This material is based upon work supported by the National Science Foundation under the Independent Research and Development program. Any opinions, findings, and conclusions or recommendations are those of the author and do not necessarily reflect the views of the National Science Foundation. This research was initiated while on a “Rientro dei cervelli” Research Fellowship from the Italian Ministry for Education, University and Research (MIUR).
Equilibrium Selection, Similarity Judgments, and the “Nothing to Gain/Nothing to Lose” Effect
Article first published online: 16 OCT 2012
Copyright © 2012 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making
Volume 26, Issue 5, pages 418–428, December 2013
How to Cite
Leland, J. W. (2013), Equilibrium Selection, Similarity Judgments, and the “Nothing to Gain/Nothing to Lose” Effect. J. Behav. Decis. Making, 26: 418–428. doi: 10.1002/bdm.1772
- Issue published online: 6 NOV 2013
- Article first published online: 16 OCT 2012
- Manuscript Accepted: 15 JUN 2012
- Manuscript Revised: 8 MAY 2012
- Manuscript Received: 7 AUG 2011
- similarity judgments;
- equilibrium selection;
- coordination games;
- focal point;
- behavioral game theory
Rubinstein and Leland have both demonstrated that many observed violations of expected and discounted utility can be explained if people employ similarity judgments to make choices. In this paper, I show that this decision process also explains which equilibria will be selected in single-shot games with multiple equilibria and implies that play in games will be associated with anomalies in risky choice. Data supporting these predictions are presented. Copyright © 2012 John Wiley & Sons, Ltd.