Conditional behavior and learning in similar stag hunt games

Abstract

This paper reports an experiment using Stag Hunt games with different payoff ranges. Specifically, in one treatment for half of the games the payoff dominant and the risk dominant equilibrium coincide and for the other half of the games they conflict; in the second treatment they always conflict. The experiment provides evidence that the payoff range experienced by the participant influences the likelihood of efficient conventions emerging. In particular, experiencing games where payoff dominance and risk dominance coincide appears to make payoff dominance more attractive in games in which they conflict. In the experiment, we also observe conditional behavior emerging with experience. We develop a model of conditional expectations to explain these stylized facts that depends crucially on the assumption that after a brief learning period participants categorize their experience using the same relative bandwidth in both treatments even though the range of experience is twice as large in treatment 1 as it is in treatment 2. The assumption cannot be rejected by the data. The analysis provides a formal example in which increasing experienced diversity by changing the way similar experiences are categorized increases the likelihood of efficient conventions emerging in communities playing similar Stag Hunt games.