Hypothetical bias is the common finding that hypothetical monetary values for “goods” are higher than real values. We extend this research to the domain of “bads” such as consumer and household choices made to avoid aversive outcomes (e.g., insurance). Previous evidence of hot-cold...

This chapter surveys literature on experimental law and economics. Long the domain of legally minded psychologists and criminologists, experimental methods are gaining significant popularity among economists interested in exploring positive and normative aspects of law. Because this literature...

We explore the influence of tacit routines in obtaining coordination. Our experiment uses simple laboratory firms, in which we interfere with one kind of firm's ability to develop tacit routines. Thus, our firms vary in the degree to which they rely on this kind of knowledge - instead of other,...

We measure individual-level loss aversion using three incentivized, representative surveys of the U.S. population (combined N = 3,000). We find that around 50% of the U.S. population is loss tolerant, with many participants accepting negative-expected-value gambles. This is counter to earlier...

Sixteen subjects' brain activity were scanned using FMRI as they made choices, expressed beliefs, and expressed iterated 2nd-order beliefs (what they think others believe they will do) in eight games. Cingulate cortex and prefrontal areas (active in theory of mind and social reasoning) are...

We meta-analyzed 32 experimental "correspondence" studies investigating discrimination in the North American labor market. We collected data on 592 different social signals to examine the impact of social perception (warmth, competence) on callback rates. Our analysis found that social...

Two related trends have created novel challenges for managing risk in the United States. The first trend is a series of dramatic changes in liability law as tort law has expanded to assign liability to defendants for reasons other than negligence. The unpredictability of future costs induced by...

We use four incentivized representative surveys to study the endowment effect for lotteries in 4,000 U.S. adults. We replicate the standard finding of an endowment effect—the divergence between Willingness to Accept (WTA) and Willingness to Pay (WTP), but document three new findings. First, we...

This paper examines the regulatory implications of behavioral economic insights. The central effect of behavioral economics in the legal literature to date has been to challenge the premise of formal economic theory that individuals understand their preferences and work to maximize these...

Hidden Markov models (HMMs) are used to study language, sleep, and other processes that reflect probabilistic transitions between states that cannot be observed directly. We apply HMMs to data from experiments on visual location games. In these games, people choose a pixel from an image. They...