We compare the standard one-bid first price auction to a corresponding two-bid first price auction where each buyer may place two bids: a high bid and a low one and the winner pays his low bid if this was higher than all other bids. We characterize the equilibria of the two mechanisms and prove...

Experimental studies of risk and time-preference typically focus on one of the two phenomena. The goal of this paper is to investigate the (possible) correlation between subjects' attitude to risk and their time-preference. For this sake we ask 61 subjects to price a simple lottery in 3...

We study the effect of variation in correlation on investment decision in an experimental two asset application. Comparison of allocations across problems suggests that subjects neglect probabilistic information on the joint distribution of returns and base their allocations on the observed...

Class and field surveys revealed that personal inclination to take structured lottery-risk significantly correlates with optimism in financial forecasting. Trait optimism reflects in return predictions for successful and problematic stocks, in likelihood assessments of specific events, and even...

The field experimental approach was utilized to collect expectations-arbitrage portfolios from competent investors in late 2008 where stock prices shrunk by 50%. Positions were closed after 3 months and the 4-factor model was applied to characterize strategies and derive risk-adjusted returns....

The close to zero interest rates past the economic crisis open possibility to directly test for loss aversion in framed field structured investment tasks. We use a Web-survey platform to compare the willingness to invest in LOSS-GAIN deposits that pay positive return G in favorable market...

Three experiments are designed to test if the level of irrelevant prizes in the menu has a positive (assimilation) or negative (contrast) effect on the perceived valuation of target objects. Familiar field prizes and binary lotteries over such prizes are placed within “more-expensive” and...

Empirically, mutual fund flows depend on past performance. It is unclear, however, whether this behavior is rational. Using the experimental approach we analyze behavior without confronting measurement problems of real data. We detect two anomalies: quot;Absolute Performance Effectquot; --...

Previous research suggests that human reaction to risky opportunities reflects two contradicting biases: "loss aversion", and "limited level of reasoning" that leads to overconfidence. Rejection of attractive gambles is explained by loss aversion, while counterproductive risk seeking is...