Incentives and Strategic Behaviour: An Experiment

Teresa Esteban-Casanelles and Duarte Gon\c{c}alves
Authors registered in the RePEc Author Service: Duarte Gonçalves

Papers from arXiv.org

Abstract: How do incentive levels affect strategic behaviour? We address this with an experiment that separately identifies own- and opponent-incentive effects in two dominance-solvable games that differ in strategic complexity. Higher own incentives favour more strategically sophisticated actions and increase best responding to stated beliefs. Beliefs shift in a parallel direction and participants expect more sophisticated opponent actions. Furthermore, while higher own incentives increase belief accuracy, opponents with higher incentives are harder to predict. Higher incentives also increase response times, and longer response times are associated with better performance and more sophisticated actions and beliefs. Taken together, the evidence suggests that incentives affect strategic behaviour through two main channels: by reducing payoff-dependent mistakes and by increasing the effort devoted to reasoning, with the returns to that effort shaped by strategic complexity of the environment.

Date: 2023-04, Revised 2026-03
New Economics Papers: this item is included in nep-exp, nep-gth, nep-mac and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2304.00412 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2304.00412

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().