What drives failure to maximize payoffs in the lab? A test of the inequality aversion hypothesis

Nicolas Jacquemet (1, 2) , Adam Zylbersztejn (3)

1 PSE - Paris School of Economics
2 BETA - Bureau d'Économie Théorique et Appliquée
3 CES - Centre d'économie de la Sorbonne

Experiments based on the Beard and Beil (1994) two-player coordination game robustly show that coordination failures arise as a result of two puzzling behaviors: (i) subjects are not willing to rely on others' self-interested maximization, and (ii) self-interested maximization is not ubiquitous. Such behavior is often considered to challenge the relevance of subgame perfectness as an equilibrium selection criterion, since weakly dominated strategies are actually used. We report on new experiments investigating whether inequality in payoffs between players, maintained in most lab implementations of this game, drives such behavior. Our data clearly show that the failure to maximize personal payoffs, as well as the fear that others might act this way, do not stem from inequality aversion. This result is robust to varying the saliency of decisions, repetition-based learning and cultural differences between France and Poland.

Mots clés: Coordination Failure; Subgame perfectness; Non-credible threats; Laboratory experiments; Social Preferences; Inequality Aversion

Domaines: Economies et finances

Nicolas Jacquemet, Adam Zylbersztejn. What drives failure to maximize payoffs in the lab? A test of the inequality aversion hypothesis. Review of Economic Design, 2014, 18 (4), pp.243-264. ⟨10.1007/s10058-014-0162-5⟩. ⟨halshs-01026080⟩