Question 1: Ultimatum and Dictator games (20 points)

1. ‘Experimentalists should try to recreate in the lab an environment that as
closely as possible matches the real-world situations they wish to study’. Do you
agree? Use the ultimatum game as an example to explain your view. (5 points)

2. What are outcome-based preferences? Use one of the Dana et al. (moral
wiggle room) experiments to explain how this set of experiments tests whether
the preferences of dictators are outcome based. (Note: I am looking for you to
explain the idea of the experiment and will deduct no points if you don’t recall
the precise money amounts used, or other particularities that are not crucial to
the basic idea.) (8 points)

3. What is an experimenter demand effect? Do you think an experimenter
demand effect is likely in the Dictator game? How about the Ultimatum Game?

Question 2: Common Value Auctions (20 points)

1. Discuss the difference between a Private Value and a Common Value auction
environment and provide one example for each environment. Make sure to
explain why your example fits the environment. (6 points)
Consider a Common Value auction with two bidders who both receive a signal X
that is uniformly distributed between 0 and 1. The (common) value V of the good
the players are bidding for is the average of the two signals, i.e. V = 1/2 ( X1+X2 )

2. Compute the symmetric Nash equilibrium bidding strategy for the second-
price sealed-bid auction assuming that players are risk-neutral and have
standard selfish preferences. Furthermore, you may assume that the other
bidder is following a linear bidding strategy. Make sure to explain your notation
and the steps you take to derive the result. (8 points)

3. The symmetric Nash equilibrium for the first-price sealed-bid auction is to bid
half your signal. How does behaviour in the laboratory compare to the
theoretical predictions? (3 points) If there are any deviations from the
theoretical predictions, how can we explain them? (3 points) EasyDue™ 支持PayPal, AliPay, WechatPay, Taobao等各种付款方式!

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