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Internet services are often free of charge but ask for customers’ personal data in exchange for usage. We experimentally study whether the provision of information-based public goods is susceptible to restraint when contributions not only make contributors better off but also enable a non-contributing “big player” to acquire substantial profits. We show that the presence of the big player crowds out the willingness to provide neutral tokens, but no such effect is observed for the provision of private information. Hence, collecting anonymized personal data instead of monetary fees can be more profitable to service providers and create greater benefits for customers.

Most of the existing empirical literature on self-employment decisions assumes that individuals’ risk-taking propensities are stable over time. We allow for endogeneity on both sides when examining the relationship between individual risk-taking propensities and entry into self-employment. We confirm that a greater risk-taking propensity is associated with a higher probability of entering self-employment. However, we also find evidence that entering self-employment is associated with a significant and substantial increase in an individual’s propensity to take risks. Our findings add to the growing evidence that risk-taking propensities are not only inborn, but also determined by environmental factors.

Personal information is a precious resource, not only for commercial interests but also for the public benefit. Reporting personal location data, for example, may aid efficient traffic flows and sharing one's health status may be a crucial instrument of disease management. We experimentally study individuals' willingness to contribute personal information to information-based public goods. Our data provide evidence that-compared to monetary contributions to public goods-information may be substantially under-provided. We show that the degree of information provision is strongly correlated to the information's implicit (emotional and cognitive) costs. Individual's reluctance to share personal information with high implicit, in particular emotional costs, may seriously limit the effectiveness of information-based public goods.

We study multimarket effects in a setting with home-market asymmetries. In our duopoly experiment each firm has a home market but may also enter the other firm's market. Without entry barriers, we observe a high level of mutual forbearance with firms serving home markets exclusively. With short-term entry barriers, the competition rates decrease significantly. Surprisingly, with long-term entry barriers, firms exhibit higher levels of competition, entering each other's market more often. We conjecture that in the latter case, bearing the cost of entryis perceived as a signal for intentions to compete, which has an adverse effect on cooperation.

We introduce an experimental setup to elicit subjects’ materialistic, pro-social, and anti-social preferences. We find one third of the population exhibits mixed social preferences, choosing to give, to destroy, and to keep some payoffs. Most others are either materialistic, keeping all payoffs, or pro-social, giving some and keeping some, but not destroying payoffs. For individuals with mixed social preferences, giving and destruction are positively correlated, but do not seem to be influenced by payoff comparisons. We find that full information and experimenter demand may increase the extent of pro-social preferences, but do not affect the extent of anti-social preferences or the distribution of social types in the population.

We assess helping and harming behavior towards an anonymous individual in a real effort and a chosen effort experiment. Both help and harm are widespread and highly correlated. Almost all individuals who harm others also help others. High cost reduces both prosocial and anti-social behavior.

Supply chains facing asymmetric information can either operate in a cooperative mode with information and benefit sharing or can choose a non-cooperative form of interaction and align their incentives via screening contracts. In the cooperative mode, supply chain efficiency can be achieved, but high levels of trust and trustworthiness are required. In the non-cooperative mode, the contract mechanism guarantees a second best supply chain performance, but only if all parties choose their equilibrium strategies without trembles. Experimental evidence, however, shows that both operating modes often fail due to strategic risk. Cooperation is disrupted by deceptive signals and the lack of trust, whereas non-cooperative strategies suffer from persistent out-of-equilibrium behavior. We present two means to reduce strategic risk. First, a punishment mechanism leads to a better matching of trust and trustworthiness and supports the cooperative operating mode. Second, an enforcement of self-selection supports the non-cooperative equilibrium by increasing the attractiveness of screening contracts. We find that supply chain performance can benefit from reduced strategic risk in either operating mode.

We conduct a natural field experiment to test for the effect of framing on prices paid in two customer-selected price mechanisms. In two framing conditions, we sell a soft drink and provide customers with a reference price for this drink. In the pay-what-you-want (PWYW) condition, customers are told that they can pay much as they want. In the mark-off-your-own-price (MOYOP) condition, customers are told that they can reduce the price by as much as they want. We find that prices are significantly lower and that more customers choose a price of zero in the MOYOP compared to the PWYW condition. We conjecture that the explicit request to reduce the price in MOYOP is a strong signal for customers to adjust their perception of the appropriate price downwards.

We study a gift exchange game with 12 employees and one employer. When the employer can offer individually differentiated wages in a setting without collective action, we observe high levels of wages, effort choices, and total earnings. When the employer is restricted to offering a uniform wage, trust and reciprocity drop dramatically due to widespread shirking. The stepwise introduction of two collective action mechanisms, strike and coordination, increases the employees׳ share of the total earnings, but does not mitigate the free-riding problem. Adding employment risk to the collective action setup drives up wages, reduces free-riding, and leads to higher total earnings. However, this increase in productivity is not sufficient to achieve the high levels of wages, efforts and earnings that we observe with individually differentiated wages.

The use of screening contracts is a common approach to solve supply chain coordination problems under asymmetric information. One main assumption in this context is that managers without specific incentives would rather use their private information strategically than reveal it truthfully. This harms supply chain performance. This study investigates the impact of information sharing in a principal-agent setting that is typical for many supply chain transactions. We conduct a laboratory experiment to test whether information sharing has an influence on supply chain coordination. We find that information sharing within the supply chain has two positive effects. First, information sharing reduces the inefficiencies resulting from information deficits if there is a certain amount of trust in the supply chain. Second, communication can limit out-of-equilibrium behavior with a small impact on the firm's own payoff, but a large impact on the supply chain partner. Furthermore, we find that both effects are amplified when communication takes place in an environment that allows the less informed supply chain party to punish or to reward the better informed party. Although our extended mechanisms substantially enhance the poor performance of the theoretically optimal coordination contract menu, we find no mechanism that implements supply chain performance superior to the theoretically predicted second-best level.

In controlled laboratory experiments with and without overlapping generations, we study the role of intergenerational altruism in public debt accumulation. Public debt is chosen by popular vote, pays for public goods, and is repaid with general taxes. We use an optimal control model to derive a theoretical benchmark. With a single generation, public debt is accumulated prudently. With multiple and over-lapping generations, the burden of debt and the risk of over-indebtedness are shifted to future generations. We find a weak but significant sign of intergenerational altruism, observing that the revealed debt preferences increase as the number of following generations decreases. However, we find considerably fewer intergenerational fairness concerns than one would expect on the basis of the behavioral and experimental literature. Instead, political debt cycles that vary with voters' age emerge. Debt ceiling mechanisms fail to encourage intergenerational altruism and do not mitigate the problem of burden shifting.

This paper presents the results of an experimental study on unemployment benefit sanctions. The experimental set-up allows us to distinguish between the effect of benefit sanctions once they are imposed (the ex post effect) and the threat of getting a benefit sanction imposed (the ex ante effect). We find that both effects matter. Moreover, the ex ante effect turns out to be substantial and bigger than the ex post effect. Benefits sanctions stimulate the outflow from unemployment.

Trust games are employed to investigate the effect of heterogeneity in income and race on cooperation in South Africa. The amount of socio-economic information available to the subjects about their counterparts is varied. No significant behavioural differences are observed, when no such information is provided. However, when the information is available, it significantly affects individual trust behaviour. The low income subjects from both racial groups invest significantly less in partnerships with the high income subjects of the other racial group than in any other partnership. We attribute this behaviour to cross-racial envy, which on aggregate may lead to substantial efficiency losses., Working papers series, ISSN 2628-1724, 2006, Heft 25

Numerous studies explore consumer perception of brands in a more or less passive way. This may still be representative for many situations or decisions we make each day. Nevertheless, sometimes we often actively search for and use information to make informed and reasoned choices, thus implying a rational and thinking consumer. Researchers suggested describing this distinction as low relative to high involvement consumer behavior. Although the involvement concept has been widely used to explain consumer behavior, behavioral and neural correlates of this concept are poorly understood. The current study aims to describe a behavioral measure that is associated with high involvement, the length of search behavior. A second aim of this study was to explore brain activations associated with involvement by employing functional magnetic resonance imaging (fMRI). We presented participants information cues for different products and told them that they had to answer questions with respect to these products at the end of the experiment. Participants were free to stop the information search if they think they gathered enough information or to continue with collecting information. Behavioral results confirmed our hypothesis of a relationship between searching behavior and personal involvement by demonstrating that the length of search correlated significantly with the degree of personal involvement of the participants. fMRI data revealed that personal involvement was associated with activation in BA44. Since this brain region is known to be involved in semantic memory, the results of this pilot study suggest that high involvement consumer behavior may be linked to cognitive load and attention towards a product.

Defense strategies have played an important role in marketing theory and practice. Drawing on industrial organization and economic theory several marketing implications can be made. One of the major concerns is the deterrence of potential entrants and the slowing down of actual competitors. Theories about entry deterrence and limiting markets have an especially great impact in deregulated markets such as the utility industry or telecommunication industry. Strategies aiming at entry deterrence include aggressive pricing, cost minimization, product diversification or advertising. The focus of our study is on aggressive pricing.

In a three player dynamic public goods experiment, social output today determines production possibilities tomorrow. In each period, players choose to sabotage, to cooperate, or to play best response. Sabotage harms social output and growth. Mutual cooperation maximises both. The property rights to social output are distributed unequally. Extent and skew of inequality are varied. We observe equilibrium play in most cases. There is also substantial cooperation, but little sabotage. Our exogenous variations of inequality are neutral to growth, neither negatively correlated to cooperation, nor positively correlated to sabotage. The neutrality result is shown to be sensitive to the dynamic nature of the employed game.

The effectiveness of relative performance evaluation schemes, such as yardstick competition, can be undermined by collusion. The degree to which the regulated agents manage to collude will be affected by the particulars of the scheme. We hypothesize that in a repeated game setting, schemes will be more prone to collusion the smaller are the rents to the agents, in case they behave noncooperatively. We illustrate the relevance of this hypothesis by means of an economic experiment in which we compare the efficiency of two performance evaluation schemes.

We introduce and experiment the Fisherman’s Game in which the application of economic theory leads to four different benchmarks. Non-cooperative sequential rationality predicts one extreme outcome while the core (which coincides with the competitive market equilibrium) predicts the other extreme. Intermediate, disjoint outcomes are predicted by fairness utility models and the Shapley value. None of the four benchmarks fully explains the observed behavior. However, since elements of both cooperative and non-cooperative game theory are crucial for organizing our data, we conclude that effort towards bridging the gap between the various concepts is a promising approach for future economic research.

We use a controlled laboratory experiment with and without overlapping generations to study the emergence of public debt. Public debt is chosen by popular vote, pays for public goods, and is repaid with general taxes. With a single generation, public debt is accumulated prudently, never leading to over-indebtedness. With multiple generations, public debt is accumulated rapidly as soon as the burden of debt and the risk of over-indebtedness can be shifted to future generations. Debt ceiling mechanisms do not mitigate the debt problem. With overlapping generations, political debt cycles emerge, oscillating with the age of the majority of voters.

We revisit the sequential search problem by Hey (J Econ Behav Organ 8:137–144, 1987). In a 2 $$\times $$ 2 factorial design, varying fixed and random cost treatments with and without recall, we address open research questions that were originally stated by Hey (1987). Our results provide clear evidence for Hey’s (1987) conjecture that recall negatively affects performance in sequential search. With experience, however, search behavior with and without recall converges toward the optimal reservation rule. We further find that the utilization of optimal reservation rules is independent from the stochastic nature of the search cost.

Many laboratory experiments show that people are often altruistic or care for fairness. We present data that reveal a darker side of human nature. We introduce the joy-of-destruction game. Two players each receive an endowment and simultaneously decide on how much of the other player's endowment to destroy. Subjects play this game repeatedly. In one treatment, subjects can hide their destruction behind random destruction. In this treatment, money is destroyed in almost 40% of all decisions. We attribute this behavior to a visceral pleasure of being nasty. Under full information destruction is also observed, but rare. In this treatment, acts of destruction are followed by immediate retaliation., Working papers series, ISSN 2628-1724, 2008, Heft 37

If payoffs are tickets for binary lotteries, which involve only two money prizes, then rationality requires expected value maximization in tickets. This payoff scheme was increasingly used to induce risk neutrality in experiments. The experiment presented here involved lottery choice and evaluation tasks. One subject group was paid in binary lottery tickets, another directly in money. Significantly greater deviations from risk neutral behavior are observed with binary lottery payoffs. This discrepancy increases when subjects have easy access to the alternatives' expected values and mean absolute deviations. Behavioral regularities are observed at least as often as with direct money payoffs.

The theory of "Judo Economics" describes an optimal entry strategy for small firms. Using a capacity limitation, small firms force dominant market incumbents to accommodate. In this article, we study the power of Judo economics as an entry strategy in different market environments. We find experimental evidence supporting the theory in the original setting with a monopolistic, dominant market incumbent. When we introduce a cost advantage for small firms, profits go down. This can be explained by incumbents responding aggressive towards large entrants. For settings with multiple market incumbents, results are reversed. There, a cost advantage strengthens small firms and pricing below the incumbents' marginal cost provides the unique entry strategy.

We introduce the give-or-destroy game that allows us to fully elicit an individual's social preference schedule. We find that about one third of the population exhibits both pro-social and anti-social preferences that are independent of payoff comparisons with those who are affected. We call this type of preference a desire to influence others. The other two thirds of the population consist to almost equal parts of payoff maximizers and pro-socials. Furthermore, we find that full information and experimenter demand may increase the extent of pro-social preferences, but neither treatment affects the extent of anti-social preferences or the distribution of social types in the population., Working papers series, ISSN 2628-1724, 2012, Heft 27

We introduce, discuss, and provide an empirical appraisal of kangaroo seminars as a new instrument for knowledge transfer in fast-growing research fields. By promoting active project-based and cooperative learning, kangaroo seminars combine educational goals with the institutional goal of fast knowledge transfer between academic institutions and private and public enterprises. The key feature that sets kangaroo seminars apart from other case-based and project-based educational formats is a two-phase concept with an intensive learning course updating the students' abstract knowledge in phase one and a collaborative applied project in phase two. The project collaboration is realized by giving the student teams the opportunity to obtain an inside view of the cooperating enterprise in radically short, but highly focused internships. These internships inspired the term "kangaroo seminars," because we like to compare the role of the participating students to that of kangaroo offspring seeing the world from a position inside the pouch of the kangaroo mother, i.e. seeing the project case from a position inside the participating enterprise's organization. Our empirical appraisal is based on four kangaroo seminars in online marketing that we conducted from 2008 to 2010 cooperating with 22 small and mid-sized enterprises. Our experience shows that the desired three-way knowledge transfer procedure can be established properly and that it leads to high levels of self-reported satisfaction amongst the participating students and firms. Furthermore, firms not only report high levels of compliance with the solution concepts developed in the seminars, but also record substantially higher growth rates of their workforce (about 16%) than the overall growth of employment in the region (under 1%). Combining the high level of satisfaction and the growth rates reported by the firms, we cautiously conclude that the kangaroo seminars may have played a positive role in the economic development of the participating enterprises., Working papers series, ISSN 2628-1724, 2011, Heft 13

Electronic commerce in Germany is getting more and more popular as growing sales figures show. The missing possibility to touch and try products during the buying process is one of the big disadvantages of online shops. Integration of multimedia information is an apporach to a solution. By this, online shopping could be more of an event. In order to identify elements of multimedia communication in electronic commerce a quantitative content analysis of 107 online-shops was applied. For 61 multimedia elements the positions within the online shops were identified. This data was used to construct six ideal-typical website templates. In a subsequent unveiling and eyetracking test these ideal websites were shown to 33 test persons in order to identify and analyse rules of usage.

If you think of Reinhard Selten, you might first think of his outstanding contributions to game-theory which were honored with the Prize in Economic Sciences in Memory of Alfred Nobel in 1994. 1 At the same time, you might think of his devotion to the field of bounded rationality and his continual effort to promote the use of experiments in the Economic discipline (interestingly, his first journal publication in 1959 was not a theoretical, but an experimental paper featuring Cournot oligopoly models). 2 By jointly using theoretical and empirical methods, he wants “[...] to build up a descriptive branch of decision and game theory which takes the limited rationality of human behavior seriously.” 3 This aim is of utmost importance, because only then will we be able to develop worthwhile economic models that enable us to understand and predict how people behave in certain economic situations.

When I first met Reinhard Selten, I was a sleepless young student, double-degreeing in economics and computer science (which, studying in Bonn, basically meant that I was spending my days and nights studying applied mathematics). I knew Herbert Simon’s work well (but not Reinhard Selten’s) and I had planned to shake-up economic research by introducing macroeconomic models based on boundedly rational decision-makers.1 That was why I had to study computer science. I needed to learn how to write simulation software for my virtual economies. Things were going OK. The university had just received about 40 first generation IBM PCs and – being a second year computer science student – I was privileged to have courses learning to program in Pascal, Modula, ProLog, and other cool languages that I cannot recall. Then, looking for an interesting course in economics, I came across a seminar given by Reinhard Selten on “experimental industrial organization.” Frankly, I had absolutely no idea what this seminar would be like, but I was pleased by the announcement that “warned” participants that in this seminar they would have to “program a strategy” to run on a PC. The seminar started with a 2-week crash course to teach the participants how to program a duopoly strategy in Turbo Pascal. Clearly, there was no course in economics that was closer than this one to programming the boundedly rational agent simulations that I was so interested in. It was immediately clear to me that I must sign-up for this course.

We use a laboratory experiment to study the extent to which investors' choices are affected by limited loss deduction in income taxation. We first compare investment behavior in the no tax baseline to a tax control setting, in which the income from investments is taxed. We find that investors significantly reduce their risk-taking as predicted by theory. Next we compare the baseline investment choices to choices under three different types of income taxation. We observe that risk-taking is significantly increased with partial and with capped loss deduction, but is unaffected by a tax system that allows no loss deduction. Since in all these treatments the after tax outcomes of the prospects were identical, we conjecture that investors have a positively biased perception of partial and capped loss deduction that promotes their willingness to take risks., Working papers series, ISSN 2628-1724, 2010, Heft 4

Imagine your doorbell rings. You open to find a young professional salesperson offering you a new type of electronic data loss insurance. You may wish to send him away immediately, but he talks so fast that you cannot help hearing the details of the deal. The contract will pay you a certain amount, if your electronic data storages are lost due to power blackouts or irregularities, due to fluid damages (water, coffee, soft drinks, etc.), or due to other unforeseen accidents or natural disasters. The insurance agent has a certified table listing the historic frequencies of all these events, i.e. you have reliable estimates of the event probabilities. The agent also quotes a price (or perhaps a number of prices for variants of the contract, insuring more or less of the data loss events). All you have to do now is to assess the value of your electronic data, match it up with your risk preferences, compare cost to benefit, relate the net benefit of the insurance contract to all other prospects that life offers, and you can immediately tell the friendly salesperson, whether the suggested insurance contract is a deal or is no deal. This should not be a big deal, right?

Virtual communities like Second Life represent an economic factor with increasing potential, but may induce behavior that deviates from real world experience. We introduce a new experimental design that is based on the trust game (Berg, Dickhaut, and McCabe 1995), but eliminates the problem of multiple virtual identities. We conduct one treatment of the experiment in the virtual world Second Life and compare the results to the First Life control treatment that we conduct on our university Campus. In Second Life, we find significantly lower investment levels, but significantly higher average returns than in our First Life treatment or in the literature. The lower investments may be due to the fact that the return schedules observed in Second Life are significantly more erratic than in First Life., Working papers series, ISSN 2628-1724, 2009, Heft 33

Customers write book reviews for Amazon.com and rate stores at BizRate.com. Car drivers call up radio stations to report traffic jams or radar traps. In many cases individuals share their information to the benefit of an unknown group of recipients, even though doing so is costly for the provider. In contrast to a standard public good, providers have no immediate benefit from information public goods. The paper reports the results of an experimental study on information sharing under two payoff conditions (opportunity announcement and hazard warning) and two information conditions (anonymous and identified provider). The experimental results show a substantial degree of information sharing. Information on extreme opportunities and extreme hazards is significantly more often provided than information on moderate prospects. Identification only plays a role in case of extreme opportunities and not in case of hazard warnings.

Es vergeht kaum noch eine Woche, in der sich nicht irgendwo auf der Erde mindestens ein Mensch dazu entschliest, einen selbsttotenden Anschlag oder einen selbsttotenden Amoklauf durchzufuhren. Die negativen externen Effekte eines solchen Selbstopferverhaltens sind zwar sehr unterschiedlicher Art, aber ohne Zweifel in jedem Fall stark wohlfahrtsreduzierend. Im schlimmsten Fall kann es bei einer standigen Bedrohung durch immer wiederkehrende Anschlage zu einer gesamtwirtschaftlichen Lahmung des Investitionsverhaltens kommen, die einen Zerfall des Produktionskapitals - insbesondere auch des Humankapitals — nach sich zieht. Gerade weil das Schadigen Dritter das Hauptziel der Anschlage und Amoklaufe ist, sind symptombekampfende Masnahmen zur Reduktion der negativen externen Effekten des Selbstopferverhaltens fast aussichtslos. Das Verhalten wird jeweils unter Berucksichtigung der Masnahmen bezuglich der Schadensmaximierung re-optimiert. So entsteht ein Wettlauf der Schadensbegrenzungs- und Schadensmaximierungsmasnahmen, der seinerseits Wohlfahrtsverluste mit sich bringt, wie man leicht anhand der Auswirkungen erhohter Sicherheitsmasnahmen bei Fernreisen beobachten kann. Selbstopferverhalten ist aber nicht nur mit Schadensmaximierung (d. h. mit negativen externen Effekten) in Verbindung zu bringen, sondern kann auch die Minimierung des Schadens anderer zum Ziel haben. Das klassische Beispiel hierfur ist jener Held, der sich opfert, indem er sich schutzend vor andere stellt, um sie vor dem sicheren Tod zu bewahren. Das eigene Leben wird fur die Erhohung der Nutzen anderer eingebracht, wodurch positive externe Effekte entstehen.

We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort. In an additional real-effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer's surplus from the work contract is a crucial prerequisite for a positive wage–effort relation. This demonstrates that an employee's reciprocity requires a clear assessment of the surplus at stake. (JEL: C91, C92, J41)

The use of screening contracts is a common approach to solve supply chain coordination problems under asymmetric information. One major assumption in this context is that subjects will rather use their private information strategically than to reveal them truthfully, if they do not get any incentives to do this. This harms supply chain performance. This paper investigates the influence of costless pre-game communication (i.e. communication without any direct incentives) between a supplier and a buyer in a lotsizing framework. A laboratory experiment was conducted to test, whether this costless pre-game communication has (in contradiction to standard game-theory) an influence on supply chain coordination.

This paper experimentally studies the extraction decisions of a sole owner in a fishery, the population dynamics of which behave according to the standard deterministic logistic growth model. Four treatments were implemented which differed in the level of information supplied to the subjects. Compared to the theoretic benchmark, the data reveal that efficiency losses increase as the information on population dynamics and stock size deteriorates. Three common patterns of behaviour are identified. The distribution of these patterns is significantly affected by the informational setting.

Trust games are employed to investigate the effect of heterogeneity in income and race on cooperation in South Africa. The amount of socio-economic information available to the subjects about their counterparts is varied. No significant behavioural differences are observed, when no such information is provided. However, when the information is available, it significantly affects individual trust behaviour. The low income subjects from both racial groups invest significantly less in partnerships with the high income subjects of the other racial group than in any other partnership. We attribute this behaviour to cross-racial envy, which on aggregate may lead to substantial underinvestment in the economy.