Many tests of asset pricing models address only the pricing predictions — but these pricing predictions rest on portfolio choice predictions which seem obviously wrong. This paper suggests a new approach to asset pricing and portfolio choices, based on unobserved heterogeneity. This approach...

We experimentally compare standard two-player trust games to three-player trust games, where two trustors compete for one trustee. We argue that a competitive environment could affect how the trustors’ behaviour is perceived by the trustee. If two trustors compete for the favour of a trustee,...

There is extensive literature, both theoretical and empirical, on the effects of social identity on a wide range of economic and non-economic outcomes. However, there is only scarce knowledge about how social identity is affected by policies or market structure. We address the question how...

Failure is embarrassing. In gambles involving both skill and chance, we show that a strategic desire to avoid appearing unskilled generates behavioral anomalies that are typically explained by prospect theory’s concepts of loss aversion, probability weighting, and framing effects. Loss...

When a risky decision involves both skill and chance, success or failure is a signal of the decision maker's skill. Adopting standard models from the career concerns literature, we show that a rational desire to avoid looking unskilled may help explain several anomalies associated with prospect...

This paper investigates how group membership and competition among trustors interact with trust and trustworthiness in a laboratory one-shot trust game. To analyze these effects, we apply a 2x2 design. We induce group membership by letting subjects play coordination games with clear focal...

We present results of an experiment on expectation formation in an asset market. Participants to our experiment must provide forecasts of the stock future return to computerized utility-maximizing investors, and are rewarded according to how well their forecasts perform in the market. In the...

We test the no-trade theorem in a laboratory financial market where subjects can trade an asset whose value is unknown. Subjects receive clues on the asset value and then set a bid and an ask at which they are willing to buy or to sell from the other participants. In treatments with no gains...

Researchers who have examined markets populated by "robot traders" have claimed that the high level of allocative efficiency observed in experimental markets is driven largely by the "intelligence" implicit in the rules of the market. Furthermore, they view the ability of agents (artificial or...

We present results of an experiment on expectation formation in an asset market. Participants to our experiment must provide forecasts of the stock future return to computerized utility-maximizing investors, and are rewarded according to how well their forecasts perform in the market. In the...