We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behaviour in markets. Topics discussed include the impact of imitative and satisficing behavior by firms, outcomes when managers care about their position relative to peers,...

The motivation crowding effect suggests that an external intervention via monetary incentives or punishments may undermine (and under different indentifiable conditions strengthen) intrinsic motivation. As of today, the theoretical \lang1033 possibility of crowding effects is widely accepted...

We use a unique hand collected data set of 6 258 auctions from the online football manager game Hattrick to study micro-patterns of reserve price formation. We find that chosen reserve prices exhibit both, very sophisticated and “irrational” behavior by the sellers. Reserve prices pick up...

This paper analyzes a recent ballot in which two virtually identical popular initiatives, both demanding a decrease in the legal age of retirement in Switzerland, led to differences in approval rates of nearly seven percentage points. Based on this unique natural experiment, the existence of...

We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a...

We develop a simple model of the exchange rate in which agents optimize their portfolio and use different forecasting rules. They check the profitability of these rules ex post and select the more profitable one. This model produces two kinds of equilibria, a fundamental and a bubble one. In a...

The weak rationality principle is not an empirical statement but a heuristic rule of how to proceed in social sciences. It is a necessary ingredient of any ‘understanding’ social science in the Weberian sense. In this paper, first this principle and its role in economic theorizing is...

Using a natural voting experiment in Switzerland that encompasses a 160-year period (1848–2009), we investigate whether a higher level of complexity leads to increased reliance on expert knowledge. We find that when more referenda are held on the same day, constituents are more likely to refer...

Explaining individual behavior in politics should rely on the same motivational assumptions as explaining behavior in the market: That’s what Political Economy, understood as the application of economics to the study of political processes, is all about. In its standard variant, those who...

This study proposes an analytical framework towards behavioral political economy of institutional change. It considers institutional changes as central government’s choices under uncertainty, which are largely driven by the strategic outcomes in a behavioral coordination game between local...