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We compare tax evasive behavior in a country in transition from communism to that in a developed economy by running an experiment across distinct social groups in Albania and the Netherlands. Aside from the tax compliance decision, subjects choose a source of income, where one type enables subsequent tax evasion. We show that they take the possibility of evasion into account when deciding on the income source. This yields potential allocative inefficiency in the labor market. In addition, Dutch subjects evade more than the Albanians. We argue that the different levels of tax evasion outside of the laboratory in the two types of countries can be attributed to distinct formal tax institutions. Keywords: Tax evasion; Comparative analysis; Experiment; Institutions; Transition JEL classification codes: C91; H26; O17; O57

The artificiality of a laboratory situation is placed in the context of the tension between external and internal validity. Most economists consider internal validity to be most important. A proper evaluation of the ‘artificiality criticism’ (a lack of external validity) requires distinguishing the various goals experimentalists pursue. External validity is relatively more important for experiments searching for empirical regularities than for theory‐testing experiments. As experimental results are being used more often in the development of new theories, a methodological discussion of their external validity is becoming more important.

Competition involves two main dimensions, a rivalry for resources and the ranking of relative performances. The latter yields a ranking in terms of social status. The rivalry for resources resulting from competitive incentives has been found to negatively affect women’s performance relative to that of men. However, little is known about gender differences in the performance consequences of status ranking. In our experiment we introduce a novel design to isolate status ranking from the rivalry for resources. Subjects do a summation task with a time limit and performance is measured by the number of correct summations. When there is no status ranking we find no gender differences in the number of attempted summations or in performance. By contrast, when there is status ranking men both significantly increase their pace and perform better. Remarkably, when women are subjected to status ranking, they significantly decrease their pace. The net result is striking. With status ranking (and no rivalry for resources) men work at a much faster pace and perform much better than women. These results suggest that increased participation in competitive environments could harm women’s labor market success along a hidden channel.

We investigate the effects of power on cooperation in repeated social dilemma settings. Groups of five players play either multi-player trust games or VCM-games on a fixed network. Power stems from having the authority to allocate funds raised through voluntary contributions by all members and/or from having a pivotal position in the network (centrality). We compare environments with and without ostracism by allowing players in some treatments to exclude others from further participation in the network. Our results show that power matters but that its effects hinge strongly on the type involved. Reminiscent of the literature on leadership, players with authority often act more cooperatively than those without such power. Nevertheless, when possible, they are quickly ostracized from the group. Thus, this kind of power is not tolerated by the powerless. In stark contrast, centrality leads to less cooperative behavior and this free riding is not punished; conditional on cooperativeness, players with power from centrality are less likely to be ostracized than those without. Hence, not only is this type of power tolerated, but so is the free riding it leads to.

We investigate a mechanism that facilitates the provision of public goods in a network formation game. We show how competition for status encourages a core player to realize efficiency gains for the entire group. In a laboratory experiment we systematically examine the effects of group size and status rents. The experimental results provide very clear support for a competition for status dynamic that predicts when, and if so which, repeated game equilibrium is reached. Two control treatments allow us to reject the possibility that the supergame effects we observe are driven by social preferences.

Several European countries and Japan are in various stages of privatizing and/or introducing more competition in passenger rail service. This process has been furthered by a directive from the Commission of the European Communities (1991) requiring member states to separate operations from infrastructure on the books and give international groupings of trains access to their infrastructure. In the Netherlands, the Ministry of Transport, Public Works, and Water Management was assigned responsibility for making a recommendation to Parliament for choosing between competition for the rails and competition on the rails in increasing competition in the supply of passenger rail service. The Ministry commissioned the experiments reported here in order to acquire better understanding of the properties of the two alternative types of competition in the context of a simple stylized rail network. The experimental rail network includes station complementarity and time slot substitutability. It also includes tradeoffs between local and express trains. Competition on the rails involves allocation of rights to use station and time slot routes by price bids in a combinatorial auction. Competition for the rails involves allocation of rights to regional monopolies by fare-structure bids for supplying a pre-specified minimum transport schedule. The experiments include both allocation of rights and scheduling of trains on the network. The two forms of competition are evaluated with various criteria developed by the Ministry, including market prices and allocative efficiency.

This paper focuses on the process of individual expectation formation. Specifically, the question is addressed whether individuals think strategically when they form their beliefs about other players' behavior. Most belief learning models assume that people abstract from strategic considerations. Using an incentive compatible mechanism, experimental data are obtained on subjects' expectations in a step-level public good game and in a game against nature. The evidence is consistent with predictions derived from a general representative of belief learning models: the naive Bayesian model. By modeling the updating process used by experimental subjects, we are also able to study the structure of the errors they make and the rate of updating. We find no evidence of primacy or recency in our data but do observe significant differences across subjects in the error structure.

We introduce a new design for experiments with the voluntary contributions mechanism for public goods. Subjects report a complete contribution function in each period, i.e. a contribution level for various marginal rates of transformation between a public and a private good. The results show that subjects' behavior cannot be explained exclusively as the result of errors. Individuals exhibit essentially one of two types of behavior. One group of subjects behaves in a way consistent with some kind of other-regarding motivation. Some features of the data indicate that these subjects' behavior is interdependent. Another group of subjects behaves in accordance with a utility function that depends only on their own earnings. The interaction between these two groups may be important when explaining behavior over time. © Elsevier Science B.V., The authors acknowledge financial support from the Dutch NWO (PGS 45-96) and the Spanish DGCICYT (PB 92-0593, PB 93-0679 and PB 94-0663- C03-01). This paper is part of the EU-TMR Research Network ENDEAR (FMRXCT98- 0238).

Various models of individual motivations are confronted with evidence from different kinds of laboratory experiments. The motivations distinguished are categorized as selfish, other regarding, or cooperative. The experimental evidence shows that the traditional, selfish model is too limited, but that the alternative models that have been suggested each have shortcomings of their own.

This paper presents the results of a political stock market in the Netherlands: PAM94. The exchange covered three consecutive elections, allowing trade on five different markets. The predictions at PAM94 appear to be less accurate than those of previous markets of comparable size. Of the possible explanations that we examine, one in particular survives closer scrutiny. It concerns a type of judgement failure related to the winner's curse in common value auctions. Theoretical as well as empirical support is offered. Apart from qualifying the attractiveness of such markets as an alternative for opinion polls, this explanation may also be relevant for the analysis of other asset markets. Moreover, this judgement failure may be more important for European political stock markets than for the U.S., because the structure of the common values (vote shares) at multiparty elections make them especially vulnerable to it.

In a public good experiment one group member is replaced by another after a prespecified number of periods. Evidence of both strategic (forward looking) and adaptive (backward looking) behavior is observed.

An experimental analysis of voluntary, binary contributions for step-level public goods/bads is presented. Alternatively, the situation is presented as the provision of a public good or the prevention of a public bad. From a strategic point of view, these presentations are equivalent. In early periods of the twenty round experiments, behavior is indeed observed to be similar in both cases but, after about five periods, differences start to occur that grow larger. A simple learning model is developed that replicates the patterns in the experiments. Extrapolation beyond twenty periods show that the pattern observed reflects an equilibrium selection.

The effect of adding noise to both an equilibrium model and a naive Bayesian model of behavior in step-level public good games is studied. Quantal response equilibria are derived for these games and a naive Bayesian quantal response function is presented. The models are fit for experimental data from such a game and compared. The results seem more promising for the naive Bayesian model than for the equilibrium model.

It is examined whether individuals learn from experience and/or by imitation. Usually individual judgmental learning displays systematic biases against the ideal Bayesian model. Imitation of successful others may decrease such effects. In an experiment subjects make investment decisions and report expectations. The profitability of an investment depends on the realization of a stationary distribution of states of the world. In the baseline subjects do not receive information about others' expectations; in the other conditions subjects perceive the expectations of others who observed either exactly the same events, or different events from the same distribution. The results indicate that people learn both from experience and by imitating successful others.

A nested model is presented which has both the sequential and the multinomial logit model as special cases. This model provides a simple test to investigate the validity of these specifications. Some theoretical properties of the model are discussed. During the analysis a distribution function is derived, which, to the best of our knowledge, has not been used before. This distribution is shown to be a generalization of the typeI extreme-value distribution. Monte Carlo experiments and empirical applications of the model are presented.

In a system of proportional representation, we study the interaction between a voter’s turnout decision and her party choice, and how these relate to party polarization. Quantal response equilibria predict such interaction effects. In particular they predict (i) a Polarization Effect: reduced strategic party choice when voting is voluntary makes voters more likely to vote for extreme parties (conditional on voting at all); (ii) an Extremist Effect: voters supporting extreme parties are most likely to vote; (iii) a Turnout Effect: party polarization increases voter turnout. We provide data from a laboratory experiment that support these theoretical predictions. In addition, we provide supporting empirical evidence from real world elections. Hence, the interaction between turnout and strategic voting that has been neglected in most of the previous literature is shown to be important.

We investigate contributions to the provision of public goods on a network when efficient provision requires the formation of a star network. We provide a theoretical analysis and study behavior in a controlled laboratory experiment. In a 2x2 design, we examine the effects of group size and the presence of (social) benefits for incoming links. We find that social benefits are highly important. They facilitate convergence to equilibrium networks and enhance the stability and efficiency of the outcome. Moreover, in large groups social benefits encourage the formation of superstars: star networks in which the core contributes more than expected in the stage-game equilibrium. We show that this result is predicted by a repeated game equilibrium.

This paper reports the results of a series of experiments in which participation games are analyzed. Voter turnout is an example of an application of this game. Hypotheses derived from a game theoretic analysis are systematically elaborated, analyzed, and tested. The results are used to explore future paths of research. A distinction is made in two parameter configurations (representing winner-takes-all elections and elections with proportional representation).

An experimental analysis of voluntary, binary contributions for step-level public goods is presented. Independent information is obtained on individual value orientation and expectations about the behavior of other subjects using incentive compatible mechanisms. The effects of increasing payoffs for the public good and of decreasing groupsize are investigated. Attention is focused on the determination of expectations, the use of expectations when deciding on behavior, and differences in expectations and behavior between individuals with different value orientations. Copyright 1996 by Royal Economic Society.

This paper investigates infrastructure investment in markets where regulation is subject to varying degrees of manipulation by elected politicians. Based on a model of price regulation in a market with increasing demand and long-term returns on investment we construct a multi-period game between a service provider, consumers with voting rights and elected decision makers. In each period the consumers elect a decision maker who may then regulate the price for service provision. Before an election the service provider chooses whether to increase its capacity. Investment is irreversible and profitable only with a sufficiently high price. We derive the subgame perfect equilibrium for this game and investigate the price and investment dynamics through an experiment with human subjects. The experimental results show that service providers invest when decision-makers' interests align with their own, though prices may rise inefficiently high when the regulatory framework is made independent of future political manipulation. Independency of regulation thus decreases efficiency and consumer surplus. In contrast, when decision-makers' interests do not align with service providers' we find efficiency only when regulation can be made independent from electoral dynamics.

In a competitive market with taxed transactions, it does not matter under full rationality which side of the market legally transfers the taxes. In the labor market, a tax levied on employers and a corresponding income tax levied on employees are equivalent. With boundedly rational agents, this equivalence is no longer obvious. If people react differently to the two taxes this has direct impact on policy making, political economics, and optimal taxation theory. This paper examines how people react to these duties in a real effort laboratory experiment. We study the differential effects of the two types of taxes on preferences concerning the size of the public sector, subjective well-being, labor supply, and on-the-job performance. To elicit public-sector-size preferences in the laboratory we introduce a novel, incentive compatible approach. Our findings suggest that employer-side taxes induce preferences for a larger public sector. Our findings also sugges t that subjective well-being is higher while both labor supply and on-the-job performance are lower when the taxes are levied on employers. Furthermore, there are gender effects, e.g., women's subjective well-being appears to be more sensitive to framing than men's, while men's labor supply is more sensitive to framing than women's.

We experimentally study the relationship between other-regarding preferences, group identity and political participation. In doing so, we propose a novel group identity induction procedure that succeeds in creating environments where in-group bias is either high or low. At the individual level, we find that both altruistic subjects and group identifiers participate above average. The most competitive subjects participate much less often than other types, while the most altruistic subjects manage to sustain high participation levels. At the aggregate level, we observe only few statistically significant differences between environments where group identity is high and low. This suggests that the higher participation observed in field settings for close-knit (political) groups might be due to underlying mobilization processes rather than a heightened sense of group-belonging.

This paper investigates infrastructure investment in markets where regulation is subject to varying degrees of manipulation by elected politicians. Based on a model of price regulation in a market with increasing demand and long-term returns on investment we construct a multi-period game between a service provider, consumers with voting rights and elected decision makers. In each period the consumers elect a decision maker who may then regulate the price for service provision. Before an election the service provider chooses whether to increase its capacity. Investment is irreversible and profitable only with a sufficiently high price. We derive the subgame perfect equilibrium for this game and investigate the price and investment dynamics through an experiment with human subjects. The experimental results show that service providers invest when decision-makers' interests align with their own, though prices may rise inefficiently high when the regulatory framework is made independent of future political manipulation. Independency of regulation thus decreases efficiency and consumer surplus. In contrast, when decision-makers' interests do not align with service providers' we find efficiency only when regulation can be made independent from electoral dynamics.

We investigate contributions to the provision of public goods on a network when efficient provision requires the formation of a star network. We provide a theoretical analysis and study behavior is a controlled laboratory experiment. In a 2x2 design, we examine the effects of group size and the presence of (social) benefits for incoming links. We find that social benefits are highly important. They facilitate convergence to equilibrium networks and enhance the stability and efficiency of the outcome. Moreover, in large groups social benefits encourage the formation of superstars: star networks in which the core contributes more than expected in the stage-game equilibrium. We show that this result is predicted by a repeated game equilibrium.

This discussion paper resulted in an article in Social Networks (2013). Volume 35, issue 4, pages 541-560. We use laboratory experiments to investigate how employers develop social structures for sharing information about the trustworthiness of job candidates, when worker opportunism is possible. The experimental data show that substantial information sharing emerges. Two types of information networks are observed. One consists of 'anonymity networks' where information is anonymously and voluntarily provided as a collective good for all employers to use. The other type is a 'reciprocity network' where information sharing is driven by the rewarding of previously given information by the requestor. In both types, the extent of information sharing depends on the costs of providing it. Moreover, information sharing enables employers to recruit trustworthy workers which creates a high quality of trading, benefiting both employer and worker.

We theoretically and experimentally study voter behavior in a setting characterized by plurality rule and mandatory voting, where voters choose from three options. We are interested in the occurrence of strategic voting in an environment where Condorcet cycles may occur. In particular, we focus on how information about the distribution of preferences affects strategic behavior. We also vary the relative importance of the second preferred option to investigate how this affects the strategic vote. Quantal response equilibrium analysis is used to analyze the game and proves to be a good predictor for the experimental data. Our results indeed show that strategic voting arises, the extent of which depends on (i) the availability of information; (ii) the relative importance of the intermediate candidate; (iii) the electorate's relative support for one's preferred candidate; and (iv) the relative position of the plurality-supported candidate in a voter's preference ordering. Our results show that information serves as a coordination device where strategic voting does not harm the plurality-preferred candidate's chances of winning.

We use laboratory experiments to investigate how employers develop social structures for sharing information about the trustworthiness of job candidates, when worker opportunism is possible. The experimental data show that substantial information sharing emerges. Two types of information networks are observed. One consists of ‘anonymity networks’ where information is anonymously and voluntarily provided as a collective good for all employers to use. The other type is a ‘reciprocity network’ where information sharing is driven by the rewarding of previously given information by the requestor. In both types, the extent of information sharing depends on the costs of providing it. Moreover, information sharing enables employers to recruit trustworthy workers which creates a high quality of trading, benefiting both employer and worker.

In a door-to-door fundraising field experiment, we study the impact of fundraising mechanisms on charitable giving. We approached about 4500 households, each participating in either an all-pay auction, a lottery, a non-anonymous voluntary contribution mechanism (VCM), or an anonymous VCM. In contrast to the VCMs, households competed for a prize in the all-pay auction and the lottery. Although the all-pay auction is the superior fundraising mechanism both in theory and in the laboratory, it raised the lowest revenue per household in the field. Our experiment reveals that this can be attributed to substantially lower participation in the all-pay auction than in the other mechanisms while the average donation for those who contribute is only slightly higher. We explore various explanations for this lower participation and favor one that argues that competition in the all-pay mechanism crowds out intrinsic motivations to contribute. Among the non-anonymous mechanisms, the lottery raises the largest revenue per household. Notably, the method that scored best, the anonymous VCM, is the one most used by door-to-door fundraisers in the Netherlands.

In the process of regulatory reform in the electric power industry, the mitigation of market power is one of the basic problems regulators have to deal with. We use experimental data to study the sources of market power with supply function competition, akin to the competition in wholesale electricity markets. An acute form of market power may arise if a supplier is pivotal; that is, if the supplier's capacity is required in order to meet demand. To be able to isolate the impact of demand and capacity conditions on market power, our treatments vary the distribution of demand levels as well as the amount and symmetry of the allocation of production capacity between different suppliers. We relate our results to a descriptive power index and to the predictions of two alternative models: a supply function equilibrium (SFE) model and a multi-unit auction (MUA) model. We find that pivotal suppliers do indeed exercise their market power in the experiments. We also find that observed behavior is consistent with the range of equilibria of the unrestricted SFE model and inconsistent with the unique equilibria of two refinements of the SFE model and of the MUA model.

A politicoeconomic model of the relationship between economic and structural variables and government popularity is developed and applied to the Weimar Republic. We obtained data from decentralized election results in the 1924 to 1933 period, using a weighted panel estimation method. Parameter estimates show a strong relationship between the development of economic variables and the decline in electoral support that confronted every government in this period. We link this finding to existing historiographie theories and extrapolate from it to estimate the effects of the economic recovery in the first years of the Nazi regime.

El pdf del artículo es el documento de trabajo., We study how the number of traders affects the interaction between a centralized exchange and bilateral negotiations in an experimental labor market with excess supply and incomplete contracts. Our large markets are three times as large as our small markets. In bilateral negotiations firms obtain information about employees' performance in previous jobs. Though market forces put a downward pressure on wages in large markets, reciprocal tendencies do not differ. Hence, the occurrence of bilateral negotiations increases overall efficiency for both market sizes., Financial support by the Spanish Ministry of Science and Innovation, the Barcelona GSE research Network, CONSOLIDER-INGENIO 2010 (CSD2006-00016), the São Paulo School of Business Administration (EAESP) and the School of Economics (EESP) of the Getulio Vargas Foundation in São Paulo is gratefully acknowledged. The authors thank Fabiana D’Atri and Marcela Prada for very able research assistance.

Three hypotheses often encountered in economic analyses of voter behaviour are tested using an extensive data set derived from six consecutive national election studies in the Netherlands in the period 1971-1986. These hypotheses are: (i) the party choice and turnout decisions are taken sequentially and independently by voters; (ii) social gorups play a central role in the decisionmaking processes in the political sphere; (iii) the effect of individual-level variables on party choice is stable over time. The results provide support for the first hypothesis and partial support for the second, where the specific categorization of individuals to be chosen is a matter that needs further investigation. The third hypothesis is rejected by the data: the relationship between the variables chosen and party choice proved to be unstable

Cheaper Cooperation In the context of public goods games in which optimal benefit is achieved when all participants contribute, bad behavior cannot always be deterred by direct punishment, and has the added disadvantage that the punisher may suffer a cost. Alternatively, instead of punishment, rewarding those who contribute can be effective in encouraging and maintaining widespread cooperation, with the added plus that group benefits are not diminished by the costs of punishment. But Ule et al. (p. 1701 ) discovered experimentally that if someone is treated depending on how they have behaved in previous interactions, retaining the option to occasionally apply punishment shifts the payouts to favor cooperators more than defectors.

Publisher Summary In the experiments, subjects were split in two groups of 6 individuals, named yellow and blue. Each subject had to decide whether or not to buy a token. The price of a token (i.e., the cost of participation) was common knowledge and equal for everyone. The number of tokens bought in each group determined the payoffs. The payoff was equal for everyone within a group. The earnings of a subject in a period equaled this payoff minus the cost of a token if one was bought by that subject. This was repeated for 20 periods. There were two payoff schedules, representing a winner-takes-all election (WIN) and proportional representation (PR). In WIN, each member of the group that bought the most tokens (won the elections) received a payoff of 2.50 Dutch Guilders and the payoff for the other group was zero. A tie was broken randomly with equal probability for both teams.

Publisher Summary This chapter discusses the cooperation in voluntary contributions mechanism (VCM) experiments. The chapter presents various experiments using a new method for collecting data from voluntary contributions mechanism environments. The main virtue of the design is that it makes it possible to collect a very rich set of data. The results presented in this chapter are inconsistent with the hypothesis that contributions are made only by mistake and with simple linear altruism and warm glow models. The type of motivation that our evidence favors is one involving some kind of reciprocal altruism. The idea for this design comes from two rather elementary insights. First, richer data may be the key to understanding subjects' behavior more fully. Second, in previous VCM experiments, any subject's decision in any single period has always been for one, given, value of the marginal rate of substitution (MRS) between a public and a private good. For different values of the MRS, subjects' motivations and choices may vary. Hence, one might prefer to obtain information about individual choices for a variety of MRS values.

Publisher Summary The step-level public good game differs strategically from the linear public good game. In the one-shot linear public good game the dominant strategy is not to contribute. In the one-shot step-level public good game multiple Nash equilibria exist. An inefficient Nash equilibrium involves nobody contributing. There are efficient Nash equilibria in pure strategies where 3 of the n players contribute (i.e., there are exactly enough contributions to reach the threshold). A rational player maximizing expected value will contribute if and only if she estimates the probability that her contribution will be critical for the provision of the public good to be sufficiently high. This chapter distinguishes individual preferences (allowing them to be non-selfish) and individual beliefs about the behavior of others. Both beliefs and preferences are important building blocks for most theories explaining behavior in games.

A dynamic model of voter behavior is discussed, explaining transitions in party choice by imputed party responsibilities with respect to public and private consumption possibilities. The model uses a group framework to explicitly describe voter interests. It allows for an estimation of the relative preference for public goods, as determined by the revealed preference mechanism of voting. The model is compared to popularity functions in their general form. An empirical application to Great Britain is presented. It appears that retired individuals have the highest relative preferences for public goods, followed by housewives/men, manual workers, self-employed and non-manual workers.

This paper studies experimentally how the existence of social information networks affects the ways in which firms recruit new personnel. Through such networks firms learn about prospective employees' performance in previous jobs. Assuming individualistic preferences social networks are predicted not to affect overall labor market behavior, while with social preferences the prediction is that when bilaterally negotiated: (i) wages will be higher and (ii) that workers in jobs with incomplete contracts will respond with higher effort. Our experimental results are consistent with the social preferences view, both for the case of excess demand and excess supply of labor. In particular, the presence of information networks leads to more efficient allocations.

This paper considers three alternative ways to sell heterogeneous licenses via a first-price format when there is single unit demand. It has been suggested that incorporating a first-price element may bolster competition in this case [Klemperer, Paul D., 2002. What really matters in auction design. Journal of Economic Perspectives, 16, 169–189]. In a controlled laboratory setting, we compare the performance of the simultaneous first-price auction, the sequential first-price auction and the simultaneous descending auction with that of the simultaneous ascending auction. The experiments involve several bidding environments of varying complexity. We find that the simultaneous ascending auction achieves the highest levels of efficiency but also has drawbacks: (i) its revenues are low and variable, (ii) per-license profits vary, and (iii) the incidence of winner's curse outcomes is high. Seller's revenues are highest when the licenses are sold in a sequential first-price auction, in decreasing order of quality.

A comment is given on an experiment by Guth and Weck-Hannemann (published in the same issue of Public Choice.

We study the politico-economic interaction in a country in transition from a communist regime to a democratic, free market system, to wit, Albania. It is argued that the politico-economic system there is characterized by the existence of clans. Both the communists and the first democratically chosen government applied policies that favored specific clans. Moreover, a popularity function estimation shows that voters related to different clans react in a distinct way to party policies.

We experimentally study the impact of preference uncertainty on voter turnout and electoral efficiency in a participation game. We find higher participation rates when the electorate is informed about the level of support for various candidates than when group sizes remain uncertain. Moreover, despite higher free riding incentives majorities win more often than minorities. In aggregate, whether or not group sizes are known hardly affects welfare. We also distinguish between allied and floating voters and our data show that the lower turnout under uncertainty can be attributed to floating voters participating less. Finally, our results match better the predictions by quantal response (logit) equilibria than by (Bayesian-) Nash equilibria.

We use experiments to study the efficiency effects for a market as a whole of adding the possibility of forward contracting to a pre-existing spot market. We deal separately with the cases where spot market competition is in quantities and where it is in supply functions. In both cases we compare the effect of adding a contract market with the introduction of an additional competitor, changing the market structure from a triopoly to a quadropoly. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels.

We use experiments to study the efficiency effects for a market as a whole of adding the possibility of forward contracting to a pre-existing spot market. We deal separately with the cases where spot market competition is in quantities and where it is in supply functions. In both cases we compare the effect of adding a contract market with the introduction of an additional competitor, changing the market structure from a triopoly to a quadropoly. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels.

This paper studies behavior in experiments with a linear voluntary contributions mechanism for public goods conducted in Japan, the Netherlands, Spain and the USA. The same experimental design was used in the four countries. Our 'contribution function' design allows us to obtain a view of subjects' behavior from two complementary points of view. It yields information about situations where, in purely pecuniary terms, it is a dominant strategy to contribute all the endowment and about situations where it is a dominant strategy to contribute nothing. Our results show, first, that differences in behavior across countries are minor. We find that when people play "the same game" they behave similarly. Second, for all four countries our data are inconsistent with the explanation that subjects contribute only out of confusion. A common cooperative motivation is needed to explain the data.

This paper studies behavior in experiments with a linear voluntary contributions mechanism for public goods conducted in Japan, the Netherlands, Spain and the USA. The same experimental design was used in the four countries. Our 'contribution function' design allows us to obtain a view of subjects' behavior from two complementary points of view. It yields information about situations where, in purely pecuniary terms, it is a dominant strategy to contribute all the endowment and about situations where it is a dominant strategy to contribute nothing. Our results show, first, that differences in behavior across countries are minor. We find that when people play "the same game" they behave similarly. Second, for all four countries our data are inconsistent with the explanation that subjects contribute only out of confusion. A common cooperative motivation is needed to explain the data.