Coordination after gains andlosses: Is prospect theory’s valuefunction predictive for games?

We analyze the effects of prior gain and loss experiences on individuals’ behavior in twocoordination games: battle of the sexes and simultaneous market entry. We proposesubjectively transformed games that integrate elements of prospect theory, aggregation ofprior and subsequent payoffs, and social projection. Mathematical predictions of behavior arederived based on equilibrium selection concepts. Males’ behavior in our experimental studiesis largely consistent with our predictions. However, the behavior of many female respondentsappears to be rather consistent with interpreting the initial random lottery outcomes used tomanipulate prior experiences as a signal for the players’ abilities to compete. This could be related to females’ known uneasiness of competing against counterparts that might be maleand thus, a generally higher salience of rivalry in our incentivized experiments. Females alsochose to play far more mixed strategies than males indicating some uncertainty about whattype of behavior is appropriate....