Expert advice is often biased in ways that benefit the advisor. We demonstrate how self-deception helps advisors be biased while preserving their self-image as ethical and identify limits to advisors' ability to self-deceive. In experiments where advisors recommend one of two investments to a...

In three experiments we examine the extent to which strategic sophistication (i.e., inductive reasoning, iterative dominance and level-k thinking) is determined by broader cognitive skills. In the first experiment we replicate previous results showing strong associations between cognitive...

This paper studies the evolution of peoplesʼ models of how other people think – their theories of mind. This is formalized within the level-k model, which postulates a hierarchy of types, such that type k plays a k times iterated best response to the uniform distribution. It is found that,...

Psychologists claim that being treated kindly puts individuals in a positive emotional state: they then treat an unrelated third party more kindly. Numerous experiments document that subjects indeed ‘pay forward’ specific behavior. For example, they are less generous after having experienced...

We analyse pricing, effort and tipping decisions at the online service ‘Google Answers’. Users set a price for the answer to their question ex ante, and they can additionally tip the researcher who provided the answer ex post.

This paper presents a model of choice based on imperfect memory and self-deception. I assume that people have preferences over their own attributes (e.g., skill, knowledge, or competence) and can manipulate their memories. The model provides a prior-dependent theory of regret aversion and allows...

We demonstrate that the Hotelling–Downs model with runoff voting always admits symmetric mixed strategy equilibria for any (even or odd) number of office-motivated candidates (provided they are at least four). In specific, (a) we show that the game does not admit any symmetric atomless...

This paper studies the temporal path of subjective probability assessments. A reference-dependent agent who experiences utility from anticipation and from changes in this anticipatory emotion makes utility-maximizing assessments about his likelihood of success in a future lottery. Consistent...

We present evidence from laboratory experiments of behavioral spillovers and cognitive load that spread across strategic contexts. In the experiments, subjects play two distinct games simultaneously with different opponents. We find that the strategies chosen and the efficiency of outcomes in...

I analyze how informal agreements can be sustained by moral emotions with regard to a large class of two-player games. Specifically, I assume that people feel guilty if they breach an agreement and that the guilt increases according to the degree of the harm inflicted on the other. A central...