This paper studies the effect of social relations on convergence to the efficient equilibrium in 2 × 2 coordination games from an experimental perspective. We employ a 2 × 2 factorial design in which we explore two different games with asymmetric payoffs and two matching protocols: “friends” versus “strangers”. In the first game, payoffs by the worse-off player are the same in the two equilibria, whereas in the second game, this player will receive lower payoffs in the efficient equilibrium. Surprisingly, the results show that “strangers” coordinate more frequently in the efficient equilibrium than “friends” in both games. Network measures such as in-degree, out-degree and betweenness are all positively correlated with playing the strategy which leads to the efficient outcome but clustering is not. In addition, ‘envy’ explains no convergence to the efficient outcome.

Recent research argues “betrayal aversion” leads many people to avoid risk more when a person, rather than nature, determines the outcome of uncertainty. However, past studies indicate that factors unrelated to betrayal aversion, such as loss aversion, could contribute to differences between treatments. Using a novel experiment design to isolate betrayal aversion, one that varies how strategic uncertainty is resolved, we provide rigorous evidence supporting the detrimental impact of betrayal aversion. The impact is substantial: holding fixed the probability of betrayal, the possibility of knowing that one has been betrayed reduces investment by about one-third. We suggest emotion-regulation underlies these results and helps to explain the importance of impersonal, institution-mediated exchange in promoting economic efficiency.

This paper combines laboratory with field data from professional sellers to study whether social preferences are related to performance in open-air markets. The data show that sellers who are more pro-social in a laboratory experiment are also more successful in natural markets: They achieve higher prices for similar quality, have superior trade relations and better abilities to signal trustworthiness to buyers. These findings suggest that social preferences play a significant role for outcomes in natural markets.

Prior research has demonstrated that the ability to express one’s views or “voice” matters in social and economic interactions, but little is known of the mechanisms through which voice operates. Using an experimental approach based on the ultimatum game with the strategy method, we explore four potential channels for voice that encompass and expand on prior work: the knowledge effect of voice, the value expressive (or inherent value) of voice, the expectation effect of voice, and the procedural fairness effects of voice. Our results show strong effects through the value expressive and expectation channel, but not through either the knowledge channel or procedural fairness. In our view, voice is powerful because people like to express their views and they are disappointed when their views did not make a difference in their outcomes.

We study beliefs and actions in a repeated normal-form game. Using a level-k model of limited strategic reasoning and allowing for other-regarding preferences, we classify action and belief choices with regard to their strategic sophistication and study their development over time. In addition to a baseline treatment with common knowledge of the game structure, feedback about actions in the previous period and random matching, we run treatments (i) with fixed matching, (ii) without information about the other player’s payoffs, and (iii) without feedback about previous play. In all treatments with feedback, we observe more strategic play (increasing by 15 percent) and higher-level beliefs (increasing by 18 percent) over time. Without feedback, neither beliefs nor actions reach significantly higher levels of reasoning (with increases of 2 percentage points for actions and 6 percentage points for beliefs). The levels of reasoning reflected in actions and beliefs are highly consistent, but less so for types with lower levels of reasoning.

We examine how multitasking affects performance. We also examine whether individuals optimally choose their degree of multitasking or whether they perform better under an externally imposed schedule. Subjects in our experiment perform two different tasks according to one of three treatments: one where they perform the tasks sequentially, one where they are forced to multitask, and one where they can freely organize their work. Subjects who are forced to multitask perform significantly worse than those forced to work sequentially. Surprisingly, subjects who can freely organize their own schedule also perform significantly worse. These results suggest that scheduling is a significant determinant of productivity. Finally, our results do not support the stereotype that women are better at multitasking. Women suffer as much as men when forced to multitask and are actually less inclined to multitask when being free to choose.

In this paper we compare behaviour in a newspaper experiment with behaviour in the laboratory. Our workhorse is the Yes-No game. Unlike in ultimatum games responders of the Yes-No games do not know the proposal when deciding whether to accept or not. We use two different amounts that can be shared (100€ and 1000€). Unlike in other experiments with the ultimatum game we find a (small) effect of the size of the stakes. In line with findings for the ultimatum game, we find more generosity among women, older participants, and participants who submit their decision via postal mail than via Internet. By comparing our results with other studies (using executives or students), we demonstrate, at least for this type of game, the external validity of lab research.

Combinatorial auctions have been studied analytically for several years, but only limited experimental results are available for auctions with more than 10 items. We investigate the Hierarchical Package Bidding auction (HPB), the Combinatorial Clock auction (CC), and one pseudo-dual price auction (PDP) experimentally, as all these formats were used or suggested for high-stakes spectrum auctions. We want to understand the impact that different auction formats have on bidder behavior and allocative efficiency. Interestingly, we find that the main source of inefficiency in all formats is the bidders’ preselection of packages, rather than their strategies or auction rules; bidders mostly preselect a small number of packages of interest early in the auction. CC achieves high efficiency and revenue in all experiments, but HPB yields similar results even in value models, where hierarchical pre-packaging is difficult. Due to their influence on the decision of the US Federal Communications Commission, we intentionally repeated a set of experiments conducted by Goeree and Holt (GH) [Games and Economic Behavior 70:146–169, 2010], and find similar aggregate results. In addition, we analyze the CC auction and find that this mechanism has advantages in environments where the auctioneers’ hierarchy does not fit the bidders’ preferences well. In addition to the value models with global synergies in GH, we used value models where bidders have local synergies, which play a significant role in spectrum auctions in the field and lead to different results.

We present an experiment designed to test the Modigliani-Miller theorem. Applying a general equilibrium approach and not allowing for arbitrage among firms with different capital structures, we find that, in accordance with the theorem, participants well recognize changes in the systematic risk of equity associated with increasing leverage and, accordingly, demand higher rate of return. Yet, this adjustment is not perfect: subjects underestimate the systematic risk of low-leveraged equity whereas they overestimate the systematic risk of high-leveraged equity, resulting in a U-shaped cost of capital. A (control) individual decision-making experiment, eliciting several points on individual demand and supply curves for shares, provides some support for the theorem.