Beer, Bourbon, and Bertrand: an Experimental Economics Analysis

This paper is currently in the publication process.

ABSTRACT:

In this paper, we investigate the relationship between binge-drinking behavior and economic performance in a standard Bertrand-style game. To measure economic performance, participants play the 2/3 average game and a Bertrand game with zero marginal cost, where the participant’s guess is the primary outcome variable. By employing a targeted binge-drinking questionnaire (DBQ-R and PBSS) and controlling for personality (NEO5 20), observable covariates, ability (math level), and strategies (Tit-for-tat, Undercutting, and Overpricing), we identify the conditional effect of binge drinking on participants’ guesses in a standard Bertrand-style game. Our results indicate that binge drinking, when paired with poor protective behavioral strategies, is associated with an increase in participants’ guesses in a Bertrand-style game, with this result persisting across contextual frameworks. Tangentially we find that, absent of time-invariant factors, when we adjust for the contextual framework of the game, participants’ guesses parallel the per-round minimum wage. Finally, we deliberate on potential avenues of causality– mainly, that PBSS is likely operating through risk aversion– and propose a structured, reduced-form model for detecting causality, going forward. In the aggregate, this study contributes to the literature by being the first of its kind to evaluate the effect of observational binge-drinking meta scores on economic performance in a Bertrand-style game.

SIMPLIFIED:

…