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How do people attribute responsibility when an outcome is not caused by an individual but results from a decision chain involving several people? We study this question in an experiment, in which five voters sequentially decide on how to distribute money between them and five recipients. The recipients can reward or punish each voter, which we use as measures of responsibility attribution. In the aggregate, we find that responsibility is attributed mostly according to the voters' choices and the pivotality of the decision, but not for being the initial voter. On the individual level, we find substantial heterogeneity with three overall patterns: Little to no responsibility attribution, pivotality-driven, and focus on choices. These patterns are similar when praising voters for good outcomes and blaming voters for bad outcomes. [ABSTRACT FROM AUTHOR]

This study explores the impact of certification on decisions to invest in green bonds. Utilizing a laboratory experiment, we evaluate how different levels of certificate reliability stimulate investments in green bonds, particularly in the context of a green premium. The findings corroborate our hypothesis, showing that reliable certification encourages investors to accept lower returns in exchange for the conservation of natural resources. Importantly, reliable certification may counteract the decline in investments caused by "greenwashing" practices. Consequently, the establishment of a unified and dependable certification system may be crucial to ensure the green attributes sought by investors. [ABSTRACT FROM AUTHOR]

Our experiment explores the impact of asymmetric incentives on collaboration within a context where participants can coordinate and potentially engage in deceptive practices to secure financial gains. We contrast two scenarios: one in which cooperation results in an equal distribution of gains, and another where the distribution is unequal. Our investigation focuses on the dynamics of collaborative behavior over time and digs into individual strategies employed by participants. We find that corruptive collaboration persists when its gains are unequally divided. Over time, participants acquire experience in collaborative tactics, often utilizing their reports to covert signals. Notably, participants coordinate around compromise distributions that yield smaller payments, suggesting that this context may actually reduce the perceived cost of dishonesty. [ABSTRACT FROM AUTHOR]

This paper experimentally investigates how inter- and intragroup heterogeneity (related to individual cooperative preferences) influences intergroup coordination. Coordination incentives are implemented through an intergroup rank-order competition. A pre-competition phase determines how individual heterogeneity is distributed across groups within an organisation. Two treatments are compared: a horizontal-heterogeneity treatment (H-Hetero, baseline), where individual differences are randomly distributed within and between groups, and a vertical-heterogeneity treatment (V-Hetero), in which groups are internally homogeneous but differ considerably from each other. In contrast to expectations, I find that vertical (intergroup) heterogeneity, when being accompanied by intragroup homogeneity, does not reduce the ability of groups to coordinate and keeps overall performance at very high levels. Indeed, subjects react more strongly to the coordination/competition incentives in vertically heterogenous organisations. Further analysis suggests that group dynamics are mainly driven by a positive orientation towards inequality (distributional preferences) of the members of the initially least cooperative groups, and their non-conditional cooperative behaviour. These results have implications for the design of group-based incentives and governance in organisations and societies. [ABSTRACT FROM AUTHOR]

The study’s primary focus is on examining fairness deliberations of bargainers in Germany and in China under symmetric and asymmetric bargaining power to understand whether they incorporate fairness into their decision process and, if so, how this affects bargaining outcomes. To this end, we conducted an incentivized ultimatum bargaining experiment with symmetric and asymmetric outside options. Groups (N = 142) of three persons interact as proposers and responders in dyads and decide simultaneously on their offer or which offers to accept or reject. Communication between parties is inhibited. We videotaped in-group discussions; the resulting transcripts were text analyzed by eliciting whether groups make fairness an issue, which fairness norms they discuss, and whether they use fairness-related perspective-taking to overcome the communication constraint. We find that asymmetry of bargaining power in favor of the proposer leads to lower offers relative to the symmetric situation. Not all groups make fairness an issue, and fairness deliberations alone have no significant impact on offers. However, when associated with the equal-payoff norm, and in Chinese groups in particular, discussing fairness increases offers in symmetric but also in asymmetric situations, in which other fairness norms could have been applied, too. Fairness-related perspective-taking is used by German and Chinese groups and is associated with higher offers in the former. Our study makes an epistemological and related methodological contribution: a possibly biased interpretation of bargaining outcomes can be mitigated if information on decision processes and underlying mechanisms were available. [ABSTRACT FROM AUTHOR]

This paper experimentally investigates the provision of real-time feedback about school assignments during the preference reporting period in three widely employed mechanisms: deferred acceptance, top trading cycles, and the Boston mechanism. Adaptive models predict that greater sensitivity to tentative assignments during the reporting period will produce more equilibrium assignments in all three mechanisms. Consistent with adaptive predictions, real-time assignment feedback consistently increased equilibrium assignments but did not increase truthful reporting. These findings suggest that providing feedback about assignments during the preference reporting period could help student assignment mechanisms more reliably achieve policy goals. [ABSTRACT FROM AUTHOR]

We study the impact of discrete versus continuous time on the behavior of agents in the context of a dynamic common pool resource game. To this purpose, we consider a linear quadratic model and conduct a lab experiment in which agents exploit a renewable resource with an infinite horizon. We use a differential game for continuous time and derive its discrete time approximation. In the single agent setting, we fail to detect, on a battery of indicators, any difference between agents' behavior in discrete and continuous time. Conversely, in the two-player setting, significantly more agents can be classified as myopic and end up with a low resource level in discrete time. Continuous time seems to allow for better cooperation and thus greater sustainability of the resource than does discrete time. [ABSTRACT FROM AUTHOR]

Decision makers in positions of power often make unobserved choices under risk and uncertainty. In many cases, they face a trade-off between maximizing their own payoff and those of other individuals. What inferences are made in such instances about their choices when only outcomes are observable? We conduct two experiments that investigate whether outcomes are attributed to luck or choices. Decision makers choose between two investment options, where the more costly option has a higher chance of delivering a good outcome (that is, a higher payoff) for the group. We show that attribution biases exist in the evaluation of good outcomes. On average, good outcomes of decision makers are attributed more to luck as compared to bad outcomes. This asymmetry implies that decision makers get too little credit for their successes. The biases are exhibited by those individuals who make or would make the less prosocial choice for the group as decision makers, suggesting that a consensus effect may be shaping both the belief formation and updating processes. [ABSTRACT FROM AUTHOR]

We conduct a laboratory experiment to investigate how different deliberative structures of varying inclusiveness affect collective decisions in the presence of economic conflict. An electorate consists of two groups, one informed and one uninformed about an uncertain state of the economy. This state affects payoffs differently for the two groups. We study three deliberative structures that vary in how the uninformed are included in pre-vote communication. Compared with a setting without any communication, we find that communication in all three deliberation treatments leads to more frequent votes for the efficient policies. The most inclusive deliberative structure motivates more truthfulness, more trust, more cooperativeness (i.e. refraining from protest votes), and more votes for the efficient policies, than the least inclusive structure. However, comparison among the deliberation treatments reveals that the most inclusive deliberative structure is not the one that generates the highest degree of truthfulness. The dynamics of communication lead to a general deterioration of truth-telling and cooperativeness, reinforced by the use of disrespectful and uncooperative language. [ABSTRACT FROM AUTHOR]

Given the growing prevalence of catastrophic events and health epidemics, policymakers are increasingly searching for effective strategies to encourage firms to invest in resilience rather than relying on insurance or government assistance. Too often, however, resilience research focuses on decisions made by firms and emergency planners in the context of "one-off" events. We extend this research by examining resilience decision making in the more realistic context of repeated catastrophic events. Using a population of professional managers of middle market firms and a university experimental economics subject pool, we conduct a series of controlled experiments on the decision to invest in inventories to improve firm resilience to repeated catastrophic events. While existing economic and supply chain resilience research has focused on resilience in terms of avoiding some magnitude of economic losses, existing research omits a focus on the probability of those losses. Controlled experiments can evaluate the influence of probability more effectively than observational data by better controlling for magnitude and more easily accounting for repeated events. We find that decision makers are less likely to make resilience investments when a disaster has recently occurred. We further find that advisory information alone is insufficient to motivate resilience investments by firms. It must be substantiated by a history of advisory accuracy. However, we find that this effect is heavily moderated by the type of advisory information provided; we find that firm managers are much more likely to trust precautionary advice. [ABSTRACT FROM AUTHOR]

Sharing information concerning expenditure choices between a migrant and the recipient affects the migrant's allocation patterns. In a lab-in-the-field experiment, Filipino migrants are asked to earmark an in-kind budget to be delivered to their most closely connected household (MCCH). When the MCCH is fully aware of the migrant's decisions (i.e., symmetric information), we observe that the migrant raises the portion for consumption goods in the range of 10.0–10.5% with respect to the case when the migrant's choices are not disclosed (i.e., asymmetric information). Moreover, when sharing information, the migrant relies on more involvement of the recipient household and lowers by 7–9% the allocation to expenses she could monitor ex-post more strictly. The former result is consistent with the signaling motive, whereas the latter supports the presence of strategic behavior by the migrant remitter. Education allocations are significantly higher in intra- rather than inter-household transfers and this provides insights for conditional cash transfer policies. [ABSTRACT FROM AUTHOR]

We study the "average Pigouvian tax" (APT), an ambient-based policy instrument that requires polluters to cooperate to achieve the social optimum. In this paper, we are interested in the group size variation and its effect of the APT efficiency. Indeed, in the field, the implementation of the instrument will face group sizes that can vary from a few to a large number of farmers. We find that increasing the size of the group reduces cooperation among subjects, thereby reducing the efficiency of the instrument. We also show that when the sucker's cost is lowered, the instrument can converge towards the social optimum. [ABSTRACT FROM AUTHOR]

Choice experiments, a survey methodology in which consumers face a series of choice tasks requiring them to indicate their most preferred option from a choice set containing two or more options are used to generate estimates of consumer preferences to determine the appropriate allocation of public resources to competing projects or programs. The analysis of choice-experimental data typically relies on the assumptions that choices of the non-status quo option are demand-revealing and choices of the status quo option are not demand-revealing, but, rather, reflect an underlying behavioral bias in favor of the status quo. This paper reports the results of an experiment demonstrating that both of those assumptions are likely to be invalid. We demonstrate that choice experiments for a public good are vulnerable to the same types of strategic voting that affect other types of multiple-choice voting mechanisms. We show that owing to the mathematics of choice-set design, what actually is strategic voting often is misinterpreted as a behavioral bias for the status quo option. Therefore, we caution against using current choice-experimental methodologies to inform policy making about public goods. [ABSTRACT FROM AUTHOR]

We compare standard (laboratory) and non-standard (field) subject pool behavior in an extensive form public goods game with random punishment. Our experimental investigation is motivated by real-world 'Activists' encouraging public goods provision by firms; an activity known as corporate social responsibility. We find that relative to laboratory subjects, activists in Mumbai are more willing to settle at the Nash equilibrium of the game (which entails increased provision of public goods) and are more willing to punish non-cooperative firm behavior even if such punishments hurt their own payoffs. [ABSTRACT FROM AUTHOR]

We consider a two-layered review system of environmental regulation where a polluting firm periodically self-reports its emissions to a regulatory authority. The system typically requires a third party to verify the firm's report and, in addition, an official of the regulatory authority to spot-check. If there are potential gains from corruption, both the verifier and the official might be corruptible. Corruption is more likely in repeated-game situations, as suggested by the literature on corruption experiments. Our experimental design is motivated by the risk of under-reporting in emissions trading schemes where both the verifier and the official are corruptible and focuses on a situation with untruthful reporting and lax enforcement. Our test-bed is a three-player bribery game. We study how different types of rotation—a baseline of fixed matching, a complete rotation treatment, and two incomplete rotation treatments—affect untruthful reporting that requires collusion between three participants in a hierarchical structure. Our findings suggest that complete rotation improves significantly firms' truthful reporting and verifiers' truthful verification compared to situations where none is rotated, while incomplete rotation does not have such impact. In our experiment, none of the rotation treatments had a significant impact on the behavior of officials. [ABSTRACT FROM AUTHOR]

This experiment investigates a stochastic version of the infinitely repeated prisoner's dilemma. The stochastic element introduces the importance of beliefs about the future for supporting cooperation as well as cooperation and defection on the equilibrium path. There is more cooperation in treatments where beliefs predict cooperation after subjects gain sufficient experience. There is some evidence for cooperation and defection as predicted by equilibrium, but there is stronger evidence for behavior conditioning on past actions that is not consistent with equilibrium play. In particular, subjects continue cooperating even when it is no longer possible in equilibrium for the realized game. [ABSTRACT FROM AUTHOR]

Traders in global markets operate at different local times-of-day. This implies heterogeneity in circadian timing and likely sleepiness or alertness of those traders operating at less or more optimal times of the day, respectively. This, in turn, may lead to differences in both individual-level trader behavior as well as market level outcomes. We examined these factors by administering single-location and global sessions of an online asset market experiment that regularly produces mispricing and valuation bubbles. Global sessions involved real time trades between subjects in New Zealand and the U.S (i.e., "global" markets) with varied local times of day for each location. Individual traders at suboptimal times of day (or, "circadian mismatched" traders) engaged in riskier trading strategies, such as holding shares (the riskier asset) in later trading rounds and mispricing shares to a greater degree. These strategies resulted in lower earnings for circadian mismatched traders, especially in heterogeneous markets that also included traders at more optimal times-of-day. These differences were also reflected in market level outcomes. Markets with higher circadian mismatch heterogeneity across traders were more likely to exhibit longer lasting asset bubbles and greater share turnover volume. Overall, our results draw attention to a unique, but underappreciated, factor present across traders in global market environments, namely, differences in sleepiness across traders. Thus, this study hopes to highlight the role of circadian mismatch in attempting to understand trader behavior and, ultimately, market volatility. [ABSTRACT FROM AUTHOR]

We investigate how information about the preferences of others affects the persistence of 'bad' social norms. One view is that bad norms thrive even when people are informed of the preferences of others, since the bad norm is an equilibrium of a coordination game. The other view is based on pluralistic ignorance, in which uncertainty about others' preferences is crucial. In an experiment, we find clear support for the pluralistic ignorance perspective. In addition, the strength of social interactions is important for a bad norm to persist. These findings help in understanding the causes of such bad norms, and in designing interventions to change them. [ABSTRACT FROM AUTHOR]

We test the performance of myopic and farsighted stability concepts in a network formation experiment with a stream of payoffs and relatively unstructured link formation process. A subtle treatment variation demonstrates clearly the power of myopic stability concepts in precisely identifying the set of the most stable networks. However, we also find support for the predictions of farsighted concepts of stability, especially those that assume players' pessimism about the eventual outcome of a deviation. This is the first study to demonstrate that there exist environments where farsighted stability concepts identify empirically stable networks that are not identified by myopic concepts. Thus, myopic stability concepts are not necessarily sufficient to predict all stable outcomes in empirical applications. [ABSTRACT FROM AUTHOR]

We introduce several new variants of the dice experiment by Fischbacher and Föllmi-Heusi (Journal of the European Economic Association 11(3):525–547, 2013) to investigate measures to reduce lying. Hypotheses on the relative performance of these treatments are derived from a straightforward theoretical model. In line with previous research, we find that groups of two subjects lied at least to the same extent as individuals—even in a novel treatment where we assigned to one subject the role of being the other's monitor. However, we find that our participants hardly lied if they do not benefit and only others do, even if they were in a reciprocal relationship. Thus, we conclude that collaboration on lying mostly happens for personal gain. To mitigate selfish lying, an honesty oath which aims to increase moral awareness turned out to be effective. [ABSTRACT FROM AUTHOR]

Ostracism is practiced by virtually all societies around the world as a means of enforcing cooperation. In this paper, we use a public goods experiment to study whether groups choose to implement an institution that allows for the exclusion of members. We distinguish between a costless exclusion institution and a costly exclusion institution that, if chosen, reduces the endowment of all players. We also provide a comparison with an exclusion institution that is exogenously imposed upon groups. A significant share of the experimental groups choose the exclusion institution, even when it comes at a cost, and the support for the institution increases over time. Average contributions to the public good are significantly higher when the exclusion option is available, not only because low contributors are excluded but also because high contributors sustain a higher cooperation level under the exclusion institution. Subjects who vote in favor of the exclusion institution contribute more than those who vote against it, but only when the institution is implemented. These results are largely inconsistent with standard economic theory but can be better explained by assuming heterogeneous groups in which some players have selfish and others have social preferences. [ABSTRACT FROM AUTHOR]

There is a heated debate on whether markets erode social responsibility and moral behavior. However, it is a challenging task to identify and measure moral behavior in markets. Based on a theoretical model, we examine in an experiment the relation between trading volume, prices and moral behavior by setting up markets that either impose a negative externality on third parties or not. We find that moral behavior reveals itself in lower trading volume in markets with a negative externality, while prices mostly depend on the market structure. We further investigate individual characteristics that explain trading behavior in markets with negative externalities. [ABSTRACT FROM AUTHOR]

Empirical studies cast doubt on the efficiency assumption made in standard economic models of household behavior. In couples, the allocation of time between activities remains highly differentiated by gender. In this paper we examine whether couples deviate from efficiency in household production, using an experimental design. We compare the allocation of gendered vs. gender-neutral domestic tasks. Our results show that women in the household overspecialize in "feminine tasks" and men in "masculine tasks" compared to what their comparative advantage would require, hence revealing the influence of gender roles and stereotypes on the couples' behavior. [ABSTRACT FROM AUTHOR]

We present results from a series of experiments that allow us to measure overbidding and, in particular, underbidding in first-price auctions. We investigate the extent to which the amount of underbidding depends on the seemingly innocuous parameters of the experimental setup. To structure our data, we present and test a theory that introduces constant markdown bidders into a population of fully rational bidders. While a fraction of bidders in the experiment can be described by Bayesian Nash equilibrium bids, a larger fraction seems either to use constant markdown bids or to rationally optimise against a population with fully rational and boundedly rational markdown bidders. [ABSTRACT FROM AUTHOR]

We experimentally investigate the relationship between (un)kind actions and subsequent deception in a two-player, two-stage game. The first stage involves a dictator game. In the second-stage, the recipient in the dictator game has the opportunity to lie to her counterpart. We study how the fairness of dictator-game outcomes affects subsequent lying decisions where lying hurts one's counterpart. In doing so, we examine whether the moral cost of lying varies when retaliating against unkind actions is financially beneficial for the self (selfish lies), as opposed to being costly (spiteful lies). We find evidence that individuals engage in deception to reciprocate unkind behavior: The smaller the payoff received in the first stage, the higher the lying rate. Intention-based reciprocity largely drives behavior, as individuals use deception to punish unkind behavior and truth-telling to reward kind behavior. For selfish lies, individuals have a moral cost of lying. However, for spiteful lies, we find no evidence for such costs. Taken together, our data show a moral cost of lying that is not fixed but instead context-dependent. [ABSTRACT FROM AUTHOR]

We use a within-subjects design to study how responsibility for the payoffs of different number of others influences the choices under risk, and how choosing together with another person changes these decisions. After controlling for the regression to the mean, we find a weak effect of responsibility for one other person on risk taking as compared to choosing just for oneself. We, however, do find that the number of others influenced by the choice matters: when it increases from one to three, risk averse subjects choose riskier options and risk loving subjects choose more cautiously, which pushes the choices towards the modal risk preferences in the population. Mutual responsibility makes choices for others shift even more in the same direction. The observed behavior is in accordance with the blame avoidance hypothesis: decision makers with responsibility try to reduce the amount of blame for their choices, which is minimal when the choices for others are consistent with what they would have chosen for themselves. [ABSTRACT FROM AUTHOR]

This paper studies whether and how strategy revision opportunities affect levels of collusion in indefinitely repeated two-player games. Consistent with standard theory, we find that such opportunities do not affect strategy choices, or collusion levels, if the game is of strategic substitutes. In games of strategic complements, by contrast, revision opportunities lead to more collusion. We discuss alternative explanations for this result. [ABSTRACT FROM AUTHOR]

Behavioural law and economics has established a burgeoning research agenda investigating the impact of bias and heuristics on legal decision-making. One of the most important behavioural contributions concerns the impact of framing on choice. The present article expands this line of scholarship by developing a novel hypothesis under which lawyers' attachment to objectivity and neutrality is assumed to militate against frames challenging the profession's underlying norms. More specifically, the "apolitical hypothesis" expects the attachment of legally irrelevant political motivation to legal arguments to decrease their attractiveness. The hypothesis is tested in an experimental setting accounting for a varying degree of legal indeterminacy in the domain of European Union law. The experimental results show support for the hypothesis: a political frame made law students 12–24% more likely to select the "apolitical" legal option. [ABSTRACT FROM AUTHOR]

Many public goods cannot be provided directly by interested parties (e.g. citizens), as they entail decision-making at nested hierarchical scales: at a lower level individuals elect a representative, while at a higher scale elected delegates decide on the provision level, with some degree of scrutiny from their constituency. Furthermore, many such decisions involve uncertainty about the magnitude of the contribution that is needed for the good to be provided (or bad to be avoided). In such circumstances delegates can serve as important vehicles for coordination by aggregating societal preferences for provision. Yet, the role of delegation in threshold public goods games is understudied. We contrast the behavior of delegates to that of self-representing individuals in the avoidance of a public bad in an experimental setting. We randomly assign twelve subjects into four teams and ask each team to elect a delegate via majority voting. The elected delegates play several variants of a one-shot public goods game in which losses can ensue if the sum of their contributions falls short of a threshold. We find that when delegation is coupled with a mild form of public pressure, it has a significantly negative effect on contributions, even though the non-delegates can only signal their preferred levels of public good contributions. The reason is that delegates give more weight to the least cooperative suggestion: they focus on the lower of the two public good contributions recommended by their teammates. [ABSTRACT FROM AUTHOR]

The frequency of interaction facilitates collusion by reducing gains from defection. Theory has shown that under imperfect monitoring flexibility may hinder cooperation by inducing punishment after too few noisy signals, making collusion impossible in many environments (Sannikov and Skrzypacz in Am Econ Rev 97:1794–1823, 2007). The interplay of these forces should generate an inverse U-shaped effect of flexibility on collusion. We test for the first time these theoretical predictions—central to antitrust policy—in a laboratory experiment featuring an indefinitely repeated Cournot duopoly, with different degrees of flexibility. Results turn out to depend crucially on whether subjects can communicate with each other at the beginning of a supergame (explicit collusion) or not (tacit collusion). Without communication, the incidence of collusion is low throughout and not significantly related to flexibility; when subjects are allowed to communicate, collusion is more common throughout and significantly more frequent in the treatment with intermediate flexibility than in the treatments with low or high flexibility. [ABSTRACT FROM AUTHOR]

Exogenously imposed infinite repetition is known to mitigate people's uncooperative behaviors in dilemma situations with partner matching through personal enforcement. One as yet unanswered question is whether people collectively choose to interact with each other under the partner matching condition when there exists an alternative possibility under random matching. In an indefinitely repeated public goods game framework, I let subjects democratically choose whether to (1) play with pre-assigned specific others for all rounds or to (2) play with randomly matched counterparts in every round. The experimental results revealed that most groups collectively opt for the partner matching protocol. The data also indicated that groups achieve a higher level of cooperation when they democratically select the partner matching protocol by voting, relative to when the same option is exogenously imposed. These findings imply that people's equilibrium selection may be affected by how the basic rules of games are introduced (endogenously or exogenously). The paper provides further evidence to suggest that the positive effect of democratic decision-making is stronger when the majority voting rule, rather than the unanimity rule, is applied. [ABSTRACT FROM AUTHOR]

Voluntary carbon markets present firms and individuals with the opportunity to offset all or part of their carbon footprints. We report on a controlled laboratory experiment to understand the behavioral motivations driving the purchase of carbon offsets, in addition to investigating the effect of the introduction of voluntary carbon markets on emission-causing activities. We find a stable demand for offsets when the price is sufficiently low. Behavior is, however, heterogeneous. Individuals with a high (low) personal-responsibility index increase their offset purchases as their own damage (total damages) increases, but do not condition their offsetting behavior on the total damages (own damage) generated. We also show that, when individuals trade in competitive markets, the availability of offsets does not affect the total damages generated. Introduction of carbon offsets increases individuals' earnings by eliminating some of the damages ex-post, but does not increase economic efficiency. [ABSTRACT FROM AUTHOR]

Many social dilemmas involve deciding among alternative public goods, and include cases where part of the population may dislike a particular option. In such cases, an agent may want to spend resources to oppose or reduce the provision of the option they don't like. We propose the generalized voluntary contributions mechanism (GVCM), which allows allocating resources to increase or decrease the level of public good. Our main treatment variables include two versions of the GVCM (uncensored, or censored at positive provision). We study performance of GVCM for various compositions of the polarized preferences. We find that uncensoring the mechanism does not impose net efficiency costs and leads to more diversity in the provision of the public good. The nature of efficiency loss is more complex compared to standard VCM and is not driven by free riding. [ABSTRACT FROM AUTHOR]

There are two efficiency effects of price controls: an "output effect" measured by the standard welfare loss triangles, and an "imperfect selection effect" that arises when controls prevent price from excluding high-cost sellers or low-value buyers. Although not discussed in most textbooks, the imperfect selection effect can be as large as the standard Harberger triangle welfare loss in symmetric designs, as confirmed by a class experiment described in this paper. The experiment also permits an analysis of the ways random non-price allocations shift the relevant supply function, and the related effects of rent-seeking competition that can arise with price controls. [ABSTRACT FROM AUTHOR]

Recent interest in reducing budget deficits raises questions regarding the impact on legislative bargaining of cuts versus increases in government spending. Using an experimental design where the outcomes are theoretically isomorphic results in significant differences in bargaining outcomes: There are longer delays in reaching agreement with cuts than with increases, along with which legislative types get their proposals passed. These results can be attributed to a change in agents' reference point in conjunction with differential responses to gains versus losses. [ABSTRACT FROM AUTHOR]

We study how the scope of negative externalities from market activity affects the willingness of market actors to exhibit social responsibility. Using the laboratory experimental paradigm introduced by Bartling et al. (Q J Econ 130(1):219–266, 2015), we compare the voluntary internalization of negative social impacts by market actors in cases where the negative externality is diffused among many subjects or is concentrated on a single subject. We (1) replicate earlier results demonstrating substantial degrees of market social responsibility and (2) find that the willingness of market actors to act pro-socially is only slightly affected by whether the impacts are concentrated or diffused. [ABSTRACT FROM AUTHOR]

We analyze the effects of limited feedback on beliefs and contributions in a repeated public goods game setting. In a first experiment, we test whether exogenously determined feedback about a good example (i.e., the maximum contribution in a period) in contrast to a bad example (i.e., the minimum contribution in a period) induces higher contributions. We find that when the type of feedback is not transparent to the group members, good examples boost cooperation while bad examples hamper it. There is no difference when the type of feedback is transparent. In a second experiment, feedback is endogenously chosen by a group leader. The results show that a large majority of the group leaders count on the positive effect of providing a good example. This is true regardless whether they choose the feedback type to be transparent or non-transparent. Half of the group leaders make the type of feedback transparent. With endogenously chosen feedback about good examples no difference in contributions can be observed among transparent and non-transparent feedback selection. In both experiments feedback shapes subjects' beliefs. With exogenously chosen feedback, transparent feedback tends to reduce beliefs when good examples are provided as feedback and tends to increase beliefs in when bad examples are provided as feedback compared to the respective non-transparent cases. Our results shed new light on the design of feedback provision in public goods settings. [ABSTRACT FROM AUTHOR]

We examine how rewards and penalties under tournament incentives impact price behaviour in experimental asset markets. Adding a penalty to a reward-only contract, or a reward to a penalty-only contract, changes the traders' behaviour. The experimental markets with adjusted contracts experience less trading, but longer-lived and larger bubbles. This observed effect of penalties is consistent with herd-driven behaviour under relative performance evaluation, while the effect of rewards reflects the influence of the convexity of bonuses. However, these effects dissipate with trader experience. Our findings contribute to the debate attributing market instability to incentive structures in the finance industry. [ABSTRACT FROM AUTHOR]

The question of ethical conduct is key for professionals, such as lawyers, doctors, or experts of different kinds. We run a laboratory experiment aimed at investigating whether acting within a profession leads to more (or less) ethical, prosocial behaviour compared to acting outside of it. We also investigate how professionals react to others' misbehaviour. We invite subjects studying or having studied economics, law or medicine and either match them in mixed groups or in homogeneous groups (telling them that we did so). We then let them play public goods games with punishment. Overall, there is little difference in cooperation levels and patterns of punishment between the homogeneous and heterogeneous groups. If anything, our subjects free ride more when matched with their peers than in a mixed group. [ABSTRACT FROM AUTHOR]

We design and conduct a laboratory experiment with students and a field experiment with fishermen to test how catch uncertainty and reward schemes affect extraction in an open access fishery. We find that uncertainty in the relationship between effort and catch increases extraction effort and accelerates resource depletion. Importantly, participants increase their extraction after a disadvantageous shock, but do not react to advantageous shocks. One possible explanation of this phenomenon is a self-serving bias. Price-responsive demand, relative to a fixed price setting, decreases extraction effort and increases efficiency. Price-responsive demand has a greater effect on students than on fishermen living inside a marine protected area, but fishermen outside this restricted area are very responsive to conditional pricing. [ABSTRACT FROM AUTHOR]

The thought of one's own death induces anxiety and threatens self-esteem. According to Terror Management Theory (TMT), to reduce this existential threat individuals (1) adhere more strongly to their cultural worldview and (2) embrace behaviors aimed at boosting self-esteem. Previous psychological studies of TMT do not generally rely on incentive-compatible mechanisms. However, economic incentives are strong drivers of individuals' behavior and need to be studied along with intrinsic motivations. Here, we combined—for the first time—a real effort task with psychological priming techniques. Crucially, we adopted a "flat-wage" scheme to investigate whether individuals primed with death-related thoughts, i.e., a Mortality Salience (MS) induction, increase their individual productivity more than individuals primed with a control topic (Music salience induction). We also investigated whether the effect of MS on performance is mainly driven by the quest for self-esteem vs. status-seeking, providing either private or public feedback on performance. Participants generally showed lower performance levels in the MS compared to the control condition. Public feedback bolstered performance, but its effect was milder under MS. These results suggest that in the absence of economic incentives to perform, individuals do not generally increase effort and productivity; they rather adhere more tightly to cultural (materialistic) worldviews, avoiding effort that is not compensated. The effect of MS, indeed, was strongly influenced by individual materialism. [ABSTRACT FROM AUTHOR]

We develop a mechanism based on the Colonel Blotto game to elicit (subjective) expectations in a group-based manner. In this game, two players allocate resources over possible future events. A fixed prize is awarded based on the amounts the players allocate to the realized event. We consider two payoff variations: under the proportional-prize rule, the award is split proportionally to the resources that players allocate to the realized event; under the winner-takes-all rule, the full award is given to the player who allocate the most resources to the realized event. When probabilities by which events realize are common knowledge to the players, both games are Bayesian-Nash incentive compatible in the sense that (expected) equilibrium allocations perfectly reflect the true realization probabilities. By means of a laboratory experiment, we find that in a setting where realization probabilities are common knowledge the game with the proportional-prize rule (Prop) elicits better distributions compared to both the winner-takes-all variation (Win) and a benchmark mechanism based on an individual-based proper scoring rule (Ind). Without common knowledge of realization probabilities Prop is at least as good as Ind, showing that it is possible to use a game to elicit expectations in a similar fashion to using a proper scoring rule. [ABSTRACT FROM AUTHOR]

This paper provides experimental evidence of the role of higher order risk attitudes—especially prudence—in prevention behavior. Prudence, under an expected utility framework, increases (decreases) self-protection effort compared to the risk neutral level when the risk of losing part of an income exists in a future (the same) period. Motivated by these predictions that give the exact test on prudence, an experiment was designed where subjects go through higher order risk attitude elicitation and make a self-protection decision. In contrast to the expected utility theory, the observed efforts are less than the risk neutral level, regardless of the timing of loss. This violation of expected utility predictions can be explained by probability weighting. [ABSTRACT FROM AUTHOR]

The aim of this paper is to analyze bidders' behavior, comparing individuals and groups' decisions within the dollar auction framework. This game induces subjects to fall prey into the paradigm of escalation, which is driven by agents' commitment to higher and higher bids. Whenever each participant commits himself to a bid, the lower bidder, motivated by the wish to win as well as to defend his prior investment, finds it in his best interest to place a higher bid to overcome his opponent. The latter mechanism may lead subjects to overbid. We find that the Nash equilibrium of the game is only rarely attained. Second, we detect clean evidence that groups' decisions are, on average, superior to individuals' decisions. Learning over time is clearly evident, leading individuals to perform nearly as good as groups in the final rounds of the game. [ABSTRACT FROM AUTHOR]

We study the market implications of ambiguity sensitive preferences using the α-maxmin expected utility (α-MEU) model. In the standard Ellsberg framework, we prove that α-MEU preferences are equivalent to either maxmin, maxmax or subjective expected utility (SEU). We show how ambiguity aversion impacts equilibrium asset prices, and revisit the laboratory experimental findings in Bossaerts et al. (Rev Financ Stud 23:1325-1359, 2010). Only when there are three or more ambiguous states, α-MEU, maxmin, maxmax and SEU models induce different portfolio choices. We suggest criteria to discriminate among these models in laboratory experiments and show that ambiguity seeking agents may prevent the existence of market equilibrium. Our results indicate that ambiguity matters for portfolio choice and does not wash out in equilibrium. [ABSTRACT FROM AUTHOR]

Utility-based green electricity programs provide market opportunities for consumers to reduce the carbon footprint of their electricity use. These programs deploy three types of public-goods contribution mechanisms: voluntary contribution, green tariff, and all-or-nothing green tariff (Kotchen and Moore, 2007). We extend the theoretical understanding of the all-or-nothing green tariff mechanism by showing that an assumption of warm-glow preferences is needed to explain widespread participation in programs deploying this mechanism. We conduct the first experimental test to compare the revenue generating capacity of a pure public good (based on the voluntary contribution mechanism) and an impure public good (based on the green tariff mechanism). In experimental play, the voluntary contribution mechanism raises 50% more revenue than the green tariff mechanism. With the all-or-nothing green tariff, experimental play and regression estimates show that a warm-glow preference positively affects participation, as predicted by the theory. [ABSTRACT FROM AUTHOR]

We conduct an experiment on a minimum effort coordination game in a (quasi-)continuous time-frame, where effort choices can be switched freely during a 60-s period. The cooperation levels of the continuous time treatments are not significantly different from the discrete time treatments. Providing subjects with the information on the effort choices of all group members increases the average effort level in continuous time only. The minimum effort level in continuous time with full information feedback is also substantially higher than that with limited information feedback, but the difference is statistically insignificant. With limited information feedback, subjects rarely coordinate to increase their efforts simultaneously to change the group minimum within a period. Our findings imply that continuous time games are not behaviorally equivalent to infinitely repeated discrete time games. [ABSTRACT FROM AUTHOR]

There is mixed evidence on whether subjects coordinate on the efficient equilibrium in experimental stag hunt games under complete information. A design that generates an anomalously high level of coordination, Rankin et al. (Games Econo Behav 32(2):315-337, 2000), varies payoffs each period in repeated play rather than holding them constant. These payoff “perturbations” are eerily similar to those used to motivate the theory of global games, except the theory operates under incomplete information. Interestingly, that equilibrium selection concept is known to coincide with risk dominance, rather than payoff dominance. Thus, in theory, a small change in experimental design should produce a different equilibrium outcome. We examine this prediction in two treatments. In one, we use public signals to match Rankin et al. (2000)’s design; in the other, we use private signals to match the canonical example of global games theory. We find little difference between treatments, in both cases, subject play approaches payoff dominance. Our literature review reveals this result may have more to do with the idiosyncrasies of our complete information framework than the superiority of payoff dominance as an equilibrium selection principle. [ABSTRACT FROM AUTHOR]

This paper reports an experiment using Stag Hunt games with different payoff ranges. Specifically, in one treatment for half of the games the payoff dominant and the risk dominant equilibrium coincide and for the other half of the games they conflict; in the second treatment they always conflict. The experiment provides evidence that the payoff range experienced by the participant influences the likelihood of efficient conventions emerging. In particular, experiencing games where payoff dominance and risk dominance coincide appears to make payoff dominance more attractive in games in which they conflict. In the experiment, we also observe conditional behavior emerging with experience. We develop a model of conditional expectations to explain these stylized facts that depends crucially on the assumption that after a brief learning period participants categorize their experience using the same relative bandwidth in both treatments even though the range of experience is twice as large in treatment 1 as it is in treatment 2. The assumption cannot be rejected by the data. The analysis provides a formal example in which increasing experienced diversity by changing the way similar experiences are categorized increases the likelihood of efficient conventions emerging in communities playing similar Stag Hunt games. [ABSTRACT FROM AUTHOR]

We study the ability of subjects to transfer principles between related coordination games. Subjects play a class of order statistic coordination games closely related to the well-known minimum (or weak-link) and median games (Van Huyck et al. in Am Econ Rev 80:234-248, 1990, Q J Econ 106(3):885-910, 1991). When subjects play a random sequence of games with differing order statistics, play is less sensitive to the order statistic than when a fixed order statistic is used throughout. This is consistent with the prediction of a simple learning model with transfer. If subjects play a series of similar stag hunt games, play converges to the payoff dominant equilibrium when a convention emerges, replicating the main result of Rankin et al. (Games Econ Behav 32:315-337, 2000). When these subjects subsequently play a random sequence of order statistic games, play is shifted towards the payoff dominant equilibrium relative to subjects without previous experience. The data is consistent with subjects absorbing a general principle, play of the payoff dominant equilibrium, and applying it in a new related setting. [ABSTRACT FROM AUTHOR]