Special Session Summary Game-Theoretical Based Experiments in Consumer Research

Citation:

Rami Zwick (2000) ,"Special Session Summary Game-Theoretical Based Experiments in Consumer Research", in NA - Advances in Consumer Research Volume 27, eds. Stephen J. Hoch and Robert J. Meyer, Provo, UT : Association for Consumer Research, Pages: 189.

Advances in Consumer Research Volume 27, 2000      Page 189

SPECIAL SESSION SUMMARY

GAME-THEORETICAL BASED EXPERIMENTS IN CONSUMER RESEARCH

Rami Zwick, The Hong Kong University of Science and Technology

The impetus for this special session was the growing interest in the development of a descriptive (experimentally based) variant of game theory that combines psychological and economic elements, often referred to as behavioral game theory. In recent years, more and more social scientists have combined in their work the theoretical framework of traditional game theory to model the environment (including the incentive structure) in which decisions are made, and the experimental methodology to study actual consumer behavior under specific conditions. The combination of rational-choice framework and psychological models seems to fit very well within the context of consumers’ extensive decision making behavior. Consequently, the objective of the session was to expose the consumer behavior community to this approach and to showcase several marketing studies that follow this tradition.

The session’s general orientation was methodological in nature, demonstrating the use of experimental economics techniques to answer consumer behavior questions. Under the methodological umbrella, the individual papers were designed to explore consumer behavior in strategic settings (rather than simple individual decision making), and consumers’ adaptation to various incentive structure. The strategic setting are embedded in bargaining and bundling decisions.

The following papers were presented in the session:

 

"PRICE NEGOTIATIONS IN MARKETING: TESTING A SEQUENTIAL BARGAINING MODEL WITH ONE-SIDED UNCERTAINTY AND OPPORTUNITY COST OF DELAY"

Joydeep Srivastava, Dipankar Chakravarti and Amnon Rapoport

The predictions of a sequential equilibrium bargaining model are tested in two experiments where a seller and a buyer sequentially negotiate the price of a product. The seller is uncertain about the maximum price that the buyer is willing to pay for the product and there is opportunity cost of delay.

 

"STRATEGIC LEARNING: PRESCRIPTIVE LESSONS FROM BEHAVIORAL GAME THEORY"

Colin F. Camerer and Teck H. Ho

This talk described a model of how people learn from experience in repeated strategic situations. The results show that the model explains behavor better than other models, in a way which is also psychologically realistic, which suggests that managers who forecast what others will do using our model will make better decisions.

 

"BUNDLING PRODUCTS FOR SUCCESS: THE EFFECT OF SPECIFICITY OF ASSETS AND SIZE OF A BUNDLE ON FOSTERING COLLABORATION"

Wilfred Amaldoss and Amnon Rapoport

An increasing number of branded components are sold as product bundles. The study aim at understanding how the specificity of assets and the number of components in a bundle affect collaboration. The authors proposed a game-theoretic model to investigate these issues both theoretically and experimentally.

 

"AN EXPERIMENTAL STUDY OF BUYER-SELLER NEGOTIATION: SELF-INTEREST VERSUS OTHER-REGARDING BEHAVIOR"

Rami Zwick and Eythan Weg

This paper pursues the investigation regarding the degree to which self-interest and other-regarding motives direct bargaining behavior in a marketing context. The salient features of the experiment (outside options and cost of delay) capture some of the common real-world characteristics which are strategically important in buyer-seller negotiation, and are rich enough to allow for focal-point agreements based on non-strategically determined motives. The authors consider five possible resolutions of the trading scenario (equal split, equal net profit, deal-me-out, split-the difference, and subgame perfect equilibrium). Although none of the tested model performed uniformly best, behavioral regularities do emerge which suggest that bargainers are motivated first and formost by individual incentives. Other-regarding behavior is only constraint on the maximization problem.

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