Group Cooperation Under Uncertainty Min Gong, Jonathan Baron, Howard Kunreuther 11/16/2008.

Slides:



Advertisements
Similar presentations
Time Horizons in Interdependent Security International Conference on Social Dilemmas Kyoto, Japan August 24, 2009 David Hardisty, Howard Kunreuther, David.
Advertisements

Introduction to Game Theory
Oligopoly.
Ultimatum Game Two players bargain (anonymously) to divide a fixed amount between them. P1 (proposer) offers a division of the “pie” P2 (responder) decides.
Game Theory S-1.
Geoffrey Heal Graduate School of Business Columbia University Howard Kunreuther Center for Risk Management.
© 2009 Pearson Education Canada 16/1 Chapter 16 Game Theory and Oligopoly.
Chapter Twenty-Eight Game Theory. u Game theory models strategic behavior by agents who understand that their actions affect the actions of other agents.
Non-Cooperative Game Theory To define a game, you need to know three things: –The set of players –The strategy sets of the players (i.e., the actions they.
Nash Equilibria By Kallen Schwark 6/11/13 Fancy graphs make everything look more official!
Game Theory. Games Oligopolist Play ▫Each oligopolist realizes both that its profit depends on what its competitor does and that its competitor’s profit.
4 Why Should we Believe Politicians? Lupia and McCubbins – The Democratic Dilemma GV917.
Time Horizons in Interdependent Security David J. Hardisty, Howard Kunreuther, David H. Krantz, & Poonam Arora Columbia University & University of Pennsylvania.
GAME THEORY.
Pemberton’s Dilemma.
Econ 2610: Principles of Microeconomics Yogesh Uppal
The Prisoner’s Dilemma -Both arrested during botched bank robbery. -Kept in separate cells – NO COMMUNICATION. -Offered separate deals if they confess.
Eponine Lupo.  Game Theory is a mathematical theory that deals with models of conflict and cooperation.  It is a precise and logical description of.
A camper awakens to the growl of a hungry bear and sees his friend putting on a pair of running shoes, “You can’t outrun a bear,” scoffs the camper. His.
Chapter 12 Choices Involving Strategy McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Small business banking and financing: a global perspective, Cagliari The impact of an IFRS-adoption on relationship lending for German SMEs – An economic.
Geoffrey Heal Graduate School of Business Columbia University Howard Kunreuther Center for Risk Management.
Interdependent Security Games and Networks Networked Life CSE 112 Spring 2006 Prof. Michael Kearns.
David Hardisty Sauder School of Business Operations and Logistics Seminar September 8 th, 2014.
Objectives © Pearson Education, 2005 Oligopoly LUBS1940: Topic 7.
Group Cooperation Under Uncertainty Min Gong Advisors: Jonathan Baron Howard Kunreuther.
Lectures in Microeconomics-Charles W. Upton Game Theory.
Outline  In-Class Experiment on a Coordination Game  Test of Equilibrium Selection I :Van Huyck, Battalio, and Beil (1990)  Test of Equilibrium Selection.
1 Section 2d Game theory Game theory is a way of thinking about situations where there is interaction between individuals or institutions. The parties.
Introduction to Game Theory and Behavior Networked Life CIS 112 Spring 2009 Prof. Michael Kearns.
Starbucks, Beating The Prisoners Dillema Brooke Hatcher Econ 202 April 28 th, 2012.
Group Influence: Lecture #7 topics  The presence of others  Interacting with others  Competing with others.
Oligopoly Chapter 16. Imperfect Competition Imperfect competition includes industries in which firms have competitors but do not face so much competition.
Game Theory, Strategic Decision Making, and Behavioral Economics 11 Game Theory, Strategic Decision Making, and Behavioral Economics All men can see the.
UNIT 4.3: IMPERFECT COMPETITION Oligopoly(Oli.). Identical Products No advantage D=MR=AR=P Both efficiencies Price-Taker 1000s Perfect Competition Monopolistic.
A Game-Theoretic Approach to Strategic Behavior. Chapter Outline ©2015 McGraw-Hill Education. All Rights Reserved. 2 The Prisoner’s Dilemma: An Introduction.
1 Chapter 11 Oligopoly. 2 Define market structures Number of sellers Product differentiation Barrier to entry.
Intermediate Microeconomics
Dynamic Games of complete information: Backward Induction and Subgame perfection - Repeated Games -
Microeconomics Course E John Hey. Examinations Go to Read.
McGraw-Hill/Irwin Copyright  2008 by The McGraw-Hill Companies, Inc. All rights reserved. GAME THEORY, STRATEGIC DECISION MAKING, AND BEHAVIORAL ECONOMICS.
The effect of common knowledge – Why do people cooperate more when they face a social dilemma situation where mutual cooperation yields restoration of.
Game Theory: introduction and applications to computer networks Game Theory: introduction and applications to computer networks Lecture 2: two-person non.
Parochial and Universal Cooperation in Intergroup Conflict When Parochialism Hurts Out-group Competitors, Pro-social Individuals Extend Their Calculated.
KRUGMAN'S MICROECONOMICS for AP* Game Theory Margaret Ray and David Anderson Micro: Econ: Module.
Chapter 10: Games and Strategic Behavior
CHAPTER 15 Oligopoly PowerPoint® Slides by Can Erbil © 2004 Worth Publishers, all rights reserved.
University of Cagliari, Faculty of Economics, a.a Business Strategy and Policy A course within the II level degree in Managerial Economics year.
“Social Capital, Social Mobility” by: Peter Q. Blair.
Frank Cowell: Microeconomics Game Theory: Basics MICROECONOMICS Principles and Analysis Frank Cowell March 2004.
Testing theories of fairness— Intentions matter Armin Falk, Ernst Fehr, Urs Fischbacher February 26, 2015.
Intermediate Microeconomics Game Theory and Oligopoly.
15-1 Economics: Theory Through Applications This work is licensed under the Creative Commons Attribution-Noncommercial-Share Alike 3.0 Unported.
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8: Games and Strategic Behavior 1.Describe the basic.
Intermediate Microeconomics Game Theory. So far we have only studied situations that were not “strategic”. The optimal behavior of any given individual.
Lec 23 Chapter 28 Game Theory.
Oligopoly CHAPTER 13B. Oligopoly IRL In some markets there are only two firms. Computer chips are an example. The chips that drive most PCs are made by.
Oligopoly and Game Theory Topic Students should be able to: Use simple game theory to illustrate the interdependence that exists in oligopolistic.
University of Papua New Guinea Principles of Microeconomics Lecture 13: Oligopoly.
전략적 선택모델: 게임이론 동시적 게임 죄수의 딜레마 비겁자 게임 전개형(순차적) 게임 농부와 호랑이 오사카 성의 해자
Copyright©2004 South-Western 17 Oligopoly. Copyright © 2004 South-Western BETWEEN MONOPOLY AND PERFECT COMPETITION Imperfect competition includes industries.
Yuan Deng Vincent Conitzer Duke University
Microeconomics Course E
Are Groups Less Ethical than Individuals?
Strategic Decision Making in Oligopoly Markets
Learning 6.2 Game Theory.
When Other Firms React CHAPTER 8
UBC Sauder, UPenn, Columbia U, Manhattan College, Western Ivey
Lecture Game Theory.
Lecture 8 Nash Equilibrium
Presentation transcript:

Group Cooperation Under Uncertainty Min Gong, Jonathan Baron, Howard Kunreuther 11/16/2008

Outline Motivation Experimental Design Results Explanations Conclusion and Future Research

Key Finding Groups are less cooperative than individuals in a prisoner’s dilemma, but more cooperative than individuals in a stochastic version of the game.

Motivation – Why Study Group Cooperation Under Uncertainty In many real-life situations, the decision makers are nations, firms, or families Groups behave differently from individuals with regard to cooperation and competition (Insko et al. 1987; Bornstein et al., 2002 ; Wildschut 2003) uncertainty (Marquis 1962; Sniezek 1992)

Experiment Design – the Deterministic Prisoner ’ s Dilemma Negative numbers represent costs or losses The dominant strategy is Not Invest (always better off by defecting no matter what the other party does) Nash Equilibrium is (NI, NI) Player 2 InvestNot Invest Player 1 Invest-45; ;- 40 Not Invest -40; ;- 52 Table 1: the DPD game

Experiment Design – the Stochastic Prisoner ’ s Dilemma In the SPD, each player decides whether or not to invest at a cost of 45 to reduce his or her own risk of losing 100. If one player invests, both players’ risks are reduced. Joint cooperation eliminates uncertainty. Substituting the outcomes with the expected values  the DPD. Player 2 InvestNot Invest Player 1 Invest-45; -4520% lose 145, 80% lose 45; 40% lose 100, 60% lose 0 Not Invest 40% lose 100, 60% lose 0; 20% lose 145, 80% lose 45 52% lose 100, 48% lose 0; 52% lose 100, 48% lose 0 Player 2 InvestNot Invest Player 1 Invest-45; ;- 40 Not Invest -40; ;- 52 Table 1: the DPD gameTable 2: the SPD game

A Example of the SPD game SPD is a special case of the Interdependent Security Game (Kunreuther and Heal, 2003) A Scenario : Baggage transfer security Pre-911 An airline has to determine whether it wants to invest in baggage security Investing reduces its risk to be attacked by terrorists But even if it invests, it may face a security risk from a dangerous bag loaded onto its plane by another airline, as in the Pan Am 103 crash.

Experiment Design--Subjects & Processes 2 Types of players Individual OR group player Group Player 3 members in each group A group makes one collective decision All members share the outcome equally Unanimous decisions or majority rule Subjects: 202 subjects Between-subject 2X2 design (2 games X 2 player types)

Key Finding Groups are less cooperative than individuals in the DPD, but more cooperative than individuals in the SPD.

What is Known and What is New Replicated the “discontinuity effect”: groups cooperate less than individuals in DPD ( Insko, et al 1987; Wildschut et al 2003 for a review ) Discovered a “reversed discontinuity effect”: groups cooperate more than individuals in SPD. Survey data and recorded discussion provide explanations for both the discontinuity effect in DPD and the reversed discontinuity effect in SPD.

Why Groups Cooperate Less than Individuals (Discontinuity Effect) in DPD Anonymity in a group shields social sanction from the other group Defection in the name of group interest Out-group schema on intergroup competition At least one member identifies the dominant strategy and persuades others Identifiability Explanation Social Support Explanation Schema-Based Distrust Explanation Smart-strategy persuasion Explanation Discontinuity Effect Greater greed Greater fear

Why Discontinuity Effect Disappears in SPD Identifiability is the same in both games. Social support for defection is reduced in the SPD than in DPD, because some members may consider defection too risky and not in the group interest. Schema-based distrust is reduced in the SPD than in DPD, because g roup members observe reduced tendency for their own group to defect and infer that the other group is less likely to defect as well. Smart-Strategy Persuasion power to defect is reduced in the SPD than in DPD, because with uncertainty it is h arder to figure out that defect is the smart strategy and convince other members.

Why Groups Cooperate More in SPD - Motivation to avoid guilt and blame People take less risk when their decisions affect others (Charness and Jackson 2008) In DPD Defection is always better off No ex post guilt or blame In SPD Defection has a higher expected payoff, but a higher probability of suffering a loss. If a large loss follows defection  ex post guilt and ex post blame for the one who suggested defection Individual members favor safety-first strategy (cooperation) to avoid ex post guilt and blame  Reversed discontinuity effect

Why Groups Cooperate More in SPD -Social Pressure to Conform to Certain Norms Three norms are most relevant in PD games: Being pro-group, Being smart, and Being nice In DPD Both Pro-group and smart norm clearly indicate defection Niceness (cooperation) is clouded In SPD Unclear what strategy is Pro-group and smart Being nice is socially desirable and more salient than in DPD.

Conclusions/Major Findings Replicated the discontinuity effect in the DPD game. Four explanations were offered to explain the discontinuity effect. Found a reversed discontinuity effect when uncertainty existed: groups were more cooperative than individuals in the SPD game. Two explanations are provided to explain the reversed discontinuity effect.

Future Extensions Generality of the phenomenon loss/gain domain Games with two Nash equilibria Deeper understanding of group decision making under uncertainty Are either of the two explanations necessary or sufficient for the reversed discontinuity effect in SPD? Are there any other undiscovered reasons for groups to be more cooperative than individuals under uncertainty? Role of communication, conflicts of interest, number of groups, etc. Practical applications to encourage group cooperation in social dilemmas