Adverse and Advantageous Selection in the Laboratory

We study two-player games where one-sided asymmetric information can lead to either adverse or advantageous selection. We contrast behavior in these games with settings where both players are uninformed. We find stark differences, suggesting that subjects do account for endogenous selection effects. Removing strategic uncertainty increases the fraction of subjects who account for selection. Subjects respond more to adverse than advantageous selection. Using additional treatments where we vary payoff feedback, we connect this difference to learning. We also observe a significant fraction of subjects who appear to understand selection effects but do not apply that knowledge.

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Work Title Adverse and Advantageous Selection in the Laboratory
Access
Open Access
Creators
  1. S. Nageeb Ali
  2. Maximilian Mihm
  3. Lucas Siga
  4. Chloe Tergiman
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. American Economic Association
Publication Date July 1, 2021
Publisher Identifier (DOI)
  1. 10.1257/aer.20200304
Source
  1. American Economic Review
Deposited April 04, 2022

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  • Added Creator Lucas Siga
  • Added Creator Chloe Tergiman
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