Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7351341 | European Economic Review | 2018 | 19 Pages |
Abstract
We examine theoretically and experimentally how individuals' willingness to follow third-party recommendations in 2â¯Ãâ¯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.
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Authors
Nejat Anbarcı, Nick Feltovich, Mehmet Y. Gürdal,