The effect of sadness in the beauty contest: A laboratory experiment

We now provide a summary description of our experimental design. First, at the outset of the experiment, participants in the same session will be randomly allocated to one of two conditions: the treatment and the control conditions. In the treatment condition, participants will be induced (incidental) sadness through procedures that are commonly used in social psychology; whereas participants in the control condition will not be induced any specific emotion. Following this stage, participants will then be matched in groups of three. The group’s composition will consist of two participants who are in the same condition and one that is in the opposite condition. Thus, they will play the beauty contest game repeatedly and for 10 rounds with fixed group matching. Participants will be told that one randomly drawn round will count for payments.

In this research we thus exogenously induce sadness to causally study the impact of this emotion on depth of reasoning and higher order beliefs. Our induction procedure relies on methods and techniques commonly used in social psychology and which validity has been extensively shown. In this way, we can cleanly understand the impact of sadness on cognition and its implications in a specific setting. In particular, we look at how this emotion affects depth of reasoning in a repeatedly beauty contest game.

This design will allow us to cleanly analyse the causal effect of sadness on a strategic game (i.e., the beauty contest) and to understand how sadness affects higher order beliefs in this game. In particular, we will address the following two questions: 1) Does sadness detrimentally affect the way individuals reason about others’ behavior? And, 2) Does sadness affect the way individuals learn over time to best respond to others’ choices?

More importantly, this study will allow us to understand whether sadness has a similar impact on strategic play as compared to anger, which we studied in the lab (AEARCTR-0004267). In other words, we aim to see if the way anger impacts cognition is a characteristic of being angry or if it is a more general consequence of experiencing a negative emotion.

2019-10-14

2020-03-14

(i) The causal impact of sadness on higher order beliefs and strategic reasoning both in terms of a) choices in the game and b) performance/profits;
(ii) The causal impact of sadness on learning and game dynamics.
(iii) Differences in the causal impact of anger and sadness on higher order beliefs and strategic reasoning both in terms of a) choices in the game and b) performance/profits;
(iv) Differences in the causal impact of sadness and anger on learning and game dynamics.

In the first part of the experiment, participants will first be asked to fill a demographic questionnaire and then will be asked to complete the PANAS survey (Watson et al., 1988) to assess participants baseline affect. Thus, participants will be randomly allocated to one of two conditions: (i) the sadness condition; and, (ii) the neutral condition. In other words, we will randomize our treatment groups at the individual level within each session. More specifically, in the sadness condition participants will be asked to recall past life events where they felt sadness. While in the neutral condition participants will be asked to recall past everyday activities. This part will last 10 minutes and will complete part I.

The second part of the experiment consists of the beauty contest game following the design in Gill & Prowse (2016). That is, participants will be matched in groups of three and will play the game for 10 rounds. The matching protocol will be such that participants will be in mixed groups: 2 players from one condition with one player from the other condition. Thus, we will have two possible groups: 2 participants from the sadness condition and 1 participant from the neutral condition, and vice versa. The beauty contest game will consist of ten rounds. In each round, participants will be asked to choose an integer (between 0 and 100). The number that is closest to the 70% of the average of all 3 chosen numbers will win that round. After every participant has made his/her choice, participants will then receive the following information: (i) the numbers chosen by each group member; (ii) the average of all 3 chosen numbers; (iii) what 70% of the average of all 3 chosen numbers was; (iv) whether they won the round or not. At the end of the ten rounds, the computer program (O-tree, Chen et al. 2016) will randomly select one round that will count for payments. Participants will be aware that only one round will count for payments.

After participants had completed part II (i.e., the beauty contest game), they will be asked to fill a set of questionnaires. First, they will be asked to fill again the PANAS questionnaire to assess the efficacy of the induction procedure. They will also be asked to complete a questionnaire that assesses participants’ feelings while in task 1.

After these questionnaires, we will elicit risk preferences using the non-incentivised question by Dohmen et al. (2011). Finally, we will ask participants whether they had previously played the beauty contest game to control for experience in the game.

Done by the computer software (oTree, Chen et al. 2016)

Individual

No

200 laboratory participants

200 laboratory participants

100 participants: treatment group (sadness treatment)
100 participants: control group (control treatment)

The frustration-aggression hypothesis posits that anger affects economic behaviour essentially by temporally changing individual social preferences and specifically attitudes towards punishment. Here, we test a different channel in an experiment where we externally induce anger to a subgroup of participants (following a standard procedure that we verify by using a novel method of textual analysis). We show that anger can impair the capacity to think strategically in a beauty-contest game, in a pre-registered experiment. Angry participants choose numbers further away from the best response level and earn significantly lower profits. Using a finite mixture model, we show that anger increases the number of level-zero players by 9 percentage points, a percentage increase of more than
. Furthermore, with a second pre-registered experiment, we show that this effect is not common to all negative emotions. Sad participants do not play significantly further away from the best response level than the control group and sadness does not lead to more level-zero play.

Alessandro Castagnetti, Eugenio Proto, Andis Sofianos, Anger impairs strategic behavior: A Beauty-Contest based analysis, Journal of Economic Behavior & Organization, Volume 213, 2023, Pages 128-141, ISSN 0167-2681, https://doi.org/10.1016/j.jebo.2023.06.027. (https://www.sciencedirect.com/science/article/pii/S0167268123002330) Keywords: Anger; Induced emotions; Strategic interactions; Beauty-contest

https://doi.org/10.1016/j.jebo.2023.06.027