In this paper, the strategy method's impact on behavior in sequential bargaining games is investigated. Besides the decision procedure (hot versus cold), we varied the second mover punishment costs (high versus low). Significant impacts of both treatment variables were observed. For example, second movers punished significantly more often in the hot version of the low cost game. Furthermore, first mover behavior was significantly different in the hot and cold versions of both games. In the hot games, first mover behavior suggests an expectation of decreased rewards and/or punishments from second movers. We observed, however, no decrease in reward and an increase in punishment. The hot cold variable only informs first movers that the decision procedure used by second movers has changed. Therefore, first mover behavior must be shaped by their perceived assessment concerning how second movers make decisions. We argue that first mover behavior can be explained by the interaction of two well-known psychological effects: the consensus and positive self-image effects.

This paper introduces new experimental designs to examine how conditional cooperation and punishment behaviours respond to the full range of variation in the contributions of others. It is shown that contributions become significantly more selfish-biased as others contribute more unequally, while punishment increases both with decreasing contributions by the target player and increasing contributions by a third player. Low contributors who punish antisocially do not direct their punishment specifically toward high contributors, while their beliefs indicate that they expect to themselves be punished.

In this paper, we present a first survey of the literature regarding whether the strategy method, in which a responder makes conditional decisions for each possible information set, leads to different experimental results than does the more standard direct-response method, in which the responder learns the action of the first mover and then chooses a response. Of the twenty-nine existing comparisons, sixteen find no difference, while four do find differences, and nine comparisons find mixed evidence. We also find some indications about the underlying determinants of when the two methods lead to different responses. For example, it appears that levels of punishment are substantially lower with the strategy method. In addition, it also appears that difference across these elicitation methods are more likely when people make fewer contingent choices. Finally, in no case do we find that a treatment effect found with the strategy method is not observed with the direct-response method.

Prior research has demonstrated that the ability to express one’s views or “voice” matters in social and economic interactions, but little is known of the mechanisms through which voice operates. Using an experimental approach based on the ultimatum game with the strategy method, we explore four potential channels for voice that encompass and expand on prior work: the knowledge effect of voice, the value expressive (or inherent value) of voice, the expectation effect of voice, and the procedural fairness effects of voice. Our results show strong effects through the value expressive and expectation channel, but not through either the knowledge channel or procedural fairness. In our view, voice is powerful because people like to express their views and they are disappointed when their views did not make a difference in their outcomes.

In experiments with two-person sequential games we analyze whether responses to favorable and unfavorable actions depend on the elicitation procedure. In our “hot” treatment the second player responds to the first player's observed action while in our “cold” treatment we follow the “strategy method” and have the second player decide on a contingent action for each and every possible first player move, without first observing this move. Our analysis centers on the degree to which subjects deviate from the maximization of their pecuniary rewards, as a response to others’ actions. Our results show no difference in behavior between the two treatments. We also find evidence of the stability of subjects’ preferences with respect to their behavior over time and to the consistency of their choices as first and second mover.

Numerous experiments have shown that people often engage in third-party punishment (3PP) of selfish behavior. This evidence has been used to argue that people respond to selfishness with anger, and get utility from punishing those who mistreat others. Elements of the standard 3PP experimental design, however, allow alternative explanations: it has been argued that 3PP could be motivated by envy (as selfish dictators earn high payoffs), or could be influenced by the use of the strategy method (which is known to influence second-party punishment). Here we test these alternatives by varying the third party’s endowment and the use of the strategy method, and measuring punishment. We find that while third parties do report more envy when they have lower endowments, neither manipulation significantly affects punishment. We also show that punishment is associated with ratings of anger but not of envy. Thus, our results suggest that 3PP is not an artifact of self-focused envy or use of the strategy method. Instead, our findings are consistent with the hypothesis that 3PP is motivated by anger.

We compare behavior in modified dictator games with and without role uncertainty. Subjects choose between a selfish action, a costly surplus creating action (altruistic behavior) and a costly surplus destroying action (spiteful behavior). While costly surplus creating actions are the most frequent under role uncertainty (64%), selfish actions become the most frequent without role uncertainty (69%). Also, the frequency of surplus destroying choices is negligible with role uncertainty (1%) but not so without it (11%). A classification of subjects into four different types of interdependent preferences (Selfish, Social Welfare maximizing, Inequity Averse and Competitive) shows that the use of role uncertainty overestimates the prevalence of Social Welfare maximizing preferences in the subject population (from 74% with role uncertainty to 21% without it) and underestimates Selfish and Inequity Averse preferences. An additional treatment, in which subjects undertake an understanding test before participating in the experiment with role uncertainty, shows that the vast majority of subjects (93%) correctly understand the payoff mechanism with role uncertainty, but yet surplus creating actions were most frequent. Our results warn against the use of role uncertainty in experiments that aim to measure the prevalence of interdependent preferences.

The strategy method is an experimental procedure for eliciting a complete strategy of play for all information sets, not only the ones that happen to be reached during the course of a play of a game. We use it to elicit individual strategy profiles for a class of large group, market entry games in which the payoff for a player who enters on a given market capacity value decreases linearly in the difference between the capacity value and the corresponding number of entrants. Our results show that the aggregate frequencies of entry do not differ from previous results obtained under the more common decision method. Under both methods, the number of entrants across a large set of market capacity values is organized remarkably well by the equilibrium solution. In contrast, the individual profiles do not support mixed equilibrium play; only three of the sixty profiles suggest attempts at randomization or “mixing” between periods. About half of the individual profiles appear to converge, albeit slowly, to cutoff decision policies and more than a quarter of the profiles exhibit a variety of patterns that defy classification.

Our paper reconsiders the triadic design proposed by Cox (Games and Economic Behavior 46:260–281, 2004) to identify trust and reciprocity in investment games. Specifically, we extend the design in two directions. First, we collect information on investors’ choices by using both the direct-response (as does Cox) and strategy methods. Using the latter, we are able to condition reciprocity on initial inequality, which is endogenous when investigating reciprocity. We demonstrate that the triadic design provides evidence for reciprocity once that initial inequality is considered. Second, we elicit expectations and test their coherence with the triadic outcomes. By examining the relationship between trust actions and expected gains, we analyze whether investors’ expectations are consistent with their behavior. Finally, we test for the existence of an emotional bias, i.e., whether expectation mismatches induce trustees to change actual choices from the planned ones.

There is a long-standing unresolved debate in game theory and experimental economics regarding the behavioral equivalence of the direct-response method (hot play) and the strategy method (cold play). Using a unified experimental framework, we compare behavior elicited via both methods in four different Centipede Games that differ in their incentives to take or pass, in the evolution of those incentives over decision nodes, and in the asymmetry of the incentives across the two player roles. Out of the four Centipede Games, we find that both methods yield statistically different behavior in two of them, while in the remaining two we cannot reject the same behavior across the hot and cold methods. Whenever the behavior diverges, hot play consistently makes individuals stop earlier. These findings should shift the question from whether both methods are generically behaviorally equivalent to under which conditions they are (not) and why.

The strategy method (SM) is, in practice, subject to a possibly severe economic-theoretical bias. Although many studies utilize SM to examine responses to rare or off-equilibrium behaviors unattainable through direct elicitation (DE), they ignore the fact that the strategic equivalence between SM and DE holds for the monetary payoff game but not the game participants actually play, which is in terms of utilities. We report three results. First, failing to account for estimation bias when decisions at one information set can influence utility at another may result in significant differences in decision-making. Second, the magnitude of this bias can be substantial, comparable to other measured treatment effects. Third, minor interventions targeting salience can amplify these differences similarly, causing treatment effects to differ significantly between SM and DE, even reversing in direction. These findings emphasize the need for reconsideration of the SM’s reliability for economic research.

This article highlights a potential and significant economic–theoretical bias in the widely used strategy method (SM) technique. Although SM is commonly employed to analyze numerous observations per subject regarding rare or off-equilibrium behaviors unattainable through direct elicitation (DE), researchers often overlook a critical distinction. The strategic equivalence between SM and DE is applicable in the context of monetary payoff games, but not in the actual utility-based games played by participants. This oversight may lead to inaccurate conclusions and demand a reevaluation of existing research in the field. We formalize the mapping from the monetary payoff game to this actual game and delineate necessary and sufficient conditions for strategic equivalence to apply.

According to the theory of guilt aversion, agents suffer a psychological cost whenever they fall short of other people’s expectations. In this paper, we suggest that there may be limits to this kind of motivation. We present evidence from an experimental dictator game showing that behavior is consistent with guilt aversion for relatively low levels of recipient expectations, roughly up to the point where the recipient expects half of the available surplus. Beyond that point the relationship between expectations and transfers becomes negative. Moreover, we examine this relationship at the individual level and establish a typology of subjects depending on how and whether they condition their behavior on recipient expectations.

Conditional cooperation is the tendency to cooperate if and only if others do so as well. It is the most common behavior in social dilemmas. We study how the incidence of conditional cooperation in the public goods game, the most widely studied social dilemma in experimental economics, varies with group size. In a laboratory experiment, we apply the strategy method to elicit how participants’ willingness to contribute to a public good depends on other group members’ decisions. A within-subject design allows us to evaluate and compare an individual participant's contribution behavior in different-sized groups. Two main findings emerge. First, the share of players who are conditional cooperators is consistent across group sizes. Second, the strategies chosen imply that conditional cooperators hold a (correct) belief that others are more cooperative in a larger than in a smaller group.

The strategy method is a powerful method for eliciting conditional cooperation instrategic interactions. Theoretically, players’ cooperation conditionalon a specific level of others’ cooperation using the strategy methodshould be equal to their unconditional cooperation given an equivalent beliefabout others’ cooperation. However, using the Prisoner’s Dilemma,we show that decisions using the strategy method are more selfish than decisionsunder a simultaneous decision protocol predicted from players’ beliefs.This is driven entirely by lower cooperation among conditional cooperators withlow expectations about others’ cooperation. We further show that relativeto simultaneous choice, the strategy method shifts salient norms from anegalitarian fairness norm (‘give half’) to a reciprocity norm(‘match others’ behaviour’). This undermines cooperationamong players with low beliefs about others’ cooperation. These resultsthus show that the strategy method does not merely hold beliefs constant, butalso shifts which salient norms influence choice behaviour. This has importantimplications for the use of the strategy method in eliciting socialpreferences.