Voluntary carbon markets present firms and individuals with the opportunity to offset all or part of their carbon footprints. We report on a controlled laboratory experiment to understand the behavioral motivations driving the purchase of carbon offsets, in addition to investigating the effect of the introduction of voluntary carbon markets on emission-causing activities. We find a stable demand for offsets when the price is sufficiently low. Behavior is, however, heterogeneous. Individuals with a high (low) personal-responsibility index increase their offset purchases as their own damage (total damages) increases, but do not condition their offsetting behavior on the total damages (own damage) generated. We also show that, when individuals trade in competitive markets, the availability of offsets does not affect the total damages generated. Introduction of carbon offsets increases individuals’ earnings by eliminating some of the damages ex-post, but does not increase economic efficiency.

Temporary changes in biological state, such as hunger, can impact decision making differently for men and women. Food scarcity is correlated with a host of negative economic outcomes. Two explanations for this correlation are that hunger affects economic preferences directly or that hunger creates a mindset that focuses on scarcity management to the detriment of other decisions. To test these predictions, we conduct a lab-in-the-field experiment in a health screening clinic in Shanghai, recruiting participants who finish their annual physical exam either before or after they have eaten breakfast. We compare the hungry and sated groups on their risk, time and generosity preferences as well as their cognitive performance. Our results show that men and women respond to hunger in opposite directions, thus hunger reduces the gender gap in decision quality, risk aversion and cognitive performance, but creates one in generosity. Finally, we examine several biomarkers and find that higher blood lipid levels are correlated with greater choice inconsistency, risk aversion and generosity. We contribute to emerging insights on the biological foundations for economic preferences and outcomes.

Competition involves two main dimensions, a rivalry for resources and the ranking of relative performance. If socially recognized, the latter yields a ranking in terms of social status. The rivalry for resources resulting from competitive incentives has been found to negatively affect women’s performance relative to that of men. However, little is known about gender differences in the performance consequences of social-status ranking. In our experiments we introduce a novel design that allows us to isolate the effects of status ranking from those caused by a rivalry for resources. Subjects do a time-limited task where they need to search for numbers and add them up. Performance is straightforwardly measured by the number of correct summations. When there is no status ranking we find no gender differences in the number of attempted summations or in performance. By contrast, when there is status ranking men significantly increase the number of attempted summations as well as the number of correct summations. Remarkably, when women are subjected to status ranking, they significantly decrease the number of attempted summations. The net result is striking. With status ranking men attempt more summations and correctly solve many more than women. These differences are markedly large and statistically highly significant. Our results suggest that increased participation in competitive environments could harm women’s labor market success along a hidden channel.

Choice lists with random incentives are widely used for preference elicitation. It is commonly assumed that subjects choose the same option in each question as they would have if it were the only question, but recent findings challenge this assumption. We conduct a large sample experiment varying incentives and presentation independently, and examine choices both near and away from certainty. We consistently find more risk taking when a choice between a safe prize and a risky lottery is embedded in a choice list than when it is presented on its own. This difference remains when we inform subjects of the paid choice in advance, implying that isolation fails not because of the random incentives scheme, but simply because the choice appears in a list together with others. We conjecture that subjects are uncertain about their preferences, reduce this uncertainty through considering the choices that confront them, and make cautious decisions in the interim. Other conditions and non-choice data support this interpretation. Our results open up the possibility that preferences inferred from choice lists offer a better indication of informed preferences than preferences inferred from single choices.

We experimentally investigate the effect of time pressure from deadlines in a rich-context bargaining game with an induced reference point at the 2/3-1/3 distribution. Our results show that first proposals, concessions, and settlements are very similar for different time-pressure levels. Nevertheless, time pressure systematically influences the type of agreements reached: the likelihood of bargainers reaching agreements on the equal split is lower under time pressure. Furthermore, disagreements and last-moment-agreements (conditional on reaching an agreement) are more frequently observed under time pressure, though the effect on last-moment agreements disappears when disagreements are included in the analysis. Finally, the effect of time-pressure on the frequency of disagreements is stronger for those pairs with higher tension in first proposals.

In this study, we use a novel design to test for directional behavioral spillover and cognitive load effects in a set of multiple repeated games. Specifically, in our experiment, each subject plays a common historical game with two different matches for 100 rounds. After 100 rounds, the subject switches to a new game with one match and continues playing the historical game with the other match. This design allows us to identify the direction of any behavioral spillover. Our results show that participants exhibit both behavioral spillover and cognitive load effects. First, for pairs of Prisoners’ Dilemma and Alternation games, we find that subjects apply strategies from the historical game when playing the new game. Second, we find that those who participate in a Self Interest game as either their historical or new game achieve Pareto efficient outcomes more often in the Prisoners’ Dilemma and Alternation games compared to their control counterparts. Overall, our results show that, when faced with a new game, participants use strategies that reflect both behavioral spillover and cognitive load effects.

We use different incentive schemes to study truth-telling in a die-roll task when people are asked to reveal the number rolled privately. We find no significant evidence of cheating when there are no financial incentives associated with the reports, but do find evidence of such when the reports determine financial gains or losses (in different treatments). We find no evidence of loss aversion in the standard case in which subjects receive their earnings in a sealed envelope at the end of the session. When subjects manipulate the possible earnings, we find evidence of less cheating, particularly in the loss setting; in fact, there is no significant difference in behavior between the non-incentivized case and the loss setting with money manipulation. We interpret our findings in terms of the moral cost of cheating and differences in the perceived trust and beliefs in the gain and the loss frames.

This paper introduces a new matching mechanism that is a hybrid of the two most common mechanisms in school choice, the Boston Mechanism (BM) and the Deferred Acceptance algorithm (DA). BM is the most commonly used mechanism in the field, but it is neither strategyproof nor fair. DA is the mechanism that is typically favored by economists, but it is not Pareto efficient. The new mechanism, the Secure Boston Mechanism (sBM), is an intuitive modification of BM that secures any school a student was initially guaranteed but otherwise prioritizes a student at a school based upon how she ranks it. Relative to BM, theoretical results suggest that sBM is an improvement in terms of strategyproofness and fairness. We present experimental evidence using a novel experimental design that confirms that sBM significantly increases truth-telling and fairness. Relative to DA, theoretical results suggest that sBM can be a Pareto improvement in equilibrium but the efficiency comparison of sBM and DA is theoretically ambiguous. We present simulation evidence that suggests that sBM often does Pareto dominate DA when DA is inefficient, while sBM and DA very often overlap when DA is efficient. Overall, our results strongly support the use of sBM over BM and suggest that sBM should be considered as a viable alternative to DA.

We examine how rewards and penalties under tournament incentives impact price behaviour in experimental asset markets. Adding a penalty to a reward-only contract, or a reward to a penalty-only contract, changes the traders’ behaviour. The experimental markets with adjusted contracts experience less trading, but longer-lived and larger bubbles. This observed effect of penalties is consistent with herd-driven behaviour under relative performance evaluation, while the effect of rewards reflects the influence of the convexity of bonuses. However, these effects dissipate with trader experience. Our findings contribute to the debate attributing market instability to incentive structures in the finance industry.

Recent interest in reducing budget deficits raises questions regarding the impact on legislative bargaining of cuts versus increases in government spending. Using an experimental design where the outcomes are theoretically isomorphic results in significant differences in bargaining outcomes: There are longer delays in reaching agreement with cuts than with increases, along with which legislative types get their proposals passed. These results can be attributed to a change in agents’ reference point in conjunction with differential responses to gains versus losses.

We use experimental methods to evaluate a simplified interbank market. The design is a laboratory adaptation of the analysis of interbank market fragility by Allen and Gale (J Eur Econ Assoc 2:1015–1048), and features symmetric banks who allocate deposit endowments between cash and illiquid assets prior to the incidence of a shock. Following the shock liquidity-deficient banks trade assets for cash. Treatments include variations in the shock type, as well as alterations in the range of permissible asset prices. Consistent with Allen and Gale, we find that while interbank trading substantially increases investment activity, the markets are frequently characterized by price variability and a stochastic distribution of investment outcomes.

We investigate the effects of centrality on cooperation in groups. Players with centrality keep a group together by having a pivotal position in a network. In some of our experimental treatments, players can vote to exclude others and prevent them from further participation in the group. We find that, in the presence of exclusion, central players contribute significantly less than others, and that this is tolerated by those others. Because of this tolerance, groups with centrality manage to maintain high levels of cooperation.

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.

This paper provides experimental evidence of the role of higher order risk attitudes—especially prudence—in prevention behavior. Prudence, under an expected utility framework, increases (decreases) self-protection effort compared to the risk neutral level when the risk of losing part of an income exists in a future (the same) period. Motivated by these predictions that give the exact test on prudence, an experiment was designed where subjects go through higher order risk attitude elicitation and make a self-protection decision. In contrast to the expected utility theory, the observed efforts are less than the risk neutral level, regardless of the timing of loss. This violation of expected utility predictions can be explained by probability weighting.

There are two efficiency effects of price controls: an “output effect” measured by the standard welfare loss triangles, and an “imperfect selection effect” that arises when controls prevent price from excluding high-cost sellers or low-value buyers. Although not discussed in most textbooks, the imperfect selection effect can be as large as the standard Harberger triangle welfare loss in symmetric designs, as confirmed by a class experiment described in this paper. The experiment also permits an analysis of the ways random non-price allocations shift the relevant supply function, and the related effects of rent-seeking competition that can arise with price controls.

We experimentally analyze the role of speculators, who have no use value for the objects on sale, in auctions. The environment is a uniform-price sealed-bid auction for 2 identical objects, followed by a free-form bargaining resale market, with one positive-value bidder, and either one or two speculators who may choose simultaneously whether to enter the auction. We show that the bidder accommodates speculators by reducing demand in the auction and subsequently purchasing in the resale market, which encourages entry by speculators. The presence of multiple speculators induces each speculator to enter less often, but increases competition in the auction and the auction price. Speculators earn positive profits on average, except when multiple speculators enter the auction.

The present study explores the value of machine learning techniques in the classification of communication content in experiments. Previously human-coded datasets are used to both train and test algorithm-generated models that relate word counts to categories. For various games, the computer models of the classification are able to match out-of-sample the human classification to a considerable extent. The analysis raises hope that the substantial effort going into such studies can be reduced by using computer algorithms for classification. This would enable a quick and replicable analysis of large-scale datasets at reasonable costs and widen the applicability of such approaches. The paper gives an easily accessible technical introduction into the computational method.

Reciprocity has been shown to be sensitive to perceived intentions, however, not much is known about the intensity of reciprocal responses to the precise nature of those intentions. For example, a person can strategically appear to be kind while being self-serving or can be selflessly (genuinely) kind. Do these two intentions elicit different reciprocal reactions? We propose a conjecture that self-serving but generous actions diminish the positively reciprocal response, compared to selfless generous actions. We classify actions that increase a recipient’s maximum payoff, but by less than the giver’s maximum payoff, as being self-serving generous actions, while classifying actions that increase a recipient’s maximum payoff by more than the giver’s as selfless generous actions. We hypothesize that selfless generous actions are considered more generous than self-serving generous actions, and that self-serving generous actions will therefore result in a diminished reciprocal response. We test this conjecture using two novel experimental designs. We find some evidence that subjects perceive self-serving generous actions as being less generous than selfless generous actions, but no empirical support for our conjecture on the diminished reciprocal response.

Time pressure is a central aspect of economic decision making nowadays. It is therefore natural to ask how time pressure affects decisions, and how to detect individual heterogeneity in the ability to successfully cope with time pressure. In the context of risky decisions, we ask whether a person’s performance under time pressure can be predicted by measurable behavior and traits, and whether such measurement itself may be affected by selection issues. We find that the ability to cope with time pressure varies significantly across decision makers, leading to selected subgroups that differ in terms of their observed behaviors and personal traits. Moreover, measures of cognitive ability and intellectual efficiency jointly predict individuals’ decision quality and ability to keep their decision strategy under time pressure.

A marketable permit system (MPS) has been suggested as a solution to environmental problems. Although the properties of MPSs under non-trader settings, in which each player is exclusively either a seller or a buyer, are well documented, little research has explored how MPSs perform under trader settings, in which each player can be both a seller and a buyer. We institute two auctions of trader settings in MPS experiments: a double auction (DA) and a uniform price auction (UPA). We then evaluate and compare their performances both with each other and with those under non-trader settings. The main results are as follows: DAs under trader settings perform much worse than do DAs under non-trader settings, whereas UPAs perform well, regardless of the trader and non-trader settings. UPAs are more efficient and generate more stable prices than do DAs under trader settings, and a considerable proportion of trades in DAs under trader settings consist of “flips” that could be considered speculation or errors. Thus, UPAs are likely to work better than DAs under trader settings.