Nonrenewable Resources, Strategic Behavior and the Hotelling Rule: An Experiment

This study uses the methods of experimental economics to investigate possible causes for the failure of the Hotelling rule for nonrenewable resources. We argue that as long as resource stocks are large enough, producers may choose to (partially) ignore the dynamic component of their production decision, shifting production to the present and focusing more on strategic behavior. We experimentally vary stock size in a nonrenewable resource duopoly setting and find that producers with large stocks indeed pay significantly less attention to variables related to dynamic optimization,leading to a failure of the Hotelling rule

UvA-DARE (Digital Academic Repository) Who should invest in firm specific training? Who should invest in firm specific training?

Abstract We study experimentally whether employers or workers should invest in firm specific training. Only workers are assumed to have an alternative trading opportunity. Both the turnover costs case where this alternative takes the form of an outside option and the no-friction case where it serves as a threat point are considered. Theory predicts that in the turnover costs case employers have better investment incentives when the outside wage is high, and therefore should make the investment from an efficiency point of view. In the no-friction case employers and workers are predicted to invest the same. Our results are by and large in line with these predictions. For the turnover costs case we do observe that employers invests more than workers do only when the outside wage is high. In the no-friction case employers and workers invest about the same when the outside wage is low, but workers invest more than employers do when this wage is high. Actual private investment returns provide a reasonable explanation for the observed differences. Overall the observed inefficiencies are remarkably similar across the different situations considered. As a result there is only weak evidence that the employer (worker) should make the investment in the turnover costs (no-friction) case

UvA-DARE (Digital Academic Repository) Emotions, rejections, and cooling off in the ultimatum game Emotions, Rejections, and Cooling off in the Ultimatum Game*

Abstract This paper experimentally investigates whether responder behavior in the ultimatum game is related to self-reported emotions. In addition, it is investigated whether responders' experienced emotions or behavior are affected by letting responders cool off for one-hour before they decide. Our results show that (negative) emotions drive the decision to reject an unfair offer. Furthermore, neither behavior nor self-reported emotions are affected by the break. These results show that emotions are robust in terms of their effect on decision making because they show up (again) when one actually has to make a decision

Promotion Rules and Skill Acquisition: An Experimental Study

Standard economic theory identifies a trade-off between up-or-stay and up-or-out promotion rules. Up-or-stay never wastes the skills of those not promoted but may provide insufficient incentives to invest in skills. Up-or-out can always induce investment in skill acquisition but may waste the skills of those not promoted. The paper reports an experiment designed to study this trade-off. Under up-or-out, parties behave almost exactly as theory predicts. But under up-or-stay (and stay-or-stay), results differ markedly from theoretical predictions. In that case workers invest rather frequently, although the prediction is that they would not. These deviations can be explained by various reciprocity mechanisms