The methodological ideal of experimentalists, E, is easily stated: derive a testable hypothesis, H, from a well-specified theory, T; implement experiments with a design; implicitly in the latter are auxiliary hypotheses, A, that surface in the review/discussion of completed research reports (payoffs are ‘adequate,’ Ss are ‘relevant,’ instructions, context are ‘clear,’ etc.). We want to be able to conclude, if statistical test outcomes support not-H, that T is ‘falsified.’ But this is not what we do; rather we ask if there is a flaw in the test, i.e. not-A is supported, and we do more experiments. This is good practice—much better than the statistical rhetoric of falsificationism. Undesigned social processes allow E to accumulate technical and instrumental knowledge that drive the reduction of experimental error and constitute a more coherent methodology than falsificationism.

This study examines fairness perceptions in ultimatum bargaining games with asymmetric payoffs, outside options, and different information states. Fairness perceptions were dependent on treatment conditions. Specifically, when proposers had higher chip values, dollar offers were lower than when responders had higher chip values. When responders had an outside option, offers were higher and were rejected less often than when proposers had an outside option. However, a given offer was rejected more often when responders had an outside option. Therefore, similar to the first mover advantage, the “advantaged” or “entitled” player received a higher monetary payoff than they would otherwise. When there was complete information about payoff amounts (payoff conversion rates and outside options), rejections occurred more often, and given offer amounts were rejected more often than when there was incomplete information. When there was incomplete information, offers were higher in the initial rounds than in the final rounds. These results suggest that proposers made offers strategically, making offers that would not be rejected, rather than out of a concern for fairness.

Two recent models incorporating fairness considerations into the economics literature based on agents’ concerns about the distribution of payoffs between themselves and others (Fehr-Schmidt, 1999, Quarterly Journal of Economics. 114 (3), 769-816; Bolton-Ockenfels, 2000, American Economic Review. 90,166-193) are investigated using a new three-person ultimatum game: One person allocates a sum of money to two others, one of which is randomly chosen to accept or reject the offer. Rejection gives both the responder and the proposer zero income and a positive consolation prize for the non-responder. The data show essentially no reductions in rejection rates, holding offers constant, with and without consolation prizes, contrary to both models’ predictions.

Lying to participants offers an experimenter the enticing prospect of making “others’ behaviour” a controlled variable, but is eschewed by experimental economists because it may pollute the pool of subjects. This paper proposes and implements a new experimental design, the Conditional Information Lottery, which offers all the benefits of deception without actually deceiving anyone. The design should be suitable for most economics experiments, and works by a modification of an already standard device, the Random Lottery incentive system. The deceptive scenarios of designs which use deceit are replaced with fictitious scenarios, each of which, from a subject's viewpoint, has a chance of being true. The design is implemented in a sequential play public good experiment prompted by Weimann's (1994) result, from a deceptive design, that subjects are more sensitive to freeriding than cooperation on the part of others. The experiment provides similar results to Weimann's, in that subjects are at least as cooperative when uninformed about others’ behaviour as they are if reacting to high contributions. No deception is used and the data cohere well both internally and with other public goods experiments. In addition, simultaneous play is found to be more efficient than sequential play, and subjects contribute less at the end of a sequence than at the start. The results suggest pronounced elements of overconfidence, egoism and (biased) reciprocity in behaviour, which may explain decay in contributions in repeated play designs. The experiment shows there is a workable alternative to deception.

Experiments on saving behavior reveal substantial heterogeneity of behavior and performance. We show that this heterogeneity is reliable and examine several potential sources of it, including cognitive ability and personality scales. The strongest predictors of both behavior and performance are two cognitive ability measures. We conclude that complete explanations of heterogeneity in dynamic decision making require attention to complexity and individual differences in cognitive constraints.

Numerous experiments have shown that people often engage in third-party punishment (3PP) of selfish behavior. This evidence has been used to argue that people respond to selfishness with anger, and get utility from punishing those who mistreat others. Elements of the standard 3PP experimental design, however, allow alternative explanations: it has been argued that 3PP could be motivated by envy (as selfish dictators earn high payoffs), or could be influenced by the use of the strategy method (which is known to influence second-party punishment). Here we test these alternatives by varying the third party’s endowment and the use of the strategy method, and measuring punishment. We find that while third parties do report more envy when they have lower endowments, neither manipulation significantly affects punishment. We also show that punishment is associated with ratings of anger but not of envy. Thus, our results suggest that 3PP is not an artifact of self-focused envy or use of the strategy method. Instead, our findings are consistent with the hypothesis that 3PP is motivated by anger.

This article replicates and “stress tests” a recent finding by Eckel and Grossman (2003) that matching subsidies generate substantially higher Charity Receipts than theoretically comparable rebate subsidies. In a first replication treatment, we show that most choices are consist with a “constant (gross) contribution” rule, suggesting that inattention to the subsidies’ differing net consequences may explain the higher revenues elicited with matching subsidies. Results of additional treatments suggest that (a) the charity dimension of the decision problems has little to do with the result, and (b) extra information regarding the net consequences of decisions reduces but does not eliminate the result.

We study behavior within a simple principal-agent experiment. Our design allows for a large class of linear contracts. Principals can offer any feasible combination of (negative) fixed wages and incentives in the form of return sharing. This great contractual flexibility allows us to study incentive compatibility simultaneously with issues of ‘fair sharing’ and reciprocity, which were previously found to be important. We find a high degree of incentive-compatible behavior, but also ‘fair sharing’ and reciprocity. In contrast to other incentive devices studied in the literature, the incentives are ‘reciprocity-compatible’. Principals recognize the agency problem and react accordingly.

We collect individual participant data from 70 papers that use laboratory experiments to examine individual tax evasion behavior (or “Tax Evasion Games”), in order to use meta-analysis to estimate the impacts of different public policy, experimental design and individual level variables on tax evasion choices. Our results show that standard enforcement variables like audits (including audit rules) and fines perform differently on the extensive and intensive margins. We find that other fiscal variables like a flat tax system, tax rates, and tax amnesties have unambiguous negative impacts on tax compliance, and that specific features of the experimental setting, such as how subjects are directed to report income, or whether taxes are redistributed to the participants or to a real life public good, have significant impacts on tax compliance. Our results also indicate that the demographic characteristics of the subjects (e.g., gender, experimental income, occupation, risk attitude) affect compliance.

In this paper we provide new evidence showing that fair behavior is intuitive to most people. We find a strong association between a short response time and fair behavior in the dictator game. This association is robust to controls that take account of the fact that response time might be affected by the decision-maker’s cognitive ability and swiftness. The experiment was conducted with a large and heterogeneous sample recruited from the general population in Denmark. We find a striking similarity in the association between response time and fair behavior across groups in the society, which suggests that the predisposition to act fairly is a general human trait.

Veto power consists of the right of one or more players to unilaterally block decisions but without the ability to unilaterally secure their preferred outcome. Our experiment shows that (i) committees with a veto player take longer to reach decisions (are less efficient) and generate less consensus than without a veto player, (ii) veto power substantially enhances proposer's power, and (iii) non-veto players are substantially more willing to compromise than veto players. We relate our results to the theoretical literature on the impact of veto power as well as to concerns about the impact of veto power in real-life committees.

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.

Individual willingness to enter competitive environments predicts career choices and labor market outcomes. Meanwhile, many people experience competitive contexts as stressful. We use two laboratory experiments to investigate whether factors related to stress can help explain individual differences in tournament entry. Experiment 1 studies whether stress responses (measured as salivary cortisol) to taking part in a mandatory tournament predict individual willingness to participate in a voluntary tournament. We find that competing increases stress levels. This cortisol response does not predict tournament entry for men but is positively and significantly correlated with choosing to enter the tournament for women. In Experiment 2, we exogenously induce physiological stress using the cold-pressor task. We find a positive causal effect of stress on tournament entry for women but no effect for men. Finally, we show that although the effect of stress on tournament entry differs between the genders, stress reactions cannot explain the well-documented gender difference in willingness to compete.

We present a new experimental evidence of how framing affects decisions in the context of a lottery choice experiment for measuring risk aversion. We investigate framing effects by replicating the Holt and Laury's (Am. Econ. Rev. 92:1644-1655, 2002) procedure for measuring risk aversion under various frames. We first examine treatments where participants are confronted with the 10 decisions to be made either simultaneously or sequentially. The second treatment variable is the order of appearance of the ten lottery pairs. Probabilities of winning are ranked either in increasing, decreasing, or in random order. Lastly, payoffs were increased by a factor of ten in additional treatments. The rate of inconsistencies was significantly higher in sequential than in simultaneous treatment, in increasing and random than in decreasing treatment. Both experience and salient incentives induce a dramatic decrease in inconsistent behaviors. On the other hand, risk aversion was significantly higher in sequential than in simultaneous treatment, in decreasing and random than in increasing treatment, in high than in low payoff condition. These findings suggest that subjects use available information which has no value for normative theories, like throwing a glance at the whole connected set of pairwise choices before making each decision in a connected set of lottery pairs.

We study how the heterogeneity of agents affects the extent to which changes in financial incentives can pull a group out of a situation of coordination failure. We focus on the connections between cost asymmetries and leadership. Experimental subjects interact in groups of four in a series of weak-link games. The treatment variable is the distribution of high and low effort cost across subjects. We present data for one, two and three low-cost subjects as well as control sessions with symmetric costs. The overall pattern of coordination improvement is common across treatments. Early coordination improvements depend on the distribution of high and low effort costs across subjects, but these differences disappear with time. We find that initial leadership in overcoming coordination failure is not driven by low-cost subjects but by subjects with the most common cost type. This conformity effect may be due to a kind of group identity or to the cognitive simplicity of acting with identical others.

The difference between people's valuations of gains and losses has been widely observed in both single trial and repeated trial experiments, as well as in survey responses and in commonplace behavior. However, the results of some Vickrey auction experiments indicate that the disparity may decrease, or even disappear, over repeated trials. This paper reports the results of two further repeated Vickrey auction experiments that test the impact of both a second price and a ninth price auction rule on valuations. Although valuations should be independent of this variation in the exchange price rule, the manipulation had a dramatic impact on subjects’ stated values of a common market good. The results suggest that the endowment effect remains robust over repeated trials, and that contrary to common understanding, the Vickrey auction may elicit differing demands dependent on the context of the valuation.

Most studies that compare individual and group behavior neglect the in-group decision making process. This paper explores the decision making process within groups in a strategic setting: a two player power-to-take experiment. Discussions preceding group decisions are video taped and analyzed. We find the following: (1) no impact of the group setting as such on individual behavior; (2) heterogeneity of individual types; (3) perceptions of fairness are hardly discussed and are prone to the self-serving bias; (4) groups ignore the decision rule of other groups and typically view them as if they were single agents. (5) We also show that to explain group outcomes two factors have to be taken into account that are often neglected: the distribution of individual types over groups and the decision rules that groups use to arrive at their decision.

We replicate Andreoni (Quarterly Journal of Economics 110: 1–21, 1995)’s finding that agents behave more selfishly when taking from a public account than when giving to a public good. Based on a neutral language setting we add new insights into motivations to give or take in a linear public good setting: we find that Andreoni’s result is partly driven by the complete elimination of giving options in the taking frame. However, a pure extension of the action space into the taking domain also leads to a significant increase in selfish behavior.

A reciprocal action is an action meant to have a similar influence on another's payoff as another's action has on one's own. One hypothesis asserts that reciprocal action is triggered by the reciprocator's belief that another's action was good or ill intended. The other hypothesis says that the reciprocator is simply acting to implement fixed preferences over payoff allocations. We report on an experiment that allows us to study both positive (reward) and negative (punishment) reciprocal action in a single framework. Knowing the preferences for payoff allocations is sufficient to account for nearly all the reciprocal action we observe in our experiment.

In most experimental studies of tax evasion, participants are instructed that they may report any amount of income from zero up to the amount they actually earned or received. This amounts to an invitation to gamble. In contrast, real-world tax authorities unambiguously demand compliance. We develop two new settings for conducting tax experiments. Both involve an explicit demand for compliance. Thus, we can determine whether knowing that the experimental authority would regard evasion as wrongful disobedience will influence compliance decisions. We demonstrate that simply telling people that they are required to pay a “participation fee” analogous to a tax produces remarkably high compliance rates and less sensitivity to changes in economic variables than in the earlier experimental literature using invitation-to-gamble language. This suggests that many people pay taxes despite the financial attraction of non-compliance because they are strongly inclined towards obeying authority. Furthermore, we show that giving participants a week to make their reporting decisions at home without an authority figure physically present overcomes the inclination to obey for some people, significantly lowering compliance rates. However, the majority still complies, even after the audit rate falls from 25% to 1%, which would make noncompliance extremely attractive if it were viewed only as a simple matter of risk and expected return.