Public reputation mechanisms are an effective means to limit opportunistic behavior in markets suffering from moral hazard problems. While previous research was mostly concerned with the influence of exogenous feedback mechanisms, this study considers the endogenous emergence of reputation through deliberate information sharing among actors and the role of barriers in hindering information exchange. Using a repeated investment game, we analyze the effects of competition and transfer costs on players’ willingness to share information with each other. While transfer costs are a direct cost of the information exchange, competition costs represent an indirect cost that arises when the transfer of valuable information to competitors comes at the loss of a competitive advantage. We show that barriers to information exchange not only affect the behavior of the senders of information, but also affect the ones about whom the information is shared. While the possibility of sharing information about others significantly improves trust and market efficiency, both competition and direct transfer costs diminish the positive effect by substantially reducing the level of information exchange. Players about whom the information is shared anticipate and react to the changes in the costs by behaving more or less cooperatively. For reputation building, an environment is needed that fosters the sharing of information. Reciprocity is key to understanding information exchange. Even when it is costly, information sharing is used as a way to sanction others.

We investigate how the selection process of a leader affects team performance with respect to social learning. We use a laboratory experiment in which an incentivized guessing task is repeated in a star network with the leader at the center. Leader selection is either based on competence, on self-confidence, or made at random. In our setting, teams with random leaders do not underperform. They even outperform teams with leaders selected on self-confidence. Hence, self-confidence can be a dangerous proxy for competence of a leader. We show that it is the declaration of the selection procedure which makes non-random leaders overly influential. To investigate the opinion dynamics, we set up a horse race between several rational and naïve models of social learning. The prevalent conservatism in updating, together with the strong influence of the team leader, imply an information loss since the other team members’ knowledge is not sufficiently integrated.

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.

The intergroup prisoner's dilemma game was suggested by Bornstein (1992, Journal of Personality and Social Psychology. 7, 597-606) for modelling intergroup conflicts over continuous public goods. We analyse data of an experiment in which the game was played for 150 rounds, under three matching conditions. The objective is to study differences in the investment patterns of players in the different groups. A repeated measures analysis was conducted by Goren and Bornstein (1999, Games and Human Behaviour: Essays in Honor of Amnon Rapoport, pp. 299-314), involving data aggregation and strong distributional assumptions. Here we introduce a nonparametric approach based on permutation tests. Two new measures, the cumulative investment and the normalised cumulative investment, provide additional insight into the differences between groups. The proposed tests are based on the area under the investment curves. They identify an overall difference between the groups as well as pairwise differences. A simultaneous confidence band for the mean difference curve is used to detect the games which account for any pairwise difference.

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.

The highly popular belief that rent-control leads to an increase in the amount of affordable housing is in contradiction with ample empirical evidence and congruent theoretical explanations. It can therefore be qualified as a misconception. We present the results of a preregistered on-line experiment in which we study how to dispel this misconception using a refutational approach in two different formats, a video and a text. We find that the refutational video has a significantly higher positive impact on revising the misconception than a refutational text. This effect is driven by individuals who initially agreed with it and depart from it after the treatment. The refutational text, in turn, does not have a significant impact relative to a non-refutational text. Higher cognitive reflective ability is positively associated with revising beliefs in all interventions. Our research shows that visual communication effectively reduces the gap between scientific economic knowledge and the views of citizens.

The Bonn Workshop 1997—Theories of Bounded Rationality, (May 6-10, 1997) was an international meeting of researchers interested in behavioral theories in economics. It was held in honor of Reinhard Selten. One goal of the workshop was to provide a platform for the introduction of new theories improving the understanding for the boundedly rational behavior of economic agents. Another goal was to support the search for links between existing theories of bounded rationality. We restricted the focus to the following topics:

1. (1) Individual Decision Making;

2. (2) Learning and Coordination;

3. (3) Bargaining and Reciprocity;

4. (4) Markets and Economic Institutions.

In order to generate a common basis for discussion, we invited four researchers to give state- of-the-art presentations on each of the four topics. The presentations were general overviews of the corresponding experimental, empirical, and theoretical literature. Each presentation also confronted conflicting approaches and provided an insight into the problems of theory formation. The state of the art contributions were the fulcrum of vigorous discussions and had a major impact on the proceeding of the workshop. We are convinced that these contributions will be of great interest to the broader audience that they can reach through publication.

The present study transforms subjective conflict perceptions into formally defined games, tests the reliability of the transformation, and explores the properties of several conflict scenarios. To this end we: (i) develop an illustration-based method that transforms implicit perceptions of expected outcomes and experiences into sets of structured numerical values, termed subjective game structures; (ii) develop a reliability index that compares the properties of two subjective games, allowing to test the consistency of repeatedly elicited games; (iii) empirically test game perceptions across eight conflict scenarios; and (iv) interpret the results in terms of two game taxonomies. The results reveal the capacity of the applied methods to transform vague social scenarios into reliable formal games, point to natural solutions, and show the distribution of games that characterizes each conflict scenario. The newly developed model and tools provide a potent instrument for studying a diverse array of social interactions, ranging from interpersonal relations to trade, political conflicts, and war. They represent invaluable resources for conducting polls, examining implicit attitudes, and assisting in the formulation of political, commercial, and social policies.

We conduct a field experiment with Amazon Mechanical Turk (“AMT”) workers to causally assess the effect of introducing a control mechanism in an existing work relationship on workers’ performance on tasks of varying difficulty. We find that introducing control significantly reduces performance. This reduction occurs primarily on challenging tasks, while performance on simple tasks is unaffected. The negative effects are primarily driven by workers who exhibit non-pecuniary motivation in the absence of control. Our results show that there are adverse effects of control, and they suggest that these adverse effects are of particular concern to firms that rely on high performance on challenging tasks.

We study how people solve the optimal stopping problem of buying an airline ticket. Over a set of problems, people were given 12 opportunities to buy a ticket ranging from 12 months before travel to 1 day before. The distributions from which prices were sampled changed over time, following patterns observed in industry analysis of flight ticket pricing. We characterize the optimal decision process in terms of a set of thresholds that set the maximum purchase price for each time point. In a behavioral analysis, we find that the average price people pay is above the optimal, that there is little evidence people learn over the sequence of problems, but that there are likely significant individual differences in the way people make decisions. In a model-based analysis, we propose a set of nine possible decision strategies, based on how purchasing probabilities change according to time and the price of the ticket. Using Bayesian latent-mixture methods, we infer the strategies used by the participants, finding that some use purely time-based strategies, while others also attend to the price of the tickets. We conclude by noting the limitations in the strategies as accounts of people's decision making, highlighting the need to consider sequential effects and other context effects on purchasing behavior.

We design a laboratory experiment in which an interested third party endowed with private information sends a public message to two conflicting players, who then make their choices. We find that third-party communication is not strategic. Nevertheless, a hawkish message by a third party makes hawkish behavior more likely while a dovish message makes it less likely. Moreover, how subjects respond to the message is largely unaffected by the third party’s incentives. We argue that our results are consistent with a focal point interpretation in the spirit of Schelling.

We examine motives for ‘overbidding’ in contests between individuals using a “two-headed” approach to decision-making. In “two-headed” contests, subject pairs send suggested bids and messages to a partner. Content analysis of the messages provides insight into an individual’s bidding motives. In addition, we elicit measures of preferences, beliefs, and impulsiveness. We find that beliefs about others’ bids and messages that emphasize winning (i.e., utility of winning) are the most robust predictors of ‘overbidding’. Our results suggest that analyzing communication provides a rich window into an individual’s thought process when making decisions, and can complement insights from elicited values from common decision tasks (Replication materials, including data, do files, and software, are available at https://sites.google.com/view/david-bruner/research).