This award funds research on strategic decision making by groups and individuals in a number of economically important settings: multilateral bargaining, markets with a small number of powerful firms, and markets with asymmetric information (one side of the market has better information than the other side of the market). The common theme underlying these three lines of inquiry is the use of two person teams participating in laboratory experiments designed to mimic the environments in question. The goal is to better understand decision making processes in these environments. Because teammates must talk to coordinate their team's decisions, using teams provides a real time accounting of agents' thought processes as they make decisions. The resulting dialogues can be used to sort out between competing explanations for the observed behavior. In short, the goal is to develop realistic models of agents thought processes and behavior in the target environments.
A second, important, motivation for the research is that many, if not most, decisions made in these environments involve team decision making of one sort or another (freely interacting teams or advisors and advisees interacting). A common claim is that for economic environments like those we study, teams learn to behave strategically much faster, and in a number of ways more rationally, than individuals. The research studies if this claim is valid and, if so, how team play improves rationality. The PIs also study whether the heightened 'rationality' of teams extends to new domains beyond those previously studied by the PIs and by other research teams.
While it is well known that cognitive ability plays an important role in economic success there is growing recognition of the importance of key personality characteristics on economic outcomes as well. The role of cognitive ability and personality characteristic on the outcomes reported will be studied as well, with particular emphasis on how the characteristics of individual team members combine to affect team performance.
The research has several broader impacts. Graduate students will participate in the project and will learn about research methods for lab experiments in economics. Another impact of the research is to demonstrate the utility of using team dialogues and information about agents' personal characteristics to better understand decision makers' behavior in strategic environments. Because many kinds of social science include the study of human behavior in strategic environments, the project will be valuable to an interdisciplinary research community. The research is of considerable practical importance as well given that many major decisions are made by teams as opposed to individuals. As such to the extent that teams behave differently from individuals this is important to know.
