We develop a framework in which: (i) a firm can have a new product tested publicly before launch; and (ii) tests vary in toughness, holding expertise fixed.  Price flexibility boosts the strong positive impact on consumer beliefs of passing a tough test and mitigates the strong negative impact...

This paper considers the impact of reviewers on sales of products of quality unknown to consumers. Sales occur simultaneously after consideration by a reviewer with a known level of bias. Consumers observe the reviewer`s decision and a private signal. We find that: (a) with flexible prices and...

We consider a principal-agent problem where the principal wishes to be endorsed by a sequence of agents, but cannot truthfully reveal type. In the standard herding model, the agents learn from each other`s decisions, which can lead to cascades on a given decision when later agents` private...

Herding arises when an agents private information is swamped by public information in what Jackson and Kalai (1997) call a recurring game. The agent will fail to reveal his own information and will follow the actions of his predecessor and, as a result, useful information is lost, which might...

This paper presents a neural network model developed to simulate the endogenous emergence of bounded-rational behavior in normal-form games. There exists an algorithm which, if learnt by a neural network, would enable it to perfectly select Nash equilibria in never before seen games. However,...

This paper examines experimental evidence relating to herd behaviour in situations when subjects can learn from each other, and can delay their decision. Subjects acted rationally, gaining from observational learning, despite penalties for delay. Cascades were ubiquitous and reverse-cascades...

We study price competition between firms over public list or posted prices when a fraction of consumers (termed 'bargainers') can subsequently receive discounts with some probability.  Such stochastic discounts are a feature of markets in which some consumers bargain explicitly; of markets in...

We use an online real-effort experiment to investigate how bonus-based pay and worker productivity interact with workplace cheating.  Firms often use bonus-based compensation plans, such as group bonuses and firm-wide profit sharing, that induce considerable uncertainty in how much workers are...

In this paper we investigate how cognitive ability and character skills influence behavior, success and the evolution of play towards Nash equilibrium in repeated strategic interactions.  We study behavior in a p-beauty contest experiment and find striking differences according to cognitive...

Teams are becoming increasingly important in work settings.  We develop a framework to study the strategic implications of a meritocratic notion of desert under which team members care about receiving what they feel they deserve.  Team members find it painful to receive less than their...