in a competitive environment? We tackle this question by combining a large online experiment (N=2,086) with machine learning. We find that when losing is unequivocally due to merit, both men and women exhibit a significant decrease in subsequent tournament entry. However, when the prior tournament is unfair, i.e., a loss is no longer necessarily based on merit, women are more discouraged than men. These results suggest that transparent meritocratic criteria may play a key role in preventing women from falling behind after experiencing a loss.
Keywords:
competitiveness; gender; fairness; machine learning; online experiment;
JEL-Classification:
C90; D91; J16; C14;
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Discussion Paper No. 392
March 30, 2023
Rebate Rules in Reward-Based Crowdfunding: Introducing the Bid-Cap Rule
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We study the efficacy of rebate rules in reward-based crowdfunding, where a project is only realized when a funding goal is met, and only those who pledge at least a reservation price receive a reward from the project. We propose and experimentally test two rebate rules against the customary all-or-nothing model. Firstly, we adapt the proportional rebate rule from threshold public good games to our reward-based setting. Secondly, we develop the novel bid-cap rule. Here, pledges must only be paid up to a cap, which is determined ex-post such that the provision point is exactly met. Theoretically, the bid-cap rule induces weakly less variance in payments compared with the proportional rebate rule. In our experiment, we find that both rebate rules induce higher pledges and increase the project realization rate in comparison to the all-or-nothing model. Further, we can confirm that the variance of payments is lower under the bid-cap rule compared with the proportional rebate rule.
Keywords:
crowdfunding; laboratory experiment; provision point mechanism; rebates;
JEL-Classification:
C72; C92; H41;
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Discussion Paper No. 382
February 14, 2023
Risk, Reward and Uncertainty in Buyer-Seller Transactions - The Seller's View on Combining Posted Prices and Auctions -
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In Buy-It-Now auctions, sellers can post a take-it-or-leave-it price offer prior to an auction. While the literature almost exclusively looks at buyers in such combined mechanisms, the current paper summarizes results from the sellers' point of view. Buy-It-Now auctions are complex mechanisms and therefore quite challenging for sellers. The paper discusses the seller's curse, a bias that sellers might fall prey to in such combined mechanisms, and how experience counterbalances this bias. Furthermore, the paper explores the role of information and bargaining power on behavior and profit prospects in Buy-It-Now auctions.
Keywords:
asymmetric information; laboratory experiment; field experiment; auction; BIN-auction; Buy-It-Now auction; BIN-price; Buy-It-Now price; combined mechanism;
JEL-Classification:
C72; C91; D44; D82; L1;
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Discussion Paper No. 359
January 4, 2023
Time Pressure and Regret in Sequential Search
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Perceived urgency and regret are common in many sequential search processes; for example, sellers often pressure buyers in search of the best offer, both time-wise and in terms of potential regret of forgoing unique purchasing opportunities. theoretically, these strategies result in anticipated and experienced regret, which systematically affect search behavior and thereby distort optimal search. In addition, urgency may alter decision-making processes and thereby the salience of regret. To understand the empirical relevance of these aspects, we study the causal effects of regret, urgency, and their interaction on search behavior in a pre-registered, theory-based, and well-powered experiment. Empirically, we and that anticipated regret does not affect search behavior either with or without time pressure, while experienced regret leads to systematic adjustments in search length. Urgency reduces decision times and perceived decision quality, but does not generally alter search length. Only very inexperienced decision-makers buy earlier when pressured. Thus, consumer protection measures against pressure selling tactics can help inexperienced consumers in particular.
Keywords:
sequential search; time pressure; regret; anticipated regret; experienced regret;
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Discussion Paper No. 358
Cross-game Learning and Cognitive Ability in Auctions
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Overbidding in sealed-bid second-price auctions (SPAs) has been shown to be persistent and associated with cognitive ability. We study experimentally to what extent cross-game learning can reduce overbidding in SPAs, taking into account cognitive skills. Employing an order-balanced design, we use first-price auctions (FPAs) to expose participants to an auction format in which losses from high bids are more salient than in SPAs. Experience in FPAs causes substantial cross-game learning for cognitively less able participants but does not affect overbidding for the cognitively more able. Vice versa, experiencing SPAs before bidding in an FPA does not substantially affect bidding behavior by the cognitively less able but, somewhat surprisingly, reduces bid shading by cognitively more able participants, resulting in lower profits in FPAs. Thus, 'cross-game learning' may rather be understood as 'cross-game transfer', as it has the potential to benefit bidders with lower cognitive ability whereas it has little or even adverse effects for higher-ability bidders.
Keywords:
cognitive ability; cross-game learning; cross-game transfer; experiment; auction; heuristics; first-price auctions; second-price auctions;
JEL-Classification:
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Discussion Paper No. 350
Lying to Individuals versus Lying to Groups
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We investigate experimentally whether individuals or groups are more lied to, and how lying depends on the group size and the monetary loss inflicted by the lie. We employ an observed cheating game, where an individual's misreport of a privately observed number can monetarily benefit her while causing a loss to either a single individual, a group of two or a group of five. As the privately observed number is known to the experimenter, the game allows to study both, whether the report deviates from the observed number and also by how much. Treatments either vary the individual loss caused by a given lie (keeping the total loss constant), or the total loss (keeping the individual loss constant). We find more lies toward individuals than toward groups. Liars impose a larger loss with their lie when that loss is split among group members rather than borne individually. The size of the group does not affect lying behavior.
Keywords:
cheating; lying; groups; observed cheating game; laboratory experiment;
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Discussion Paper No. 330
December 1, 2022
Ignorance, Intention and Stochastic Outcomes
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In sequential interactions, both the agent’s intention and the outcome of his choice may influence the principal’s action. While outcomes are typically observable, intentions are more likely to be hidden, leaving potential wiggle room for the principal when deciding on a reciprocating action. We employ a controlled experiment to investigate how intentions and outcome affect the principal’s actions and whether principals use hidden information as an excuse to behave more selfishly. We find that principals react mainly to the intention of the agent. When intentions are not revealed by default, principals tend to select into information based on their inclination to behave more prosocially. While information avoidance is frequent and selfishness is higher with hidden information, we do not find evidence of a strategic exploitation of moral wiggle room.
Keywords:
information avoidance; dictator game; moral wiggle room; intentions; reciprocity;
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Discussion Paper No. 314
January 25, 2022
Anchored Strategic Reasoning
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Anchoring is a robust behavioral phenomenon modeled predominantly as a bias in individual judgment. We propose a game-theoretic model that considers players’ beliefs about others’ behavior as a mediator for the effect of the anchor on a player’s choice. The results establish that anchoring in strategic interactions reported in the literature can be rationalized by anchored beliefs about the opponents’ intentions. Notwithstanding, we also demonstrate that a player might adjust away from rather than toward the anchor in games where choices are strategic substitutes.
Keywords:
anchoring bias; auctions; games; incomplete information; strategy;
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