Payoff inequity reduces the effectiveness of correlated-equilibrium recommendations
European Economic Review, cilt.108, ss.172-190, 2018 (SSCI, Scopus)
- Yayın Türü: Makale / Tam Makale
- Cilt numarası: 108
- Basım Tarihi: 2018
- Doi Numarası: 10.1016/j.euroecorev.2018.07.003
- Dergi Adı: European Economic Review
- Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
- Sayfa Sayıları: ss.172-190
- Anahtar Kelimeler: Correlated equilibrium, Inequity, Level-k reasoning, Other-regarding behaviour, Recommendations
- Boğaziçi Üniversitesi Adresli: Evet
Özet
We examine theoretically and experimentally how individuals’ willingness to follow third-party recommendations in 2 × 2 games is affected by payoff asymmetry. We consider six versions of Battle-of-the-Sexes. Recommendations imply monetary payoffs that are equal ex ante, but unequal ex post. So, although following recommendations constitutes a Nash equilibrium under standard preferences, sufficiently inequity-averse players can rationally disobey a recommendation that would lead to a very unfavourable payoff distribution, as long as the cost of doing so is not too large. Our theoretical model incorporates inequity aversion, along with level-k reasoning. Our main experimental result is consistent with the model: as either payoff asymmetry increases or the cost of disobeying an unfavourable recommendation decreases, subjects are more likely to disobey recommendations.