There is overwhelming evidence of reciprocal behavior, driven by intentions. However, the role of consequences is less clear cut. Experimentally manipulating how efficient trust and reciprocity can be in deterministic and uncertain environments allows us to study how payoff consequences of trust...

We experimentally examine the effects of flexible and fixed prices in markets for experience goods in which demand is driven by trust. With flexible prices, we observe low prices and high quality in competitive (oligopolistic) markets, and high prices coupled with low quality in non-competitive...

Random choices of prices and product characteristics can be used by a contestable monopolist to deter entry and fully extract the monopoly rent. We develop this idea in a model of Bertrand price competition. In equilibrium, one firm enters the market and makes choices that are unpredictable to...

We analyze educational institutions’ incentives to set up demanding or lax curricula in duopolistic markets for education with endogenous enrolment of students. We assume that there is a positive externality from student achievement to the local economy. Comparing the case of regulated tuition...

Adverse selection is a classic market failure known to limit or "unravel"' trade in high-quality insurance and many other economic settings. While the standard theory emphasizes quality distortions, we argue that selection has another big-picture implication: it unravels competition among...

The demonstrated capacity of markets to aggregate information motivates research on alternative institutions designed to do the same task. This study inquires about forms of parimutuel betting systems. Measures of information aggregation for performance evaluation are introduced. Two...

We study the voluntary revelation of private information in a labor-market experiment where workers can reveal their productivity at a cost. While rational revelation improves a worker׳s payoff, it imposes a negative externality on others and may trigger further revelation. Such unraveling can...

Economists are increasingly turning to the experimental method as a means to estimate causal effects. By using randomization to identify key treatment effects, theories previously viewed as untestable are now scrutinized, efficacy of public policies are now more easily verified, and stakeholders...

This paper presents the results of a policy oriented macroeconomic experiment involving an ‘international’ economy with a relatively small ‘home’ country and a large ‘foreign’ country. It compares the economic performance of two alternative tax systems: a wage tax system and a...

Laboratory experiments have been used extensively in economics in the past several decades to lend both positive and normative insights into a myriad of important economic issues. This study discusses a related approach that has increasingly grown in prominence of late--field experiments. I...