I study in a series of experiments how the possibility of resale alters the common results in the literature on English auctions. Resale has been widely neglected in the theoretical literature until recently and there exist precious few papers that examine resale in the lab. To my knowledge Lange, List and Price (2004) is the only other paper that provides results from resale experiments, using first price auctions while I use English auctions. The model is based mainly on the theoretical work of Haile (2003). I designed and tested a simple English auction and two English auctions with resale, but with different informational backgrounds in the resale stage. Bid your value is an equilibrium in all three treatments. I find, however, that the possibility of resale alters behaviour significantly. In the two treatments with resale, subjects deviate from both the Nash prediction and the established results about bidding behaviour in English auctions. In the first treatment subjects are given enough information about other players' values after the initial auction to be able to reap the whole surplus in the resale market. This results in systematic overbidding with respect to the equilibrium prediction. I employ various models of bounded rationality like a quantal response equilbrium and a levels of reasoning model and conclude that overbidding can be explained as a rational response to the noisy environment in markets with human participants, that is, as rational decision making when anticipating others to make errors. In the second treatment subjects receive less information after the initial auction, thus the outcome of the resale market is not certain. We observe significant signalling behaviour and auction prices tend to be lower than the Nash prediction. I employ models of bounded rationality to explain the results and find again that a QRE and a levels of reasoning model fit the data better than the conventional Nash prediction. However we also find that using a logit specification of the errors when fitting the data, leads to a very large improvement in the performance of the Nash model. Therefore, I suggest that further research is needed to examine if the strong performance of QRE in many experiments lies in the logit specification of the errors or the other behavioural assumptions being made.

Auctions with resale have seen a burst of theoretical interest in the last few years. We present results from a series of experiments based on Krishna and Hafalir's (2008) resale model. As predicted, weak bidders bid more with resale than without, so that average auction prices tend to increase. When the equilibrium calls for weak types to bid higher than their values with resale they do, but not nearly as much as the theory predicts. In other treatments outcomes are much closer to the risk neutral Nash model's predictions. Bid distributions for weak and strong types are more similar with resale than without, in line with the theory.

We run experiments on English Auctions where the bidders already own a part (toehold) of the good for sale. The theory predicts a very strong effect of even small toeholds, however we find the effects are not so strong in the lab. We try to explain this, analyzing the flatness of the payoff functions, which leads to relatively costless deviations from the equilibrium strategies. We find that a levels of reasoning model explains the results better than the Nash equilibrium. Moreover, we find that big toeholds can be effective although the cost to acquire them might be higher than the strategic benefit they bring. Our results show that in general the seller's revenues fall when the playing field is uneven. Our results can help to explain the empirical result that most bidders do not acquire toeholds before bidding for a company.

We experimentally investigate the Jackson-Moselle (2002) model where legislators bargain over policy proposals and the allocation of private goods. Key comparative static predictions of the model hold as policy proposals shift in the predicted direction with private goods, with the variance in policy outcomes increasing as well. Private goods increase total welfare even after accounting for their cost and help secure legislative compromise. Coalition formations are better characterized by an efficient equal split between coalition partners than the stationary subgame perfect equilibrium prediction.

Consumer’s expectations and perceptions of inflation have been systematically greater than the true inflation rate, especially over the past decade. We hypothesize that this is due in part to consumers over-weighting the inflation rates of frequentlypurchased goods (such as non-durables) in their estimates of economy-wide inflation. Using a novel experimental design, we confirm the existence of this ‘frequency bias’: Subjects’ perceptions of overall inflation are disproportionately influenced by the inflation rates of frequently-purchased goods. As a result, subjects make systematic errors in a simple consumption-savings decision.

We examine whether the Level-k model of strategic behavior generates reliable cross-game testable predictions at the level of the individual player. Within one family of similar games subjects' observed levels are fairly consistent, but within another family of games there is virtually no cross-game correlation. Moreover, the relative ranking of subjects' levels is not consistent within the second family of games. Direct measures of strategic intelligence are generally not correlated with observed levels of reasoning in either family. Our results suggest that the Level-k model is just one of many heuristics that may be triggered in some strategic settings, but not in others.

Peer effects arise in situations where workers observe each other's work activity. In this paper we disentangle the effect of observing a peer from that of being observed by a peer, by setting up a real effort experiment in which we manipulate the observability of performance. In particular, we randomize subjects into three groups: in the first one subjects are observed by another subject, but do not observe anybody; in the second one subjects observe somebody else's performance, but are not observed by anybody; in the last group subjects work in isolation, neither observing, nor being observed. We consider both a piece rate compensation scheme, where pay depends solely on own performance, and a team compensation scheme, where pay also depends on the performance of other team members. Overall, we find some evidence that subjects who are observed increase productivity at least initially when compensation is team based, while we find that subjects observing react to what they see in a non-linear but monotonic way when compensation is based only on own performance.

Bidding one’s value in a second-price, private-value auction is a weakly dominant solution (Vickrey in J Finance 16(1):8–37, 1961), but repeated experimental studies find more overbidding than underbidding. We propose a model of optimistically irrational bidders who understand that there are possible gains and losses associated with higher bids but who may overestimate the additional probability of winning and/or underestimate the potential losses when bidding above value. These bidders may fail to discover the dominant strategy—despite the fact that the dominant strategy only requires rationality from bidders—but respond in a common sense way to out-of-equilibrium outcomes. By varying the monetary consequences of losing money in experimental auctions we observe more over- bidding when the cost to losing money is low, and less overbidding when the cost is high. Our findings lend themselves to models in which less than fully rational bidders respond systematically to out-of-equilibrium incentives, and we find that our model better fits the effects of our manipulations than most of the existing models we consider.

We run experiments on second price auctions with resale opportunities, where a speculator (zero-value bidder) is commonly known to exist. Garratt and Troeger (2006) show that there is a continuum of speculative equilibria, apart from the standard bid- your-value one, where the speculator gets the good in the first stage auction with a positive probability. She pays a price of zero and resells it to the private-value bidder in the second stage. In the most extreme equilibrium, the private-value bidder always bids zero and the speculator always obtains the good. We find that bidders often follow the speculative equilibrium, however, when they do, they tend to split the rents more fairly than predicted by theory. When the speculative equilibrium is not observed, the presence of the speculator leads to more aggressive bidding by private- value bidders that results in increased revenue from the seller. A fixed matching yields more speculation than random matching, as expected. An increase in the number of bidders makes speculation harder, but does not eliminate it.

How effective are lockdowns in containing an epidemic? During the COVID-19 pandemic, some countries have enforced tight lockdown measures, including early curfews. Several studies try measure the effectiveness of such measures across different countries, but clear identification of effects is elusive. On the one hand countries differ in important characteristics that affect the performance of measures, but also the measurement of the pandemic itself: recorded cases are biased and since testing methods are not homogeneous across countries, the bias is heterogeneous (see Georganas, Velias & Vandoros, 2021a). On the other hand, the measures are not the same across countries, and seldom are enforced alone within a specific country; a bundle of measures is usually enacted on the same day complicating the isolation of single measure effects. In this paper we use a natural experiment in a single European country to clearly identify the effect of early curfews, using a difference in difference approach, comparing a region affected by the curfew to neighbouring regions. We find that early curfews hardly curb mobility, meaning that the actually increase congestion and possibly the number of daily contacts, lowering social distancing. While anecdotes of increased congestion abound, this is the first clear measurement of the effect. The result is important to show that curfews may backfire, but also more generally to show that strictness in lockdown procedures is not necessarily related to effectiveness. Instead of mechanistic approaches claiming that more (lockdown) is always better, interventions should be based on a thorough analysis of human behaviour, that anticipates substitution of activities.

We examine the impact of retirement on prosocial behaviour using individual cross-sectional and longitudinal data covering 22 European countries, as well as experimental data. Currently, there is no formal evidence on how individuals behave regarding their volunteering activity after they exit from the labour market. Identification relies on exogenous variation in the early retirement age legislation across countries, time and gender. We find that retirement increases the probability of volunteering and providing care to household members, at least for a few hours per week. The effect is stronger for females, people who are better educated, people not limited by health conditions, those with past volunteering activity and those with volunteering partners. The experiment involving 255 participants of pre-retirement and retirement age making incentive-compatible choices confirms that the increased volunteering is explained by a broader increase in prosocial preferences, rather than by having more free time upon retirement. Given the ageing of the population and the increased life expectancy at retirement, these are policy-relevant findings, providing evidence on time and effort allocation decision of retirees, as well as their productive capacity regarding unpaid labour supply. Targeted policies could stimulate their interest and engagement in prosocial activities.

In markets with asymmetric information between sellers and buyers, feedback mechanisms are important to increase market efficiency and reduce the informational dis- advantage of buyers. Feedback mechanisms might work because of self-selection of more trustworthy sellers into markets with such mechanisms or because of reputational concerns of sellers. In our field experiment, we can disentangle self-selection from reputation effects. Based on 476 taxi rides with four different types of taxis, we can show strong reputation effects on the prices and service quality of drivers, while there is practically no evidence of a self-selection effect. We discuss policy implications of our findings.

How do you distinguish real experts from charlatans in topics where you have no knowledge and credentials can not be trusted?

Jim completes a technical questionnaire and then receives recommendations by two advisors. He is told that one advisor is an expert, who answers all questions correctly, while the other is a populist and answers correctly only some. Jim also knows he has X correct answers, Y common answers with one advisor and X common answers with the other. Who should he pick? We recruit a large sample (12,000) of laypeople, representative of the general population, to answer this question. Even though the task is very simple, with a simple heuristic achieving the rational benchmark, the majority of participants fail to identify the expert. We modify the difficulty of the task by changing the presentation of the information between table and text, and by varying the number of common answers with the two advisors. Most people fail to identify the expert. The fraction of participants who answer correctly increases with the difference in commons and with text. Socio-demographic characteristics also play a role.

Accurate epidemic prevalence measurement is a necessary condition for informed policy decision-making. In the Covid-19 pandemic especially, wrong prevalence measurement can lead to tremendous waste, be that in life years or economic output. A number of countries offer random Covid-19 tests to estimate the prevalence of the virus in the population, and report daily positivity rates. However, since virus testing has to be voluntary, all tests done in the field, even if supposedly random, suffer from selection bias. This bias, unlike standard biases in polling, is not limited to having a representative sample, and thus cannot be corrected by the usual methods (quota sampling etc). The issue is that people who feel they have symptoms (or other reasons to suspect they are carrying the virus), are up to 38 times more likely to volunteer to get tested, and testing stations cannot readily correct this by oversampling (i.e. selecting people without symptoms to test). Using controlled, incentivized online experiments with over 500 subjects of all ages in a European country, we show that this difference in testing propensities leads to sizeable bias; 'random' tests in the field inflate infection figures by up to five times. We suggest ways to correct the bias of the testing stations, but even better, a cleaner way to sample the population to avoid the bias altogether. Our methodology is relevant for covid-19, but also any other epidemic where carriers can have informative beliefs about their own carrier status.

We investigate how an initial public offering (IPO) preceding the sale of a company can raise the original owner's revenue. The value of a company consists of two components: future cash flows and a private benefit associated with control which only the majority owner enjoys. By issuing a fraction of the asset in a financial market (partial IPO) with a large number of small liquidity constrained shareholders, the seller elicits information in order to extract rents from the potential buyer of the controlling share of the company. We compare this two-step procedure to going public with the entire company, and with an auction with optimal reserve price. We find conditions, under which the two-step procedure outperforms the other two mechanisms. Our model provides a possible explanation for an IPO followed by a take-over as it is frequently observed in practice. Additionally, it provides a framework to analyze the information content of share prices when takeovers are expected and contributes to the discussion of minority shareholder protection regulation. Such rules do not only affect the efficiency of takeovers which is the usual focus of the analysis, but also make market prices more informationally revealing.