Abstract not found

This paper introduces a psychological notion of categorization into economics and derives its implications for economic decision making. We show, using a tractable model of social cognition, that a decision maker in (efficiently) assigning past experiences to categories, will sort experiences of interaction with larger (majority) groups more finely than experiences with smaller (minority) groups. We then apply the model to understand simple forms of discrimination and social identity. It is shown that discrimination in hiring can result from such cognitive processes even when there is no malevolent taste to do so and workers' qualifications are fully observable. The model also provides a framework that is equipped to investigate the social psychological concept of identity, where identity is viewed as self-categorization.

This is a paper on the creation and evolution of conventions of behavior in ”inter-generational games”. In these games a sequence of nonoverlapping ”generations ” of players play a stage game for a finite number of periods and are then replaced by other agents who continue the game in their role for an identical length of time. Players in generation t are allowed to see the history of the game played by all (or some subset) of the generations who played it before them and can communicate with their successors in generation t+1 and advise them on how they should behave. What we find is that word-of-mouth social learning (in the form of advice from laboratory “parents ” to laboratory “children”) can be a strong force in the creation of social conventions, far stronger than the type of learning subjects seem capable of doing simply by learning the lessons of history without the guidance offered by such advice.

: We report experimental results on the importance of information disclosure policy in first-price sealed-bid auctions. Interaction takes place in ten periods according to a random matching protocol, and we control the level of information feedback bidders receive after each period. When bidders are informed about the losing bids in previous periods, prices are higher than the theoretical prediction. However, when this information is not revealed the bidding becomes more competitive, and the bids come close to the theoretical prediction. We suggest that a signaling phenomenon may be important for explaining these results. JEL codes: C92, D44, L15 Keywords: First-price auctions, experiment, information disclosure, signaling Acknowledgments: We thank Gary Charness, Eric van Damme, David Grether, and Reinhard Selten for very helpful comments, and the Swedish Competition Authority for financial support. We started this research while we were both at the CentER for Economic Research at T...

Abstract: A government that regularly procures the services of construction companies wants to minimize its costs. The instrument it can use is the level of information feedback given to the firms in the market. Theoretically, the competition between firms is supposed to drive prices to the lowest possibility, independently of the information feedback. We design an experiment in which firms participate in a first price sealed-bid auction. Interaction takes place in 10 periods according to a random matching mechanism, and we control for the level of information feedback firms receive after each period. It turns out that when firms are informed about the losing bids in previous periods, prices are higher than the theoretical prediction. However, when firms do not receive this information prices converge towards the theoretical prediction. We suggest that a phenomenon of price signaling may be important for explaining these results.