UC Irvine

This dissertation contains three chapters researching how individuals make decisions in an interactive game setting. Chapter 1 investigates principal-agent behavior under a company setting in which portions of subjects are assigned to be workers and others are managers. Managers decide how much to pay to the workers and workers decide the level of effort to contribute. Managers can earn positive revenue only if the workers' effort contribution surpasses certain criteria. When the threshold is high, we find that the workers tend to slack off as the high threshold is difficult to reach. The zero contribution and zero wage equilibrium becomes the dominant strategy under the high threshold setting while the positive contribution strategy is adopted more frequently when the threshold is low. Chapter 2 continues to adopt the same setting as the chapter 1. In this chapter, the wage payment is no longer paid in advance of workers' effort contribution. It becomes a form of bonus, in which workers are paid after their effort contribution. The outcome is that the after-contribution payment encourages workers to work harder and allows managers to spend less money compared to paying workers before their contribution. Chapter 3 studies agents' price prediction decision in the financial market. Agents with predictions close to the realized market price earn the higher return than others who make farther away predictions. A ranking system is given to agents to check their performance in the market. This ranking system approves to be misleading and make agents believe that they are doing the right predictions without checking the dynamic market condition. As a result, their predictions in general are farther away from the real market price as compared to agents' performance in a market without the ranking. Thus, the contribution of this dissertation is twofold: the contribution of each individual Chapter to its subject and the collective contribution of all Chapters to understanding large group strategic interactions under specific treatments and conditions.