We study how institutional design influences moral transgression. People are heterogeneous in their feelings of guilt and can share guilt with others. Institutions determine the number of supporters necessary for immoral outcomes to occur. With more supporters required, every supporter can share guilt more easily. This facilitates becoming a supporter. Conversely, an institution requiring more ...

In this paper we study the role of incomplete ex ante contracts for ex post trade. Previous experimental evidence indicates that a contract provides a reference point for entitlements when the terms are negotiated in a competitive market. We show that this finding no longer holds when the terms are determined in a non-competitive way. Our results imply that the presence of a “fundamental transf...

Actual behaviour is influenced in important ways by moral emotions, for instance guilt or shame (see among others Tangney et al., 2007). Beliefdependant models of social preferences using the framework of psychological games aim to consider such emotions to explain other-regarding behaviour. Our study links recent advances in psychological theory on moral emotions to belief-dependant models in ...

We study how reference dependence and loss aversion motivate highly experienced agents, professional basketball players. We find a very large “losing motivates” effect, an average team scores like a league leader when trailing by ten points and a bottom dweller leading by ten. Detailed data on players’ actions shows this effect comes through differential exertion of effort. Using betting spread...

Can Contracts Signal Social Norms? Experimental Evidence We investigate whether incentive schemes signal social norms and thus affect behavior beyond their direct economic consequences. A principal-agent experiment is studied in which prior to contract choice principals are informed about past actions of other agents and thus have more information about “norms of behavior”. Compared to a settin...

We investigate the “law of small numbers” using a data set on lotto gambling that allows us to measure players’ reactions to draws. While most players pick the same set of numbers week after week, we find that those who do change, react on average as predicted by the law of small numbers as formalized in recent behavioral theory. In particular, players tend to bet less on numbers that were draw...

Incentives and Group Identity This paper investigates in a principal-agent environment whether and how group membership influences the effectiveness of incentives and when incentives can have “hidden costs”, i.e., a detrimental effect. We show experimentally that in all interactions control mechanisms can have hidden costs for reasons specific to group membership. In within-group interactions c...

Although weather has been shown to affect financial markets and financial decision making, a still open question is the channel through which such influence is exerted. By employing a multiple price list method, this paper provides direct experimental evidence that sunshine and good weather promote risk-taking behavior. This effect is present whether relying on objective measures of meteorologi...

Appearance and personal characteristics, such as age, gender, ethnicity and the way a person presents himself have been shown to play a role in many economic exchanges. Various explanations have been proposed for this finding, ranging from ‘statistical discrimination’, where such variables are surrogates for unobservable characteristics related to the quality of the counterparty, to ‘taste-base...

This paper considers the problem of a risk-neutral firm offering a gamble to consumers with preferences given by prospect theory. Under conditions satisfied by virtually all functional forms used in the literature, firms can extract arbitrarily high expected values from consumers. Moreover, for any given lottery, there exists another lottery that makes both the firm and the consumer better off....