Kahneman and Tversky and their behavioral economics stand in a long tradition of applying mathematics to human behavior. In the seventeenth century, attempts to describe rational behavior in mathematical terms run into problems with the formulation of the St. Petersburg paradox. Bernoulli’s...

The most important financial source for behavioral economics is the Russell Sage Foundation (RSF). The most prominent behavioral economists among the RSF’s twenty-six member Behavioral Economics Roundtable (BER) are Kahneman, Tversky, Thaler, Camerer, Loewenstein, Rabin, and Laibson. The...

This contribution deals with the fundamental critique in Dinar et al. (1992, Theory and Decision 32) on the use of Game theory in water management: People are reluctant to monetary transfers unrelated to water prices and game theoretic solutions impose a computational burden. For the bilateral...

We investigate experimentally the economic effects of wage taxation to finance unemployment benefits for a closed economy and an international economy. The main findings are the following. (i) There is clear evidence of a vicious circle in the dynamic interaction between the wage tax and...

Empirical research suggests that - rather than improving incentives - exerting control can reduce workers' performance by eroding motivation. The present paper shows that intention-based reciprocity can cause such motivational crowding-out if individuals differ in their propensity for...

We experimentally study the strategic transmission of information in a setting where both cheap talk and money can be used for communication purposes. Theoretically a large number of equilibria exist side by side, in which senders either use costless messages, money, or a combination of the two....

In this laboratory experiment we study the use of strategic ignorance to delegate real authority within a firm. A worker can gather information on investment projects, while a manager makes the implementation decision. The manager can monitor the worker. This allows her to better exploit the...

We develop a theory of leadership that focuses on the role managers

In housing markets with asymmetric information list prices may signal unobserved properties of the house or the seller. Asymmetric information is the starting point of many models for the housing market. In this paper, we estimate the causal effect of list-price reductions to test for the...

Currently no refinement exists that successfully selects equilibria across a wider range of Cheap Talk games. We propose a generalization of refinements based on credible deviations, such as neologism proofness and announcement proofness. According to our Average Credible Deviation Criterion...