The fact that according to the celebrated Coase Theorem rational parties always try to exploit all gains from trade is usually taken as an argument against the necessity of government intervention through Pigouvian taxation in order to correct externalities. However, we show that the hold-up...

This experiment explores whether individuals know that other people are biased. We confirm that overestimation of abilities is a pervasive problem, but observe that most people are not aware of it, i.e. they think others are unbiased. We investigate several explanations for this result. As a...

Essential characteristics of corruption are (1) a reciprocity relationship between briber and public official, (2) negative welfare effects, and (3) high penalties when discovered. We separate the influences of these factors in an experiment. In a two-player game reciprocation is economically...

In a bribery experiment, we test the hypothesis that distributive fairness considerations make relatively well-paid public officials less corruptible. Corrupt decisions impose damages to workers whose wage is varied in two treatments. However, there is no apparent difference in behaviour.

This paper contributes to the ongoing methodological debate on context-free versus in-context presentation of experimental tasks. We report an experiment using the paradigm of a bribery experiment. In one condition, the task is presented in a typical bribery context, the other one uses abstract...

The German federal government intends to introduce regular staff rotation as a precautionary measure against corruption in public administrations. To test the effectiveness of this instrument, we conduct an experiment using the bribery game by Abbink, Irlenbusch, and Renner (1999), in which...

everal empirical findings have challenged the traditional trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained.

We provide an evolutionary foundation to evidence that in some situations humans maintain optimistic or pessimistic attitudes towards uncertainty and are ignorant to relevant aspects of the environment. Players in strategic games face Knightian uncertainty about opponents' actions and maximize...

We develop a model of assignment games with pairwise-identity-dependent externalities. A concept of conjectural equilibrium is proposed, and the universal conjecture is shown to be the necessary and sufficient condition for the general existence of equilibrium. We then apply the solution concept...

This paper explores the impact of insatiable needs on the sustainability and the direction of technological change and economic growth. In a simple framework it is shown that growth can only be sustained if either the opportunity costs of research are small at low levels of research or if some...