QuBE Working Papers

2017

• #051
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  JEL-Codes:

  C70; C91; D63; D64

  Driving a Hard Bargain is a Balancing Act: How social preferences constrain the negotiation process

  Yola Engler and Lionel Page

  We investigate the haggling process in bargaining. Using an experimental bargaining game, we find that a first offer has a significant impact on the bargaining outcome even if it is costless to reject. First offers convey information on the player's reservation value induced by his social preferences and they are most often accepted when they are not above the equal split. However, offers which request much more than the equal split induce punishing counter-offers triggered by the responder's social preferences. The bargaining outcome is therefore critically influenced by the balance of toughness and kindness signalled through the offers made in the haggling phase.

• #050
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  JEL-Codes:

  C91, C92, D81, G10, G12

  Keywords:

  Behavioural finance, countercyclical risk aversion, time-varying risk aversion, feedback loops, financial bubbles.

  Countercyclical risk aversion and self-reinforcing feedback loops in experimental asset markets

  Anthony Newell and Lionel Page

  We design an asset market experiment in which participants are primed in a boom or bust market condition before trading. We find that pricing bubbles are significantly reduced in the markets in the bust priming condition and that mispricing of assets is larger in the boom condition. We also find that participants exhibit weaker predictive ability in the boom priming condition compared to the bust priming condition. These findings lend weight to the idea that traders’ risk attitude are time varying and that market dynamics may affect these risk attitudes, creating the possibility of feedback loops on market conditions themselves.

• #049
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  JEL-Codes:

  D23, D83, D86, L14

  Keywords:

  contract theory, informativeness principle, quasi-experiment, outcome bias, behavioural economics.

  Fooled by performance randomness: over-rewarding luck

  Romain Gauriot and Lionel Page

  We provide evidence of a violation of the informativeness principle whereby lucky successes are overly rewarded. We isolate a quasi-experimental situation where the success of an agent is as good as random. To do so, we use high quality data on football (soccer) matches and select shots on goal which landed on the goal posts. Using non scoring shots, taken from a similar location on the pitch, as counterfactuals to scoring shots, we estimate the causal effect of a lucky success (goal) on the evaluation of the player’s performance. We find clear evidence that luck is overly influencing managers’ decisions and evaluators’ ratings. Our results suggest that this phenomenon is likely to be widespread in economic organizations.

• #048
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  JEL-Codes:

  C91, D81, D83

  Keywords:

  search; decision under uncertainty; information; optimal stopping; real option

  Optimal hesitation, an experiment

  Ambroise Descamps, S´ebastien Massoni and Lionel Page

  We investigate how people make choices when they are unsure about the value of the options they face. At any moment in time they can make a decision or choose to wait and acquire more information before making their mind. We design a laboratory experiment to study whether human behaviour is able to approximate the optimal solution to this problem. We find that participants deviate from the optimal strategy in a systematic manner: they acquire too much information when it is costly and not enough when it is cheap. With time, participants tend to learn, without converging towards equilibrium. This deviation costs participants between 10% and 25% of their potential payoffs. We examine various explanations to our results, and find that the most likely one is that participants exhibit a confirmation bias.

• #047
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  JEL-Codes:

  A13, D72

  Keywords:

  social preferences, voting behavior, online survey

  Assessing the unidimensionality of political opinions. An indirect test of the persuasion bias

  Lionel Page

  In an influential paper, DeMarzo, Vayanos, and Zwiebel propose a model of persuasion bias whereby people are overly influenced by repetitive information. Such a persuasion bias leads political opinions to be unidimensional with individuals converging to a single "left-right" dimension on every issues. Using a large dataset on political opinions on a wide range of issues just before a presidential election in France, I test whether political opinions are indeed unidimensional. I find that political opinions are far from being unidimensional and I discuss what it means for the persuasion model.