Experiments with the Traveler's Dilemma: Welfare, Strategic Choice and Implicit Collusion

32 Pages Posted: 24 Mar 2011

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Luca Stanca

University of Milan, Bicocca - Department of Economics; Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS); Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS)

Date Written: September 30, 2010

Abstract

This paper investigates behavior in the Traveler's Dilemma game and isolates deviations from textbook predictions caused by differences in welfare perceptions and strategic miscalculations. It presents the results of an experimental analysis based on a 2x2 design where the own and the other subject's bonus-penalty parameters are changed independently. We find that the change in own bonus-penalty alone entirely explains the effect on claims of a simultaneous change in one's own and the other's bonus-penalty. An increase in the other subject's bonus-penalty has a significant negative effect on claims when the own bonus-penalty is low, whereas it does not have a significant effect when the own bonus-penalty is high. We also find that expected claims are inconsistent with actual claims in the asymmetric treatments. Focusing on reported strategies, we document substantial heterogeneity and show that changes in choices across treatments are largely explained by risk aversion.

Suggested Citation

Basu, Kaushik and Becchetti, Leonardo and Stanca, Luca, Experiments with the Traveler's Dilemma: Welfare, Strategic Choice and Implicit Collusion (September 30, 2010). CEIS Working Paper No. 188. Available at SSRN: https://ssrn.com/abstract=1793199 or http://dx.doi.org/10.2139/ssrn.1793199

Kaushik Basu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
607-255-2818 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Leonardo Becchetti (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Luca Stanca

University of Milan, Bicocca - Department of Economics ( email )

Piazza dell'Ateneo, Nuovo I
Milan 20126
Italy

Università degli Studi di Milano-Bicocca - Center for Interdisciplinary Studies in Economics, Psychology & Social Sciences (CISEPS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, 20126
Italy

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Register to save articles to
your library

Register

Paper statistics

Downloads
58
Abstract Views
642
rank
365,395
PlumX Metrics