We report the results of an experiment on selective exposure to information. A decision maker interested in learning about an uncertain state of the world can acquire information from one of two sources that have opposite biases: when informed on the state, they report it truthfully; when uninformed, they report their favorite state. A Bayesian decision-maker is better off seeking confirmatory information unless the source biased against the prior is sufficiently more reliable. In line with the theory, subjects are more likely to seek confirmatory information when sources are symmetrically reliable. On the other hand, when sources are asymmetrically reliable, subjects are more likely to consult the more reliable source even when prior beliefs are strongly unbalanced and this source is less informative. Our experiment suggests that base rate neglect and simple heuristics (e.g., listen to the most reliable source) are important drivers of the endogenous acquisition of information.

We compare different forms of communication in the context of cheap talk sender-receiver games. While previous experiments find evidence supporting the comparative statics prediction that more preference divergence leads to less information transmission, there is also a consistent pattern of overcommunication and exaggeration, not predicted by theory, in which subjects convey more information than predicted in equilibrium. The latter of these findings may be due to the restricted nature of the message space in most experimental cheap talk games, encouraging subjects to engage in exaggeration artificially, rather than allowing it to emerge naturally. We tested this hypothesis with an incentivized lab experiment, and found evidence both phenomena persist with natural language (text-based) communication. Moreover, we probe the consequences of this expanded message space for outcomes, showing that senders benefit more than receivers, but that the most notable effect is that text messages improve efficiency.

Although evidence suggests men are more generous to women than to men, it may stem from paternalism and could reverse when women excel in important skills for one’s career success, such as cognitive skills. Using a dictator game, this paper studies whether male dictators allocate less to female receivers than to male receivers when these receivers have higher intelligence quotients (IQs) than dictators. By exogenously varying the receivers’ IQ relative to the dictators’, I do not find evidence consistent with this hypothesis; if anything, male dictators allocate slightly more to female receivers with higher IQs than to male receivers with equivalent IQs. The results hold both in mean and distribution and are robust to the so-called “beauty premium.” Also, female dictators’ allocations are qualitatively similar to male dictators. These findings suggest that women who excel in cognitive skills may not receive less favorable treatment than equally intelligent men in the labor market.

We propose a two-sided market entry game and present experiments studying coordination behavior in the game. The two-sided market in the game is operated by an intermediary monopoly platform, serving two sides (i.e., customers and service providers) and featuring asymmetric agents, cross-side network effects, and endogenous market capacity. The game has multiple pure-strategy Nash equilibria if at least one side has a high willingness to enter the market and the other side’s willingness is not very low. We conduct a laboratory experiment involving three treatments corresponding to different combinations of willingness to enter the market among customers and service providers. The experimental results indicate that willingness to enter the market and cross-side network effects significantly influence coordination behavior in two-sided markets. When the multiple pure-strategy Nash equilibria are Pareto ranked on both sides, customers and service providers can coordinate their behavior to the payoff-dominant equilibrium via tacit coordination under strategic uncertainty. However, when the multiple pure-strategy Nash equilibria are Pareto ranked on one side but Pareto equivalent on the other side, coordination failure and disequilibrium occurred, and the equilibria cannot predict the aggregate behavior well. Our experimental results indicate that a thriving two-sided market should coordinate both sides on board.

Using a laboratory experiment, we investigate complexity in decision problems as a cause of failures in contingent reasoning. For this purpose, we introduce three dimensions of complexity to a decision problem: the number of contingencies, the dominance property of choices, and reducible states. Each decision problem is designed to reflect variations in complexity across the three dimensions. Experimental results show that the number of contingencies has the most significant effect on failures in contingent reasoning. The second dimension, the dominance property of choices, also has a statistically significant effect, though the effect size is smaller than in the existing literature. In contrast, the third complexity dimension has no impact; presenting the decision problem in a reduced or reducible form does not change subjects’ performance on contingent reasoning. Additionally, we examine the Power of Certainty and show its existence. This effect is particularly pronounced when the number of contingencies is large.

We conduct a laboratory experiment among male participants to investigate whether rewarding schemes that depend on work performance—in particular, tournament incentives—induce more stress than schemes that are independent of performance—fixed payment scheme. Stress is measured over the entire course of the experiment at both the hormonal and psychological level. Hormonal stress responses are captured by measuring salivary cortisol levels. Psychological stress responses are measured by self-reported feelings of stress and primary appraisals. We find that tournament incentives induce a stress response whereas a fixed payment does not induce stress. This stress response does not differ significantly across situations in which winners and losers of the tournament are publically announced and situations in which this information remains private. Biological and psychological stress measures are positively correlated, i.e. increased levels of cortisol are associated with stronger feelings of stress. Nevertheless, neither perceived psychological stress nor elevated cortisol levels in a previous tournament predict a subsequent choice between tournaments and fixed payment schemes, indicating that stress induced by incentives schemes is not a relevant criterion for sorting decisions in our experiment. Finally, we find that cortisol levels are severely elevated at the beginning of the experiment, suggesting that participants experience stress in anticipation of the experiment per se, potentially due to uncertainties associated with the unknown lab situation. We call this the novelty effect.

We introduce two novel matching mechanisms, Reverse Top Trading Cycles (RTTC) and Reverse Deferred Acceptance (RDA), with the purpose of challenging the idea that the theoretical property of strategy-proofness induces high rates of truth-telling in economic experiments. RTTC and RDA are identical to the celebrated Top Trading Cycles (TTC) and Deferred Acceptance (DA) mechanisms, respectively, in all their theoretical properties except that their dominant-strategy equilibrium is to report one’s preferences in the order opposite to the way they were induced. With the focal truth-telling strategy being out of equilibrium, we are able to perform a clear measurement of how much of the truth-telling reported for strategy-proof mechanisms is compatible with rational behaviour and how much of it is caused by confused decision-makers following a default, focal strategy without understanding the structure of the game. In a school-allocation setting, we find that roughly half of the observed truth-telling under TTC and DA is the result of naïve (non-strategic) behaviour. Only 14–31% of the participants choose actions in RTTC and RDA that are compatible with rational behaviour. Furthermore, by looking at the responses of those seemingly rational participants in control tasks, it becomes clear that most lack a basic understanding of the incentives of the game. We argue that the use of a default option, confusion and other behavioural biases account for the vast majority of truthful play in both TTC and DA in laboratory experiments.

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

We report on an experiment conducted to evaluate the effects of varying the way in which market information is presented to participants in laboratory Cournot duopolies. We find that the most standard variations, which are the use of a profit table or a profit calculator, yield indistinguishable performance. However, the addition of a best-response option to the profit calculator tends to increase aggregate output to the Cournot level and decrease the incidence of tacit collusion.

Leadership mechanisms provide a potential means to mitigate social dilemmas, but empirical evidence on the success of such mechanisms is mixed. In this paper, we explore the institutional frame as a relevant factor for the effectiveness of leadership. We compare subjects’ behavior in public-goods experiments that are either framed positively (give-some game) or negatively (take-some game). We observe that leader and follower decisions are sensitive to the institutional frame. Leaders contribute less in the take-some game, and the correlation between leaders’ and followers’ contribution is weaker in the take-some game. Additionally, using a strategy method to elicit followers’ reactions at the individual level, we find evidence for the malleability of followers’ revealed cooperation types. Taken together, the leadership institution is found to be less efficient in the take- than in the give-frame, both in games that are played only once and repeatedly.

Many democratic decision making institutions involve quorum rules. Such rules are commonly motivated by concerns about the “legitimacy” or “representativeness” of decisions reached when only a subset of eligible voters participates. A prominent example of this can be found in the context of direct democracy mechanisms, such as referenda and initiatives. We conduct a laboratory experiment to investigate the consequences of the two most common types of quorum rules: a participation quorum and an approval quorum. We find that both types of quora lead to lower participation rates, dramatically increasing the likelihood of full-fledged electoral boycotts on the part of those who endorse the Status Quo. This discouraging effect is significantly larger under a participation quorum than under an approval quorum.

This paper studies the effects of social status—a socially recognized ranking of individuals—on prosocial behavior. We use a laboratory experiment and propose a theory to address this issue. In a one-shot game, two players, whose social status is either earned or randomly assigned, jointly make effort contributions to a project. Player 1 first suggests an effort level for each player to player 2 who then determines the actual effort levels. Deviation from the proposal is costly. We find causal evidence that high-status players are less selfish than their low-status counterparts. In particular, high-status players 2 provide relatively more effort, ceteris paribus, than those with low status. The experimental results and theoretical framework suggest that a high social ranking yields more social behavior and that this can be attributed to the sense of responsibility that it gives.

This paper studies how social ties interact with bribery and corruption. In the laboratory, subjects are in triads where two ‘performers’ individually complete an objective real-effort task and an evaluator designates one of them as the winner of a monetary prize. In one treatment dimension, we vary whether performers can bribe the evaluator—where any bribe made is non-refundable, irrespective of the evaluator’s decision. A second treatment dimension varies the induced social ties between the evaluator and the performers. The experimental evidence suggests that both bribes and social ties may corrupt evaluators’ decisions. Bribes decrease the importance of performance in the decision. The effect of social ties is asymmetric. While performers’ bribes vary only little with their ties to the evaluator, evaluators exhibit favoritism based on social ties when bribes are not possible. This ‘social-tie-based’ corruption is, however, replaced by bribe-based corruption when bribes are possible. We argue that these results have concrete consequences for possible anti-corruption policies.

When multiple charities, social programs and community projects simultaneously vie for funding, donors risk mis-coordinating their contributions leading to an inefficient distribution of funding across projects. Community chests and other intermediary organizations facilitate coordination among donors and reduce such risks. To study this, we extend a threshold public goods framework to allow donors to contribute through an intermediary rather than directly to the public goods. Through a series of experiments, we show that the presence of an intermediary increases public good success and subjects’ earnings only when the intermediary is formally committed to direct donations to socially beneficial goods. Without such a restriction, the presence of an intermediary has a negative impact, complicating the donation environment, decreasing contributions and public good success.

Does loss aversion apply to social image concerns? In a laboratory experiment, we first induce social image in a relevant domain, intelligence, through public ranking. In a second stage, subjects experience a change in rank and are offered scope for lying to improve their final, also publicly reported rank. Subjects who care about social image and experience a decline in rank lie more than those experiencing gains. Moreover, we document a discontinuity in lying behavior when moving from rank losses to gains. Our results are in line with loss aversion in social image concerns.

This paper is concerned with multi-object, multi-unit auctions with a budget constrained auctioneer who has noisy value estimates for each object. We propose a new allocation mechanism, the endogenous reference price auction, with two key features. First, bids are normalized across objects using “reference prices.” Second, reference prices are set endogenously using information extracted from the bids submitted. We report on an experiment showing that a simple endogenous process mitigates value inaccuracies and improves three performance measures: the seller’s profit, allocative efficiency and total surplus. These results have important implications for large auctions used in practice.

A growing number of experimental studies focus on the differences between the lab and the field. One important difference between many lab and field experiments is how the endowment is obtained. By conducting a dictator game experiment, we investigate the influences of windfall and earned endowment on behavior in the laboratory and in the field. We find subjects donate more in both environments if the endowment is a windfall gain. However, although the experimental design was intended to control for all effects other than environment, there are significant differences in behavior between the lab and the field for both windfall and earned endowment. This points to the importance of discussing the context when interpreting both laboratory and field experiment results as well as when conducting replication studies.

When every individual’s effort imposes negative externalities, self-interested behavior leads to socially excessive effort. To curb these excesses when effort cannot be monitored, competing output-sharing partnerships can form. With the right-sized groups, aggregate effort falls to the socially optimal level. We investigate this theory experimentally and find that while it makes correct qualitative predictions, there are systematic quantitative deviations, always in the direction of the socially optimal investment. Using data on subjects’ conjectures of each other’s behavior we investigate altruism, conformity and extremeness aversion as possible explanations. We show that deviations are consistent with both altruism and conformity (but not extremeness aversion).

The paper examines whether an institution has a differing impact on cooperation if it is introduced by a representative of the affected subjects rather than exogenously imposed. The experimental design controls for selection effects arising from the endogenous policy choice. The treatment varies whether the decision-maker is elected or randomly appointed. There is evidence of a large democracy premium in the sense that endogenously chosen institutions lead to more cooperation than identical exogenous institutions, but only if the group leader is democratically chosen. Especially the subjects who initially did not prefer the policy are more likely to cooperate if it was brought about by an elected representative. There is no democracy premium for randomly appointed group leaders.

We experimentally study the effects of allotment—the division of an item into homogeneous units—in independent private value auctions. We compare a bundling first-price auction with two equivalent treatments where allotment is implemented: a two-unit discriminatory auction and two simultaneous single-unit first-price auctions. We find that allotment in the form of a discriminatory auction generates a loss of efficiency with respect to bundling. In the allotment treatments, we observe large and persistent bid spread, and the discriminatory auction is less efficient than simultaneous auctions. We provide a unified interpretation of our results that is based on both a non-equilibrium response to the coordination problem characterizing the simultaneous auction format and a general class of behavioral preferences that includes risk aversion, joy of winning and loser’s regret as specific cases.