Data from 692 subjects in 11 experimental treatments provide a systematic exploration of the existence and nature of reciprocal behavior in two-person games. The experimental design discriminates between motivations of reciprocity and (nonreciprocal) other-regarding preferences. The existence of positive reciprocity is found to be dependent on the level of social distance but not the level of monetary payoff. The larger context in which a decision is made is found to have a significant effect on negative reciprocity. These findings on payoff levels, social distance, decision context, and reciprocity have implications for both theoretical modeling and experimental design.

Psychologists and economists have examined the effect of cognitive load in a variety of situations from risk taking to snack choice. We review previous experiments that have directly manipulated cognitive load and summarize their findings. We report the results of two new experiments where participants engage in a digit-memorization task while simultaneously performing a variety of economic tasks including: (1) choices involving risk, (2) choices involving intertemporal substitution, (3) choices with anchoring effects, (4) choices over healthy and unhealthy snacks, and (5) math problems. We find that higher cognitive load reduces numeracy as measured by performance in math problems. Moreover, within-subject analysis indicates that cognitive load leads to more risk-averse behavior, more impatience over money, and (nominally) more likelihood to anchor. We do not find any evidence that cognitive load increases impatience over consumption goods or unhealthy snack choices. Exploiting the panel nature of our data set, we find that those individuals who are most sensitive to cognitive load, as measured by a large drop in their own math performance across 1-and 8-digit memorization treatments, are driving much of the effect. * The authors wish to thank

Previous research on gender differences in behavior has led to seemingly contradictory findings about generosity. From data generated by 290 subject pairs, we find that women are more sensitive than men to the costs of generous actions when deciding whether to be generous. The factors that affect the level of generosity observed in our experiments are reciprocal motivation, the level of money payoffs, and the level of social distance in the experimental protocol. The relatively greater sensitivity of women to the costs of generous behavior can explain most of the apparent inconsistencies in previously reported findings. (JEL C70, C91, D63, D64)

Abstract:Higher-order risk effects play an important role in examining economic behavior under uncertainty. A precautionary demand for saving has been linked to the property of prudence and the property of temperance has been used to show how the presence of an unavoidable risk affects one's behavior towards a second risk. These two properties also play key roles in aversion to negative skewness and to kurtosis, respectively. Both properties recently have been characterized by preferences over lottery pairs in simple 50-50 gambles. The simplicity of this characterization is ideal for experimental investigation. This article reports the results of such experiments and concludes that there is behavioral evidence for prudence, but not for temperance. Implications of these results for both expected-utility and non-expected-utility models are examined.

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Using controlled experiments, we examine how individuals make choices when faced with multiple options. Choice tasks are designed to mimic the selection of health insurance, prescription drug, or retirement savings plans. In our experiment, available options can be objectively ranked allowing us to examine optimal decision making. First, the probability of a person selecting the optimal option declines as the number of options increases, with the decline being more pronounced for older subjects. Second, heuristics differ by age with older subjects relying more on suboptimal decision rules. In a heuristics validation experiment, older subjects make worse decisions than younger subjects.

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Abstract:Higher-order risk effects play an important role in examining economic behavior under uncertainty. A precautionary demand for saving has been linked to the property of prudence and the property of temperance has been used to show how the presence of an unavoidable risk affects one's behavior towards a second risk. These two properties also play key roles in aversion to negative skewness and to kurtosis, respectively. Both properties recently have been characterized by preferences over lottery pairs in simple 50-50 gambles. The simplicity of this characterization is ideal for experimental investigation. This article reports the results of such experiments and concludes that there is behavioral evidence for prudence, but not for temperance. Implications of these results for both expected-utility and non-expected-utility models are examined.