Are collective actors different …? Some observations and questions

1. Are collective actors different …? Some observations and questions Andreas Ortmann Center for Economic Research and Graduate Education, Charles University Economics Institute, Academy of Sciences of the Czech Republic Prague, Czech Republic

2. The importance of the question • From Camerer’s Top Ten Open Research Questions: “8. How do teams, groups, and firms play games? Virtually all the experiments described in this book maintained a standard hypothesis in game theory, that whether players are genes, nonhuman animals, people, households, workgroups, or nation-states makes little difference to whether standard tools are applicable. So most experiments just made individual subjects responsible for their own decisions. But labs are certainly flexible enough to permit experiments in which subjects are, say, teams, to see how decision making differs. The fact that theories of collective decision making in games are not always well-developed should not inhibit experimenters from using facts to lead theory, rather than follow it.” (p. 475)

3. What do we know? (1) • Johnson, Camerer, et al. (JET 2003): - Alternating offer game (three rounds, sgp 1.25, es 2.50) - Three (actually, four) treatments to - replicate basic findings from earlier implementations - - control of social preferences (robots programmed as canonical game theorists as other players) - control for cognitive limitations (backward induction “training”) - Findings: - Basic findings replicated, ave offer was 2.11; offers below 1.80 rejected half of the time - With social preferences turned off, 1.84 (rej: 51%, with rej rates in first two trials twice as high as in trials 3 – 8) - With subjects trained in backward induction, 1.22 (rej: down to 7%)

4. What do we know? (2) • Psychology (thanks to Cooper & Kagel 2003): • Lorge & Solomon (PM 1955): - Introduction of Truth Wins (TW) evaluation criterion p = P = 1 – (1-p)n where n is the number of group members - Re-analysis of Shaw (AJP 1932) and similar studies - Findings: - “… freely interacting groups very rarely exceed, sometimes match, and usually fall below the Lorge- Solomon baseline” (Davis, OBHDP 1992, p. 7) - contradicts the established folk wisdom that groups are better at decision making than individuals - why? - is the evaluation criterion wrong? (too demanding?) (problem solving/playing strategically not a single heureka experience, rather multiple steps) - is repeated play important?

5. What do we know? (3) • Economics: • Cooper & Kagel (2003): - Entry limit pricing game (Milgrom & Roberts, ECMTA 1982) - TW evaluation criterion as benchmark - Findings: - teams play more strategically than individuals - team performance particularly striking when transfers are required - teams manage quicker to put themselves into the other players’ shoes - why? - repeated play?

6. What do we know? (4) • Economics: • Kocher & Sutter (EJ 2004): - Guessing game (Nagel, AER 1995) - One price only in each round (for each session) - Criterion is difference in first round picks/ difference in rounds 2 – 4 picks – “learning”) - Findings: - no difference in first round between teams and individuals - significant faster convergence for teams than individuals in rounds 2 - 4 - interpretation: - “groups not smarter decision makers per se, but they learn faster than individuals.”

7. What do we know? (5) • Economics: • Kovac, Ortmann, & Vojtek (2004): - Guessing game (Gueth, Kocher, & Sutter, EL 2002) - Everyone is paid - Comparison between heterogeneous and homogeneous players - Slovak high school students at math camps - Findings: - heterogeneous players closer to equilibrium in first round - significant faster convergence for teams than individuals - why? (compare to Kocher & Sutter! And GKS!)

8. Discussion (1) • With exception of Johnson, Camerer, et al. (JET 2003), papers discussed above don’t have social preferences as confound. • If we assume that Cooper & Kagel results generalize, then what does it imply for games where social preferences seem to matter (such as public good provision problems, distribution, and bargaining games, etc.)? Will groups converge faster to the game-theoretic norm? (the subgame-perfect equilibrium?) - See Cox (2002, in Zwick & Rapoport) - no significant difference in amounts sent - groups return significantly lower amounts than individuals - See Bornstein & Yaniv (EE 1998) - groups more rational than individuals both as props and resps - See Cason & Mui (EJ 1998) - groups have more other-regarding preferences (social distance? earned assets? See Cherry et al. (AER 2002)

9. Discussion (2) • Is group deliberation (just) a substitute for teaching/training? • How are heterogeneity of group composition and (quality of) group deliberation connected? • Why, if indeed group deliberation is a substitute for teaching/training, and if heterogeneity is positively related to the quality of group deliberation, do we get the seemingly contradictory partners and strangers results (Andreoni & Croson forthcoming, in Plott & Smith)

10. Discussion (3) • Using facts to lead theory is fine but we really need theory!

11. “Methodological discussion, like spinach and calisthenics, is good for us … .” (Paul Samuelson 1963, p. 231) spinach : Pronunciation: 'spi-nich Function: noun Etymology: Middle English spynache, Middle French espinache, ... 1 : an Asian herb (Spinacia oleracea) of the goosefoot family cultivated for its edible leaves which form in a dense basal rosette 2 a : something unwanted, pretentious, or spurious b : an untidy overgrowth - spin·ach·like /-nich-"lIk/ adjective - spin·achy /-ni-chE/ adjective calisthenics: Pronunciation: -niks Function: noun plural but singular or plural in construction Etymology: Greek kalos beautiful + sthenos strength 1 : systematic rhythmic bodily exercises performed usually without apparatus 2 usually singular in construction : the art or practice of calisthenics “The way which in an experiment is conducted is unbelievably important.” (Camerer 2003, p. 34)