Joep Sonnemans
Professor of Behavioral Economics at theFaculty of Economics and Econometrics of the
University of Amsterdam
Email: j.h.sonnemans@uva.nl
Phone: +31 (0)20 525 4249
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Joep SonnemansProfessor of Behavioral Economics at theFaculty of Economics and Econometrics of the University of Amsterdam Email: j.h.sonnemans@uva.nl |
I graduated in mathematics and social psychology at
the University of Utrecht. After working as a researcher on social
security at the Ministry of Social affairs and as a research
associate in psychology at the University of Amsterdam (where I
obtained my doctorate degree), I joined CREED in February 1992. I am mainly interested in (experimental) research in which insights from economics and other social sciences (e.g. psychology) are combined or contrasted: expectation formation, bargaining, social
behavior, emotional decision-making and individual search behavior
(see the abstracts of working papers and publications below). In recent years I have become interested in behavioral finance and behavioral economics. Part of the research is done in the Center for Nonlinear Dynamics in Economics and Finance (CeNDEF). I am an Associate Editor of the European Economic Review and member of the editorial board of Quantitative Finance and the Journal of Economic Psychology.
I am also a Research Fellow of the Tinbergen Institute.
Other (non-working related) interests are modern literature, modern art
, vegetarian cooking and Laurel and Hardy movies.
Meet my co-authors! Visit the list with all of my co-authors, with photographs and links to websites.
(2009) Cartel Formation and Pricing: The Effect of Managerial Decision Making Rules PDF-file
We experimentally investigate how the managerial decision making process affects choices in a Bertrand pricing game with an opportunity to form non-binding cartels. To do so we compare the effects of three decision-making rules for the firm (decisions by CEOs, majority rule and consensus) to each other and to decisions in a benchmark consisting of single-individual firms. It has been argued elsewhere that groups behave more competitively than individuals. In this setting this predicts that for all three decision-making rules we should observe fewer cartels and lower prices. This is not what we find. For the formation of cartels, there are no differences across treatments. For prices asked, we find that first, cartels lead to higher prices in al treatments, despite the fact that they are non-binding. Second, the decision-making rules strongly affect the prices asked. One thing that stands out is that firms run by CEOs ask higher prices than observed in the other treatments.
(2009) Incentives versus sorting in tournaments: Evidence from a field experiment PDF-file
A vast body of empirical studies lends support to the incentive effects of rankorder tournaments. Evidence comes from experiments in laboratories and non-experimental studies exploiting sports or firm data. Selection of competitors across tournaments may bias these non-experimental studies, whereas short task duration or lack of distracters may limit the external validity of results obtained in lab experiments or from sports data. To address these concerns we conducted a field experiment where students selected themselves into tournaments with different prizes. Within each tournament the best performing student on the final exam of a standard introductory microeconomics course could win a substantial financial reward. A standard non-experimental analysis exploiting across tournament variation in reward size and competitiveness confirms earlier findings. We find however no evidence for effects of tournament participation on study effort and exam results when we exploit our experimental design, indicating that the non-experimental results are completely due to sorting. Treatment only affects attendance of the first workgroup meeting following the announcement of treatment status, suggesting a difference between short-run and long-run decision making.
(2009) Social Comparison and Risky Choices PDF-file
This study attempts to combine two traditional fields in microeconomics: individual decision making under risk and decision making in an interpersonal context. The influence of social comparison on risky choices is explored in an experiment in which participants make a series of choices between lotteries with only positive outcomes. Three kinds of choice situations are employed. In the loss and gain context the social referent receives a fixed payoff that is respectively higher and lower than all possible payoffs of the decision maker. In the neutral context social referent and decision maker will always earn the same amount. In the gain and loss contexts the decision maker has no influence on the earnings of the social referent so strategic behavior or social preferences can play no role. We find that decision makers are more risk-averse in the loss context than in the gain context, with the behavior in the neutral context in between. This result is in opposition to the predictions of prospect theory extrapolated to a social context.
(2008) How Individuals Choose Health Insurance: An Experimental Analysis PDF-file
An individual choosing a health insurance policy faces a complex decision environment where a large set of alternatives differ on a variety of dimensions. There is uncertainty and the choice is repeated at least once a year. We study decisions and decision strategies in a laboratory experiment where we create a controlled environment that closely mirrors this setting. We use an electronic information board that allows to carefully monitor the individual’s decision strategy. The number of alternatives, switching costs, and the speed at which health deteriorates are varied across treatments. We find that most subjects’ search is based more on attributes than on policies. Moreover, we find that an increase in the number of alternatives increases decision-making time; makes subjects consider a lower fraction of the available information; makes it more likely that subjects will switch; and decreases the quality of their decisions. The introduction of positive costs of switching make people switch less often but improve the quality of their decisions. Finally, if health deteriorates only gradually, individuals tend to stick to their current policy too long.
(2008) Errors in judicial decisions: experimental evidence PDF-file Appendix
In criminal cases the task of the judge is to transform the uncertainty of the facts into the certainty of the verdict. In this experiment we examine the relationship between evidence of which the strength is known, subjective probability of guilt and verdict for abstract cases. We look at two situations: (1) all evidence is given and (2) evidence can be acquired. Roughly half of the participants do not base their decision on a subjective belief of the probability of guilt. The others underestimate in general the probability of guilt, but this is more than compensated by a tendency to convict at too low probability of guilt. In the situation where evidence can be acquired, participants do not acquire enough evidence.
(2008) Positive expectations feedback experiments and number guessing games as models of financial markets PDF-file
In repeated number guessing games choices typically converge quickly to the Nash equilibrium. In positive expectations feedback experiments, however, convergence to the equilibrium price tends to be very slow, if it occurs at all. Both types of experimental designs have been suggested as modeling essential aspects of financial markets. In order to isolate the source of the differences in outcomes we present several new treatments in this paper. We conclude that the feedback strength (i.e. the ‘p-value’ in standard number guessing games) is essential for the results. Furthermore, positive expectations feedback experiments may provide good representations of highly speculative markets while standard number guessing games model financial markets with more emphasis on dividend yield and value stocks.
(2007) Gift exchange and the separation of ownership and control. PDF-file
Abstract Numerous gift exchange experiments have found a positive wage-effort relationship. In (almost) all these experiments the employer both owns and controls the firm. This paper explores to what extent the separation of ownership and control affects the wage-effort relationship. We compare the standard bilateral gift exchange game between an owner-manager and a worker with two trilateral ones where the firm is owned by a shareholder and controlled by a manager. The wage-effort relationship is similar in all three situations. Most strikingly, workers reward higher wages with higher effort, even when the manager does not share in the firm’s profits.
(2006) Rent-seeking versus productive activities in a multi-task experiment PDF-file
Incentive instruments like asset ownership and performance pay often have to strike a balance between the productive incentives and the rent-seeking incentives they provide. Standard theory predicts that a given instrument becomes less attractive when the effectiveness of rent-seeking activities increases. More recent theories that emphasize the importance of reciprocity, however, suggest that this relationship may go the other way around. In this paper we test these predictions by means of a laboratory experiment. By and large our findings confirm standard theory. Incentive instruments typically become less attractive when the scope for rent-seeking activities increases. However, reciprocity motivations do seem to mitigate the adverse effects of rent-seeking opportunities to a considerable extent.
(2009) Price Stability and Volatility in Markets with Positive and Negative Expectations Feedback: An Experimental Investigation Journal of Economic Dynamics and Control 33, 1052-1072 Link to article
The evolution of many economic variables is affected by expectations that economic agents have with respect to the future development of these variables. We show, by means of laboratory experiments, that market behaviour depends to a large extent on whether realized market prices respond positively or negatively to average price expectations. In the case of negative expectations feedback, as in commodity markets, prices converge quickly to their equilibrium value, confirming the rational expectations hypothesis. In the case of positive expectations feedback, as is typical for speculative asset markets, large fluctuations in realized prices and persistent deviations from the benchmark fundamental price are likely. We estimate individual forecasting rules and investigate how these explain the differences in aggregate market outcomes.
(2009) The Tragedy of the Commons Revisited: The Importance of Group Decision-Making Journal of Public Economics 93, 785-797 Link to article
We use a laboratory experiment to compare the way groups and individuals behave in an inter-temporal common pool dilemma. The experimental design distinguishes between a non-strategic problem where players (individuals or groups of three) make decisions without interaction and a strategic part where players harvest from a common pool. This allows us to correct for differences between individuals and groups in the quality of decisions when testing for differences in competitiveness. Group decisions are either made by majority rule or unanimity. The results show that groups are less myopic than individuals (i.e., they make qualitatively better decisions) but that they are more competitive than individuals when placed in a strategic setting. The net result for groups deciding by majority rule is that they make less efficient decisions in the strategic game than individuals do. We are able to show that this is caused by the median voter departing from her original preference in early periods with a shrinking pool. When groups have to make unanimous decisions they start playing the strategic game more efficiently then individuals do, but they rapidly become more competitive with repetition of the game.
(2009) A Truth-Serum for Non-Bayesians: Correcting Proper Scoring Rules for Risk Attitudes Review of Economic Studies 76, 1461-1489 Link to article Background material
Proper scoring rules provide convenient and highly efficient tools for incentive compatible elicitations of subjective beliefs. As traditionally used, however, they are valid only under expected value maximization. This paper shows how they can be generalized to modern (“nonexpected utility”) theories of risk and ambiguity, yielding mutual benefits: people using proper scoring rules can benefit from the empirical realism of nonexpected utility, and people analyzing ambiguity attitudes can benefit from the efficient measurements through proper scoring rules. An experiment demonstrates the feasibility of our generalized proper scoring rule.
(2008) Expectations and Bubbles in Asset Pricing Experiments Journal of Economic Behavior and Organization 67, 116-133 Link to article
We present results on expectation formation in a controlled experimental environment. In each period subjects are asked to predict the next price of a risky asset. The realized market price is derived from an unknown market equilibrium equation with feedback from individual forecasts. In most experiments prices deviate from the benchmark fundamental and bubbles emerge endogenously. These bubbles are inconsistent with rational expectations and seem to be driven by trend chasing behavior or positive feedback expectations. of the participants. We also analyze individual predictions of participants and find that participants within a group tend to coordinate on a common prediction strategy.
(2008) Participation game experiments: Explaining voter turnout C.R. Plott and V.L. Smith (eds) The Handbook of Experimental Economics Results volume 1 Amsterdam: North-Holland 888-901
(2008) Explaining the comparative statistics in step-level public good games C.R. Plott and V.L. Smith (eds) The Handbook of Experimental Economics Results volume 1 Amsterdam: North-Holland 817-824
(2008) Intrinsic Motivation in a Public Good Environment C.R. Plott and V.L. Smith (eds) The Handbook of Experimental Economics Results Volume 1 Amsterdam: North-Holland 836-845
(2007) Learning in Cobweb Experiments Macroeconomic Dynamics 11, 8-33 Link to article
Different theories of expectation formation and learning usually yield different outcomes for realized market prices in dynamic models. The purpose of this paper is to investigate expectation formation and learning in a controlled experimental environment. Subjects are asked to predict next periods aggregate price in a dynamic commodity market model with feedback from individual expectations. Subjects have no information about underlying market equilibrium equations, but can learn by observing past price realizations and predictions. We conduct both a stable, an unstable and a strongly unstable treat-ment. In the stable treatment rational expectations (RE) yields a good description of observed aggregate price fluctuations: prices remain close to the RE steady state. In the unstable treatments prices exhibit large fluctuations around the RE steady state. Although the sample mean of realized prices is close to the RE steady state, the amplitude of the price fluctuations as measured by the variance is significantly larger than the amplitude under RE, implying persistent excess volatility. However, agents? forecasts are boundedly rational in the sense that fluctuations in aggregate prices are unpredictable and exhibit no forecastable structure that could easily be exploited.
(2007) Gift exchange in a multi-worker firm. Economic Journal 117, 1025-1050 Link to article
One of the main findings of a large body of gift exchange experiments is that in an incomplete contracts environment workers on average do not shirk and usually provide more than the minimum enforceable effort level. In general, 40 to 60 percent of the workers reward higher wages with higher effort. These results are observed for simple one-employer − one-worker relationships. In this paper we investigate whether they generalize to the more realistic situation in which the employer employs several workers. We compare a bilateral gift exchange game with a treatment in which each employer has four workers. We find that effort levels in the latter treatment are only marginally lower. Gift exchange thus appears to be robust to increases in the size of the workforce.
(2007) Who should invest in firm specific training? Journal of Population Economics 20, 329-357 Link to article
We study experimentally whether employers or workers should in- vest in firm specific training. Workers have an alternative trading opportunity that either takes the form of an outside option or of a threat point. Theory predicts that with outside options employers have (weakly) better investment incentives than workers and should therefore be the investing party. With threat points employers and workers are predicted to invest the same. Our results are by and large in line with these predictions. Due to offsetting inefficiencies in the bargaining stage, however, realized inefficiencies are remarkably similar across the different situations considered.
(2007) Promotion rules and skill acquisition: An experimental study. Economica 74, 259-297 Link to article
Gibbons (1998) identifies a tradeoff between up-or-stay and up-or-out promotion rules. Up-or- stay never wastes skills of those not promoted but may provide insufficient incentives to invest in skills. Up-or-out on the other hand can always induce investment in skill acquisition but may waste the skills of those not promoted. This paper reports an experiment designed to study this tradeoff. Under the up-or-out rule parties behave (almost) just as theory predicts them to do. But under up-or-stay (and stay-or-stay) rules results differ markedly from theoretical predictions. Workers invest rather frequently although the subgame perfect prediction is that they should not do so. Deviations from theoretical predictions can be explained by reference to different reciprocity mechanisms.
(2007) Does making specific investments unobservable boost investment incentives? Journal of Economics and Management Strategy 16, 911-942 PDF-file webappendix, extended equilibrium analyses
Standard theory predicts that holdup can be alleviated by making specific investments unobservable; private information creates an informational rent that boosts investment incentives. Empirical findings, however, indicate that holdup is attenuated by fairness and reciprocity motivations. Private information may interfere with these, as it becomes impossible to observe whether the investor behaved fair or not. In that way unobservability could crowd out an informal fairness/reciprocity mechanism in place. This paper reports on an experiment to investigate this issue empirically. Our results are in line with standard predictions when there is limited scope for social preferences. But with sufficient scope for these motivational factors, unobservability does not boost specific investments.
(2007) On the Importance of Default Breach Remedies Journal of Institutional and Theoretical Economics 163, 5-22 Link to article webappendix, instructions, extended equilibrium analyses
Economic theory predicts that default breach remedies are immaterial whenever contracting and bargaining cost sare negligible. Parties will then always incorporate the efficient remedy in to their contract. Some experimental studies, however, suggest that in practice default rules do matter, because they may affect parties’ preferences over the various breach remedies. This paper presents results from an experiment designed to address the (un)importance of default breach remedies for actual contract outcomes. In contrast to previous studies the focus is on a setting with both explicit interaction between contracting parties and explicit monetary incentives. We find that default rules do have an impact on actual contract choices. The reason for this is not that proposals and/or responses are biased towards the default contract, but rather that parties often disagree over what the best contract is and therefore end up with the default.
(2007) Underinvestment in training? Joop Hartog and Henriette Maassen van den Brink (eds) Human Capital; Advances in Theory and Evidence Cambridge University Press 113-133
(2007) Distant relations, a review of "Social Psychology and Economics" Social Justice Research 20, 388-399 Link to article
An essay on the relation between (social) psychology and (experimental) economics and a review of the recent book "Social Psychology and Economics".
(2006) Breach remedies, reliance and renegotiation. International Review of Law and Economics 26, 263-296 Link to article
Breach remedies can be used to protect specific investments and are therefore a remedy against holdup. Yet some commonly used remedies are predicted to provide too much protection, thereby inducing overinvestment. Two motives drive this prediction: the insurance motive and the separation prevention motive. This paper presents results from an experiment designed to test whether these two motives show up in practice. In contrast to previous experiments the focus is on a setting where ex post renegotiations are possible. Our results indicate that also in this case the insurance motive and the separation prevention motive are at work, as predicted. A second main finding is that there is much less need for sophisticated breach remedies based on compensatory money damages than is suggested by theory.
(2006) Price clustering and natural resistance points in the Dutch stock market: a natural experiment European Economic Review 50, 1937-1950 Link to article Appendix
This paper focuses on the tendency of stock prices to cluster at round numbers (like 10, 20, 30 etc and to a lesser extend 5, 15, 25, etc) and the related effect of round number price barriers (prices pass less frequently round numbers than other numbers). These effects are against any strict definition of the efficient market theory. Two competing hypotheses are tested, using data from the Dutch stock market during 1990-2001. After January 1, 1999 stock prices were listed in euros, while guilders were still the currency of daily life until 2002. According to the aspiration level hypothesis investors will have target prices for the stocks they own. This hypothesis predicts that round number effects in guilders will only slowly disappear. The odd price hypothesis originates from cognitive psychology and marketing. Humans have to tendency to compare numbers digit by digit from left to right, and therefore consider an odd price of 19.90 as considerable less than 20.00. This hypothesis predicts an abrupt change in round number effects after January 1, 1999. The results reject the aspiration level hypothesis and support the odd price hypothesis.
(2006) On the dynamics of social ties structures in groups (An earlier version of this paper was titled: Group formation in a public good experiment) Journal of Economic Psychology 27, 187-204 Link to article
Economic behavior often takes place in small groups of people interacting with each other (like work teams and boards of directors, but also social networks and neighborhoods). Characteristic of such interaction is the development of (affective) interpersonal relationships, or social ties. The embeddedness of economic behavior in networks of social ties seems to have a profound impact on the outcome of economic processes. In this paper we investigate experimentally the development of social ties structures through economic interaction in a public good environment. It turns out that complicated dynamics arise from individual differences in social value orientation and affective response patterns.
(2005) A strategy experiment in dynamic asset pricing. Journal of Economic Dynamics and Control 29, 823-843 Link to article
This study presents a strategy experiment is asset pricing. In a simple dynamic asset pricing model the price in the present period is determined by the expectations of next period's price. After participating in an introductory laboratory experiment on expectation formation participants formulate a complete forecasting strategy. These strategies are programmed and markets are simulated. Participants receive feedback from the results of these simulations and can adapt their strategy. Four rounds are played. A final laboratory experiment compares predictions of participants with the predictions of the submitted strategy. We find that most of the participants submit complicated strategies and that strategies become more complicated over the rounds. Most markets converge to a steady state price only after many periods, if at all. The number of converging price sequences increases over the rounds. These results suggest in general slow convergence and learning of the subjects over the rounds. Even in a stationary environment it turns out to be difficult to learn the correct fundamental price level. An important part of the non-convergence seems to be caused not by individual strategies but by the interaction of several strategies together. From the final experiment we conclude that the strategies are a good representation of what participants do in a laboratory experiment.
(2005) Coordination of Expectations in Asset Pricing Experiments Review of Financial Studies 18, 955-980 Link to article Appendix
We investigate expectation formation in a controlled experimental environment. Subjects are asked to predict the price in a standard asset pricing model. They do not have knowledge of the underlying market equilibrium equations, but they know all past realized prices and their own predictions. Aggregate demand of the risky asset depends upon the forecasts of the participants. The realized price is then obtained from market equilibrium with feedback from individual expectations. Each market is populated by six subjects and a small fraction of fundamentalist traders. Realized prices differ significantly from fundamental values. In some groups the asset price converges slowly to the fundamental price, in other groups there are regular oscillations around the fundamental price. In all groups participants coordinate on a common prediction strategy. The individual prediction strategies can be estimated and correspond, for a large majority of participants, to simple linear autoregressive forecasting rules.
(2004) Do Democracies breed Chickens? R. Suleiman, D. Budescu, I. Fischer and D. Messick (eds) Contemporary Psychological Research on Social Dilemmas Cambridge University Press 248-268
Our interest is in assessing the effect of different group decision-rules (or ?regimes?) on conflict resolution. Toward this goal, we model intergroup conflict as a two-stage Chicken game between two groups (teams) of players and distinguish two decision-making procedures for determining a team's choice: democracy (majority rule) and dictatorship (one individual makes the team's decision). In an experiment with three individuals per team, we found that (i) decision-making procedures had no effect on choices at the team level; (ii) decision-making procedures did not affect first-stage choices by individuals; (iii) in the second stage, individuals in democracies were more likely to concede than dictators; (iv) dictators facing a democratic team were least likely to concede, whereas individuals in a democratic team facing a dictator were most likely to concede.
(2004) What's Causing Overreaction? An Experimental Investigation of Recency and the Hot Hand Effect Scandinavian Journal of Economics 106, 533-553 Link to article
A substantial body of empirical literature provides evidence for overreaction in markets. Past losers outperform past winners in stock markets as well as in sports markets. Two hypotheses are consistent with this observation. The recency hypothesis states that traders overweight recent information. Thus, they are too optimistic about winners and too pessimistic about losers. According to the hot hand hypothesis, traders try to discover trends in the past record of a firm or a team, and thereby overestimate the autocorrelation in the series. An experimental design allows us to distinguish between these hypotheses. The evidence is consistent with the hot hand hypothesis. Experience slightly reduces the observed phenomenon of overreaction.
(2004) Specific investments, holdup, and the outside option principle. European Economic Review 48, 1399-1410 Link to article
According to the outside option principle the holdup problem can be solved when the non-investor has a binding outside option. The investor then becomes residual claimant, creating efficient investment incentives. This paper reports about an experiment designed to test this. We find that when the outside option is binding investment levels fall short of the efficient level, but holdup is less of a problem than predicted when the outside option is non-binding.
(2004) The Instability of a Heterogeneous Cobweb Economy:a Strategy Experiment on Expectation Formation Jounal of Economic Behavior and Organization 54, 453-481 Link to article
Which strategies do agents use when forming expectations about future prices, and how often do combinations of these strategies lead to stable or unstable outcomes? To answer these questions we performed a four-round strategy experiment in a 20 period cobweb economy with expectations feedback. Subjects did not know the underlying market equilibrium equations, but only observed past prices. All strategies were programmed and after each round the subjects received feedback about the relative performance of their strategy, and were allowed to revise their strategy for the next round. Over the rounds quadratic forecasting errors decrease and realized market prices move to a neighborhood of the rational expectations (RE) steady state, but at the same time the complexity of the price fluctuations increases. Convergence to the unique RE steady state occurs in less than 10% of all cases. In the final round 60% of the price fluctuations appears to be chaotic. Strategy simulations with homogeneous agents typically show regular behavior, with prices converging to a steady state or to a 'far from the steady state' stable cycle. Heterogeneous interaction of simple prediction strategies thus seems to be the main source of the endogenous price fluctuations, frequently leading to a boundedly rational equilibrium of 'close to the steady state chaos'.
(2003) The Need for Marriage Contracts: An Experimental Study. Journal of Population Economics 16, 431-53 Link to article
A spouse who invests in relationship specific human capital enlarges the size of a couple s total surplus. Such investments typically also weaken the outside opportunities of the specializing spouse and thereby her bargaining position. Realizing this, underinvestment in relationship specific human capital may result. This reduces the couple s potential surplus. Private or public marriage contracts can stipulate conditions to solve this holdup underinvestment problem. This paper reports about an experiment that addresses the practical relevance of this problem. We find that although underinvestment in home production occurs, it is less frequent than game theory predicts. That is: players are prepared to specialize in home production when backwards induction predicts them not to do so. Furthermore, we find that the non-investing spouses are less opportunistic towards their partners when the large surplus has been created by the spouse than when the size of the surplus is determined exogenously.
(2003) An experimental comparison of reliance levels under alternative breach remedies. Rand Journal of Economics 34, 205-222
Breach remedies serve an important role in protecting relationship-specific investments. Theory predicts that some common remedies protect too well and induce overinvestment because of complete insurance against potential separation, and the possibility to prevent breach by increasing the damage payment due through the investment made. In this paper we report on an experiment designed to address whether these two motives show up in practice. In line with theoretical predictions we find that overinvestment does not occur under liquidated damages. In case of expectation damages the full insurance motive indeed appears to be operative. In case of reliance damages both motives are at work, as is predicted.
(2002) Social Ties in a Public Good Experiment. Journal of Public Economics 85, 275-99 Link to article
The formation of social ties is examined in an experimental study of voluntary public good provision. The experiment consists of three parts. In the first part the value orientation (attitude to a generalized other) is measured. In the second part couples play 25 periods of a public good game. In the third part the attitudes of subjects to their partners in the public good game is measured. The concept of a social tie is operationalized as the difference between the measurements in the first and third parts. Evidence for the occurrence of social ties is found. These ties depend on the success of the interaction in the public good game.
(2002) Imitation and Belief Learning in an Oligopoly Experiment. Review of Economic Studies 69, 973-97
We examine the force of three types of behavioural dynamics in quantity-setting triopoly experiments: (1) mimicking the successful firm, (2) rules based on following the exemplary firm, and (3) rules based on belief learning. Theoretically, these three types of rules lead to the competitive, the collusive, and the Cournot-Nash outcome, respectively. In the experiment we employ three information treatments, each of which is hypothesized to be conducive to the force of one of the three dynamic rules. To a large extent, the results are consistent with the hypothesized relationships between treatments, behavioural rules, and outcomes.
(2001) Incentive Systems in a Real Effort Experiment. European Economic Review 45, 187-214 Link to article
In the reported experiment different payment schemes are examined on their incentive effects. Payments based on individual, team and relative performance are compared. Subjects conducted computerized tasks that required substantial effort. The results show that individual and team payment induced the same effort levels. In team production free-riding occurred, but it was compensated by many subjects providing more effort than in case of individual pay. Effort was higher, but more variable in tournaments, while in case of varying abilities workers with relatively low ability worked very hard and drove up effort of the others. Finally, attitudes towards work and other workers differed strongly between conditions.
(2001) Expectation Formation in Step-Level Public Good Games. Economic Inquiry 39, 250-69 Link to article
This article focuses on the process of expectation formation. Specifically, the question is addressed whether individuals think strategically when they form beliefs about other players behavior. Most belief learning models assume that people abstract from strategic considerations. Using an incentive-compatible mechanism, experimental data are obtained on subjects expectations in a step-level public good game and in a game against nature. Beliefs in the interactive games develop in the same way as in the game against nature, providing evidence that strategic considerations do not play a role. The evidence is consistent with predictions derived from the naive Bayesian model.
(2001) On the Relation between Asset Ownership and Specific Investments. Economic Journal 111, 791-820 Link to article
Experimental results are presented for a simplified version of Hart s(1995) theory of the firm. Theory predicts that investment levels remain constant when investors no-trade pay-offs increase, if these pay-offs are threat points. While they may decrease when no-trade pay-offs are outside options. Our results support these predictions in a relative sense. Average investment levels exceed the predicted level. Actual investment behaviour is consistent with the outcomes of the bargaining stage. The play of the game is supported by a reciprocity mechanism in which non-investors consider higher investment levels as fair behaviour which deserves a reward. Investors anticipate this.
(2000) Expectation Formation in a Cobweb Economy; some one-person experiments. D.Delli Gatti, M. Gallegati and A. Kirman (eds) Market Structure, Aggregation and Heterogeneity Springer Verlag 253-266 PDF-file
In economics expectations play an important role. In making decisions agents form expectations about future values of variables. Therefore, in any dynamic economic model, agents beliefs about the future have to be modeled. Do people form expectations using a simple rule of thumb or do they use a continually updated forecasting rule? Can people learn a rational expectations equilibrium ? This paper describes experiments where we investigate how people form expectations in the simplest dynamic economic model, the cobweb model, without any knowledge of the underlying market equilibrium equations. We found that only about 35% of the subjects seemed to be able to learn the unique rational expectations equilibrium. We also found that many individuals deviate from rational expectations for long periods of time, sometimes with 'systematic forecasting errors'.
(2000) The influence of banking and borrowing under different penalty regimes in tradable green certificate markets - resulst from an experimental laboratory experimen Energy & Environment 11, 407-422 PDF-file
(2000) Decisions and Strategies in a Sequential Search Experiment. Journal of Economic Psychology 21, 91-102 Link to article
The strategy method is becoming an important tool in experimental methodology. This study examines how well this method works in an individual decision experiment. Subjects are faced with a sequential search problem. After extensive practice in solving the problem and formulating strategies, they play 20 periods for money. In each period the subjects first make decisions by hand, after that their strategy operates on the same sequence of bids. In each period, only one of the results is paid out (randomly determined). After each period, subjects can change their strategy. This method makes a direct comparison between strategies and decisions possible.
(1999) Strategic Behavior in Public Good Games: When Partners Drift Apart. Economics Letters 62, 35-41 Link to article Expanded working paper
(Abstract of the expanded Working Paper) We use a new design to (re)examine the occurrence of strategic behavior in voluntary contributions mechanism experiments. Subjects are in groups that remain constant for a number of periods before they change. The change is public knowledge and always consists of one member switching to another group. Moreover, everyone knows that this individual will not be grouped with any of the members again. In this sense 'partners' really become 'strangers'. We find considerable evidence of strategic behavior in these relatively simple games. Subjects who leave their group contribute less than in the previous period and less than in the next period in their new group. Contribution levels decline with the number of periods remaining for the group. The results can be explained by the occurrence of conditional cooperators, who are willing to contribute if and only if enough others do the same. The presence of these subjects elicits strategic (forward looking) behavior from others.
(1998) Learning by Experience and Learning by Imitating Successful Others. Journal of Economic Behavior and Organization 34, 559-75 Link to article
It is examined whether individuals learn from experience and/or by imitation. Usually individual judgmental learning displays systematic biases against the ideal Bayesian model. Imitation of successful others may decrease such effects. In an experiment, subjects make investment decisions and report expectations. The profitability of an investment depends on the realization of a stationary distribution of states of the world. In the baseline, subjects do not receive information about others expectations; in the other conditions, subjects perceive the expectations of others who observed either exactly the same events or different events from the same distribution. The results indicate that people learn both from experience and by imitating successful others.
(1998) Quantal Response Models in Step-Level Public Good Games. European Journal of Political Economy 14, 89-100 Link to article
The effect of adding noise to both an equilibrium model and a naive Bayesian model of behavior in step-level public good games is studied. Quantal response equilibria are derived for these games and a naive Bayesian quantal response function is presented. The models are fit for experimental data from such a game and compared. The results seem more promising for the naive Bayesian model than for the equilibrium model.
(1998) Strategies of Search. Journal of Economic Behavior and Organization 35, 309-32 Link to article
Two experiments are designed to examine the strategies people use in search behavior. In the first experiment, an electronic information board is used to register on which aspects of the situation subjects focus their attention and after that subjects also submit a formal strategy. Although efficiency is rather high, most subjects do not use the theoretical optimal strategy. Many subjects seem to focus on the total earnings instead of the marginal return of another draw. On an average, subjects stop searching too early. This cannot totally be explained by risk aversion. The second experiment shows that the tendency to search too little can be(partly) explained by learning processes.
(1998) Public Good Provision and Public Bad Prevention: The Effect of Framing. Journal of Economic Behavior and Organization 34, 143-61 Link to article
An experimental analysis of voluntary, binary contributions for step-level public goods/bads is presented. Alternatively, the situation is presented as the provision of a public good or the prevention of a public bad. From a strategic point of view, these presentations are equivalent. In early periods of the twenty round experiments, behavior is indeed observed to be similar in both cases but, after about five periods, differences start to occur that grow larger. A simple learning model is developed that replicates the patterns in the experiments. Extrapolation beyond twenty periods show that the pattern observed reflects an equilibrium selection.
(1998) Quantifying the effects of sow-herd management information systems on farmers' decision making using experimental economics American Journal of Agricultural Economy 80, 821-829 Link to article
A pilot experiment was conducted to yield insight into whether laboratory experiments can be used as an alternative to surveys for determining the profitability of management information systems (MIS) in sow farming. In total, eighty-six sow farmers, including fifty-one farmers from an earlier survey study, participated in an individual decision experiment, which was executed in a quasi-experimental, nonequivalent control, pretest/posttest design. In a MIS group, MIS estimates were derived by within-subjects comparisons of decision quality with and without MIS features. A baseline group was included to control for learning or exhaustion effects during an experimental session. Subjects receiving MIS features significantly improved their decision making whereas subjects without MIS features did not. Correlation between MIS estimates of the survey study and MIS estimates of the experiments was not significant.
(1996) Value Orientations, Expectations and Voluntary Contributions in Public Goods. Economic Journal 106, 817-45 Link to article
An experimental analysis of voluntary, binary contributions for step-level public goods is presented. Independent information is obtained on individual value orientation and expectations about the behavior of other subjects using incentive compatible mechanisms. The effects of increasing payoffs for the public good and of decreasing groupsize are investigated. Attention is focused on the determination of expectations, the use of expectations when deciding on behavior, and differences in expectations and behavior between individuals with different value orientations.
(1996) Voter Turnout as a Participation Game: An Experimental Investigation. International Journal of Game Theory 25, 385-406 PDF-file
This paper reports the results of a series of experiments in which participation games are analyzed. Voter turnout is an example of an application of this game. Hypotheses derived from a game theoretic analysis are systematically elaborated, analyzed, and tested. The results are used to explore future paths of research. A distinction is made in two parameter configurations (representing winner-takes-all elections and elections with proportional representation).
(1996) Why People Vote: Experimental Evidence. Journal of Economic Psychology 17, 417-42 Link to article
This paper reports the results of a series of experiments in which the voter turnout decision was analyzed as a participation game. The experiments were inspired by the model of Schram and Van Winden(1991). In the model, individuals favoring the same policy or candidate are members of a common reference group, and the vote decision is determined by inter- and intragroup relations. Our experimental data supported three hypotheses derived from this model. First, participation increased with group identity. Second, communication enhanced participation. Finally, participation was strongly related to individual characteristics. A simple analysis of the way people learn from their experiences in previous periods is used to argue that any model of voter turnout should take account of myopic adaptive behavior and inertia.
(1995) The Determinants Of Subjective Emotional Intensity. Cognition Emotion 9, 483-506 PDF-file
Tested the hypothesis that emotional intensity is determined jointly by variables from the following 4 classes: concerns (strength and relevance), appraisal, regulation, and individual response propensities. For 6 wks, 37 college students reported an emotion every week and answered questions on a computer. All 4 classes were correlated with emotional intensity, and the concern variables showed the highest correlations. The importance of the determinants was not always the same. There were differences between the emotions and between the dimensions of emotional intensity. The relation between regulation and emotional intensity is a complex and reciprocal one. Emotional intensity presumably determines how much regulation is needed, but successful regulation will decrease that intensity.
(1994) The Structure Of Subjective Emotional Intensity. Cognition & Emotion 8, 329-350 PDF-file
Examined whether the subjective intensity of emotion is one dimensional, and, if not, what are its dimensions? 222 instances of emotions were studied and for each instance 37 Ss completed a questionnaire. Ss also drew a diagram of the course of their emotion over time. A factor analysis of the intensity questions and the diagram variables yielded 6 factors: (1) duration of the emotion and delay of its onset and peak; (2) perceived bodily changes and strength of felt passivity; (3) recollection and re-experience of the emotion; (4) strength and drasticness of action tendency, and drasticness of actual behavior; (5) belief changes and influence upon long-term behavior; and (6) overall felt intensity. Most specific dimensions correlated moderately with overall felt intensity.
(1992) The complexity of intensity. Issues concerning the structure of emotion intensity. Margaret S. Clark (eds) Emotion, Review of Personality and Social Psychology vol. 13. Newbury Park London New Delhi: SAGE Publications 60-89 PDF-file
(from the editor's introduction) One chapter takes on a surprisingly neglected topic in the field - that of the nature of emotional intensity. In this chapter, Frijda and his collegues discuss various ways of thinking about emotional intensity (e.g., duration, peak intensity, onset latency). Then they present some preliminairy data relevant to the questions of how these dimensions interrelate and whether qualitatively distinct emotions are also quantitatively distinct.
(1991) The duration of affective phenomena or: emotions, sentiments and passions K.T. Strongman (eds) International Review of Studies on Emotion 1 Chichester: John Wiley and Sons 187-225 PDF-file
(1991) The Structure and Determinants of Emotional Intensity PhD dissertation University of Amsterdam