We investigate a private value auction in which a single “entrant” on winning imposes a negative externality on two “regular” bidders. In an English auction when all bidders are active, “regular” bidders free ride, exiting before price reaches their values. In a first-price...

We study experimentally the effects of cost structure and prize allocation rules on the performance of rent-seeking contests. Most previous studies use a lottery prize rule and linear cost, and find both overbidding relative to the Nash equilibrium prediction and significant variation of...

Rule learning posits that decision makers, rather than choosing over actions, choose over behavioral rules with different levels of sophistication. Rules are reinforced over time based on their historically observed payoffs in a given game. Past works on rule learning have shown that when...

We introduce noise in the signaling technology of an otherwise standard wasteful signaling model (Spence, 1973). We theoretically derive the properties of the equilibria under different levels of noise and we experimentally test how behavior changes with noise. We obtain three main insights....

In a credence goods game with an expert and a consumer, we study experimentally the impact of two devices that are predicted to induce consumer-friendly behavior if the expert has a propensity to feel guilty when he believes that he violates the consumerʼs payoff expectations: (i) an...

How do people learn? We assess, in a model-free manner, subjectsʼ belief dynamics in a two-armed bandit learning experiment. A novel feature of our approach is to supplement the choice and reward data with subjectsʼ eye movements during the experiment to pin down estimates of subjectsʼ...

From the regulation of sports to lawmaking in parliament, in many situations one group of people (“agents”) make decisions that affect the payoffs of others (“principals”) who may offer action-contingent transfers in order to sway the agents' decisions. Prat and Rustichini (2003)...