Abstract:

Studies of the detection of change have commonly been concerned with individuals inspecting a system or a process, whose characteristics were fully determined by the researcher. We, instead, study the detection of change in the preferences - and hence the behavior - of others with whom an individual interacts. More specifically, we study situations in which one's benefits are the result of the joint actions of one and one's partner when at times the preferred combination is the same for both and at times it is not. In other words, what we change is the payoffs associated with the different combinations of interactive choices and then look at choice behavior following such a change. We find that players are extremely quick to respond to a change in the preferences of their counterparts. This responsiveness can be explained by the players' impulsive reaction to regret - if one was due - at their most recent decision.

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