Managerial decision makers are increasingly supported by advanced data analytics and other artificial intelligence (AI)-based technologies, but they are often found to be hesitant to follow the algorithmic advice. We examine how compensation contract design and framing of an AI algorithm influence decision makers’ reliance on algorithmic advice and performance in a price estimation task. Based on a large sample of almost 1,500 participants, we find that compared with a fixed compensation, both compensation contracts based on individual performance and tournament contracts lead to an increase in effort duration and to more reliance on algorithmic advice. We further find that using an AI algorithm that is framed as also incorporating human expertise has positive effects on advice utilization, especially for decision makers with fixed pay contracts. By showing how widely used control practices, such as incentives and task framing, influence the interaction of human decision makers with AI algorithms, our findings have direct implications for managerial practice.

We study how an explicit blank vote option “None of the above” (NOTA) on the ballot paper affects the behavior of voters and political candidates as well as election results. In a series of survey and laboratory experiments we identify a tradeoff regarding making NOTA an explicit voting option. On the one hand it can reduce the vote share of candidates who voters consider as protest candidates, who often come from the extremes of the political spectrum, making it less likely that such a protest candidate wins the election. On the other hand, anticipating the above effect, establishment candidates may care less about the electorate when NOTA is on the ballot. Evidence on voters’ reaction to NOTA comes from two online survey experiments conducted in the weeks preceding the 2016 U.S. presidential election and the 2016 Austrian run-off election for president. Participants were subjected to either the original ballot paper or to a ballot paper where we added a NOTA option. We investigate the dynamic response of politicians to the presence of NOTA in a laboratory experiment in which an establishment candidate can decide between selfish and fair policy proposals and voters can choose between the establishment candidate and an inefficient protest option.

With the help of more than 700 reviewers, we assess the reproducibility of nearly 500 articles published in the journal Management Science before and after the introduction of a new Data and Code Disclosure policy in 2019. When considering only articles for which data accessibility and hardware and software requirements were not an obstacle for reviewers, the results of more than 95% of articles under the new disclosure policy could be fully or largely computationally reproduced. However, for 29% of articles, at least part of the data set was not accessible to the reviewer. Considering all articles in our sample reduces the share of reproduced articles to 68%. These figures represent a significant increase compared with the period before the introduction of the disclosure policy, where only 12% of articles voluntarily provided replication materials, of which 55% could be (largely) reproduced. Substantial heterogeneity in reproducibility rates across different fields is mainly driven by differences in data set accessibility. Other reasons for unsuccessful reproduction attempts include missing code, unresolvable code errors, weak or missing documentation, and software and hardware requirements and code complexity. Our findings highlight the importance of journal code and data disclosure policies and suggest potential avenues for enhancing their effectiveness.

In a series of four experiments I demonstrate the existence of significant aversion to basically non-existent strategic uncertainty in very simple bargaining games. This aversion goes far beyond ordinary risk or ambiguity aversion. Specifically, although almost nobody expects or chooses the rejection of an offered equal split in a bargaining game, participants behave as if there would be a considerably large rejection rate for equal splits. This behavior is robust across experimental designs and subject pools, can lead to inefficiencies in markets, and is incompatible with consistency of strategies and rational beliefs.

Feedback withdrawal mechanisms in online markets aim to facilitate the resolution of conflicts during transactions. Yet, frequently used online feedback withdrawal rules are flawed and may backfire by inviting strategic transaction and feedback behavior. Our laboratory experiment shows how a small change in the design of feedback withdrawal rules, allowing unilateral rather than mutual withdrawal, can both reduce incentives for strategic gaming and improve coordination of expectations. This leads to less trading risk, more cooperation, and higher market efficiency.

In order to decrease social distance and increase trust on their platforms, many online marketplaces allow traders to be represented by profile pictures or avatars. In a laboratory experiment, we investigate whether the presence of seller avatars affects trading behavior in a market. We contrast markets without avatars with markets where avatars genuinely represent traders and markets where avatars can be freely changed at any time and may thus be chosen strategically. At the aggregate level, we find that the presence of genuine avatars increases the trustworthiness of sellers, but that this effect is undone when avatars can be chosen strategically. We do not detect aggregate effects on buyers’ trusting choices. Female avatars are more trusted, and correspondingly in the treatment with free avatar choice men are more likely to represent themselves with a female avatar than vice versa.

We experimentally study the relationship between time inconsistency, sophistication about time inconsistency, and self-commitment. Previous research has interpreted demand for commitment devices as evidence for the sophistication of a time-inconsistent decision-maker. In our laboratory experiment, we attempt to measure sophistication directly by way of a cognitive test. We then test the hypothesis that people who are both time-inconsistent and show high cognitive capacity take up commitment devices when offered in the strategic game between their current and their future self. For experimental laboratory commitment choices, we cannot detect a moderating effect of cognition on commitment demand of time-inconsistent subjects.

In the context of repeated public good contribution games, we experimentally compare the institution of democratic punishment, where members of a group decide by majority voting whether to inflict punishment on another member, with individual peer-to-peer and dictatorial punishment institutions. Democratic punishment leads to more cooperation and higher average payoffs, both under perfect and imperfect monitoring of contributions. A comparison with dictatorial punishment suggests that the effect relative to traditional peer-to-peer punishment primarily works by curbing anti-social punishment and thereby establishing a closer connection between a member's contribution decision and whether subsequently being punished by others.

We examine differences in trust and trustworthiness across age groups by running a trust game experiment with current students and alumni of a large Austrian university. We find linear age effects, in that older adults are more trusting and more trustworthy than younger participants. We detect no gender effect in terms of trustingness, but observe that females are more trustworthy than males.

Many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity to withdraw negative reputational feedback in a dispute resolution phase. Motivated by field evidence and guided by theoretical considerations, we use laboratory markets with two-sided moral hazard to show that this option, contrary to the intended purpose, produces an escalation of dispute. The mutual feedback withdrawal option creates an incentive to leave negative feedback, independent of the opponent’s behavior, to improve one’s bargaining position in the dispute resolution phase. This leads to distorted reputation information and less trust and trustworthiness in the trading phase. Buyers who refuse to give feedback strategically, even when it comes at a personal cost, mitigate the detrimental impact. It is also mitigated in markets with one-sided moral hazard and a unilateral feedback withdrawal option.

In an informational voting environment, we study the impact of an explicit nil vote option on the ballot when some voters are uninformed and face the swing voters curse. We postulate a simple model of strategic voting in which voters entertain heterogeneous thresholds on legitimacy of different voting actions. We predict that introducing a nil vote option reduces the number of uninformed and invalid votes, increasing expected welfare in both voluntary and compulsory voting. We test our model in a pen-and-paper laboratory experiment, and find that the predictions of the model hold in the data, for both voting systems.

Health care is a credence good, and its market is plagued by asymmetric information. In this paper, we use a laboratory experiment to test the performance of a potential remedy discussed in the applied literature, the separation of prescription and treatment activities. We observe a significant amount of overtreatment (and a smaller nonpredicted amount of undertreatment) in our baseline environment. Requiring a different than the treating physician to provide diagnosis and prescription for free is an effective way to reduce overtreatment in our laboratory setting. This effect, however, is partially offset by an increased frequency of undertreatment. Allowing prescription and treatment physicians to independently set prices for their services reduces efficiency due to coordination failures: In sum, prices are often higher than expected benefit of patients, who in turn do not attend to the physician. Also contrary to theory, bargaining power does not play a significant role for the distribution of profits between physicians.

We experimentally study the effect of auction format (sealed‐bid versus closed clock versus open clock) and auction sequence (simultaneous versus sequential) on bidding behaviour and auction outcomes in auctions of multiple related multi‐unit items. Prominent field applications are the sale of emission permits, fishing rights, and electricity. We find that, when auctioning simultaneously, clock auctions outperform sealed‐bid auctions in terms of efficiency and revenues. This advantage disappears when the items are auctioned sequentially. In addition, auctioning sequentially has positive effects on total revenues across all auction formats, resulting from fiercer competition on the item auctioned first.

This paper experimentally investigates how individual preferences, through unrestricted deliberation, are aggregated into a group decision in two contexts: reciprocating gifts and choosing between lotteries. In both contexts, we find that median group members have a significant impact on the group decision, but the median is not the only influential group member. Non-median members closer to the median tend to have more influence than other members. By investigating the same individual's influence in different groups, we find evidence for relative position in the group having a direct effect on influence. These results are consistent with predictions from spatial models of dynamic bargaining, for members with intermediate levels of patience. We also find that group deliberation involves bargaining and compromise as well as persuasion: preferences tend to shift towards the choice of the individual's previous group, especially for those with extreme individual preferences.

This paper discusses aspects of recruiting subjects for economic laboratory experiments, and shows how the Online Recruitment System for Economic Experiments can help. The software package provides experimenters with a free, convenient, and very powerful tool to organize their experiments and sessions.

This paper introduces a video-game designed to support teaching introductory economics at undergraduate level. In order to test its effectiveness compared to traditional textbook learning we designed a laboratory experiment. Results show no evidence that playing the video-game leads to lower exam performance than reading a textbook, neither for multiple-choice nor for essay questions. We also find no gender bias and no effect of announcing the test prior to the learning task or thereafter. However, game behavior appears to be related to test performance, and differently so for different types of learning. Students perceive the two learning tools similarly in terms of understanding requirements or usefulness, but enjoyed the video-game considerably more. Interestingly, although women enjoyed the game less than men, they do not differ in their test performance.

We report results from an Ultimatum Game experiment with and without pre-play communication, conducted both in a real-world experimental laboratory and in the virtual world Second Life. In the laboratory, we replicate previous results that communication increases offers and agreement rates significantly, and more so for face-to-face communication than for text-chat. In Second Life we detect a level shift to more cooperation when there is no communication, either driven by selection on unobservables or environmental effects. The higher cooperativeness in the virtual world lowers the need for additional communication between avatars in order to achieve efficient outcomes. Consistent with this we are not able to detect an effect of allowing avatar-to-avatar communication.

Reciprocity in feedback giving distorts the production and content of reputation information in a market, hampering trust and trade efficiency. Guided by feedback patterns observed on eBay and other platforms, we run laboratory experiments to investigate how reciprocity can be managed by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust, and more efficient trade. We discuss the implications for theory building and for managing the redesign of market trust systems.

This paper experimentally investigates the effects of a costly punishment option on cooperation and social welfare in long, finitely repeated public good contribution games. In a perfect monitoring environment, increasing the severity of the potential punishment monotonically increases average net payoffs. In a more realistic imperfect monitoring environment, we find a U-shaped relationship. Access to a standard punishment technology in this setting significantly decreases net payoffs, even in the long run. Access to a severe punishment technology leads to roughly the same payoffs as with no punishment option, as the benefits of increased cooperation offset the social costs of punishing.

We report on an experiment using video technology to study effects of communication on donations to and discrimination between potential receivers. The experimental design eliminates strategic factors by allowing two receivers to unilaterally communicate with an anonymous dictator before the latter decides on her gifts. Through the use of three communication setups (none, audio, and audio-visual) we analyze purely social effects of communication. A silent video channel leads to discrimination between potential receivers based on impression formation, but does not affect average levels of donations. When the auditory channel is added, average donations increase. The social processes invoked by the visual and audio channels are heterogeneous and communicator-specific but not unsystematic.

We study the interplay of inequality and trust in a dynamic growth game, in which trust increases efficiency and thus allows higher growth of the laboratory economy in the future. We find that trust (as measured by the percentage of wealth invested in a trust game) is initially high in a treatment starting with equal endowments, but decreases over time. In a treatment with unequal endowments, trust is initially lower yet more robust. The disparity of wealth distributions across economies mitigates over time. Our findings suggest that both the level and the (exogenous or endogenous) source of inequality matters for the dynamics of trust.

Without transparency about peer wages in a real effort experiment, a change of wages does not affect performance. With transparency, however, higher paid workers tend to work more accurately, and lower paid workers shirk more under piece rates.

Wir geben einen selektiven Überblick über die jüngeren Fortschritte der ökonomischen Laborforschung zu Vertrauen. Insbesondere betonen wir, dass Vertrauen systematisch beeinflusst wird (a) durch ein Streben nach Verteilungsgerechtigkeit und der Reziprozitätsnorm, und (b) durch die Interaktion strategischen Verhaltens mit dem sozialen und institutionellen Umfeld (dem Kontext). Schließlich zeigen wir, wie die Laborforschung auch nutzbringend in der ökonomischen Praxis zur Stärkung des Vertrauens auf einem anonymen elektronischen Marktplatz eingesetzt werden kann.

We study the role of social preferences and conformity in explaining herding behavior in anonymous risky environments. In an experiment similar to information cascade settings, but with no private information, we find no evidence for conformity. On the contrary, we observe a significant amount of non-conforming behavior, which cannot be attributed to errors.

This paper revisits the experiment on the solidarity game by Selten and Ockenfels [Selten, R., Ockenfels, A., 1998. An experimental solidarity game. Journal of Economic Behavior and Organization 34, 517–539]. We replicate the basic design and extend it to test the robustness of the ‘fixed total sacrifice’ effect and the applied strategy method. Our results only partially confirm the validity of the fixed total sacrifice effect. In a treatment with constant group endowment rather than constant winner endowment, the predominance of ‘fixed total sacrifice’ behavior is replaced by ‘fixed relative gift’ behavior. We do not find correlations between actual gift behavior and measures of empathy-driven pro-social behavior used in social science.

A cyclical network of indirect reciprocity is derived organizing 3- or 6-person groups into rings of social interaction where the first individual may help the second, the second the third, and so on until the last, who in turn may help the first. Mutual cooperation is triggered by assuming that what one person passes on to the next is multiplied by a factor of 3. Participants play repeatedly either in a partners or in a strangers condition and take their decisions first simultaneously and then sequentially. We find that pure indirect reciprocity enables mutual cooperation, although strategic considerations and group size are important too.

Reputation systems are core components of online platform markets, incentivizing trust and trustworthiness. Small market design details may have large implications on the extent of trade and platform revenues. We selectively review our own and others’ research on the design of reputation mechanisms for platforms highlighting particular issues in the design of feedback systems which may affect feedback behavior and thus the informativeness and effectiveness of feedback information. We also discuss new research on conflict resolution mechanisms for platforms and the arguments for allowing reputation mobility. Finally, we conclude with implications for platform management and users.

How to counter welfare-reducing sub-coalition formation within larger groups? What are the challenges involved? Our main point in this chapter is that looking at first-order incentives to cooperate within a larger group is not enough, as sub-coalitions display reciprocal behavior despite the incentives to renege. We discuss three related complications: i) parasitic behavior is often coordinated in sub-groups, ii) natural within-group resistance to parasitism already exists, and iii) group members' actions can often only be imperfectly monitored. We outline some of the implications of current research for applied market and institutional design.

"Exploitation" or free riding are names for strategies by which agents benefit from other agents' investments. This chapter reviews the consequences of these exploitative strategies for individual behavior, social structure, and design of institutions. From an evolutionary perspective, it begins by outlining how natural selection should act to construct behavioral connections that maximize the benefits and minimize the costs of sociality for individuals. Individuals are predicted to show specific leaving or joining decision rules that will construct groups composed of complementary strategies; alternatively, they should be plastic in response to their social environment, which can lead to conditional strategies and social niche construction. What happens on an individual level impacts, in tum, social structures. When individuals have fewer or more frequent interactions with a set of specific (known) individuals, "groupiness" may result to reduce uncertainty in interactions. In humans, common knowledge of within-group norms can further facilitate coordination on socially efficient equilibriums and establish cooperation Once groups are maintained and cooperate to produce and share resources, they become open to exploitation by other groups, which is directly relevant to the design of institutions. Economic conflict theory offers a potential framework for understanding and predicting exploitative behavior between groups. Through a better understanding of exploitation at these different levels, it is hoped that the payoffs of specific interactions can be adjusted to reduce the negative impacts on a system.

This article outlines the theoretical, empirical, and experimental contributions that address, in particular, bidding behavior in Internet auctions and the auction design in single-unit Internet auctions. Revenue equivalence generally breaks down with bidder asymmetry and the interdependence of values. There is evidence on the Internet for a specific kind of overbidding, occurring when there is also competition on the supply side. There is strong evidence both for the existence of incremental and of late bidding in Internet auctions. The phenomena appear to be driven partly by the interaction of naive and sophisticated bidding strategies. Multi-unit demand typically increases the strategic and computational complexities and often results in market power problems. The emergence of Internet-specific auction formats, such as advertisement position auctions, proxy bidding, and penny auctions, initiated a whole new research literature that already feeds back into the development and design of these auctions.

We study bidding behavior and learning in laboratory markets with differ-ent reputation systems. The rules of the reputation systems are modeled from eBay’s past and present feedback systems. While the new feedback systems economically outperform the old system, buyer learning of sellers’ trustworthiness does not look much different in treatments with different strategic feedback environments. There is overbidding in all treatments, and simple, linear regressions – neglecting any strategic end-game effects – capture the dynamics of buyers' bids quite well.

In this paper we introduce the Online Recruitment System for Economic Experiments (ORSEE). With this software experimenters have a free, convenient and very powerful tool to organize their experiments and sessions in a standardized way. Additionally, ORSEE provides subject pool statistics, a laboratory calendar, and tools for scientific exchange. A test system has been installed in order to visually support the reader while reading the paper.

The goal of this paper is to provide an overview on the Virtual Laboratory infrastructure for controlled online experiments in economics. We summarize our experience gained from performing several economic experiments on the Internet. The experiments we have run range from electronic markets to individual decision making. From there we synthesize and evaluate the methodological issue of experimental control in performing economic experiments on the Internet. The paper discusses IT-based solutions to maximize control over subjects and the environment when conducting experiments online. As a result for further exploration we sketch the design of an infrastructure that allows the automated execution of Internet experiments including marketing of experiments, control of application and participation, payment system integration, and evaluation of results.