Revisiting Rational Incremental Decision: Replication of Signaling Game Experiments in Asia

This study is designed to revisit (rational) incremental decision, which has been considered one of the most power principles in the government decision-making. While the “muddling through” model is applicable in many... [ view full abstract ]

This study is designed to revisit (rational) incremental decision, which has been considered one of the most power principles in the government decision-making. While the “muddling through” model is applicable in many decisional situations, incremental decisions also appear to be a rational one in some conditions. This study sets laboratory experiments using signaling games to investigate when people use incremental decisions. The experiments will be done in Hong Kong and Korea during August to October in 2015, and experimentees will be undergraduate student volunteers who understand basic idea of game theory.
In the first phase, we will replicate Knott and his colleague’s (2003) experiments of two-person cooperative signaling game where participants have four types of pay-off conditions: high/low uncertainty and high/low risk. Knott et al. (2003) expected gamers would show some patterns from decision behaviors such as Cournot adjustment (contained rational choice: duopoly situation, assuming rival’s selection is fixed same as the previous choice), sequential Bayesian updating (rational choices: starting from maximum expected value, and moving selection based on the average of the prior probability distribution by piling previous selection information), incremental adaptation (mutually adjusting behavior over time), and satisficing selection (stopping selections on the satisfying point; not going to Nash equilibrium).
Using the results of the first phase experiment which is expected to show decisions are affected by not only uncertainty and risk but also the other player’s decision behavior; we would like to examine whether the findings of Knott and his colleague’s experiments are valid in the selected Asian settings then to investigate decision patterns (Cournot adjustment, sequential Bayesian, incremental adaptation, and satisficing) when we fix the other player’s selection sequence. This study is expected to contribute to revisiting rational incremental decision in the public sector by replicating two-person signaling game experiment in two Asian settings to examine the validity and reliability of the previous findings.