"Modeling Bounded Rational Behavior in Experimental Games and Markets" was the general theme of the Fourth Conference on Experimental Economics, held from September 21 to 25, 1986 at the Zentrum fUr Interdisziplinare Forschung in Bielefeld, Germany. This volume contains the papers presented at this conference in a revised and condensed form. The discussed topics concern experimental economics in general, unilateral and bilateral decisions, auctions and markets, and the problem of coalition formation. A selective bibliograpghy of the participants' work in the field of experimental economics is added. On behalf of the Conference Board and of the Gesellschaft fur Experimentelle Wirtschaftsforschung we express thanks to the Zentrum fur Interdiszipl inare Forschung for organizing and financing the conference. We owe thanks also to an anonymous donor for additional financial support. We thank Ulrich Vossebein and Sigrid . Manthey for their help in preparing the conference and this publication. Reinhard Tietz Wulf Albers Reinhard Selten CONTENTS PREFACE III CONTENTS v I. EXPERIMENTAL ECONOMICS Reinhard Tietz 3 Experimental Economics: Ways to Model Bounded Rational Bargaining Behavior - Introductory Remarks to the Fourth Conference on Experimental Economics - Daniel Kahneman 11 Experimental Economics: A Psychological Perspective II. UNILATERAL DECISIONS Monika Isis Ksiensik and Dirk Wendt 21 Normative and Individual Strategies in Social Dilemmata Friedel Bolle 37 Learning to Make Good Predictions in Time Series John D. Hey and Valentino Dardanoni 51 A Preliminary Analysis of a Large-Scale Experimental Investigation into Consumption under Uncertainty Oswald Huber 66 Mental Representation in Multistage Decision Making III. I. Experimental Economics.- Experimental Economics: Ways to Model Bounded Rational Bargaining Behavior - Introductory Remarks to the Fourth Conference on Experimental Economics.- Experimental Economics: A Psychological Perspective.- II. Unilateral Decisions.- Normative and Individual Strategies in Social Dilemmata.- Learning to Make Good Predictions in Time Series.- A Preliminary Analysis of a Large-Scale Experimental Investigation into Consumption under Uncertainty.- Mental Representation in Multistage Decision Making.- III. Bilateral Decisions.- Stability and Outcome Tradeoffs in Asymmetric Dilemmas: Conditions Promoting the Discovery of Alternating Solutions.- The Influence of Social Orientation and Generalized Expectancies on Decision Making in Iterated Experimental Games.- Ultimatum Bargaining for a Shrinking Cake - An Experimental Analysis.- Bounded Rational Strategies in Sequential Bargaining: An Experiment and a Learning by Evolution Strategy.- Semi-Normative Properties of Bounded Rational Bargaining Theories.- Modeling Mediator Behavior in Experimental Games.- IV. Auctions and Markets.- Dual Ceteris Paribus Comparisons: Some Initial Thoughts on Laboratory Isolation of Equilibrium Forces in Auction Markets.- Learning in Common Value Auctions.- Inflation and Expectations in Experimental Markets.- Modeling Investment Behavior in an Experimental Market.- V. Coalition Formation.- Order of Strength and Exhaustivity as Additional Hypotheses in Theories for 3-Person Characteristic Function Games.- The Effects of Justice Norms in a Bargaining Situation.- Modeling Coalition Formation in Inessential Probabilistic Games.- Sequential Games of Status: A Replication.- Equal Share Analysis for Location Games.- Limits of Rational Behavior in Cooperatively Played Normal FormGames.- Revealed Aspirations and Reciprocal Loyalty in Apex Games.- VI. Bibliography.- Selected Bibliography of the Participant's Contributions to Experimental Economics.- Author Index. Prof. em. Dr. Dr. h.c. mult. Reinhard Selten was born in Breslau at October 5, 1930. Reinhard Selten finished highschool in 1950 at Melsungen and then began to study mathematics at Frankfurt a. M.. Reinhard Selten received his Ph. D. in 1961 at Frankfurt a. M. His Ph. D. thesis was on valuation of n-person games. Reinhard Selten spent one academic year in 1967-1968 at the University of California, Berkeley, as a Visiting Full Professor. Since 1969 until 1996 Reinhard Selten taught economic theory first at the Free University of Berlin, then at the University of Bielefeld and finally at the University of Bonn. Together with John Harsanyi and John F. Nash Reinhard Selten received in 1994 the Alfred Nobel Memorial Prize. The price was awarded for foundational work in gamee theory. During his stay at Bonn he founded the first computerized laboratory in Europe. He received 11 honorary doctorates from universities in Germany, France, Great Britain, the United States and China. In 2005 he became the leader of the workinggroup "Rationality in the Light of Experimental Economics" of the Northrhine-Westfalian Academy of Sciences and Arts at the University of Bonn. He resigned from this position in September 2014 and finished working for this group at Oktober 2014. Since then he works in his home. He was married with his first wife from 1959 until her death at March 2014. He married again in September 2014.
