Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/227188 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13661
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Anger is an important driver in shaping economic activities, particularly in instances that involve strategic interactions between individuals. Here we test whether anger impairs the capacity to think strategically, and we analyze the implications of our result on bargaining and cooperation games. Accordingly, with a preregistered experiment (Experiment 1), we externally induce anger to a subgroup of subjects following a standard procedure that we verify by using a novel method of text analysis. We show that anger can impair the capacity to think strategically in a beauty contest game. Angry subjects choose numbers further away from the Nash equilibrium, and earn significantly lower profits. A structural analysis estimates that there is an increase in the share of level-zero players in the treated group compared to the control group. Furthermore, with a second preregistered experiment (Experiment 2), we show that this effect is not common to all negative emotions. Sad subjects do not play significantly further away from the Nash equilibrium than the control group in the same beauty contest game of Experiment 1, and sadness does not lead to more level-zero play.
Subjects: 
anger
induced emotions
strategic interactions
beauty-contest
JEL: 
C92
D90
D91
Document Type: 
Working Paper

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