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Games 2018, 9(1), 13; https://doi.org/10.3390/g9010013

Creating a Domain of Losses in the Laboratory: Effects of Endowment Size

Department of Economics, Southern Illinois University, Carbondale, IL 62901, USA
Received: 7 December 2017 / Revised: 11 February 2018 / Accepted: 18 February 2018 / Published: 2 March 2018
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Abstract

This study examines the effects of initial endowment size on individual behavior in a binary choice game with no dominant strategy. Subjects make decisions in two, theoretically identical sequences, differing in initial endowment levels only. Each decision involves a choice between an option with a certain loss and an option with a loss that is increasing in the number of individuals who choose it. For the higher endowment level, all subjects are guaranteed a positive payoff. For the lower endowment level, subjects who choose the uncertain loss option could receive a negative payoff. The results indicate that in the first round of play, subjects with the higher endowment level choose the certain loss option significantly more often than subjects with the lower endowment level. There are, however, no significant differences in behavior beyond the first few rounds of play. View Full-Text
Keywords: experimental economics methods; laboratory experiments; domain of losses; binary choice experimental economics methods; laboratory experiments; domain of losses; binary choice
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Sorensen, A. Creating a Domain of Losses in the Laboratory: Effects of Endowment Size. Games 2018, 9, 13.

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