Groups often agree that change is needed, but differing preferences and information may still lead to difficulty coordinating on a particular alternative. In a laboratory experiment, we study coordination and information aggregation in a divided-majority voting game with public information and conflicting preferences. Voters observe private signals and a public signal about whether alternative upper A $A$ A or upper B $B$ B is socially optimal. Unless sufficiently many voters agree, an inferior default upper C $C$ C occurs. When the public signal is more accurate than the private signal and voters have common preferences, most voters coordinate on the public signal. However, when public-signal accuracy is reduced or preferences conflict, voters follow the public signal less frequently. While reduced public-signal accuracy substantially increases the frequency of coordination failure, conflicting preferences between subgroups do not. These results highlight the importance of accurate public information in achieving collective action.
We experimentally investigate preferences for clumping-versus-separating information in the gain and the loss domains, and also preferences for timing. Our design is motivated by the idea that information preferences may depend on reference points. Subjects participate in two monetary lotteries and choose how to receive the outcome information. For half of the subjects, the lotteries are framed as two gain lotteries; for the other half, as two loss lotteries. Based on Thaler (1985) one can expect that people want to learn the outcomes of the gain lotteries separately and the outcomes of the loss lotteries clumped together (cf. hedonic editing hypothesis). On the other hand, a different reference dependent model by Koszegi and Rabin (2009) relies on expectations-based reference points, and predicts that subjects should prefer clumped information irrespective of the frame.The results of our experiment show a preference for separating information about gains, and no preference for clumping or separating information about losses. Regarding timing, we find a weak overall preference for receiving information sooner. These findings provide new insights into information preferences. We conclude by discussing policy implications, as well as our additional contributions to related literature.
In a $k$-replica Edgeworth box economy, we compare outcomes of laboratory markets in which human traders have different visualizations available on their screens. Novel visualizations include a heat map that shows at a glance the value of all feasible portfolios (i.e., final allocations); a geometric display of the order book; and order entry via point-and-click on the heat map. Efficiency metrics focus on allocations, prices and profitability. Compared to the traditional text-oriented trader screen for the continuous double auction, we find that the novel features generally increase all three efficiency metrics.
The Multiple Price List (MPL) and Switching Multiple Price List (sMPL) provide a useful framework for estimating preference parameters, most usually risk aversion, from a sample of experimental subjects or survey respondents. In this paper, we consider designs in which more than one sMPL is presented to each subject, allowing more than one preference parameter to be estimated simultanously, and we propose a consistent estimator in this setting - the Multivariate Heterogeneous Preference (MHP) estimator. Focusing on the bivariate case of two sMPLs and two preference parameters, we demonstrate that non-standard econometric techniques, namely Monte Carlo integration with importance sampling, are required to implement the MHP estimator. Via a Monte Carlo exercise, we show that our estimator has good finite-sample properties. Finally, we apply the MHP estimator to a real data set and compare the estimates to those obtained using an inconsistent estimator applied in previous studies.
The use of real monetary incentives has long defined experimental economics, setting it apart from disciplines like psychology, where hypothetical choices are common. While full-payment and hypothetical designs represent two clear extremes, random-payment incentive schemes - where one of several decisions is randomly selected for payment - have become a prominent approach in economics. Yet the behavioral validity of random-payment schemes remains underexamined: Do they more closely resemble fully incentivized tasks or hypothetical ones? We compare full-payment (participants paid for every decision), no-payment (participants not paid for any decision), and random-payment (participants paid for one randomly selected decision) incentive schemes, using five standard economic games to measure social preferences (Dictator Game, Ultimatum Game, Trust Game, Public Goods Game, and Prisoner's Dilemma). Results from Experiment 1 (n = 1,501), with 1 pound stakes, indicate no significant differences between incentive schemes in any of the games included or a composite measure of prosocial behavior. In Experiment 2 (n = 750), with 10 pound stakes, results were largely in line with Experiment 1, suggesting no consistent behavioral impact of incentive schemes at increased stakes. The one notable exception was responder behavior in the Ultimatum Game, where participants in the full-payment condition were less likely to reject offers compared to those in the no-payment condition, with random-payment falling in between. Our results challenge the rigid disciplinary norm that real stakes are essential for valid measurement and invite a more nuanced consideration of how and when different incentive schemes are necessary or appropriate in behavioral research.
We present and conduct a novel experiment on a multi-period beauty contest game. Leveraging the multi-period feature, we investigate how participants revise their forecasts in periods when new information-such as shocks or announcements-arrives and how they form their expectations in the absence of new information. We make two key contributions. First, we develop a new method based on forecast revisions to evaluate whether participants behave in a forward-looking manner. The experimental results show that participants do react to anticipated shocks: namely, the announcements of future shocks. Second, we identify a new strategic environment effect during periods without new information; only when the game exhibits strategic complementarity do participants use extrapolation and expect continuously rising prices. This finding suggests that expectation formation is endogenous to the economic environment; and policy design should thus take this endogeneity into account.
Theoretical insights dominate the literature examining the incentive compatibility of payment mechanisms. Despite their elegance, theoretical insights are rarely empirically validated. We fill this gap by empirically exploring the effects of frequently used payment mechanisms using a collective sample of over 3000 participants across two experiments. In Experiment 1, we obtained offer prices to sell a card, systematically varying between-subjects the way subjects received payments over repeated rounds, by either paying for all decisions (and various modifications) or just one, as well as making the payments certain, probabilistic, or purely hypothetical. While we find that the magnitude of the induced value and the range of the prices used to draw a random price significantly affect misbidding behavior, neither the payment mechanism nor the certainty of payment affected misbidding. In Experiment 2, we replaced the BDM mechanism with a Second Price-Auction and found similar results, albeit lower rates of misbidding behavior. Overall, our empirical exercise shows that theoretically relevant elements do not produce empirical differences, while design choices that are theoretically irrelevant produce empirical differences. As such, payment mechanism design considerations should carefully consider the choice architecture in addition to incentive compatibility.
Large Language Models (LLMs) have the potential to profoundly transform and enrich experimental economic research. We propose a new software framework, "alter_ego", which makes it easy to design experiments between LLMs and to integrate LLMs into oTree-based experiments with human subjects. Our toolkit is freely available at github.com/mrpg/ego. To illustrate, we run differently framed prisoner's dilemmas with interacting machines as well as with human-machine interaction. Framing effects in machine-only treatments are strong and similar to those expected from previous human-only experiments, yet less pronounced and qualitatively different if machines interact with human participants.
In various organizational settings, a team member is given the authority to make an investment decision that influences the value of the jointly produced surplus. We experimentally investigate the effect of asymmetric status, investment decisions, and the outcome of these decisions on bargaining behavior and outcomes. Agents' initial contributions to the surplus are determined by their relative performances in a real-effort task. Three treatments vary in how the final surplus value is determined. We observe that when low-contributors take a risk, they are punished (rewarded) for failure (success), whereas high-contributors receive a fixed share independent of the outcome. Analysis of bargaining process variables, subjects' communication during bargaining, and third parties' normative judgments provides further insights into the possible mechanism behind this observation.
We investigate whether time pressure exacerbates or mitigates bubbles in laboratory experiments. We find that under high time pressure price volatility is lower and market prices are closer to their fundamental value. This is due to participants using simpler adaptive forecasting strategies, instead of the self-reinforcing extrapolative expectations that they use under low time pressure, and which are conducive to the emergence of bubbles. In addition, by substantially increasing the number of decision periods in our experiment, we find that in the long run prices tend to converge to their fundamental value, also in the absence of time pressure.
Agents frequently engage with multiple principals simultaneously - for example, when borrowing from several banks or peers. In such settings, principals typically possess less information about the agent's ability or intentions (e.g., to repay a loan) and must rely on trust. This paper presents experimental evidence from trust games framed in a credit market context to examine the role of reciprocity in interactions involving multiple principals (lenders) and a single agent (borrower). Agents were asked to decide whether to act trustworthily and repay, or to default and act selfishly, after receiving the same credit amount from either one or multiple principals. The results show that reciprocity declines when the number of trusting principals increases. A key mechanism appears to be the reduced marginal harm that an agent's default imposes on each individual principal. Additionally, agents seem less sensitive to the negative consequences of their actions when multiple principals are affected. These findings suggest that interactions involving multiple principals are behaviorally riskier than bilateral ones. The results have implications for the design of incentive structures in multi-principal-agent environments, such as crowdlending platforms.
We develop and validate a survey instrument to elicit six key economic preferences in children: undefined time preferences, risk preferences, altruism, positive reciprocity, negative reciprocity, and trust. The survey was administered to a sample of 339 nine-year-old children, for whom we also collected behavioral data through incentivized choice experiments targeting the same preferences. Our econometric analysis allows us to identify a set of 14 survey items that best predict children's experimental behavior. For each preference, we also compare the predictive power of this 14-item validated survey to a shorter 9-item self-evaluation version. Our results demonstrate that these surveys provide a simple and reliable tool for measuring individual preferences in children - enabling researchers to account for heterogeneity when designing and evaluating policies targeting younger populations.
Across three studies involving more than 5,000 participants, we provide a comprehensive analysis of the effects of incentivizing responses in the Krupka-Weber norm elicitation task. We consider both the potential benefits of incentivization (higher response quality and mitigation of response biases) and its possible drawbacks (distortion of responses in the direction of norm-unrelated focal points and materialistic values). We find no evidence of undesirable effects of incentives. While we report only modest improvements in response quality, we also show that incentives effectively mitigate response biases that arise when participants' self-serving motivations conflict with accurate responding.
This study investigates how in-game virtual currencies influence consumer spending behaviour. In an incentivized randomized controlled trial with 753 UK participants, we estimate the willingness-to-pay (WTP) for loot boxes represented as risky and ambiguous lotteries. We test the effects of virtual currencies, money illusion, and cognitive-demanding (non-intuitive) exchange rates, three practices commonly used to sell loot boxes. Our results show that WTP is significantly higher when transactions are conducted in virtual currencies with a 1:1 exchange rate compared to British pounds, contributing to the debate on the neutrality of virtual currencies and experimental currency units. Moreover, participants in our study are affected by money illusion distortions, regardless of the exchange rate's intuitiveness. However, we find no evidence that non-intuitive exchange rates affect participants' WTP compared to intuitive exchange rates of comparable size. These findings highlight the behavioural distortions induced by common monetization practices in games and provide empirical support for the European Commission's call for stricter regulation of virtual currencies in digital environments.
Recent studies showing that some outcome variables do not statistically significantly differ between real-stakes and hypothetical-stakes conditions have raised methodological challenges to experimental economics' disciplinary norm that experimental choices should be incentivized with real stakes. I show that the hypothetical bias measures estimated in these studies do not econometrically identify the hypothetical biases that matter in most modern experiments. Specifically, traditional hypothetical bias measures are fully informative in 'elicitation experiments' where the researcher is uninterested in treatment effects (TEs). However, in 'intervention experiments' where TEs are of interest, traditional hypothetical bias measures are uninformative; real stakes matter if and only if TEs differ between stakes conditions. I demonstrate that traditional hypothetical bias measures are often misleading estimates of hypothetical bias for intervention experiments, both econometrically and through re-analyses of three recent hypothetical bias experiments. The fact that a given experimental outcome does not statistically significantly differ on average between stakes conditions does not imply that all TEs on that outcome are unaffected by hypothetical stakes. Therefore, the recent hypothetical bias literature does not justify abandoning real stakes in most modern experiments. Maintaining norms that favor completely or probabilistically providing real stakes for experimental choices is useful for ensuring externally valid TEs in experimental economics.
The prevalence of false and misleading news has become an issue of great concern in recent years. Academic researchers, policymakers, and social media firms all continue to seek effective solutions to reduce the sharing of misinformation. In this paper, we evaluate the effectiveness of two policies in particular: competition among media firms and fact-checking of published news articles by independent organizations. We first develop a theoretical model that predicts the effect of each policy and then conduct a behavioral experiment to test those predictions. Our experimental findings indicate that media competition is most effective at nipping misinformation in the bud because media firms spend significantly more resources on improving the accuracy of their news when readers obtain news from multiple sources. We also find that fact-checking improves the overall quality of news available to viewers; however, it does not incentivize firms to improve the accuracy of their own news articles. Last, our results from an interaction treatment suggest that under competition, fact-checking adversely affects firms' investment in news accuracy.
This introduction presents the two-part Special Issue of honoring the life and work of Amnon Rapoport (1936–2022), a pioneering scholar whose six decades of research shaped experimental studies of interactive decision making. Rapoport’s hallmark was the interplay between formal game-theoretic modeling and rigorous laboratory testing, advancing understanding in coalition formation, social dilemmas, market entry, traffic networks, decision timing, resource dilemmas, behavioral operations, and methodological innovation. The 27 articles collected across the volumes revisit and extend these themes, offering fresh insights into how rationality assumptions succeed and fail in predicting human behavior. Together, the contributions reflect both continuity with Rapoport’s intellectual credo—“model first, test second, refine third”—and renewal through new methods and applications. Beyond scholarship, the issue pays tribute to Rapoport’s extraordinary role as a mentor and his enduring influence on the evolution of behavioral and experimental economics
A zero price effect is a discontinuous change in demand when price is reduced to zero from a level arbitrarily close to it. It has been proposed that social norms play a role in zero price effects on consumption. We first conducted a norm-elicitation experiment to measure how people perceive the social appropriateness of consumption under zero versus minimal prices. We then ran a natural field experiment in the same contexts to observe actual taking behavior. Results show that the social appropriateness of consuming high quantities is significantly lower when goods are offered for free than when they are sold at 1 cent. Zero pricing increases the proportion of individuals who consume something, but reduces the average amount taken by those who consume positive amounts. Overall, the evidence suggests that high consumption of free goods is prevented by its social inappropriateness, potentially helping to explain the inconsistent evidence on the direction of zero price effects in previous studies.
In a game with costly information acquisition, the ability of one player to acquire information directly affects her opponent's incentives for gathering information. Rational inattention theory then posits the opponent's information-acquisition strategy is a direct function of these incentives. This paper argues that people are cognitively limited in predicting their opponent's level of information, and hence lack the strategic sophistication that the theory requires. In an experiment involving a real-effort attention task and a simple two-player trading game, I study the ability of subjects to (1) anticipate the information acquisition of opponents in this strategic game, and (2) best respond to this information acquisition when acquiring their own costly information. I study this by exogenously manipulating the difficulty of the attention task for both the player and their opponent. Predictions of behavior are generated by a novel theoretical model in which Level-K agents can acquire information & agrave; la rational inattention. I find an out-sized lack of strategic sophistication, driven largely by the cognitive difficulties of predicting opponent information. These results suggest a necessary integration of the theories of rational inattention and costly sophistication in strategic settings.
How do bribes and lobbying distort judgment? In our experiment, referees are tasked with judging a worker's performance, and awarding a bonus to workers who score above a certain threshold. We find that bribes and lobbying are both distortionary, but in different ways. Whereas lobbying increases the number of workers receiving a bonus, bribes weaken the relationship between performance and success, with bonuses mostly being awarded to workers who bribe. We discuss implications for anti-corruption interventions.
