1. Cai, Hongbin and Joseph Tao-yi Wang (2006), "Overcommunication in Strategic Information Transmission Games," Games and Economic Behavior, 56(1), 7-36. (longer working paper version)
Abstract: In this paper we conduct laboratory experiments to test the Crawford and Sobel (1982) theory of strategic information transmission. Our experimental results strongly support the basic insight of the theory, namely, that less information is transmitted when preferences of the sender and the receiver diverge. Moreover, the average payoffs for the senders, the receivers, and the overall subject population are very close to those predicted by the most informative equilibrium. However, the evidence shows that subjects consistently overcommunicate in that the senders' messages are more informative about the true states of the world and that the receivers rely more on the senders' messages in choosing actions, compared with what the theory allows in the most informative equilibrium. To understand the overcommunication phenomenon, we use two popular approaches of bounded rationality: behavior type analysis and quantal response equilibrium, to analyze subjects' behavior in our experiment data.
2. Knoepfle, Daniel, Joseph Tao-yi Wang and Colin F. Camerer (2009), "Studying Learning in Games Using Eye-Tracking," Journal of the European Economic Association, 7(2-3), 388-398. (long version with appendix)
Abstract: We report results from an exploratory study using eye-tracking recording of information acquisition by players in a game theoretic learning paradigm. Eye-tracking is used to observe what information subjects look at in 4x4 normal-form games; the eye-tracking results favor sophisticated learning over adaptive learning and lend support to anticipatory or sophisticated models of learning in which subjects look at payoffs of other players to anticipate what those players might do. The decision data, however, are poorly fit by the simple anticipatory models we examine. We discuss how eye-tracking studies of information acquisition can fit into research agenda seeking to understand complex strategic behavior and consider methodological issues that must be addressed in order to maximize their potential.
3. Kang, Min Jeong, Ming Hsu, Ian M. Krajbich, George Loewenstein, Samuel M. McClure, Joseph Tao-yi Wang and Colin F. Camerer (2009), "The Wick in the Candle of Learning: Epistemic Curiosity Activates Reward Circuitry and Enhances Memory," Psychological Science, 20(8), 963-973. (2009 JCR ranking 6/111 in Psychology, Multidisciplinary; IF=5.09).
Abstract: Curiosity has been described as a desire for learning and knowledge, but its underlying mechanisms are not well understood. We scanned subjects with functional magnetic resonance imaging while they read trivia questions. The level of curiosity when reading questions was correlated with activity in caudate regions previously suggested to be involved in anticipated reward. This finding led to a behavioral study, which showed that subjects spent more scarce resources (either limited tokens or waiting time) to find out answers when they were more curious. The functional imaging also showed that curiosity increased activity in memory areas when subjects guessed incorrectly, which suggests that curiosity may enhance memory for surprising new information. This prediction about memory enhancement was confirmed in a behavioral study: Higher curiosity in an initial session was correlated with better recall of surprising answers 1 to 2 weeks later.
4. Wang, Joseph Tao-yi, Michael Spezio and Colin F. Camerer (2010), "Pinocchio's Pupil: Using Eyetracking and Pupil Dilation To Understand Truth Telling and Deception in Sender-Receiver Games," American Economic Review, 100(3), 984-1007. (Older versions can be found here, here, here, and here.)
Abstract: We report experiments on sender-receiver games with an incentive for senders to exaggerate. Subjects “overcommunicate”— messages are more informative of the true state than they should be, in equilibrium. Eyetracking shows that senders look at payoffs in a way that is consistent with a level-k model. A combination of sender messages and lookup patterns predicts the true state about twice as often as predicted by equilibrium. Using these measures to infer the state would enable receiver subjects to hypothetically earn 16-21 percent more than they actually do, an economic value of 60 percent of the maximum increment.
5. Wang, Joseph Tao-yi (2010), "Pupil Dilation and Eye-Tracking," in A Handbook of Process Tracing Methods for Decision Research: A Critical Review and User’s Guide, ed. by Michael Schulte-Mecklenbeck, Anton Kuhberger and Rob Ranyard, Psychology Press, 185-204. (book chapter; working paper version)
6. Ostling, Robert, Joseph Tao-yi Wang, Eileen Chou and Colin F. Camerer (2011), "Testing Game Theory in the Field: Swedish LUPI Lottery Games," American Economic Journal: Microeconomics, 3(3), 1-33. (Lead article, Equal contribution with Robert Ostling; online appendix; dataset; working paper version)
Abstract: Game theory is usually difficult to test precisely in the field because predictions typically depend sensitively on features that are not controlled or observed. We conduct a rare such test using field data from the Swedish lowest unique positive integer (LUPI) game. In the LUPI game, players pick positive integers and whoever chose the lowest unique number wins a fixed prize. Theoretical equilibrium predictions are derived assuming Poisson-distributed uncertainty about the number of players, and tested using both field and laboratory data. The field and lab data show similar patterns. Despite various deviations from equilibrium, there is a surprising degree of convergence toward equilibrium. Initial responses can be rationalized by a cognitive hierarchy model.
7. Kuo and Wang (2014), "Use of Strategy Methods in Experimental Pivotal-Voting Game," Pacific Economic Review, 19(3), 387-400. (working paper version, online appendix)
Abstract: We use the strategy method to conduct laboratory experiments on a nine‐player heterogeneous‐cost voting game. We replicate the underdog and competition effect, but find significantly higher voter turnout rates to be oddddnly partially explained by logit quantal response equilibrium. We examine round‐by‐round changes in cut‐off behaviour and find that voters are highly responsive to historical pivotal events. Voters also respond to past winning and tying, but only as a minority (upsetting the majority), demonstrating an ‘underdog winning effect’, receiving extra utility when winning as a minority. An equilibrium with such asymmetry in utility explains the high minority turnout (and high majority turnout as a best response).
8. Liu, Meng and Wang (2014), "Confucianism and Preferences: Evidence from Lab Experiments in Taiwan and China," Journal of Economic Behavior & Organization, 104, 106-122. (working paper)
Abstract: This paper investigates how Confucianism affects individual decision making in Taiwan and in China. dWe found that Chinese subjects in our experiments became less accepting of Confucian values, such that they became significantly more risk loving, less loss averse, and more impatient after being primed with Confucianism, whereas Taiwanese subjects became significantly less present-based and were inclined to be more trustworthy after being primed by Confucianism. Combining the evidence from the incentivized laboratory experiments and subjective survey measures, we found evidence that Chinese subjects and Taiwanese subjects reacted differently to Confucianism.
9. Mohlin, Ostling and Wang (2015), "Lowest Unique Bid Auctions with Population Uncertainty," Economics Letters, 134, 53-57. (working paper version)
Abstract: We characterize the unique Poisson–Nash equilibrium of the lowest unique bid auction (LUBA) when the number of bidders is uncertain and follows a Poisson distribution.
10. Lai, Lim and Wang (2015), "An Experimental Analysis of Multidimensional Cheap Talk," Games and Economic Behavior, 91, 114-144. (Online Appendix; working paper version; Former versions titled "Experimental Implementations and Robustness of Fully Revealing Equilibria in Multidimensional Cheap Talk" are here and here.)
Abstract: We design experimental games that capture the logic of Battaglini's (2002) construction of fully revealing equilibrium in multidimensional cheap talk. Two senders transmit information to a receiver over a 2x2 state space. Despite overall misaligned interests, full revelation is achieved in equilibrium by having the senders truthfully reveal along distinct dimensions. Our experimental findings confirm that more information can be extracted with two senders in a multidimensional setting. The extent to which information is transmitted depends on whether dimensional interests are aligned between a sender and the receiver, the sizes of the message spaces, and the specification of out-of-equilibrium beliefs. While inducing interest alignment on the relevant dimensions and restricting the message spaces facilitated equilibrium play and information transmission, having a fully revealing equilibrium that is supported by implausible beliefs reduced the instances in which the equilibrium was played.
11. Hsieh and Wang (2016), "Cheap Talk Games: Comparing Direct and Simplified Replications," Research in Experimental Economics, Vol. 19, Experiments in Organizational Economics, 19-38. (Working paper version)
Abstract: To study strategic information transmission in organizations, we conduct a simplified version (with only three states) of the sender-receiver game experiment designed by Wang, Spezio, and Camerer (2010), in which an informative sender advises an uninformed receiver to take an action (to match the true state), but has incentives to exaggerate. We also have the same subjects play the original five-state game. We find similar “overcommunication” behavior with Taiwanese subjects – messages reveal more information about the true state than what equilibrium predicts – that let us classify subjects into various level-k types. However, results from the simplified version are closer to equilibrium prediction, with more senders robustly classified as level-2.
12. Chen, Huang and Wang (2018), "A Window of Cognition: Eyetracking the Reasoning Process in Spatial Beauty Contest Games," Games and Economic Behavior, 111, 143-158. (Older versions can be found here, here and here.)
Abstract: We study the reasoning process in an environment where final choices are well understood and the associated theory is procedural by introducing two-person beauty contest games played spatially on two-dimensional grid maps. Players choose locations and are rewarded by hitting targets dependent on opponents' choice locations. By tracking subjects' eye movements (lookups), we infer their reasoning process and classify subjects into various levels. More than a half of the subjects' classifications coincides with their classifications using final choices, supporting a literal interpretation of the level-k model for subject's reasoning process. Lookup analyses reveal that the center area is where most subjects initially look at. This sheds light on the level-0 belief. Moreover, learning lookups of a trial on average could increase payoffs of that trial and eliminates roughly 60% of the gap to empirical best response, indicating how valuable lookups can help predict choices.
13. Battaglini, Lai, Lim and Wang (2018), "The Information Theory of Legislative Committees: An Experimental Analysis," accepted by American Political Science Review. (1st revision; old version)
Abstract: We experimentally investigate the informational theory of legislative committees (Gilligan and Krehbiel 1989). Two committee members provide policy-relevant information to a legislature under alternative legislative rules. Under the open rule, the legislature is free to make any decision; under the closed rule, the legislature chooses between a member’s proposal and a status quo. We find that even in the presence of biases the committee members improve the legislature’s decision by providing useful information. We obtain evidence for two additional predictions: the outlier principle, according to which more extreme biases reduce the extent of information transmission; and the distributional principle, according to which the open rule is more distributionally efficient than the closed rule. When biases are less extreme, we find that the distributional principle dominates the restrictive-rule principle, according to which the closed rule is more informationally efficient. Overall, our findings provide experimental support for Gilligan and Krehbiel’s informational theory.
1. Chen, Wei (James) and Joseph Tao-yi Wang* (2010), "Epiphany Learning for Bayesian Updating: Overcoming the Generalized Monty Hall Problem" (Corresponding author)
Abstract: We study how people learn the correct action in a probabilistic situation. In particular, we create a modified version of the Monty Hall problem, and conduct laboratory experiments to show how a 100-door variant of the problem helps people learn to play optimally (always switch). Experimental results show that after playing the 100-door variant, subjects obtain an average switching rate above 80% in the 3-door problem, higher than most of the previous work without subject communication and/or competition. Moreover, results from estimating structural learning models using subject-level data show that the individual learning process is more likely to be an epiphany rather than a gradual one.
2. Own, Vivian Tzu-fan and Joseph Tao-yi Wang* (2010), "How Price Tags Affect Willingness-To-Pay---Evidence from the Field (and Lab)"
Abstract: We investigate how posted prices affect consumers' willingness-to-pay (WTP) for real-world products by eliciting the WTP from experienced consumers for water-resisting handbags and consumer electronics accessories before and after people see the price tag. To control for possible experimental artifacts, we elicit WTP with the following procedure: The incentive compatible Becker, DeGroot, Marschak (BDM) mechanism, explanations of the optimal strategy under BDM (truthfully revealing one's valuation), and paid practice rounds with subjects switching roles between buyers and sellers. Though this procedure has successfully minimized the willingness-to-pay and willingness-to accept gap in the literature (which we indeed replicate), we find a moderate but significant increase in WTP for the majority whose initial WTP were lower than the price tag, and a sharp decrease in WTP among the few whose initial WTP were higher than the price tag. This suggests a price effect driven by information regarding potential resale (and repurchase) opportunities. A similar laboratory experiment with college students replicates these findings. This suggests that when firms determine prices or discounts, they might have to care more about the negative “outside-opportunity” effect of low prices instead of the positive “price placebo” effect commonly observed in more controlled environments.
3. Wang, Joseph Tao-yi (2006), "The eBay Market as Sequential Second Price Auctions---Theory and Experiments"
Abstract: We consider the sequential second price auction in which the two highest bids are announced after each stage with unit demand bidders of affiliated private values. We find an efficient symmetric sequential equilibrium in monotonic strategies where bidders bid the expected winning price of the next stage, conditional on being the tied winner in this stage. Such an equilibrium survives in an eBay auction setting, in which bidders are allowed to submit multiple proxy (second-price) bids in a given fixed time period, when all bidders bid only at the last minute, or snipe. We then conduct controlled (laboratory) experiments with the special case of three items sold to bidders with independent private values, using either a sealed-bid second price auction or an eBay auction format. We show the timing of bidding in the eBay auction demonstrate “last minute bidding (sniping)” as reported by Roth and Ockenfels (2002), and early “squatting” coined by Ely and Hossain (2006). Moreover, both formats achieve high efficiency levels and have estimated bid functions seemly as predicted. However, prices decline, but revenue is higher than predicted in the early stages. Individual bids reveal that a significant portion of subjects either bid their valuations or zero in early auctions, even though they bid their valuations in the last one. To explain this, we construct a steps-of-thinking (cognitive hierarchy) model anchored on L0 bidders who always bid their valuations. The combination of various types of bidders explain the data better than that of standard equilibrium theory and shed light on the “declining price anomaly” documented by Ashenfelter (1989) and previously attributed to extreme risk aversion by McAfee and Vincent (1993).
4. Wang, Joseph Tao-yi (2006), "Is Last Minute Bidding Bad?"
Abstract: We demonstrate how last minute bidding on internet auctions is not compatible with a private value setting with a proxy bidding system, but can be rationalized by adding another identical auction. In the repeated eBay auction model, the last minute bidding equilibrium, in which bidders only bid at the last minute in the first auction, is the unique symmetric equilibrium considering monotonic, undominated strategies. Nonetheless, though high valuation bidders efficiently win the items, under strict affiliation, expected revenue is lower in the first auction than in the last, and sellers can increase their revenue by running a joint multi-unit auction.
神經經濟學淺談 (Neuroeconomics: An Introduction) (in Chinese)
實驗經濟學簡介 (What is Experimental Economics?) (in Chinese)
Pupil Dilation and Eye-Tracking (Handbook Chapter)
Here are the experimental laboratories I have been involved in:
SSEL - Social Sciences Experimental Laboratory (at Caltech)
Last modified on September 29, 2018