Three essays in behavioral and experimental economics

Date created: 
David J. Freeman
Arts & Social Sciences: Department of Economics
Attention and Comprehension
Non-strategic Play
Depth of Reasoning
Traveler's Dilemma
Default Bias
Choice Architecture

My thesis includes three chapters in Behavioural and Experimental Economics. The first chapter -- ``Instructions'', is co-authored with David J. Freeman, Erik O. Kimbrough and Garrett M. Petersen, and is published in the Journal of the Economic Science Association. In this paper, we experimentally compare how methods of delivering and reinforcing experiment instructions impact subjects' comprehension and retention of payoff-relevant information. We report a one-shot individual decision task in which non money-maximizing behavior can be unambiguously identified and find that such behavior is prevalent in our baseline treatment which uses plain, but relatively standard experimental instructions. We find combinations of reinforcement methods that can eliminate half of non money-maximizing behavior, and we find that we can induce a similar reduction via enhancements to the content of instructions. Residual non money-maximizing behavior suggests this may be an important source of noise in experimental studies. The second chapter -- ``Anchors of Strategic Reasoning in the Traveler's Dilemma'', is co-authored with David J. Freeman. In this paper, we experimentally study players' initial beliefs about non-strategic play that anchors their strategic reasoning in the traveler’s dilemma, a game in which each player chooses a number and has the incentive to undercut their opponent by the minimal amount possible. In a within-subject design, each subject repeatedly plays variations of the traveler’s dilemma game without feedback. To identify their strategic reasoning, we vary the upper and lower bounds of the strategy space in each round, and also vary the reward/penalty parameter for undercutting one's opponent. We find that players are both heterogeneous in the amount that they reason, and in their beliefs about non-strategic play. Notably, few players anchor their strategic reasoning on a non-strategic uniform random play. We also find ample evidence of non-strategic play being prevalent. Our results caution against the common practice of assuming the same anchor of initial reasoning for all players when estimating players' depths of strategic reasoning. The third chapter -- ``Default-Setting and Default Bias: Does the Choice Architect Matter?'', is co-authored with David J. Freeman and Lanny Zrill. The presence of pre-selected default options has been shown to influence individual decision making in various contexts including the choice of health insurance and retirement contributions. Even so, it is not well understood how individuals with heterogeneous preferences react to the procedure used to select the default options. We develop an econometric approach to test and compare default bias across default-setting rules that controls for heterogeneous individual preferences. In a within-subject experimental design studying lottery choices, we apply our approach to compare four different default-setting rules: Random defaults, Custom defaults selected based on an individual's own past choices, Social defaults selected based on others' choices, and Expert-set defaults. We find that the content of default-setting rules matters: we find default bias in all non-random default-setting regimes but not with Random defaults. Our subjects also tended to rank non-random default-setting regimes over choosing with No Default and Random defaults.

Thesis type: 
(Thesis) Ph.D.
Document type: 
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