Payment schemes in random-termination experimental games

Katerina Sherstyuk, Nori Tarui, Majah-Leah Ravago and Tatsuyoshi Saijo ()

No 2011-9, Working Papers from University of Hawaii Economic Research Organization, University of Hawaii at Manoa

Abstract: We consider payment schemes in experiments that model infinite-horizon games by using random termination. We compare paying subjects cumulatively for all periods of the game; with paying subjects for the last period only; with paying for one of the periods, chosen randomly. Theoretically, assuming expected utility maximization and risk neutrality, both the cumulative and the last-period payment schemes induce preferences that are equivalent to maximizing the discounted sum of utilities. The last-period payment is also robust under different attitudes towards risk. In comparison, paying subjects for one of the periods chosen randomly creates a present-period bias. Experimentally, we find that the cumulative payment appears the best in inducing long-sighted behavior.

Keywords: economic experiments; infinite-horizon games; random termination (search for similar items in EconPapers)
JEL-codes: C73 C90 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2011-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://uhero.hawaii.edu/wp-content/uploads/2019/08/WP_2011-9.pdf First version, 2011 (application/pdf)

Related works:
Working Paper: Payment schemes in random-termination experimental games (2011)
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:hae:wpaper:2011-9

Access Statistics for this paper

More papers in Working Papers from University of Hawaii Economic Research Organization, University of Hawaii at Manoa Contact information at EDIRC.
Bibliographic data for series maintained by UHERO ().