Uncertainty and Resistance to Reform in Laboratory Participation Games

Vai-Lam Mui and Timothy Cason

No 1, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: This paper presents a participation game experiment to study the impact of uncertainty and costly political participation on the incidence of reform. Fernandez and Rodrik (1991) show that uncertainty about who will ultimately gain or lose as a result of a reform can prevent its adoption. We introduce intra-group conflict into this framework by incorporating costly political participation, which creates a natural incentive for free-riding on fellow group members’ efforts to influence policy outcomes. An agent, however, may still be willing to participate if her participation is likely to affect the policy outcome given the probabilities of participation by others. Our experimental findings show that uncertainty reduces the incidence of reform even with costly political participation, and that an increase in the cost of participation reduces the participation of all agents, regardless of whether they belong to the majority and minority. This second result cannot be reconciled with the standard mixed strategy Nash equilibrium, but is consistent with the quantal response equilibrium.

Keywords: Reform; Uncertainty; Experiment; Participation Game; Bounded Rationality; Quantal Response Equilibrium (search for similar items in EconPapers)
JEL-codes: C92 D72 D80 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-cdm and nep-reg
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Journal Article: Uncertainty and resistance to reform in laboratory participation games (2005)
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