There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish...

This paper analyzes individual decision making under risk. It is assumed that an individual does not have a preference relation on the set of risky lotteries. Instead, an individual possesses a probability measure that captures the likelihood of one lottery being chosen over the other. Choice...

We provide a direct test of the role of social preferences in voluntary cooperation. We elicit individuals’ cooperation preference in one experiment and make a point prediction about the contribution to a repeated public good. This allows for a novel test as to whether there are "types" of...

This paper investigates the effectiveness of two instruments designed to defer termination in the centipede game: an insurance against termination by the opponent, and an option to offer the opponent a bonus for not terminating the game. The rational prediction in both cases is passing until...

This paper proposes a new model that explains the violations of expected utility theory through the role of random errors. The paper analyzes decision making under risk when individuals make random errors when they compute expected utilities. Errors are drawn from the normal distribution, which...

We investigate to what extent contribution decisions to a public good depend on the contributions of others. We employ a novel experimental technique that allows us to elicit people's willingness to be conditionally cooperative, i.e., to contribute more to the public good the more the other...

This paper presents an experimental examination of the Falkinger (1996) mechanism or overcoming the free-rider problem. The basic idea of the mechanism is that deviations from the mean contribution to the public good are taxed and subsidized. The mechanism has attractive properties because (i)...

An individual makes random errors when evaluating the expected utility of a risky lottery. Errors are symmetrically distributed around zero as long as an individual does not make transparent mistakes such as choosing a risky lottery over its highest possible outcome for certain. This stochastic...