Efficient coordination is a major source of efficiency gains. We study in an experimental coordination game with 727 children and teenagers, aged 9 to 18 years, the strategies played in pre-adulthood. In our one-shot, experimental coordination game, we vary the incentives for reaching the more efficient equilibrium and the number of subjects within a group. Looking at strategy choices dependent on age, we do not find robust age effects in the aggregate. Yet, we see that smaller group sizes and larger incentives increase the likelihood of choosing the efficient strategy. The larger strategic uncertainty in larger groups is obviously harmful for overall efficiency. Regarding incentives, we find that increasing the profits in the efficient equilibrium seems to work better than providing a cushion in case of miscoordination. Beliefs play an important role as well, as subjects are more likely to play the efficient strategy when they expect others to do so as well. Our results are robust to controlling for individual risk-, time-, and social preferences.

In the presence of a default option, the optimal search rule for an agent with a reference-dependent utility and a search cost predicts: (i) the default increases the reservation utility due to the reference effect, leading to a better choice, and (ii) those with higher reservation utility will self-select into search and are more likely to find a superior option. Our experiments document the presence of both effects. Those who reject the default are likely to find higher-ranked options in their active search, supporting the self-selection effect. Even when the self-selection channel is shut down, the reference effect remains.

We report a lab experiment to study subjects’ preferences over their ordinal rank in an earnings distribution. Following an assignment of unequal earnings, subjects can select a monetary transfer from exactly one individual to another, not including themselves. This can potentially change their own position in the distribution, as well as influence overall inequality. The experiment varies whether the initial earnings assignment is random or is affected by preliminary competition. It also varies the reference group from a complete to a partial network. A majority of observed transfers reduce inequality by moving earnings from those with the highest rank to the lowest rank in the distribution. Rank-improving transfers are substantially more common for preliminary competition losers than winners. Transfers to individuals outside of the reference group are not uncommon, and they usually target as the source the individuals high in the income distribution. While generally weak overall, own rank preferences appear to be more common among men than women.

We conduct an economic experiment to examine the causal impact of social ties on the preference for competition. Participants decide whether to engage in a competition or not. Across four treatments, potential competitors vary based on their relationship with the decision-maker: whether they had a conversation with the decision-maker prior to the competition, whether they are expected to chat after the competition, or both, or neither. We find that the process of chatting increases social closeness. This increase in social closeness tends to reduce the preference for competition when participants are expected to meet again after the competition. However, it does not change the likelihood of opting for competition if there is no prospect of further interaction. Through this experiment, we thus uncover previously unknown implications of managerial practices, such as team-building exercises and remote work options, that influence the formation of social ties.

This paper investigates the collusive and competitive effects of algorithmic price recommendations on market outcomes. These recommendations are often non-binding and common in many markets. We develop a theoretical framework and derive two algorithms that recommend collusive pricing strategies. Utilizing a laboratory experiment, we find that sellers condition their prices on the recommendation of the algorithms. The algorithm with a soft punishment strategy lowers market prices and has a pro-competitive effect. The algorithm that recommends a subgame perfect equilibrium strategy increases the range of market outcomes, including more collusive ones.

Previous studies have shown that an oath can reduce lying in individual settings. Can it reduce lying in groups, a context where lying is more prevalent? Results from a lab experiment reveal that the impact depends on the incentive structures and procedures. A mandatory oath reduces lying when group members’ payoffs are independent, but only has a marginal effect when payoffs are dependent. Voluntary oath-taking enhances the effectiveness under both incentive structures by fostering intrinsic motivation to keep promises. The findings highlight the importance of peer effects and oath-taking procedures on the effectiveness of an oath in group settings.

We introduce the “Fork Game,” a graphical interface designed to elicit higher-order risk preferences. In this game, participants connect forked pipes to create a final structure. A ball is then dropped into the top opening of this structure and follows a downward path, randomly turning left or right at each forked joint. This construction is effectively isomorphic to the apportionment of binary-outcome lotteries, allowing participants to construct complex gambles. Furthermore, the game is easily comprehensible, highly modular, and provides a flexible means of assessing risk aversion, prudence, temperance, and even higher-order risk preferences.

In this paper, we present a flexible approach to estimating parametric cumulative Prospect Theory using Hierarchical Bayesian methods. Bayesian methods allow us to include prior knowledge in estimation and heterogeneity in individual responses. The model employs a generalised parametric specification of the value function allowing each individual to be risk-seeking in low-stakes mixed prospects. In addition, it includes parameters accounting for varying levels of model noise across domains (gain, loss, and mixed) and several aspects of lottery design that can influence respondent behaviour. Our results indicate that enhancing value function flexibility leads to improved model performance. Our analysis reveals that choices within the gain domain tend to be more predictable. This implies that respondents find tasks in the gain domain cognitively less challenging in comparison to making choices within the loss and mixed domains.

In meritocratic societies, inequality is considered just if it reflects factors within but not outside individuals’ control. However, individuals often benefit differentially from other people’s efforts. Such passive inequality is simultaneously just and unjust by meritocratic standards, confronting meritocrats with a dilemma. We conducted an experiment with a representative US sample to investigate how people deal with this dilemma. In the experiment, impartial spectators redistribute payments between pairs of individuals. We vary whether initial payments result from luck or effort and whether spectators redistribute between individuals who worked themselves or individuals who benefited from the work of real-life friends. We find that spectators treat inequality based on the efforts of individuals’ friends as if individuals had worked themselves, and very different from inequality resulting from differential luck. This indicates that most people accept inequality if it is merited at some stage, which may explain opposition to redistributive policies.