The evidence from many experiments suggests that people are heterogeneous with regard to their abilities to make rational, forward looking, decisions. This raises the question when the rational types are decisive for aggregate outcomes and when the boundedly rational types shape aggregate...

Many of the most important choices in people's lives have an inter-temporal dimension, i.e., these choices are associated with a flow of benefits or costs that accrue in the future. In addition, such choices are frequently habit-forming. Yet, little is known about habit-forming inter-temporal...

Typically, laboratory experiments suffer from homogeneous subject pools and self-selection biases. The usefulness of survey data is limited by measurement error and by the questionability of their behavioral relevance. Here we present a method integrating interactive experiments and...

This paper reports the results of a series of competitive labour market experiments in which subjects have the possibility to reciprocate favours. In the high stake condition subjects earned between two and three times their monthly income during the experiment. In the normal stake condition the...

This paper shows that identical offers in an ultimatum game generate systematically different rejection rates depending on the other offers that are available to the proposer. This result casts doubt on the consequentialist practice in economics to define the utility of an action solely in terms...

There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality do not necessarily refute the aggregate predictions of standard economic models that assume full...

This paper examines how the presence of a non-negligible fraction of reciprocally fair actors changes the provision of incentives through contracts. We provide experimental evidence that principals have a strong preference for less complete contracts although the standard self-interest model...

During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically questionable view of human motivation. The purpose of this paper is to show that this narrow view of...

In this paper we show that subtle forms of deceit undermine the effectiveness of incentives. We design an experiment in which the principal has an interest in underreporting the true performance difference between the agents in a dynamic tournament. According to the standard approach, rational...

In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long term contracts and important aspects of the employment relation. However, so far there exists no direct evidence that supports these assumptions and, in particular, Hart and Moore’s notion that...