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This paper uses laboratory experiments to study subjects’ assessment of uncertainty resulting from strategic and non-strategic decisions of other players. Nonstrategic events are defined by the colors of balls drawn from urns, whereas strategic events are defined by the action choice in Stag Hunt (SH) and Prisoners’ Dilemma (PD) games. We elicit subjects’ matching probabilities and examine if they satisfy the law of probability including monotonicity and additivity. Violations from the law are observed for both uncertainty sources, but are more substantial for strategic uncertainty. In particular, we observe a coordination fallacy, a violation of monotonicity whereby the probability weight placed on a symmetric coordination profile of the games exceeds that placed on the corresponding action choice. The violation is found to be severer for an efficient coordination profile.

We summarize the experimentally measured characteristics of the regis-tered participants of the experiments conducted at the Institute of Social and Economic Research, Osaka University. Measured characteristics include uid intelligence, risk preference (risk aversion, prudence, and temperance), social value orientation, theory of mind, personality (Big Five and Grit), ability to backward induct, as well as their general trust. We discuss reliability of these measures and correlation among them.

We conducted laboratory experiments for the multi-unit Vickrey auction with and without advice to subjects on strategy-proofness. The rate of truth-telling among the subjects without advice was 20%, whereas the rate increased to 47% among those who received advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that the increase in truth-telling owes significantly to the net advice effect, i.e., the effect beyond the so-called experimenter demand effect. Moreover, providing advice improves efficiency in the Vickrey auction, particularly in the early periods, when subjects are less experienced. It is well known that subjects tend to overbid in Vickrey auction experiments. Our results indicate the possibility that providing a piece of simple advice decreases such overbidding by promoting a better understanding of the strategy-proofness property in the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to find the benefit in telling the truth; however, our observations show that introducing advice on the property of strategy-proofness helps them behave “correctly.”

In this study, we employ a game-theoretic framework to formulate and analyze a number of tax audit schemes. We then test the theoretical predictions in a laboratory experiment. We compare audit schemes based on three audit rules: the random rule, cut-off rule, and lowest income reporter audited rule. While the cut-off rule is known to be optimal in theory, it has not thus far been examined in a controlled laboratory experimental setting. Contrary to the theory, the lowest income reporter audited rule yielded higher compliance behavior than the optimal cut-off rule in the experiment, even after controlling for social norms regarding tax payment perceived by the subjects. This empirical finding is practically important because the tax authorities in most countries assign higher priority to enhancing tax compliance.

We experimentally test a two-stage mechanism called the stay-leave mechanism to achieve cooperation in n-player prisoner's dilemma situations. Under this mechanism, each cooperator has the chance to revise his choice when players' choices are not unanimous. We say a player is selfish if he eliminates dominated choices in each stage. If all participants of the stay-leave mechanism are selfish, for any value of public good benefit that arises, the unique equilibrium is unanimous cooperation. The average cooperation rate in the stay-leave mechanism experiment averaged 86. 6% across 15 periods, with an upward trend, increasing to 96. 0% after period 5. By examining earlier period data, we detected that selfish and conditionally cooperative subjects coexist at a proportion of approximately 3:1. Finally, we extended our model to incorporate a mixture of the observed two types and misbeliefs about others' types. Paradoxically, unanimous cooperation is less likely to occur as the number of conditionally cooperative players increase. The model also partially explains the observed upward trend in the cooperation rate in the stay-leave mechanism sessions.

We summarize the experimentally measured characteristics of the regis-tered participants of the experiments conducted at the Institute of Social and Economic Research, Osaka University. Measured characteristics include uid intelligence, risk preference (risk aversion, prudence, and temperance), social value orientation, theory of mind, personality (Big Five and Grit), ability to backward induct, as well as their general trust. We discuss reliability of these measures and correlation among them.

We conducted laboratory experiments for the multi-unit Vickrey auction with and without advice to subjects on strategy-proofness. The rate of truth-telling among the subjects without advice was 20%, whereas the rate increased to 47% among those who received advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that the increase in truth-telling owes significantly to the net advice effect, i.e., the effect beyond the so-called experimenter demand effect. Moreover, providing advice improves efficiency in the Vickrey auction, particularly in the early periods, when subjects are less experienced. It is well known that subjects tend to overbid in Vickrey auction experiments. Our results indicate the possibility that providing a piece of simple advice decreases such overbidding by promoting a better understanding of the strategy-proofness property in the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to find the benefit in telling the truth; however, our observations show that introducing advice on the property of strategy-proofness helps them behave “correctly.”

We summarize the experimentally measured characteristics of the regis-tered participants of the experiments conducted at the Institute of Social and Economic Research, Osaka University. Measured characteristics include uid intelligence, risk preference (risk aversion, prudence, and temperance), social value orientation, theory of mind, personality (Big Five and Grit), ability to backward induct, as well as their general trust. We discuss reliability of these measures and correlation among them.

This paper uses laboratory experiments to study subjects’ assessment of uncertainty resulting from strategic and non-strategic decisions of other players. Nonstrategic events are defined by the colors of balls drawn from urns, whereas strategic events are defined by the action choice in Stag Hunt (SH) and Prisoners’ Dilemma (PD) games. We elicit subjects’ matching probabilities and examine if they satisfy the law of probability including monotonicity and additivity. Violations from the law are observed for both uncertainty sources, but are more substantial for strategic uncertainty. In particular, we observe a coordination fallacy, a violation of monotonicity whereby the probability weight placed on a symmetric coordination profile of the games exceeds that placed on the corresponding action choice. The violation is found to be severer for an efficient coordination profile.

We conducted laboratory experiments for the multi-unit Vickrey auction with and without advice to subjects on strategy-proofness. The rate of truth-telling among the subjects without advice was 20%, whereas the rate increased to 47% among those who received advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that the increase in truth-telling owes significantly to the net advice effect, i.e., the effect beyond the so-called experimenter demand effect. Moreover, providing advice improves efficiency in the Vickrey auction, particularly in the early periods, when subjects are less experienced. It is well known that subjects tend to overbid in Vickrey auction experiments. Our results indicate the possibility that providing a piece of simple advice decreases such overbidding by promoting a better understanding of the strategy-proofness property in the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to find the benefit in telling the truth; however, our observations show that introducing advice on the property of strategy-proofness helps them behave “correctly.”

This paper uses laboratory experiments to study subjects’ assessment of uncertainty resulting from strategic and non-strategic decisions of other players. Nonstrategic events are defined by the colors of balls drawn from urns, whereas strategic events are defined by the action choice in Stag Hunt (SH) and Prisoners’ Dilemma (PD) games. We elicit subjects’ matching probabilities and examine if they satisfy the law of probability including monotonicity and additivity. Violations from the law are observed for both uncertainty sources, but are more substantial for strategic uncertainty. In particular, we observe a coordination fallacy, a violation of monotonicity whereby the probability weight placed on a symmetric coordination profile of the games exceeds that placed on the corresponding action choice. The violation is found to be severer for an efficient coordination profile.

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 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 could be explained by probability weighting.

We employed a game-theoretic framework to formulate and analyze a number of tax audit rules, especially the lowest income reporter audited rule. We explicitly considered the auditor’s resource constraint to choose one target from a continuous type of taxpayer. We then tested the theoretical predictions in a laboratory experiment, using three audit rules: the random, cut-off, and lowest income reporter audited rules. While the cut-off rule is known to be optimal in theory, it has not thus far been examined in a controlled laboratory experimental setting. Contrary to the theory, the lowest income reporter audited rule increased average compliance behavior significantly more compared with the optimal cut-off rule and, especially, the random rule. This holds with and without controlling the subjects’ demographics and attitudes regarding tax payment. This finding is practically important because the tax authorities in most countries assign higher priority to enhancing tax compliance.

We employed a game-theoretic framework to formulate and analyze a number of tax audit rules, especially the lowest income reporter audited rule. We explicitly considered the auditor’s resource constraint to choose one target from a continuous type of taxpayer. We then tested the theoretical predictions in a laboratory experiment, using three audit rules: the random, cut-off, and lowest income reporter audited rules. While the cut-off rule is known to be optimal in theory, it has not thus far been examined in a controlled laboratory experimental setting. Contrary to the theory, the lowest income reporter audited rule increased average compliance behavior significantly more compared with the optimal cut-off rule and, especially, the random rule. This holds with and without controlling the subjects’ demographics and attitudes regarding tax payment. This finding is practically important because the tax authorities in most countries assign higher priority to enhancing tax compliance.

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 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 could be explained by probability weighting.