Collaborative Research: Individual and Team Behavior in Strategic Interactions

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Economists use game theory (the theory of strategic interactions) to study a wide variety of policy issues such as how to prevent collusion between large firms, how to design auctions for various purposes (e.g. air wave rights), and how to limit dysfunctional phenomena such as bank runs and market panics. In many of these settings, decisions are made by teams rather than individuals - the board of a large corporation, a congressional committee, etc. - but relatively little is known about how decisions made by teams differ from individuals in strategic interactions. Researchers on this project will conduct carefully designed experiments to identify how groups agree to cooperate with other groups, the mechanism by which groups perform better (or worse) than individuals at generating more efficient outcomes, and to compare how groups, as opposed to individuals, learn to make choices in related situations from past experience. Better understanding how teams make decisions, and how these decisions differ from ones made by individuals, will contribute to foundational understanding of game theory. In terms of broader impacts, this research will enable economists to better predict behavior of entities when the decisions of those entities are made by teams rather than individuals. Psychologists studying repeated prisoner's dilemma games typically find that teams are less cooperative than individuals, referred to as the "discontinuity effect". Kagel and McGee (2016) fail to find a discontinuity effect across finitely repeated super-games with no communication between teams. Experiments involving multiple plays of repeated PD games with a probabilistic stopping rule will be run with and without communication between opponents to understand why groups seem less cooperative that individuals in some setting but not in others. A second set of experiment will explore the relative efficacy of communication for teams vs. individuals in reaching the efficient outcome in a coordination game where the efficient equilibrium is quite challenging. A final set of experiments will examine whether teams and individuals differ in the extent to which they perceive different types of games as similar.