People, across a wide range of personal and professional domains, need to accurately detect whether the state of the world has changed. Previous research has documented a systematic pattern of over- and under-reaction to signals of change due to system neglect, the tendency to overweight the signals and underweight the system producing the signals. We investigate whether experience, and hence the potential to learn, improves people’s ability to detect change. Participants in our study made probabilistic judgments across 20 trials, each consisting of 10 periods, all in a single system that crossed three levels of diagnosticity (a measure of the informativeness of the signal) with four levels of transition probability (a measure of the stability of the environment). We found that the system-neglect pattern was only modestly attenuated by experience. Although average performance did not increase with experience overall, the degree of learning varied substantially across the 12 systems we investigated, with participants showing significant improvement in some high diagnosticity conditions and none in others. We examine this variation in learning through the lens of a simple linear adjustment heuristic, which we term the “δ-ϵ” model. We show that some systems produce consistent feedback in the sense that the best δ and ϵ responses for one trial also do well on other trials. We show that learning is related to the consistency of feedback, as well as a participant’s “scope for learning” how close their initial judgments are to optimal behavior.

We report two meta-analyses on the determinants of antisocial behavior in experimental settings in which such behavior is not rationally motivated by pecuniary incentives. The first meta-analysis employs aggregate data from 95 published and unpublished studies (24,086 participants), using laboratory, field and online experiments carried out since 2000. We find that antisocial behavior depends significantly on the experimental setting, being highest in vendetta games and lowest in social dilemmas. As we find significant heterogeneity across the studies, including across game classes, in the second meta-analysis, we focus only on “Joy of Destruction” (JoD) and money-burning (MB) experiments, for which we have the most observations, 51 studies and around 16,784 participants. Overall, our findings suggest that procedural fairness and being observed by others reduce the frequency of antisocial behavior. Online and field experiments display more antisocial behavior than laboratory experiments. We also find that the strategy method biases antisocial behavior upward. However, we do not find evidence for a positive publication bias being correlated with higher destructive behavior, either in the general meta-analysis or in relation to JoD/MB experiments; if anything, there is evidence of a negative publication bias. The JoD/MB meta-analysis finds evidence of a price effect for destruction frequency, negative discrimination against outsiders, within-subject designs underestimating destructive behavior, and more antisocial behavior in one-shot interactions. Collectively, our results point to the value of more laboratory experiments that systematically build on paradigmatic experimental designs to enable comparability and the identification of key economic drivers of antisocial behavior.

Narrow bracketers who are myopic in specific decisions would fail to consider preexisting risks in investment and neglect hedging opportunities. Growing evidence has demonstrated the relevance of narrow bracketing. We take a step further in empirical investigation and study individual heterogeneity in narrow bracketing. Specifically, we use a lab experiment in investment and hedging that elicits subjects’ preferences on rich occasions to uncover the individual degree of narrow bracketing without imposing distributional assumptions. Combining prospect theory and narrow bracketing can explain our findings: Subjects who invest more also insure more, and subjects insure significantly less in the loss domain than in the gain domain. More importantly, we show that the distribution of the individual degree of narrow bracketing is skewed at two extremes, yet with a substantial share of people in the middle who partially suffer from narrow bracketing. Neglecting this aspect, we would overestimate the severity of narrow bracketing and misinterpret its relation with individual characteristics.

Research on individual decisions from experience reveals a robust tendency to behave as if rare events are underweighted. Experimental studies of strategic interactions often exclude probabilistic outcomes, thus neglecting the potential extension of this tendency to strategic games. Our study addresses this gap by examining how players in games adjust their strategies when confronted with low-probability, high-impact outcomes. We introduce two finitely repeated, asymmetric games with lottery-based payoffs. These games, when simplified by replacing lotteries with their expected values, yield straightforward equilibrium predictions based on dominant strategies. However, results from three experiments reveal players strongly deviate from these predictions, instead behaving consistently with underweighting of rare events. The results additionally indicate that social preferences also play a role in shaping behavior. To explain these observations, we propose the simplistic Reciprocal Altruistic Sampler (REALS) model. This model posits that players’ decisions are a result of the interplay between reliance on small samples of past experiences, altruistic tendencies, and strategic considerations. We experimentally compare behavior in variants of the games that disentangle the behavior to these three components, and show that the REALS model, despite its simplicity, effectively captures their complex interactions. Our results additionally demonstrate that players can often choose strictly dominated strategies in a sophisticated effort to react to underweighting of rare events by other players. Overall, this study enhances our understanding of strategic decision making by highlighting the crucial impact of rare events and the interplay of different uncertainties in influencing players’ choices.

Using a laboratory experiment, we investigate complexity in decision problems as a cause of failures in contingent reasoning. For this purpose, we introduce three dimensions of complexity to a decision problem: the number of contingencies, the dominance property of choices, and reducible states. Each decision problem is designed to reflect variations in complexity across the three dimensions. Experimental results show that the number of contingencies has the most significant effect on failures in contingent reasoning. The second dimension, the dominance property of choices, also has a statistically significant effect, though the effect size is smaller than in the existing literature. In contrast, the third complexity dimension has no impact; presenting the decision problem in a reduced or reducible form does not change subjects’ performance on contingent reasoning. Additionally, we examine the Power of Certainty and show its existence. This effect is particularly pronounced when the number of contingencies is large.

Disappointment aversion has been suggested as an explanation for non-truthful rankings in strategy-proof school-choice matching mechanisms. We test this hypothesis using a novel experimental design that eliminates important alternative causes of non-truthful rankings. The design uses a simple contingent choice task with only two possible outcomes. Between two treatments, we manipulate the possibility for disappointment aversion to have an effect on ranking. We find a small and statistically marginally significant treatment effect in the direction predicted by disappointment aversion. We therefore conclude that disappointment aversion is a minor contributor to non-truthful rankings in strategy-proof school-choice matching mechanisms.

We investigate the role of visual attention in risky choice in a rich experimental dataset that includes eye-tracking data. We first show that attention is not reducible to individual and contextual variables, which explain only 20% of attentional variation. We then decompose attentional variation into individual average attention and trial-wise deviations of attention to capture different cognitive processes. Individual average attention varies by individual, and can proxy for individual preferences or goals (as in models of “rational inattention” or goal-directed attention). Trial-wise deviations of attention vary within subjects and depend on contextual factors (as in models of “salience” or stimulus-driven attention). We find that both types of attention predict behavior: average individual attention patterns are correlated with individual levels of loss aversion and capture part of this individual heterogeneity. Adding trial-wise deviations of attention further improves model fit. Our results show that a decomposition of attention into individual average attention and trial-wise deviations of attention can capture separable cognitive components of decision making and provides a useful tool for economists and researchers from related fields interested in decision-making and attention.

Pledges are ubiquitous in charitable giving, but they are often reneged upon. To investigate whether adding the phrase “I swear” to pledge language can reduce pledge reneging, we conduct a series of experiments in the context of online fundraising. We find that including “I swear” at the beginning of the pledge language significantly increases immediate giving and pledge fulfillment, with more individuals switching from pledging to giving immediately. We also observe individual heterogeneity in moral identity: Our findings are present among individuals with low moral identity, but not among those with high moral identity. Our paper presents a simple and no-cost strategy for increasing the effectiveness of pledges in online fundraising.

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.

Norm-based accounts of social behavior in economics typically reflect tradeoffs between maximization of own consumption utility and conformity to social norms. Theories of norm-following tend to assume that there exists a single, stable, commonly known injunctive social norm for a given choice setting and that each person has a stable propensity to follow social norms. We collect panel data on 1468 participants aged 11–15 years in Belfast, Northern Ireland and Bogotá, Colombia in which we measure norms for the dictator game and norm-following propensity twice at 10 weeks apart. We test these basic assumptions and find that norm-following propensity is stable, on average, but reported norms show evidence of change. We find that individual-level variation in reported norms between people and within people across time has interpretable structure using a series of latent transition analyses (LTA) which extend latent class models to a panel setting. The best fitting model includes five latent classes corresponding to five sets of normative beliefs that can be interpreted in terms of what respondents view as “appropriate” (e.g. equality vs. generosity) and how they view deviations (e.g. deontological vs. consequentialist). We also show that a major predictor of changing latent classes over time comes from dissimilarity to others in one’s network. Our application of LTA demonstrates how researchers can engage with heterogeneity in normative perceptions by identifying latent classes of beliefs and deepening understanding of the extent to which norms are shared, stable, and can be predicted to change. Finally, we contribute to the nascent experimental literature on the economic behavior of children and adolescents.

We develop a new design for the experimental beauty-contest game (BCG) that is suitable for children in school age and test it with 114 schoolchildren aged 9–11 years as well as with adults. In addition, we collect a measure for cognitive skills to link these abilities with successful performance in the game. Results demonstrate that children can successfully understand and play a BCG. Choices start at a slightly higher level than those of adults but learning over time and depth of reasoning are largely comparable with the results of studies run with adults. Cognitive skills, measured as fluid IQ, are predictive only of whether children choose weakly dominated strategies but are neither associated with lower choices in the first round nor with successful performance in the BCG. In the implementation of our new design of the BCG with adults we find results largely in line with behavior in the classical BCG. Our new design for the experimental BCG allows to study the development of strategic interaction skills starting already in school age.

We conduct a laboratory experiment among male participants to investigate whether rewarding schemes that depend on work performance—in particular, tournament incentives—induce more stress than schemes that are independent of performance—fixed payment scheme. Stress is measured over the entire course of the experiment at both the hormonal and psychological level. Hormonal stress responses are captured by measuring salivary cortisol levels. Psychological stress responses are measured by self-reported feelings of stress and primary appraisals. We find that tournament incentives induce a stress response whereas a fixed payment does not induce stress. This stress response does not differ significantly across situations in which winners and losers of the tournament are publically announced and situations in which this information remains private. Biological and psychological stress measures are positively correlated, i.e. increased levels of cortisol are associated with stronger feelings of stress. Nevertheless, neither perceived psychological stress nor elevated cortisol levels in a previous tournament predict a subsequent choice between tournaments and fixed payment schemes, indicating that stress induced by incentives schemes is not a relevant criterion for sorting decisions in our experiment. Finally, we find that cortisol levels are severely elevated at the beginning of the experiment, suggesting that participants experience stress in anticipation of the experiment per se, potentially due to uncertainties associated with the unknown lab situation. We call this the novelty effect.

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 study investigates the mechanisms driving the effectiveness of free-form communication in promoting cooperation within a sequential social dilemma game. We hypothesize that the self-constructing nature of free-form communication enhances the sincerity of messages and increases the disutility of dishonoring promises. Our experimental results demonstrate that free-form messages outperform both restricted promises and treatments where subjects select and use previously constructed free-form messages. Interestingly, we find that selected free-form messages and restricted promises achieve similar levels of cooperation. We observe that free-form messages with higher sincerity increase the likelihood of high-price and high-quality choices, thereby promoting cooperation. These messages frequently include promises and honesty, while threats do not promote cooperation. Our findings emphasize the crucial role of the self-constructed nature of free-form messages in promoting cooperation, exceeding the impact of message content compared to restricted communication protocols.

This paper examines how image concerns affect the way giving behavior responds to social information. Subjects in the laboratory decide first whether they wish to donate part of their earnings to a charity, and then, conditional on opting in, decide how much to donate. They receive information on the size of a previous donation either before or after opting in, which allows one to examine the effect of the social information on the extensive and intensive margins of giving separately, and thus distinguish self-image concerns from potential alternative mechanisms. Information on a large previous donation caused subjects to opt out, but when shown only after opt-in, the same information caused subjects to increase donation amounts and did not lead to $0 donations. As further evidence of the influence of image concerns, the reaction to the social information was found to be correlated with a preference for quietly exiting a dictator game, and with scoring high on neuroticism. The results have implications for the inferences we draw about donor motives and welfare based on changes in giving in response to social information.

Nothing is known about the effectiveness of defaults when moving the target outcomes requires substantial effort. We conduct two field experiments to investigate how defaults fare in such situations: we change the university exam sign-up procedure in two study programs to “opt-out” (a) for a single exam, and (b) for many exams. Both interventions increase task uptake (exam sign-up). Concerning the outcomes which require effort, we find no effects for many exams. For a single exam, the opt-out increases task completion (exam participation) in the study program where the default arguably entails stronger endorsement. Within this program, the effects on successful task completion (exam passing) are heterogeneous: treated students who in the past were willing to communicate with the university (responsive individuals) invest more effort into exam preparation and are more likely to pass the exam than their control counterparts.For non-responsive individuals, we find increased sign-ups but no effects on the target outcomes. Defaults can thus be effective and may be an attractive policy option even when the target outcome requires substantial effort provision. It is, however crucial that the interventions target the appropriate individuals.

I study the effect of task difficulty on workers’ effort. I find that task difficulty has an inverse-U effect on effort and that this effect is quantitatively large, especially when compared to the effect of conditional monetary rewards. Difficulty acts as a mediator of monetary rewards: conditional rewards are most effective at the intermediate or high levels of difficulty. The inverse-U pattern of effort response to difficulty is inconsistent with many popular models in the literature, including the Expected Utility models with the additively separable cost of effort. I propose an alternative mechanism for the observed behavior based on non-linear probability weighting. I structurally estimate the proposed model and find that it successfully captures the behavioral patterns observed in the data. I discuss the implications of my findings for the design of optimal incentive schemes for workers and for the models of effort provision.

Intertemporal choices are affected by both discount rate and utility curvature. We investigate how the two aspects of time preference are affected by the size of the total budget using an intertemporal allocation task. At the aggregate level as well as at the individual level, we find magnitude effects both on the discount rate and on intertemporal substitutability (i.e., utility curvature). Individuals are more patient when dealing with larger budgets and also regard larger budgets to be more fungible. The latter effect suggests that the degree of asset integration is increasing in the stake.

Widespread evidence from psychology and neuroscience documents that previous choices unconditionally increase the later desirability of chosen objects, even if those choices were uninformative. This is problematic for economists who use choice data to estimate latent preferences, demand functions, and social welfare. The evidence on this mere choice effect, however, exhibits serious shortcomings which prevent evaluating its possible relevance for economics. In this paper, we present a novel, parsimonious experimental design to test for the economic validity of the mere choice effect addressing these shortcomings. Our design uses well-defined, monetary lotteries, all decisions are incentivized, and we effectively randomize participants’ initial choices without relying on deception. Results from a large, pre-registered online experiment find no support for the mere choice effect. Our results challenge conventional wisdom outside economics. The mere choice effect does not seem to be a concern for economics, at least in the domain of decision making under risk.

To investigate whether attention responds rationally to strategic incentives, we experimentally implement a buyer-seller game in which a fully informed seller makes a take-it-or-leave-it offer to a buyer who faces cognitive costs to process information about the offer's value. We isolate the impact of seller strategies on buyer attention by exogenously varying the seller's outside option, which leads sellers to price high more often. We find that buyers respond by making fewer mistakes conditional on value, which suggests that buyers exert higher attentional effort in response to the increased strategic incentives for paying attention. We show that a standard model of rational inattention based on Shannon mutual information cannot fully explain this change in buyer behavior. However, we identify another class of rational inattention models consistent with this behavioral pattern.