We experimentally test overconfidence in investment decisions by offering partic- ipants the possibility to substitute their own for alternative investment choices. Overall, 149 subjects participated in two experiments, one with just one risky as- set, the other with two risky assets....

An empirically well-established finding is that equity portfolios are concentrated in the domestic equity market of the investor. Previous theoretical and empirical analyses have mainly focused on institutional explanations and largely neglected individual behavior. In this study we report the...

Dynamics of compliance, depending on audit probability, sanctions, and the time lag between audits, are investigated in a tax experiment. Compliance varied significantly over time: it decreased immediately after an audit and increased afterwards, especially if audits were frequent and sanctions...

We conducted a laboratory study with a public goods game in which contributions are not submitted all at once but incrementally as coordinated in real time by a clock. Individuals press a button as soon as the clock equals their willingness to contribute. This public goods institution exploits...

Conventions can be narrowly interpreted as coordinated ways of equilibrium play, i.e., a specific convention tells all players in a game with multiple strict equilibria which equilibrium to play. In our view, coordination often takes place before learning about the games. Thus, one has to...

In a cascade experiment subjects are confronted with artificial predecessors predicting in line with the BHW model (Bikhchandani, Hirshleifer and Welch, 1992). Using the BDM mechanism we study subjects' probability assignments based on price limits for participating in the prediction game. We...

We study the value of information in financial markets by asking whether having more information always leads to higher returns. We address this question in an experiment where single traders have different information levels about an asset's intrinsic value. In our treatments we vary the nature...

An auction is externality-robust if unilateral deviations from equilibrium leave the other bidders’ payoffs unaffected. The equilibrium and its outcome will then persist if certain types of externalities arise between bidders. One example are externalities due to spiteful preferences, which...

This paper explores the sale of an object to an ambiguity averse buyer. We show that the seller can increase his profit by using an ambiguous mechanism. That is, the seller can benefit from hiding certain features of the mechanism that he has committed to from the agent. We then characterize the...

We propose a sequential auction mechanism for a single object in which the seller jointly determines the allocation and the disclosure policy. A sequential disclosure rule is shown to implement an ascending price auction in which each losing bidder learns his true valuation, but the winning...