Zero Sum Games
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i have a problem whit this task
Trading Company should provide 5 types of goods.
p - income from sale
l - a loss of storage. To determine the optimum allocation of supply
l1=19 l2=18 l3=17 l4=16 l5=15. I [View full text and thread]
|01/04/2000 01:10 PM by David K. Levine; How does theory work in the laboratory?|
Conventional economic theory posits a "Nash"
equilibrium in which rational self-interested players have rational
expectations about one anothers behavior. Does this theory hold up in the
- There is overwhelming evidence [Plott,
1987] that after subjects have had a chance to learn how to play the
theory works well in "competitive environments." These are
settings in which no player can have much impact on another player's
welfare. From a theoretical perspective, these environments satisfy Ostroy's
no surplus condition [Friedman
and Ostroy 1991]. From a practical point of view, these are the settings
in which economists have traditionally looked for competition - many buyers
or sellers competing with each other to buy or sell the same products.
Because there are many buyers or sellers, no one buyer or seller matters
- The theory works less well when players can have an impact on their
opponents. Occasionally players engage in altruism, spite or other forms of
non-self-interested behavior. However, it is important to emphasize the word
occasionally. In practice 70% or more of the subjects do engage in
rational self-interested behavior. One interpretation of equilibrium - that
of an exact equilibrium may fair poorly, because the behavior of a small
number of players may matter a great deal to the majority. However, more
sophisticated notions of equilibrium, such as that of approximate
equilibrium [Fudenberg and Levine,
1997] or quantal response equilibrium [McKelvey and Palfrey,
1995], that allow for deviant behavior by some individuals, do predict
- Theories of equilibrium that come about because of internal calculation
by players do poorly. Equilibrium behavior is typically observed only after
players have had some opportunity to learn and adapt. All learning and
adaptive theories [Camerer
and Ho, forthcoming] give a reasonable description of the basic groping
towards equilibrium that is observed in the laboratory, but none seem to do
especially well on the details.
- The size of the stakes matter. The more money is at stake, the better
the theory does [Slonim and Roth,
Although there are theories that are consistent with what happens in the
laboratory, the "tightness" with which these theories make predictions
depends on the environment - in some environments theory is useful, in others it
is not. So despite the general success of theory in the laboratory, there is a
need for theories that make tighter predictions.
- Plott, C.R. : "Laboratory
Experiments in Economics: The Implications of Posted-Price
Institutions," Science 232: 732-738.
- Friedman, D. and J. M. Ostroy :
"Competitivity in Auction markets: An experimentl and theoretical
investigation," UCLA, Department of Economics Working Paper No 633
- Slonim, R. and A. E. Roth
: "Learning in High Stakes Ultimatum Games: An Experiment in the
Slovak Republic," Econometrica, 66: 569-596.