We test the buffer stock model of savings behavior using a three-period intertemporal model. In one treatment, liquidity in the second period is constrained (borrowing not possible), while the unconstrained treatment has no such constraint. The buffer stock model predicts that a second-period liquidity constraint increases first-period savings. We also vary the variance of stochastic income (high or low) in a 2x2 design. While we find no evidence for the predicted liquidity constraint effect, most other predictions hold, for example, income variance effects. Observed departures can be explained by some combination of debt aversion, cognitive heterogeneity, and/or learning. 

Despite their empirical relevance, increasing returns to scale are understudied in experimental markets. We use Bertrand duopolies with increasing returns to examine the effects of two sharing rules on collusive behavior and prices in a pre-registered experiment: the symmetric rule (where each of the two firms that set the same price serves half of the market demand) and the winner-takes-all rule (where a fair randomization device decides which of the two firms serves the entire market). We hypothesized that market prices would be higher under the winner-takes-all rule because it provides a collusion mechanism that the symmetric rule does not. While we find that subjects under the winner-takes-all rule coordinate more often on one price than the symmetric sharing rule, this does not increase market prices. Coordination on high prices is rare. Additionally, the winner-takes-all rule facilitates the subjects' ability to coordinate on equal prices after sharing a market in the previous period.

Stochastic uncertainty can cause coordination problems that may hinder mutually beneficial cooperation. We propose a mechanism of ex-post voluntary transfers designed to circumvent these coordination problems and ask whether it can increase efficiency. To test this transfer mechanism, we implement a controlled laboratory experiment based on a repeated Ultimatum Game with a stochastic endowment. Contrary to our hypothesis, we find that allowing voluntary transfers does not lead to an efficiency increase. We suggest and analyze two major reasons for this failure: first, stochastic uncertainty forces proposers intending to cooperate to accept high strategic uncertainty, which many proposers avoid; second, many responders behave only incompletely conditionally cooperatively, which hinders cooperation in future periods.

We collect a network dataset of tenured economics faculty in Austria, Germany and Switzerland. We rank the 100 institutions included with a minimum violation ranking. This ranking is positively and significantly correlated with the Times Higher Education ranking of economics institutions. According to the network ranking, individuals on average go down about 23 ranks from their doctoral institution to their employing institution. While the share of females in our dataset is only 15%, we do not observe a significant gender hiring gap (a difference in rank changes between male and female faculty). We conduct a robustness check with the Handelsblatt and the Times Higher Education ranking. According to these rankings, individuals on average go down only about two ranks. We do not observe a significant gender hiring gap using these two rankings (although the dataset underlying this analysis is small and these estimates are likely to be noisy). Finally, we discuss the limitations of the network ranking in our context.

In the past years, work-time in many industries has become more flexible, opening up a new channel for intertemporal substitution: workers might, instead of saving, adjust their work-time to smooth consumption. To study this channel, we set up a two-period consumption/saving model with wage uncertainty. This extends the standard saving model by also allowing a worker to allocate a fixed time budget between two work-shifts. To test the comparative statics implied by these two different channels, we conduct a laboratory experiment. A novel feature of our experiments is that we tie income to a real-effort style task. In four treatments, we turn on and off the two channels for consumption smoothing: saving and time allocation. Our main finding is that savings are strictly positive for at least 85 percent of subjects. We find that a majority of subjects also uses time allocation to smooth consumption and use saving and time shifting as substitutes, though not perfect substitutes. Part of the observed heterogeneity of precautionary behavior can be explained by risk preferences and motivations different from expected utility maximization.

Cooperation is—despite not being predicted by game theory—a widely documented aspect of human behaviour in Prisoner’s Dilemma (PD) situations. This article presents a comparison between subjects restricted to playing pure strategies and subjects allowed to play mixed strategies in a one-shot symmetric PD laboratory experiment. Subjects interact with 10 other subjects and take their decisions all at once. Because subjects in the mixed-strategy treatment group are allowed to condition their level of cooperation more precisely on their beliefs about their counterparts’ level of cooperation, we predicted the cooperation rate in the mixed-strategy treatment group to be higher than in the pure-strategy control group. The results of our experiment reject our prediction: even after controlling for beliefs about the other subjects’ level of cooperation, we find that cooperation in the mixed-strategy group is lower than in the pure-strategy group. We also find, however, that subjects in the mixed-strategy group condition their cooperative behaviour more closely on their beliefs than in the pure-strategy group. In the mixed-strategy group, most subjects choose intermediate levels of cooperation.

We test the price-setting behavior of firms using the Rotemberg (1982) model in order to explain puzzles in the New Keynesian Phillips curve (NKPC). For our tests, we conducted experiments that adapt the model into an individual decision-making problem. We find systematic deviations in price-setting according to the subjects’ degree of information acquisition. Subjects rarely make use of past information. On the other hand, subjects that decide to acquire relatively little information about future desired prices tend to overweight their own past set price when they set prices. We study the impact of this heterogeneous price-setting behavior for theoretically derived forward-looking Phillips curves. Our estimated NKPCs are in line with the empirical literature. The deviations from theoretical predictions in our NKPCs are driven by the less-informed subjects.

We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations, either to volunteer or to abstain from it, in order to facilitate coordination and improve efficiency. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving the disadvantageous recommendation to volunteer between players. We find evidence that while recommendations improve overall efficiency regardless of their implications for expected payoffs, there are behavioural asymmetries depending on the recommendation: advantageous recommendations are followed less frequently than disadvantageous ones and beliefs about others’ actions are more pessimistic in the treatment with recommendations inducing unequal expected payoffs.

I examine the determinants of both perceived inflation and unemployment in one single survey and include Big Five traits in the analysis. This is the first survey on this topic in Germany. My sample consists of 1771 students from different fields and levels. Using PhD students’ estimates as a reference, I create categories for underestimation and overestimation of both variables. Multinomial logit regressions show that females overestimate both variables. Education and news consumption reduce misestimation. A higher level of Neuroticism is related with a higher probability to overestimate unemployment. Overstating (understating) one indicator is associated with overstating (understating) the other.

We conduct experiments based on the oligopoly model by Kreps and Scheinkman (1983) to assess the impact of demand side concentration on market outcomes. Both buyers and sellers in our markets are humans. The number of firms is fixed at three in all treatments. Only the number of buyers is varied and total demand is split equally among them. We observe that firms set lower prices in markets with only few buyers, namely one or two. Price dispersion is higher in markets with few buyers. Aggregate demand withholding decreases with the number of buyers. This results in lower profits for firms and higher profits for buyers in markets with few buyers.

Empirical estimations of the New Keynesian Phillips curve support hybrid versions with a positive weight on lagged inflation and a weight less than one on expected inflation. We argue that myopic price setting of some agents explains the low weight on expected inflation. The lagged term can be explained by trend extrapolation if information about the future is costly. In a laboratory experiment we implement the Calvo (1983) microfoundations of the Phillips curve. Our hypotheses are supported by the experimental data. About half of the subjects set optimal Calvo prices while about a third is myopic.