Smith et al. (1988) reported large bubbles and crashes in experimental asset markets, a result that has been replicated by a large literature. Here we test whether the occurrence of bubbles depends on the experimental subjects' cognitive sophistication. In a two-part experiment, we first run a...

We test in the laboratory the potential of evolutionary dynamics as predictor of actual behavior. To this end, we propose an asymmetric game -which we interpret as a borrowerlender relation-, study its evolutionary dynamics in a random matching set-up, and tests its predictions. The model...

Kahneman and Tversky asserted a fundamental asymmetry between gains and losses, namely a “reflection effect” which occurs when an individual prefers a sure gain of $ pz to an uncertain gain of $ z with probability p, while preferring an uncertain loss of $z with probability p to a certain...

We test whether risk attitudes change when losses instead of gains are involved. The study of gain-loss asymmetries has been largely confined to “reflected” choices, where all the money amounts of a positive prospect are multiplied by minus one. We define the decomposition “reflection =...

"Beauty-contest" is a game in which participants have to choose, typically, a number in [0,100], the winner being the person whose number is closest to a proportion of the average of all chosen numbers. We describe and analyze Beauty-contest experiments run in newspapers in UK, Spain, and...

In Selten (1967) “Strategy Method,” the second mover in the game submits a complete strategy. This basic idea has been exported to nonstrategic experiments, where a participant reports a complete list of contingent decisions, one for each situation or state in a given sequence, out of which...

We experimentally question the assertion of Prospect Theory that people display risk attraction in choices involving high-probability losses. Indeed, our experimental participants tend to avoid fair risks for large (up to € 90), high-probability (80%) losses. Our research hinges on a novel...

Does risk attitude (aversion or attraction) vary with the level of the income at risk? About half of our subjects chose to insure all levels, whereas another half chose instead not to insure low levels, but to insure high levels.

This paper introduces a mixture model based on the beta distribution, without preestablished means and variances, to analyze a large set of Beauty-Contest data obtained from diverse groups of experiments (Bosch-Domenech et al. 2002). This model gives a better t of the experimental data, and more...