We introduce the uncertainty of psychological motivation into a reciprocity model and explore its implications on behavior. We extend the Sequential Reciprocity Equilibrium in extensive-form games (Dufwenberg and Kirchsteiger, 2004) to a broader class of incomplete information games. We use this...

We test 494 households participating in the German Socio Economic Panel SOEP to examine risk taking by one household member that affects a second household member. Choices cannot be explained by (short term) strategic behavior. Respect for the risk preference of the counterpart is at best...

Substantial evidence in field, lab and thought experiments in multiple disciplines, shows that decision makers often choose a dominated strategy, which contradicts with current economic theory. To bridge this gap between theory and evidence, first, we propose two alternative axiomatic...

We investigate the trade-off between the opportunity costs of decisions and their quality in a simple model. In a lab experiment, we introduce exogenous variation in the opportunity costs of time. Contrary to claims in the previous literature, we show that using more time when making small-stake...

Existing models of regret aversion assume that individuals can make an ex-post comparison between their choice and a foregone alternative. Yet in many situations such a comparison can be made only if someone else chose the alternative option. We develop a model where regret-averse agents must...

Do experimental subjects have consistent first and higher-order beliefs about others? How does any inconsistency affect strategic decisions? We introduce a simple four-player sequential social dilemma where actions reveal first and higher-order beliefs. The unique sub-game perfect Nash...

Existing models of regret aversion assume that individuals can make an ex-post comparison between their choice and a foregone alternative. Yet in many situations such a comparison can be made only if someone else chose the alternative option. We develop a model where regret-averse agents must...

Experiments typically rely on small payments to incentivize participants. This works if participants view these payments as fungible with their own money, but if participants view the payments as a windfall, they may behave differently in experiments than in real life. We modify standard risky...

We explain essentially all known discounted utility anomalies as artefacts of the optimizing behavior of an individual with a time-separable utility function, who perceives a good as a source of a stochastic consumption stream, and believes that she can wait for an optimal moment to buy or sell...

Our lab experiment offers new insights on Bayesian probability updating and the effects of group discussion on risk decision making. We exploit a within-subject experimental setting based on Bougheas et al. (2015). We find that the majority of participants react to conflicting signals in a...