Economics Literature Reviews Example

Abstract

The paper reveals the use of experimental approach with respect to cooperative game theory to test the axiomatic principles and normative perspective. The researcher classifies subjects as decision-makers and recipients, whereby the former are tested to make fair payoff decisions for the latter according to their worth. The researchers highlight that subjectivity impacts decision-making regarding monetary allocations. In addition, the research study provides basis for using cooperative game solutions in the areas of social choice and distributive justice theories.

Fairness through the lens of cooperative game theory: An experimental approach

Clippel and Rozen (2013, 1-3) have contributed an article on using an experimental approach for determining fairness through the lens of cooperative game theory. The researchers highlight that several past theorists have contributed literature on testing non-cooperative game theories, models and economic frameworks. Hence, there is some valuable literature exists on cooperative frameworks. The purpose of this paper is to test characteristic function by inducting subjects in the experiment classified as Decision-makers and Recipients. The researchers, thus, use normative properties and axiomatic principles to test cooperative game solutions, while avoiding strategic channels to ensure the decision-makers remain unbiased observers and consistent with their allocations based on independent decisions. Indeed, the authors test the level of fairness in the wake of self-serving bias and contribute economic findings related to another important concept known as distributive justice theory. The paper also aims to address the issues pertaining to fairness in game theory and to reveal the extent of independent decision-making by participants through use of cooperative game components.
Clippel and Rozen (2013, 4) have conducted extensive literature review of previous theorists who used bargaining protocols, informal interactions, negotiations and announcement of payoffs during game testing that also impacted solutions (the core). Hence, there were certain biases that affected outcomes of past experimental approaches. The authors have based their research design by randomly selecting three recipients while all others are regarded as decision-making subjects. The test includes how decision-makers allocate monetary incentives to the recipients to ensure the fair treatment and correct financial disbursement according to worth of recipients. The authors have significant knowledge about dictator and ultimatum games, which was used as a basis for the experiment design. Next, the methodology also entails that there is no similarity in roles of participants to avert any Decision-maker using past experience as a Recipient. Also, the test process disallowed interactions among Decision-makers to ensure zero influence and conflict of choices. Finally, the Decision-makers were also trained through practice sessions so that they could correctly provide on computerized devices.
The paper addresses the problem of unbiased monetary resource allocation by developing a linear regression analysis that not only tests axioms but also coalitions to study the impact on allocation decisions for recipients. Clippel and Rozen (2-5) reveal that “Decision Makers respect symmetry, desirability, monotonicity, and additivity but also violate dummy player property at aggregate level”. The researchers have also incorporated the theoretical standpoints of cooperative game solutions known as the Core and Shapely Value. Besides, they also used Just Desert index and Gaussian mixed model for statistical analysis. In addition, there were six computerized experimental sessions were conducted at Brown University and the participants were unknown to each other. Also, the subject participants were different for every experimental session and there were total 109 participants in entire research project of which 18 were Recipients and 89 chosen as Decision-makers. For instance, the descriptions were also provided for the Core, the Shapely Value, the Nucleolus and the normative principles to clearly reveal their meaning in the research undertaken (Clippel & Rozen, 11).
The first main conclusion of authors is that there are different payoff allocations due to subjectivity of decision-makers regarding differences in characteristic functions. The second conclusion is pertaining to social choice theory and distributive justice for which the future researchers could develop axioms and adopt similar experimental approach. The third major result is that preference maximization over payoff allocation should be dependent on contextual information about characteristic function. Fourth, the choice of decision-makers would be a combination of cooperative game theory solutions such as Shapely Value and equal split (Clippel & Rozen, 35-36).
As far as the reviewer personal assessment of article is concerned, it should be argued that Clippel & Rozen (2013) have contributed a commendable experimental design with immense comprehensiveness and significance. The research involves enormous and profound analysis of findings, limitations and biases of past cooperative game theories and approaches. In other words, the authors have designed a unique experimental model to taste a large group of subjects without any interdependence and interconnections. The findings and conclusions mentioned above are just not related to economics principles by also provide applications and implications for distributive justice and social choice theory that are Organizational Behavior concepts and frameworks. This reflects the depth of academic article that opens new avenues for future research on cooperative game theory models and solutions pertaining to different disciplines such as Economics, Marketing, OB, Power Transmission, Actuarial Insurance, Engineering Management and others.

Reference

Clippel, G. D. and Rozen. K. Fairness through the lens of cooperative game theory: An experimental approach. Cowles Foundation Discussion Paper No. 1925, November 2013. Web. http://www.dklevine.com/archive/refs4786969000000000904.pdf