Adverse and advantageous selection in the laboratory

S. Nageeb Ali, Maximilian Mihm, Lucas Siga, Chloe Tergiman

Research output: Contribution to journalReview articlepeer-review

Abstract

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.

Original languageEnglish (US)
Pages (from-to)2152-2178
Number of pages27
JournalAmerican Economic Review
Volume111
Issue number7
DOIs
StatePublished - Jul 2021

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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