TY - JOUR
T1 - Adverse and advantageous selection in the laboratory
AU - Ali, S. Nageeb
AU - Mihm, Maximilian
AU - Siga, Lucas
AU - Tergiman, Chloe
N1 - Funding Information:
*Ali: Department of Economics, Penn State University (email: [email protected]); Mihm: Division of Social Science, NYU-Abu Dhabi (email: [email protected]); Siga: Division of Social Science, NYU-Abu Dhabi (email: [email protected]); Tergiman: Smeal College of Business, Penn State University (email: cjt16@psu. edu). Jeffrey Ely was the coeditor for this article. We thank the three anonymous referees for their thoughtful and constructive feedback, and Colin Camerer, Juan Carrillo, Alex Imas, Ryan Oprea, Emanuel Vespa, and Sevgi Yuksel for useful comments and suggestions. Robizon Khubulashvili provided excellent research assistance and programming. Our experiment was funded by NYU-Abu Dhabi through REF Pathways Grant RE099.
Publisher Copyright:
© 2021 American Economic Association. All rights reserved.
PY - 2021/7
Y1 - 2021/7
N2 - We study two-player games where one-sided asymmetric information can lead to either adverse or advantageous selection. We contrast behavior in these games with settings where both players are uninformed. We find stark differences, suggesting that subjects do account for endogenous selection effects. Removing strategic uncertainty increases the fraction of subjects who account for selection. Subjects respond more to adverse than advantageous selection. Using additional treatments where we vary payoff feedback, we connect this difference to learning. We also observe a significant fraction of subjects who appear to understand selection effects but do not apply that knowledge.
AB - We study two-player games where one-sided asymmetric information can lead to either adverse or advantageous selection. We contrast behavior in these games with settings where both players are uninformed. We find stark differences, suggesting that subjects do account for endogenous selection effects. Removing strategic uncertainty increases the fraction of subjects who account for selection. Subjects respond more to adverse than advantageous selection. Using additional treatments where we vary payoff feedback, we connect this difference to learning. We also observe a significant fraction of subjects who appear to understand selection effects but do not apply that knowledge.
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U2 - 10.1257/aer.20200304
DO - 10.1257/aer.20200304
M3 - Article
AN - SCOPUS:85109883103
SN - 0002-8282
VL - 111
SP - 2152
EP - 2178
JO - American Economic Review
JF - American Economic Review
IS - 7
ER -