does investor risk perception drive asset prices in markets experimental evidence abstract we explore how individual risk perception influences prices and trading behavior in a market setting specifically our study lets experimental participants trade assets characterized by varying shapes of return distributions while common mean variance models predict identical prices for most of our assets we find trading prices to differ significantly assets that are perceived as being less risky on average despite having identical volatility trade at significantly higher prices individually traders who perceive a certain asset to be less risky are also net buyers on average with regard to different risk measures our results show that the probability of a loss is the strongest predictor of transaction prices and risk perception all these results hold also for experienced traders and when traders can trade two assets at the same time

power illusion in coalitional bargaining an experimental analysis abstract one feature of legislative bargaining in naturally occurring settings is that the distribution of seats or voting weights often does not accurately reflect bargaining power game theoretic predictions about payoffs and coalition formation are insensitive to nominal differences in vote distributions and instead only depend on pivotality we conduct an experimental test of the classical baron ferejohn model with five player groups holding real power constant we compare treatments with differences in nominal power we find that initial effects of nominal differences become small or disappear with experience our results also point to the complexity of the environment as having a negative impact on the speed at which this transition takes place finally and of particular importance as a methodological observation giving subjects a pause accelerates learning

rent seeking and rent dissipation a neutrality result abstract we consider rent seeking contests between at least two agents who might value the prize differently we capture a wide range of institutional aspects of contests by analyzing a class of contest success functions fulfilling several properties the main properties are anonymity and a condition on the elasticity of a rent seeker s win probability with respect to her effort we show the existence of a mixed strategy equilibrium and establish equilibrium payoffs in this equilibrium complete rent dissipation holds our results imply a partial robustness result for the all pay auction

monopoly vs competition in light of extraction norms this note demonstrates that whether the market is competitive or monopolistic need not be the result of ideology political power or non convexity of the technology the answer can be determined by a government that maximizes the extracted resources from the alternative market structures our claim is illustrated by assuming that demand and supply are linear functions and that the government can extract the same share of the producers profit under the alternative market structures this share can be extracted from the actual producers or from the potential producers who take part in the contest to get a license to produce

affirmative action or just discrimination a study on the endogenous emergence of quotas affirmative action rules are often implemented to promote women on labor markets little is known however about how and whether such rules emerge endogenously in groups of potentially affected subjects we experimentally investigate whether subjects vote for affirmative action rules against or abstain if approved by the vote a quota rule is implemented that favors women in one treatment but members of an artificially created group based on random color assignment in another treatment we find that quota rules based on gender are implemented frequently and do not affect the performance of men and women in a contest quota rules based on an arbitrary criterion however are less often approved and lead to strong individual reactions of advantaged and disadvantaged group members and to efficiency losses these results show that the effects of affirmative action policies largely depend on whether these policies are viewed favorably within the affected groups

financial contagion in the laboratory does network structure matter we explore the role of interbank network structure and premature liquidation costs for the likelihood of financial contagions in a laboratory experiment we consider complete versus incomplete networks of banks linked together by interbank deposits and we further vary premature liquidation costs subjects play the role of depositors deciding whether or not to withdraw funds from their interconnected bank we find that when liquidation costs are high a complete network structure is significantly less vulnerable to financial contagions than an incomplete network structure however when liquidation costs are low network structure is less important for the frequency of financial contagions

inequality fairness and social capital we study the impact of unjust inequality on social trust and trustworthiness and its separate effect on the economically successful and the unsuccessful in a controlled economic experiment we find evidence for a negative effect of unfair economic inequality on social interactions probing the boundaries of this effect we document that this erosion of social capital critically depends on the context if a well off person is not directly responsible for the outcome of the worse off person then we observe no negative effects on trust and trustworthiness in the aggregate moreover our data do not support the view that higher status or wealth leads to an erosion of pro social attitudes the successful are always more generous groups of unsuccessful persons are least efficient and least generous in the trust game

lying and reciprocity abstract we extend the literature on the determinants of lying to the impact of reciprocity in strategic interactions we study a theoretical model with reciprocity by assuming that a player s degree of altruism depends on her perception of the other player s altruism towards herself specifically we consider a sequential two player contest and vary the second mover s degree of information on the first movers lying behavior this yields predictions on the second mover s behavior which we study in a largescale online experiment and the laboratory surprisingly the second mover s lying propensity does not depend on her information on the first mover s lying behavior to investigate whether this is specific to lying we consider an additional treatment with the same payoff structure where subjects can increase their chances of winning by simple statements without lying as we do find evidence for reciprocity there the lack of reciprocity cannot solely be attributed to the contest structure

sharing the emission reduction burden in an uneven world in the climate agreement reached in paris on the 12th of december 2015 the participating countries agreed to provide information about their intended nationally determined contribution and also to assess its fairness and ambition this study contributes a transparent empirical econometric tool for such an assessment it shows that using a formal decomposition framework that uniquely disentangles the macroeconomic and other influences on emissions effort sharing in global greenhouse gas reductions can be achieved in a way that promotes innovation and environmental efficiency to reduce emissions without interfering with the right of poor countries to catch up economically based on gdp projections by the imf and the oecd in a sample of about 185 countries it presents country level co2 emission targets applicable as benchmarks to assess the adequacy and fairness of national contributions

can violence harm cooperation experimental evidence abstract in this paper we argue that natural resource conservation is jeopardised by the ability of users to resort to violence to appropriate resources when they become scarce we provide evidence from a lab experiment that participants interacting in a dynamic game of common pool resource extraction reduce their cooperation on efficient levels of resource extraction when given the possibility to appropriate the resource at some cost i e through conflict theoretically cooperation is achievable via the threat of punishment strategies which stop being subgame perfect in the presence of conflict accordingly we argue that the observed reduction of cooperation in the game s early stages in the lab is a consequence of participants correctly anticipating the use of appropriation when resources become scarce

free entry and efficient rent seeking this paper concerns rent seeking and the extent to which rents are dissipated under various circumstances gordon tullock s 1967 insight that expenditures made to capture an artificially created transfer represent a social waste suggested that the cost to the economy of monopoly and regulation is greater than the simple harberger 1954 deadweight loss indeed under tullock s original formulation and in the extensions of his work by krueger 1974 and posner 1975 rents are exactly dissipated at the social level 1 is spent to capture 1 so that the total welfare loss from such activities is equal to the harberger triangle plus the rectangle of monopoly profits

jumping the queue an experiment on procedural preferences abstract we present a three player queuing game to study procedural preferences in a laboratory experiment together with markets queues and waiting lists are universal procedures for allocating goods and services we designed our queuing game to disentangle motivations of outcome oriented egoistic preferences outcome oriented distributional inequality aversion preferences and outcome independent procedural preferences in a series of treatments we introduce a market element and allow two of the three players to bargain over a queue jump thus violating the queuing procedure a third player is able to engage in peer punishment to sanction queue jumping we provide evidence that a simple model of procedural preferences is able to explain the behavior of a share of the subjects in our experiment

carbon dioxide emissions allocation a review carbon dioxide co2 emissions allocation plays a fundamental role in determining reduction responsibility at economy level or emission permits at firm level past decades have seen the development and applications of various methods for co2 emissions allocation this paper provides a literature review of co2 emissions allocation with emphasis on the evolution of allocation methods used it begins with a summary of the most popular allocation principles and criteria that lay a foundation for the development of allocation methods we then classify the existing allocation methods into four groups namely indicator optimization game theoretic and hybrid approaches the main features and findings of past studies are identified and summarized while the fairness principle prevails in earlier studies the efficiency principle has been found to receive increasing attention recently we also present a comparison of the empirical results based on ten popular indicator methods to show how indicator choice affects the allocation results issues related to selecting appropriate methods in co2 emissions allocation are finally discussed further research may be carried out to strike a balance between fairness and efficiency so that the allocation results become more widely acceptable and economically feasible

the pizza night game conflict of interest and payoff inequality in tacit bargaining games with focal points we report the results of a new tacit bargaining experiment that provides two key insights about the effects of payoff inequality on coordination and cooperation towards efficient outcomes the experiment features the novel pizza night game which can disentangle the effects of payoff inequality and conflict of interest when coordination relies on focal points based on labelling properties payoff inequality does not interfere with the successful use of those properties when there are efficiency cues that assist coordination payoff inequality is not an obstacle to the maximisation of efficiency conflict of interest is the main barrier to successful coordination

exclusion and reintegration in a social dilemma using a social dilemma game we study the cooperative behavior of individuals who reintegrate their group after being excluded by their peers we manipulate the length of exclusion and whether this length is imposed exogenously or results from a vote we show that people are willing to exclude the least cooperators and they punish more and more severely chronic defections in return a longer exclusion has a higher disciplining effect on cooperation after reintegration but only when the length of exclusion is not chosen by group members its relative disciplining effect is smaller when the length of exclusion results from a vote in this environment a quicker reintegration also limits retaliation the difference in the impact of long vs short exclusion on retaliation is larger when the length of exclusion is chosen by group members than when it is exogenous post reintegration cooperation and forgiveness depend not only on the length of exclusion but also on the perceived intentions of others when they punish

effort sharing in ambitious global climate change mitigation scenarios abstract the post 2012 climate policy framework needs a global commitment to deep greenhouse gas emission cuts this paper analyzes reaching ambitious emission targets up to 2050 either 10 or 50 from 1990 levels and how the economic burden from mitigation efforts could be equitably shared between countries the scenarios indicate a large low cost mitigation potential in electricity and industry while reaching low emission levels in international transportation and agricultural emissions might prove difficult the two effort sharing approaches triptych and multistage were compared in terms of equitability and coherence both approaches produced an equitable cost distribution between countries with least developed countries having negative or low costs and more developed countries having higher costs there is however no definitive solution on how the costs should be balanced equitably between countries triptych seems to be yet more coherent than other approaches as it can better accommodate national circumstances last challenges and possible hindrances to effective mitigation and equitable effort sharing are presented the findings underline the significance of assumptions behind effort sharing on mitigation potentials and current emissions the challenge of sharing the effort with uncertain future allowance prices and how inefficient markets might undermine the efficiency of a cap and trade system

how uncertainty and ambiguity in tournaments affect gender differences in competitive behavior abstract tournament incentives prevail in labor markets yet the number of tournament winners is often unclear to competitors while it is hard to measure how this uncertainty affects work performance and willingness to compete in the field it can be studied in a controlled lab experiment we present a novel experiment where subjects can compete against each other but the number of winners is either uncertain but with known probabilities or ambiguous with unknown probabilities for different numbers of winners we compare these two conditions to a control treatment with a known number of winners we find that ambiguity induces a significant increase in the performance of men who choose to compete while we observe no change for women men also increase their willingness to enter competition in the presence of ambiguity overall both effects contribute to men winning the tournament significantly more often than women under uncertainty and ambiguity these findings suggest that management should make tournament conditions transparent and information available in order to prevent gender disparities from increasing under uncertainty and ambiguity

the spillover effects of gender quotas on dishonesty we experimentally test for spillover effects of gender quotas on subsequent unrelated unethical behavior we find that introducing quotas has no systematic effect on unethical behavior for both genders high performing competitive females are more likely to display unethical behavior than their male counterparts

bubbles and financial professionals the efficiency of financial markets and their potential to produce bubbles are central topics in academic and professional debates yet little is known about the contribution of financial professionals to price efficiency we run 116 experimental markets with 412 professionals and 502 students we find that professional markets with bubble drivers capital inflows or high initial capital supply are susceptible to bubbles although they are more efficient than student markets in mixed markets with students bubbles also occur but professionals act as price stabilizers we show that heterogeneous price beliefs drive overpricing especially in bubble prone market environments

ambiguity and excuse driven behavior in charitable giving a donation may have ambiguous costs or ambiguous benefits in a laboratory experiment we show that individuals use this ambiguity strategically as a moral wiggle room to behave less generously without feeling guilty such excuse driven behavior is more pronounced when the costs of a donation rather than its benefits are ambiguous however the importance of excuse driven behavior is comparable under ambiguity and under risk individuals exploit any type of uncertainty as an excuse not to give regardless of the nature of this uncertainty

international equity and differentiation in global warming policy ne of the major obstacles to reaching a comprehensive agreement on global warming is the setting of greenhouse gas emission reduction targets for individual countries long standing tensions between industrialized and developing countries have raised the issue of equity in burden sharing moreover individual industrialized nations have pleaded special circumstances and have sought differentiation in their obligations this paper analyzes alternative rules for distributing tradable carbon dioxide emissions permits a non linear programming model which distinguishes between allocation based and outcome based rules is used to analyze the relative welfare outcomes the model is applied to the world body of nations and yields several important policy implications

take it or leave it experimental evidence on the effect of time limited offers on consumer behaviour making time limited offers is a common retail pricing strategy economic theory implies that such offers inhibit price search making markets less competitive we investigate experimentally whether this effect is intensified by behavioural factors specifically feedback conditional regret reduced decision quality due to time constraints and aversion to small scale risk participants choose from a sequence of alternative price offers one of which might be time limited under various conditions these price search problems were matched with equivalent time unconstrained binary choices between lotteries we find no evidence of regret effects surprisingly time limited offers are more likely to be chosen when the time available for decision making is longer overall individuals show aversion to small scale risk this is stronger in price search than lottery choice allowing for this choices in the two types of task tend to be mutually consistent at the individual level even when decision making is subject to tight time constraints

selfish punishers an experimental investigation of designated punishment behavior in public goods abstract we show that a second party punisher forces his peers to contribute to a public good while contributing significantly less himself this effect increased over time and casts doubt on the prevalent prosocial interpretation of designated punishment behavior

abatement costs of post kyoto climate regimes abstract this article analyses the abatement costs of three post kyoto regimes for differentiating commitments compatible with stabilising atmospheric greenhouse gases concentrations at 550 ppmv co 2 equivalent in 2100 the three regimes explored are 1 the multi stage approach assumes a gradual increase in the number of parties involved who are adopting either emission intensity or reductions targets 2 the brazilian proposal approach i e the allocation or reductions based on countries contribution to temperature increase 3 contraction convergence with full participation in convergence of per capita emission allowances in 2050 the global costs increase up to about 1 of the world gdp ranging from 0 5 to 1 5 depending on baseline scenario and marginal abatement costs four groups of regions can be identified on the basis of similar costs expressed as the percentage of gdp these are 1 oecd regions with average costs 2 fsu the middle east and latin america with high costs 3 south east asia and east asia incl china with low costs and 4 south asia incl india and africa with net gains from emissions trading for most regimes the brazilian proposal approach gives the highest costs for groups 1 and 2 the distribution of costs for the contraction convergence approach highly depends on the convergence year the multi stage approach and contraction convergence convergence year 2050 seem to result in relatively the most even distribution of costs amongst all parties

emission allowances and mitigation costs of china and india resulting from different effort sharing approaches to meet ambitious global climate targets mitigation effort in china and india is necessary this paper presents an analysis of the scientific literature on how effort sharing approaches affect emission allowances and abatement costs of china and india we find that reductions for both china and india differ greatly in time across and within approaches and between concentration stabilisation targets for china allocated emission allowances in 2020 are substantially below baseline projections moreover they may be below 2005 emission levels particularly for low concentration targets below 490 ppm co2 eq effort sharing approaches based on allocating reduction targets lead to relatively lower reductions for china than approaches that are based on allocating emission allowances for 2050 emission allowances for china are 50 80 below 2005 levels for low concentration targets with minor differences between approaches still mitigation costs of china including emissions trading remain mostly below global average according to literature chinese emission allowances peak before 2025 2030 for low concentration targets india s emission allowances show high increases compared to 2005 levels if emission trading is allowed financial revenues from selling credits might compensate mitigation costs in most approaches even for low concentration targets india s emission allowances peak around 2030 2040 for all concentration targets c 2012 elsevier ltd all rights reserved

hroot hamburg registration and organization online tool abstract hroot hamburg registration and organization online tool is a web based software designed for managing participants of economic experiments this package provides important features to assure a randomized invitation process based on a filtered pre specified subject pool and a complete documentation of the selection procedure for potential participants of an experiment

do quotas help women to climb the career ladder a laboratory experiment abstract women are less likely to enroll in selective or scientific courses applying for promotions and are particularly underrepresented in both middle and top positions in the stem field quota are often advocated as an instrument to reduce this gender gap but it remains unclear at what step of the career ladder they more effectively foster women s reaching the top many factors may affect quota s success or failure such as how they would in turn affect teamwork and trust between members within organizations or coordination in applying for promotions in this paper by means of a laboratory experiment implementing a two stage tournament we evaluate the impact of three different interventions in affecting individual decision to climb the career ladder abstracting away from other possible confounding factors we find that compared with no intervention a gender quota introduced in the initial stage of competition was ineffective in encouraging women to compete for the top quotas introduced in the final stage of competition or at both stages increased women s willingness to compete for the top without distorting the performance of the winners

comparison of different climate regimes the impact of broadening participation so far most climate mitigation studies look at climate policy strategies in a so called first best world i e using the least expensive emission reduction options in all world regions and sectors to explore the impact of limited participation of countries we have run a set of scenarios that explore the impact of introducing a carbon tax in oecd the bric countries brazil russia india and china and the rest of the world the results show that carbon taxes can effectively reduce greenhouse gas emissions however if low greenhouse gas concentration levels are to be achieved early participation in some form of large developing countries is important to increase reduction potential it should be noted that global carbon taxes without additional assumptions lead to relatively high costs in low income regions cap and trade regimes have more flexibility to create a comparable distribution of costs amongst countries

decision making for others the case of loss aversion risky decisions are at the core of economic theory while many of these decisions are taken on behalf of others rather than for oneself the existing literature finds mixed results on whether people take more or less risk for others then for themselves recent studies suggest that taking decisions for others reduces loss aversion thereby increasing risk taking on behalf of others to test this we elicit loss aversion in three treatments making risky decisions for oneself for one other subject or for the decision maker and another person combined we find a clear treatment effect when making decisions for others but not when making decisions for both

a post kyoto analysis of the greek electric sector abstract the obligations resulting from the kyoto protocol kp are implemented by many participants e g greece by a combination of two methods a application of regional measures which restrict co2 emissions and b procurement of green certificates e g in a climate exchange market cex therefore the cost for compliance with the kp depends on the extent each method is used and also on the traded values in the cex the energy policy and planning to be considered are long term items and now extension of the kp to a post kp is discussed which reaches year 2020 in greece the electricity sector is with a weighted co2 contribution of 73 the dominantly emission sector the paper analyzes the cost and other merits of different scenarios for the expansion of electrical power system in greece for different scenarios the total cost of the electrical power system expansion is calculated as a function of the price of emission certificates it has been shown that there is a price of 27 5 tco2 above which specific mitigation measures may lead to cost optimum solutions a sensitivity analysis is also presented concerning the variation of key parameters like the participation in the system expansion of new supercritical coal units the price evolution of natural gas the res usage rate and the discount rates of the expansion investments results may be of interest for a decision on the cost optimum electrical power system expansion

looking at the bright side the motivational value of confidence abstract the motivational value of confidence postulates that individual effort provision is increasing in beliefs on one s own ability this relation is supposed to also hold for overconfident individuals who have exaggerated ability beliefs we present the first empirical evidence on the existence of a motivational value of absolute confidence that many microeconomic models with overconfident agents build on moreover we document that negative debiasing information on individual ability diminishes effort provision a result that is of obvious relevance for many contexts such as labor relations or learning at school we also offer a strategy for identifying significant absolute overconfidence at the individual level

asymmetric employer information promotions and the wage policy of firms abstract this paper provides evidence that inefficient promotion strategies and large wage increases upon promotion may both arise as a consequence of asymmetric employer information building on the seminal work by waldman 1984a and milgrom and oster 1987 we first present a model that illustrates how both phenomena may jointly arise due to the information revealing character of promotions using experimental labor markets we find evidence consistent with asymmetric employer information being a causal factor for both inefficient promotions and large wage increases upon promotion furthermore we analyze the effect of asymmetric employer information on profits and turnover

how tournament incentives affect asset markets a comparison between winner take all tournaments and elimination contests abstract we investigate the impact of investment managers tournament incentives on investment strategies and market efficiency distinguishing between winner take all tournaments wta where a minority wins and elimination contests ec where a majority wins theoretically we show that investment managers play heterogeneous strategies in wta and homogeneous strategies in ec and markets are more prone to mispricing in wta than in ec experimentally we find that investment managers play more heterogeneous strategies in wta than in ec but this does not trigger significant differences in prices moreover prices in wta and ec do not differ significantly from markets composed of linearly incentivized subjects

allocation of co2 emission permits economic incentives for emission reductions in developing countries the economic impacts on developing regions following a global cap and trade system for carbon dioxide are assessed through the use of an energy economy systems model both an equal per capita allocation and a contraction and convergence allocation with convergence of the per capita emissions by 2050 are shown to offer economic incentive for africa india and probably also latin america to accept binding emissions commitments under a 450 ppm carbon dioxide stabilization scenario the gain for latin america is mainly a result of increased export revenues from sales of bio fuels as a result of the climate policy it is on the other hand unlikely that these allocation approaches would offer an economic incentive for china to join the regime because of its high economic growth present higher per capita emissions than india and africa and more costly mitigation options than latin america a more stringent allocation for developing countries such as contraction with convergence of the per capita emissions by the end of this century is estimated to generate reduced net gains or increased net losses for the developing regions though africa is still expected to gain

when do people exploit moral wiggle room an experimental analysis of information avoidance in a market setup abstract we investigate if decision makers avoid information to exploit moral wiggle room in green market settings we therefore implement a laboratory experiment in which subjects purchase products associated with externalities in six between subjects treatments we alter the availability of information on the externalities the price of revealing information as well as the nature of the externality which could either affect another subject or change the amount spent by the experimenters on carbon offsets we find that subjects do not strategically avoid information when revealing information is costless when a very small cost of revealing information is introduced their behavior depends on the relation between prices and externalities in situations in which it is relatively cheap to have a large impact on the recipient s payoff subjects avoid information in order to choose selfishly for other parameterizations subjects behave either honestly egoistically or altruistically

the role of egalitarian motives in altruistic punishment abstract we conduct experiments in which subjects participate in both a game that measures preferences for income equality and a public goods game involving costly punishment the results indicate that individuals who care about equality are those who are most willing to punish free riders in public goods games

what you see is all there is news reports and communication are inherently constrained by space time and attention as a result news sources often condition the decision of whether to share a piece of information on the similarity between the signal and the prior belief of the audience which generates a sample selection problem this article experimentally studies how people form beliefs in these contexts in particular the mechanisms behind errors in statistical reasoning i document that a substantial fraction of experimental participants follows a simple what you see is all there is heuristic according to which participants exclusively consider information that is right in front of them and directly use the sample mean to estimate the population mean a series of treatments aimed at identifying mechanisms suggests that for many participants unobserved signals do not even come to mind i provide causal evidence that the frequency of such incorrect mental models is a function of the computational complexity of the decision problem these results point to the context dependence of what comes to mind and the resulting errors in belief updating

does competition kill corruption corrupt agents officials or gangsters exact money from firms corruption affects the number of firms in a free entry equilibrium the degree of deep competition in the economy increases with lower overhead costs relative to profits and with a tendency toward similar cost structures increases in competition may not lower corruption the model explains why a rational corrupt agent may extinguish the source of his bribe income by causing a firm to exit assessing the welfare effect of corruption is complicated by the fact that exit caused by corruption does not necessarily reduce social welfare

efficient rents 2 free entry and efficient rent seeking in the competition for a monopoly right in which the number of bidders is fixed tullock and others have found the value of the resources spent in the aggregate to capture the transfer to be sometimes less than and sometimes greater than the value of the monopoly we think this approach to be incomplete since it leaves unanswered the question of what determines the number of individuals who will vie for the right to be the monopolist it is unsatisfactory to imagine for example that the franchisor sets the number of contestants one could then foresee that rent seeking would arise to influence the permissible number of bidders and this merely moves the rent seeking dissipation question one step back