Despite substantial evidence for the effectiveness of monetary incentives, some experiments have shown that high-powered incentives might lead to lower performance than lesser incentives. This study explores whether firms have means to counter these potential negative effects. Building on a standard experimental design identifying the drawbacks of large-stake rewards, it shows that when workers either self-select into the task or have prior practice, high-powered incentives lead to higher average performance than a smaller reward. This effect is driven mainly by selection and practice increasing the share of workers who respond positively to high-powered incentives. These results suggest that firms have natural instruments to deal with the potential adverse effects of high-powered incentives.

We conduct an experiment where participants make choices between completing a task now or waiting to complete it in the future. We vary the dates when a task can be completed and the effort required at each date. We infer participants’ preferences for when to complete a task and their expectations about how their future preferences will differ from their current ones. Our findings indicate that most participants prefer to complete tasks immediately, even if it demands more effort than waiting. Their choices generally align with the principles of time consistency, monotonicity, and time invariance. We show that quasi-hyperbolic discounting, anticipatory utility, fixed costs, decision costs, and cost-of-keeping-track are all unable to provide a reasonable account of both our findings and related experiments.

Pro-social individuals typically face a trade-off between their monetary incentives and their other-regarding preferences. When this is the case, they may be tempted to exploit the uncertainty in their decision environment to reconcile this trade-off. In this paper, we investigate whether individuals with belief-dependent preferences acquire information about others’ expectations in a self-serving way. We present a model of endogenous information acquisition and test our theoretical predictions in an online experiment based on a modified trust-game in which the trustee is uncertain about the trustor’s expectations. Our experimental design enables us to (1) identify participants with belief-based preferences and (2) investigate their information acquisition strategy. Consistent with our predictions for subjective belief-dependent preferences, we find that most individuals classified as belief-dependent strategically select their source of information to avoid the cost of their conscience.

When the editors of Experimental Economics received news of Amnon Rapoport's passing in 2022, we immediately thought it appropriate to honor his contributions to the community of experimental researchers in economics, psychology, and related disciplines with a special issue. Amnon's impacts in social science research are wide-spread and profound. They span a broad set of topics, largely under the theme of understanding human decision making in complex environments that are challenging to analyze theoretically and that require careful and thoughtful designs to investigate experimentally. He was a pioneer in using experimental methods to understand the world, and always had an open mind to novel questions and approaches.

To investigate whether attention responds rationally to strategic incentives, we experimentally implement a buyer-seller game in which a fully informed seller makes a take-it-or-leave-it offer to a buyer who faces cognitive costs to process information about the offer's value. We isolate the impact of seller strategies on buyer attention by exogenously varying the seller's outside option, which leads sellers to price high more often. We find that buyers respond by making fewer mistakes conditional on value, which suggests that buyers exert higher attentional effort in response to the increased strategic incentives for paying attention. We show that a standard model of rational inattention based on Shannon mutual information cannot fully explain this change in buyer behavior. However, we identify another class of rational inattention models consistent with this behavioral pattern.

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 studies use “real” effort designs for laboratory experiments where subjects complete an actual task to exert effort rather than using a stylized effort design where subjects simply choose an effort level from a predefined set. The commonly argued reason for real effort is that it makes the results more generalizable and field relevant. We investigate the nature of modeling effort provision by first trying to provide a clear theoretical understanding of the nature of effort costs. We then empirically examine claims about the differences between real effort and stylized effort. A key to our examination is ensuring that we compare the two modes of effort provision keeping effort costs constant, which is a point overlooked in many past examinations. In our data, when controlling for effort costs, we find no differences in behavior between real and stylized effort. Given the importance of effort costs and the lack of a generally accepted way to include them in real effort designs, we provide a simple add-on that any researcher can use with their real effort experiments to incorporate a theoretically appropriate and controlled cost of effort even in a real effort setting. We also discuss ways to better approach modeling effort costs in experiments, whether one is conducting real or stylized designs, to improve inference on research questions.

We compare the first-price sealed-bid (FPSB) auction and the simultaneous multiple-round auction (SMRA) in an environment based on the recent sale of 900 MHz spectrum in Australia. Three bidders compete for five indivisible items. Bidders can win at most three items and need to obtain at least two to achieve profitable scale, i.e. items are complements. Value complementarities, which are a common feature of spectrum auctions, exacerbate the “fitting problem” and undermine the usual logic for superior price discovery in the SMRA. We find that the FPSB outperforms the SMRA across a range of bidding environments: in terms of efficiency, revenue, and protecting bidders from losses due to the exposure problem. Moreover, the FPSB exhibits superior price discovery and almost always results in competitive (“core”) prices unlike the SMRA, which frequently produces prices that are too low because of demand-reduction or too high because of the exposure problem. We demonstrate the robustness of our findings by considering two-stage variants of the FPSB and SMRA as well as environments in which bidders know their own values but not the distributions from which values are drawn.

Empirical studies of ambiguity aversion mostly use artificial events such as Ellsberg urns to control for unknown probability beliefs. The present study measures ambiguity attitudes using real-world events in a large sample of investors. We elicit ambiguity aversion and perceived ambiguity for a familiar company stock, a local stock index, a foreign stock index, and Bitcoin. Measurement reliability is higher than for artificial sources in previous studies. Ambiguity aversion is highly correlated for different assets, while perceived ambiguity varies more between assets. Further, we show that ambiguity attitudes are related to actual investment choices.

This article presents a new approach to understanding strategic decision making inspired by the mathematics of quantum theory. Empirical support for this new approach is based on five different puzzling findings from past work on the prisoner dilemma game including the disjunction effect, the interference of predictions on actions in simultaneous and sequential games, question order effect, and the effects of cheap promises. Eight different quantum models are described, which purport to account for these puzzling findings. The competing models are systematically compared with respect to their capability of accounting for the five empirical findings.

Using double auction market experiments with both human and agent traders, we demonstrate that agent traders prioritising low latency often generate, sometimes perversely so, diminished earnings in a variety of market structures and configurations. With respect to the benefit of low latency, we only find superior performance of fast-Zero Intelligence Plus (ZIP) buyers to human buyers in balanced markets with the same number of human and fast-ZIP buyers and sellers. However, in markets with a preponderance of agents on one side of the market and a noncompetitive market structure, such as monopolies and duopolies, fast-ZIP agents fall into a speed trap. In such speed traps, fast-ZIP agents capture minimal surplus and, in some cases, experience near first-degree price discrimination. In contrast, the trader performance of slow-ZIP agents is comparable to that of human counterparts, or even better in certain market conditions.

Using public goods games in a laboratory setting, we study team-level production, where two teams compete for the resources of a common-member who can benefit from and provide effort in both teams. Intrinsically, the common-member faces divided loyalties. We examine such competition in a setting in which the common-member has productive abilities equal to that of the other team members (dedicated-members), and in two settings where he/she has greater relative potential. When effort (contributions) by the common-member have greater productivity (coupled with higher opportunity costs to contribute) in providing the public good relative to that of dedicated-members, we find team performance is not significantly increased. On the other hand, when the common-member has a greater endowment, sufficient to match the absolute contributions of team members in both teams, there is a significant increase in team performance. The evidence suggests that a norm of reciprocity by dedicated-members based on absolute contributions of the common-member better explains behavior than a norm based on the value added of the common-member's contributions. This behavior, along with fairness norms elicited in a survey, suggests that on average dedicated members do not sufficiently incorporate the common-members' higher opportunity costs in the treatment where his/her productivity is increased. This setting provides an important illustration of where the behavioral response to the type of inequality matters, leading to differences in team efficiency.

We examine whether the way individuals randomize between options captures their decision confidence. In two experiments in which subjects faced pairs of options (a lottery and a varying sure payment), we allowed subjects to choose randomization probabilities according to which they would receive each option. Separately, we obtained two measures of self-reported confidence - confidence statements and probabilistic confidence - for choosing between the two options. Consistent with the predictions of two theoretical frameworks incorporating preference uncertainty, the randomization probabilities correlated strongly with both self-reported measures (median Spearman correlations between 0.86 to 0.89) and corresponded in absolute levels to probabilistic confidence. This relationship is robust to two exogenous manipulations of decision confidence, where we varied the complexity of the lottery and subjects’ experience with the lottery.

The presence of financial constraints changes traditional auction theory predictions. In the case of multiple items, such constraints may affect revenue equivalence and efficiency of different auction formats. We consider a simple complete information setting with three financially constrained bidders and two items that have different values common to all the bidders. Using a laboratory experiment, we find that, as predicted by theory, it is more beneficial for the seller to sell the higher value item first. We then show that the first-price sealed-bid auction yields higher revenue than the English auction, with significant differences in learning of equilibrium strategies.

We provide the first direct test of how the credibility of an auction format affects bidding behavior and final outcomes. To do so, we conduct a series of laboratory experiments where the role of the seller is played by a human subject who receives the revenue from the auction and who (depending on the treatment) has agency to determine the outcome of the auction. Contrary to theoretical predictions, we find that the non-credible second-price auction fails to converge to the first-price auction. We provide a behavioral explanation for our results based on sellers’ aversion to rule-breaking, which is confirmed by an additional experiment.

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.

In a dyadic game, strategic asymmetric dominance occurs when a player's preference for one strategy A relative to another B is systematically increased by the addition of a third strategy Z, strictly dominated by A but not by B. There are theoretical and empirical grounds for believing that this effect should decline over repetitions, and other grounds for believing, on the contrary, that it should persist. To investigate this question experimentally, 30 participant pairs played 50 rounds of one symmetric and two asymmetric 3 × 3 games each having one strategy strictly dominated by one other, and a control group played 2 × 2 versions of the same games with dominated strategies removed. The strategic asymmetric dominance effect was observed in the repeated-choice data: dominant strategies in the 3 × 3 versions were chosen more frequently than the corresponding strategies in the 2 × 2 versions. Time series analysis revealed a significant decline in the effect over repetitions in the symmetric game only. Supplementary verbal protocol analysis helped to clarify the players’ reasoning and to explain the results.

I experimentally investigate whether there is a gender difference in advice giving in a gender-neutral task with varying difficulty in which the incentives of the sender and the receiver are perfectly aligned. I find that women are more reluctant to give advice compared to men for difficult questions. The gender difference in advice giving cannot be explained by gender differences in performance. Self-confidence explains some of the gender gap, but not all. The gender gap disappears if advice becomes enforceable. Introducing a model of guilt and responsibility, I discuss possible underlying mechanisms that are consistent with the findings.