Norm-based accounts of social behavior in economics typically reflect tradeoffs between maximization of own consumption utility and conformity to social norms. Theories of norm-following tend to assume that there exists a single, stable, commonly known injunctive social norm for a given choice setting and that each person has a stable propensity to follow social norms. We collect panel data on 1468 participants aged 11–15 years in Belfast, Northern Ireland and Bogotá, Colombia in which we measure norms for the dictator game and norm-following propensity twice at 10 weeks apart. We test these basic assumptions and find that norm-following propensity is stable, on average, but reported norms show evidence of change. We find that individual-level variation in reported norms between people and within people across time has interpretable structure using a series of latent transition analyses (LTA) which extend latent class models to a panel setting. The best fitting model includes five latent classes corresponding to five sets of normative beliefs that can be interpreted in terms of what respondents view as “appropriate” (e.g. equality vs. generosity) and how they view deviations (e.g. deontological vs. consequentialist). We also show that a major predictor of changing latent classes over time comes from dissimilarity to others in one’s network. Our application of LTA demonstrates how researchers can engage with heterogeneity in normative perceptions by identifying latent classes of beliefs and deepening understanding of the extent to which norms are shared, stable, and can be predicted to change. Finally, we contribute to the nascent experimental literature on the economic behavior of children and adolescents.

We offer a novel test of whether non-binding goals set ahead of a task are effective motivators, taking into account that individuals in principle could easily revise these goals. In our setting, subjects either set a goal some days prior to an online task (early goal) or right at the start of the task (late goal). Two further treatments allow for (unanticipated) explicit revision of the early goal. We observe that (i) early goals are larger than late goals; (ii) subjects who set early goals work more than those who only set a late goal if they explicitly revise their goal and are reminded about their revised goal. A secondary contribution of our paper is that our design addresses a treatment migration problem present in earlier studies on goals that stems from the fact that subjects in a ‘no goals’ control condition may privately set goals.

We propose a novel experimental method that disentangles strategically- and non-strategically-motivated behavior. We apply it to an indefinitely-repeated prisoner's dilemma game to observe simultaneously how the same individual behaves in situations with future interaction and in situations with no future interaction, while controlling for expectations. This method allows us to determine the extent to which strategically-cooperating individuals are responsible for the observed pattern of cooperation in experiments with repeated interaction, including the so-called endgame effect. Our results indicate that the most common motive for cooperation in repeated games is strategic.

This paper examines the effects of alternative assumptions regarding the curvature of utility upon estimated discount rates in experimental data. To do so, it introduces a novel design to elicit time preference building upon a translation of the Holt and Laury method for risk. The results demonstrate that utility elicited directly from choice over time is significantly concave, but far closer to linear than utility elicited under risk. As a result, the effect of adjusting discount rates for this curvature is modest compared to assuming linear utility, and considerably less than when utility from a risk preference task is imposed.

This paper reports a new and significant experimental demonstration that market participants adjust their bids towards the price observed in previous market periods when—by design—individuals’ values should not be affiliated with the market price. This demonstration implies that market prices may not adjust as standard comparative statics predicts and emphasizes the significance of social aspects even in market contexts. Hence, the present study shows that market behaviour is not anomaly-free. Indeed, market behaviour does not reveal the underlying true preferences but rather context-dependent preferences.

Charitable donations provide positive externalities and can potentially be increased with an understanding of donor preferences. We obtain a uniquely comprehensive characterization of donation motives using an experiment that varies treatments between and within subjects. Donations are increasing in peers’ donations and past subjects’ donations. These and other results suggest a model of heterogeneous beliefs about the social norm for giving. Estimation of such a model reveals substantial heterogeneity in subjects’ beliefs about and adherence to the norm. A simple fundraising strategy increases donations by an estimated 30% by exploiting previously unstudied correlations between dimensions of donor preferences.

In a best-shot public good, where the provision level is determined by the highest contribution instead of the sum of all contributions, there is potential for waste and underprovision due to coordination failure. These failures are exacerbated when agents are identical because there is no focal point to guide coordination. In most real-world best-shot public-good situations, however, heterogeneity exists in the ability to contribute and the benefits received from the good. With such differences, shared expectations might emerge to improve coordination and increase efficiency. Using laboratory experiments, we find significant behavioral responses to heterogeneity that improve efficiency, but not always from increased coordination.

Widespread evidence from psychology and neuroscience documents that previous choices unconditionally increase the later desirability of chosen objects, even if those choices were uninformative. This is problematic for economists who use choice data to estimate latent preferences, demand functions, and social welfare. The evidence on this mere choice effect, however, exhibits serious shortcomings which prevent evaluating its possible relevance for economics. In this paper, we present a novel, parsimonious experimental design to test for the economic validity of the mere choice effect addressing these shortcomings. Our design uses well-defined, monetary lotteries, all decisions are incentivized, and we effectively randomize participants’ initial choices without relying on deception. Results from a large, pre-registered online experiment find no support for the mere choice effect. Our results challenge conventional wisdom outside economics. The mere choice effect does not seem to be a concern for economics, at least in the domain of decision making under risk.

Reciprocation of monetary gifts is well-understood in economics. In contrast, there is little research on reciprocal behavior following immaterial gifts like compliments. We narrow this gap and investigate how employees reciprocate after receiving immaterial gifts and material gifts over time. We purchase (1) ice cream from fast food restaurants, and (2) durum doner, a common lunch snack, from independent vendors. Prior to the food’s preparation, we either compliment or tip the salesperson. We find that salespersons reciprocate compliments with higher product weight than in a control treatment. Importantly, this reciprocal behavior following immaterial gifts grows over repeated transactions. Tips, in contrast, have a stronger level effect which does not change over time.

The common-ratio effect and the Allais Paradox (common-consequence effect) are the two best‐known violations of Expected Utility Theory. We reexamine data from 39 articles reporting experiments (143 designs/parameterizations, 14,909 observations) and find that the common-ratio effect is systematically affected by experimental design and implementation choices. The common-ratio effect is more likely to be observed in experiments with a low common-ratio factor, a high ratio of middle to highest outcome, when lotteries are presented as simple probability distributions (not in a compound/frequency form), and with high hypothetical incentives.

Rationality is a fundamental pillar of Economics. It is however unclear if this assumption holds when decisions are made under stress. To answer this question, we design two laboratory experiments where we exogenously induce physiological stress in participants and test the consistency of their choices with economic rationality. In both experiments we induce stress with the Cold Pressor test and measure economic rationality by the consistency of participants’ choices with the Generalized Axiom of Revealed Preference (GARP). In the first experiment, participants delay the decision-making task for 20 min until the cortisol level peaks. We find significant differences in cortisol levels between the stressed group and the placebo group which, however, do not affect the consistency of choices with GARP. In a second experiment, we study the immediate effect of the stressor on rationality. Overall, results from the second experiment confirm that rationality is not impaired by the stressor. If anything, we observe that compared to the placebo group, participants are more consistent with rationality immediately after the stressor. Our findings provide strong empirical support for the robustness of the economic rationality assumption under physiological stress.

Favor trading is common. We do something nice for someone and they do something nice in return. Several motives might underlie such behavior, including altruism, strategic motives, and direct or indirect positive reciprocity. It is not yet well-understood how these fit together to affect behavior, how they interact in various institutional structures, and how they play out over time. We use a laboratory experiment to study the elements and dynamics of favor trading in a particular setting: the private provision of a public good. In our experiment, giving subjects the ability to practice targeted reciprocity by making a simple, low-cost change in information provision increases contributions to the public good by 14 %. Subjects reward group members who have previously been generous to them and withhold rewards from ungenerous group members. Strategic concerns cannot explain all of this behavior, and it must be at least partly due to direct reciprocity. When someone cannot directly benefit from favor trading, he gives much less to the public good. People thus excluded from the “circle of reciprocity” provide a clean and strict test of indirect reciprocity. Contrary to previous studies in the literature, we do not observe indirect reciprocity.

Is the assumption that people automatically know their own preferences innocuous? We present an experiment studying the limits of preference discovery. If tastes must be learned through experience, preferences for some goods may never be learned because it is costly to try new things, and thus non-learned preferences may cause welfare loss. We conduct an online experiment in which finite-lived participants have an induced utility function over fictitious goods about whose marginal utilities they have initial guesses. Subjects learn most, but not all, of their preferences eventually. Choice reversals occur, but primarily in early rounds. Subjects slow their sampling of new goods over time, supporting our conjecture that incomplete learning can persist. Incomplete learning is more common for goods that are rare, have low initial value guesses, or appear in choice sets alongside goods that appear attractive. It is also more common for people with lower incomes or shorter lifetimes. More noise in initial value guesses has opposite effects for low-value and high-value goods because it affects the perceived likelihood that the good is worth trying. Over time, subjects develop a pessimistic bias in beliefs about goods’ values, since optimistic errors are more likely to be corrected. Overall, our results show that if people need to learn their preferences through consumption experience, that learning process will cause choice reversals, and even when a person has completed sampling the goods she is willing to try, she may continue to lose welfare because of suboptimal choices that arise from non-learned preferences.

Altruistic punishment is often thought to be a major enforcement mechanism of social norms. I present experimental results from a modified version of the dictator game with third-party punishment, in which third parties can remain ignorant about the choice of the dictator. I find that a substantial fraction of subjects choose not to reveal the dictator’s choice and not to punish the dictator. I show that this behavior is in line with the social norms that prevail in a situation of initial ignorance. Remaining ignorant and choosing not to punish is not inappropriate. As a result, altruistic punishment is significantly lower when the dictator’s choice is initially hidden. The decrease in altruistic punishment leads to more selfish dictator behavior only if dictators are explicitly informed about the effect of willful ignorance on punishment rates. Hence, in scenarios in which third parties can ignore information and dictators know what this implies, third-party punishment may only ineffectively enforce social norms.

We investigate the implications of Salience Theory for the classical preference reversal phenomenon, where monetary valuations contradict risky choices. It has been stated that one factor behind reversals is that monetary valuations of lotteries are inflated when elicited in isolation, and that they should be reduced if an alternative lottery is present and draws attention. We conducted two preregistered experiments, an online choice study ($N=256$) and an eye-tracking study ($N=64$), in which we investigated salience and attention in preference reversals, manipulating salience through the presence or absence of an alternative lottery during evaluations. We find that the alternative lottery draws attention, and that fixations on that lottery influence the evaluation of the target lottery as predicted by Salience Theory. The effect, however, is of a modest magnitude and fails to translate into an effect on preference reversal rates in either experiment. We also use transitions (eye movements) across outcomes of different lotteries to study attention on the states of the world underlying Salience Theory, but we find no evidence that larger salience results in more transitions.

We show that, if giving is equivalent to not taking, impure altruism could account for List’s (in Journal of Political Economy 115(3):482–493, 2007) finding that the payoff to recipients in a dictator game decreases when the dictator has the option to take. We examine behavior in dictator games with different taking options but equivalent final payoff possibilities. We find that recipients tend to earn more as the amount the dictator must take to achieve a given final payoff increases, a result consistent with the hypothesis that the cold prickle of taking is stronger than the warm glow of giving. We conclude that not taking is not equivalent to giving and agree with List (in Journal of Political Economy 115(3):482–493, 2007) that the current social preference models fail to rationalize the observed data.

We present an interactive eye-tracking study that explores the strategic use of gaze. We analyze gaze behavior in an experiment with four simple games. The game can either be a competitive (hide & seek) game in which players want to be unpredictable, or a game of common interest in which players want to be predictable. Gaze is transmitted either in real time to another subject, or it is not transmitted and therefore non-strategic. We find that subjects are able to interpret non-strategic gaze, obtaining substantially higher payoffs than subjects who do not see gaze. If gaze is transmitted in real time, gaze becomes more informative in the common interest games and players predominantly succeed to coordinate on efficient outcomes. In contrast, gaze becomes less informative in the competitive game.

Previous experimental research suggests that individuals apply rules of thumb to a simplified mental model of the “real” decision problem. We claim that this simplification is obtained either by neglecting the other players’ incentives and beliefs or by taking them into consideration only for a subset of game outcomes. We analyze subjects’ eye movements while playing a series of two-person, 3 × 3 one-shot games in normal form. Games within each class differ by a set of descriptive features (i.e., features that can be changed without altering the game equilibrium properties). Data show that subjects on average perform partial or non-strategic analysis of the payoff matrix, often ignoring the opponent´s payoffs and rarely performing the necessary steps to detect dominance. Our analysis of eye-movements supports the hypothesis that subjects use simple decision rules such as “choose the strategy with the highest average payoff” or “choose the strategy leading to an attractive and symmetric outcome” without (optimally) incorporating knowledge on the opponent’s behavior. Lookup patterns resulted being feature and game invariant, heterogeneous across subjects, but stable within subjects. Using a cluster analysis, we find correlations between eye-movements and choices; however, applying the Cognitive Hierarchy model to our data, we show that only some of the subjects present both information search patterns and choices compatible with a specific cognitive level. We also find a series of correlations between strategic behavior and individual characteristics like risk attitude, short-term memory capacity, and mathematical and logical abilities.

Afriat’s (Int Econ Rev 14(2): 460–472, 1973) critical cost efficiency index is often used to measure the extent to which experimental choice data violate the axioms of revealed preference. Under certain conditions, the index yields a value of one—which typically signifies rational choice—when, in fact, the choice violates the axioms. We term this a cost efficient violation (CEV) of the axioms, clarify the conditions under which it arises, and find that CEVs comprise the majority of violations in three of four studies reviewed. We suggest changes in experiment design to eliminate or reduce the likelihood of CEVs.

In this study, we conduct a laboratory experiment in which the subjects make choices between real-world lottery tickets typically purchased by lottery customers. In this way, we can reliably offer extremely high potential payoffs, something rarely possible in economic experiments. In a between-subject design, we separately manipulate several features that distinguish the situation faced by the customers in the field and by subjects in typical laboratory experiments. We also have the unique opportunity to compare our data to actual sales data provided by the operator of the lottery. We find the distributions to be highly similar (meaning high external validity for this particular setting). The only manipulation that makes a major difference is that when the probabilities of winning specific amounts are explicitly provided (which is not the case in the field), choices shift towards options with lower maximum possible payoff and lower payoff variance. We also find that subjects generally show preference for long shots and that standard laboratory measures of risk posture fail to explain their behavior in the main task.