We report a lab experiment to study subjects’ preferences over their ordinal rank in an earnings distribution. Following an assignment of unequal earnings, subjects can select a monetary transfer from exactly one individual to another, not including themselves. This can potentially change their own position in the distribution, as well as influence overall inequality. The experiment varies whether the initial earnings assignment is random or is affected by preliminary competition. It also varies the reference group from a complete to a partial network. A majority of observed transfers reduce inequality by moving earnings from those with the highest rank to the lowest rank in the distribution. Rank-improving transfers are substantially more common for preliminary competition losers than winners. Transfers to individuals outside of the reference group are not uncommon, and they usually target as the source the individuals high in the income distribution. While generally weak overall, own rank preferences appear to be more common among men than women.

Within-group communication in competitive coordination games has been shown to increase competition between groups and lower efficiency. This study further explores potentially harmful effects of communication, by addressing the questions of (1) asymmetric communication and (2) the endogenous emergence of communication. Our theoretical analysis provides testable hypotheses regarding the effect of communication on competitive behavior and efficiency. We test these predictions using a laboratory experiment. The experiment shows that although asymmetric communication is not as harmful as symmetric communication, it leads to more aggressive competition and lower efficiency relative to the case when neither group can communicate. Moreover, groups vote to endogenously establish communication channels even though they would earn higher payoffs if jointly they chose to restrict within-group communication.

This paper studies voluntary public good provision in the laboratory, in a cross-cultural experiment conducted in the United States and Japan. Our environment differs from the standard voluntary contribution mechanism because subjects first decide whether or not to participate in providing this non-excludable public good. This participation decision is conveyed to the other subject prior to the subjects’ contribution decisions. We find that only the American data are consistent with the evolutionary-stable-strategy Nash equilibrium predictions, and that behavior is significantly different across countries. Japanese subjects are more likely to act spitefully in the early periods of the experiment, even though our design changes subject pairings each period so that no two subjects ever interact twice. Surprisingly, this spiteful behavior eventually leads to more efficient public good contributions for Japanese subjects than for American subjects.

We propose a simple adaptive learning model to study behavior in the call market. The laboratory environment features buyers and sellers who receive a new random value or cost in each period, so they must learn a strategy that maps these random draws into bids or asks. We focus on buyers’ adjustment of the “mark-down” ratio of bids relative to private value and sellers’ adjustment of the corresponding “mark-up” ratio of asks relative to private cost. The learning model involves partial adjustment of these ratios towards the ex post optimum each period. The model explains a substantial proportion of the variation in traders’ strategies. Parameter estimates indicate strong recency effects and negligible autonomous trend, but strongly asymmetric response to different kinds of ex post error. The asymmetry is only slightly attenuated in “observational learning” from other traders’ ex post errors. Simulations show that the model can account for the main systematic deviations from equilibrium predictions observed in this market institution and environment.

How do people distribute defenses over a directed network attack graph, where they must defend a critical node? This question is of interest to computer scientists, information technology and security professionals. Decision-makers are often subject to behavioral biases that cause them to make sub-optimal defense decisions, which can prove especially costly if the critical node is an essential infrastructure. We posit that non-linear probability weighting is one bias that may lead to sub-optimal decision-making in this environment, and provide an experimental test. We find support for this conjecture, and also identify other empirically important forms of biases such as naive diversification and preferences over the spatial timing of the revelation of an overall successful defense. The latter preference is related to the concept of anticipatory feelings induced by the timing of the resolution of uncertainty.

Many social dilemmas exhibit nonlinearities and equilibrium outcomes in the interior of the choice space. This paper reports a laboratory experiment studying whether peer punishment promotes socially efficient behavior in such environments, which have been ignored in most experimental studies of peer punishment. It compares the effectiveness of peer punishment in a linear public good game to the effectiveness of this decentralized enforcement mechanism in two nonlinear social dilemma games: a piecewise linear public good game and a common pool resource game. While peer punishment improves cooperation in these new environments, the impact of punishment is weaker and takes longer to be effective. This appears to be due to the greater complexity of the nonlinear settings, which makes socially optimal choices more difficult to identify.

This paper presents a laboratory collective resistance (CR) game to study how different forms of non-binding communication among responders can help coordinate their collective resistance against a leader who transgresses against them. Contrary to the predictions of analysis based on purely self-regarding preferences, we find that non-binding communication about intended resistance increases the incidence of no transgression even in the one-shot laboratory CR game. In particular, we find that the incidence of no transgression increases from 7 percent with no communication up to 25-37 percent depending on whether communication occurs before or after the leader's transgression decision. Responders’ messages are different when the leaders can observe them, and the leaders use the observed messages to target specific responders for transgression.

We report a laboratory experiment that investigates the impact of passive participation on bubble formation in asset markets with inexperienced and experienced traders. Some treatments employ pre-market training in which each participant is ‘matched’ with a trader from a different prior market and observes all trading details but does not directly participate in trading. We find that passive participation, similar to direct experience, significantly reduces mispricing in subsequent markets. This finding suggests that observation of prices is a key mechanism through which experience mitigates bubbles. We also vary whether transaction prices are displayed in a column of text or in a graphical display, and find that among inexperienced and once-experienced traders, markets with the tabular display result in bubbles that are greater in amplitude relative to markets with the graphical display.

The laboratory provides a test bed to inform many design choices for emissions permit markets. Experiments are sometimes strongly motivated and structured by specific theoretical models and predictions, but in other cases the experiment itself can be the model of the market and regulatory environment. We review specific experimental applications that address design issues for permit auction rules, permit expiration dates and banking, liability rules, and regulatory enforcement.

This paper reports an experiment to evaluate the effectiveness of repeated interactions in deterring leaders from using divide-and-conquer strategies to extract surplus from their subordinates, when every decision-maker involved is a group instead of an individual. We find that both the resistance rate by subordinates and the divide-and-conquer transgression rate by leaders are the same in the group and individual repeated coordinated resistance games. Similar to the individual game, adding communication to the group game can help deter opportunistic behavior by the leaders even in the presence of repetition.