Research

We report an experiment that tests whether violations of the stationarity principle of the exponentially discounted utility model are mistakes. In normative decision theory, a mistake is defined as a choice that a decision-maker does not wish to maintain following an analysis of their decision. If observed violations of the stationarity principle are mistakes of that type, its normative credentials remain intact. The intertemporal decisions of 448 subjects were observed and categorized according to whether they were stationary or not. Subjects were then provided with a normative argument in support of a counterfactual behavior, alongside the opportunity to revise their decisions. The majority of subjects made stationary choices and did not revise them, despite the normative reason to do so. Those choices cannot be attributed to mistakes. However, final choices also exhibit systematic present-biased violations of the stationarity principle that cannot be attributed to errors. Hence, whilst the stationarity principle cannot be excluded as a requirement of rationality for the majority of our subjects, nor can it claim to be universal.

This paper reports a laboratory experiment that provides insights on cooperation in R&D investment when knowledge sharing decisions are endogenous. Specifically, there are two types of treatments: one in which participants decide on whether to share knowledge before they make their investment decisions and one where the knowledge sharing constellation is exogenously given, both with and without non-binding communication. The results show that there are behavioral spillovers between the decisions on knowledge sharing and investment. When exogenously set, the degree of symmetric knowledge sharing does not affect cooperation. Communication increases cooperation more when participants can decide on knowledge sharing.

How groups decide on the distribution of losses is central to many economic and social interactions. We study this in a laboratory bargaining game where four participants with unequal endowments must unanimously agree on how to distribute a collective loss. Initial endowments are assigned either by chance or by individual performance in a real-effort task, and bargaining occurs with or without information about one’s own position. We find that the source of inequality matters: when endowments are merit-based, high-endowment participants contribute less, while low-endowment par- ticipants contribute more. Detailed analysis shows that under merit those with the lowest endowment accept significantly higher losses for themselves and lower losses for those with the highest endowments than under luck. This suggests that legiti- macy perceptions extend in particular to those most disadvantaged. By contrast, the availability of information about one’s position has little effect on final agreements. These findings highlight how fairness views rooted in merit versus luck shape collective burden-sharing and can lead even the least-advantaged individuals to endorse merito- cratic rather than egalitarian outcomes when inequalities are perceived as deserved.

The hold-up problem plays a central role in organizational and institutional economics. According to standard theory, an investor may have insu¢ cient incentives to invest in a relationship with a trading partner when the investor anticipates that in future negotiations the trading partner might behave op- portunistically, so the investorís costs might not be recouped. In a prominent paper-and-pencil experiment, Ellingsen and Johannesson (2004a) have shown that communication can mitigate the hold-up problem. They allow either the investor or the trading partner to send a single text message to the other player. In order to study the robustness of their Öndings, we replicate their setup in an online experiment, allowing for a larger number of observations and a di§erent subject pool. Moreover, we extend the original setup by adding a treatment with bilateral communication in order to Önd out whether or not the possibility of arguing back and forth can further alleviate the hold-up problem.