A compelling body of evidence indicates that observing a task-irrelevant action makes the execution of that action more likely. However, it remains unclear whether this 'automatic imitation' effect is indeed automatic or whether the imitative action is voluntary. The present study tested the automaticity of automatic imitation by asking whether it occurs in a strategic context where it reduces payoffs. Participants were required to play rock-paper -scissors, with the aim of achieving as many wins as possible, while either one or both players were blindfolded. While the frequency of draws in the blind -blind condition was precisely that expected at chance, the frequency of draws in the blind -sighted condition was significantly elevated. Specifically, the execution of either a rock or scissors gesture by the blind player was predictive of an imitative response by the sighted player. That automatic imitation emerges in a context where imitation reduces payoffs accords with its 'automatic' description, and implies that these effects are more akin to involuntary than to voluntary actions. These data represent the first evidence of automatic imitation in a strategic context, and challenge the abstraction from physical aspects of social interaction typical in economic and game theory.

We study the effects of reputation and competition in a stylized market for experience goods. If interaction is anonymous, such markets perform poorly: sellers are not trustworthy, and buyers do not trust sellers. If sellers are identifiable and can, hence, build a reputation, efficiency quadruples but is still at only a third of the first best. Adding more information by granting buyers access to all sellers' complete history has, somewhat surprisingly, no effect. On the other hand, we find that competition, coupled with some minimal information, eliminates the trust problem almost completely.

-Multiple group memberships are the rule rather than the exception. Locally operating groups frequently offer the advantage of providing social recognition and higher marginal benefits to the individual, whereas globally operating groups may be more beneficial from a social perspective. Within a voluntary contribution environment we experimentally investigate the tension that arises when subjects belong to a smaller local and a larger global group. When the global public good is more efficient individuals first attempt to cooperate in the global public good. However, this tendency quickly unravels and cooperation in the local public good builds up.

We study the effects of reputation and competition in a stylized market for experience goods. If interaction is anonymous, such markets perform poorly: sellers are not trustworthy, and buyers do not trust sellers. If sellers are identifiable and can, hence, build a reputation, efficiency quadruples but is still at only a third of the first best. Adding more information by granting buyers access to all sellers' complete history has, somewhat surprisingly, no effect. On the other hand, we find that competition, coupled with some minimal information, eliminates the trust problem almost completely.

In a laboratory experiment designed to capture key aspects of the interaction between physicians and patients, we study the effects of medical insurance and competition in the guise of free choice of physician, including observability of physicians' market shares. Medical treatment is an example of a credence good: only the physician knows the appropriate treatment, the patient does not. Even after a consultation, the patient is not sure whether he received the right treatment or whether he was perhaps overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insurance: most patients seek treatment, but overtreatment is moderated.

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Rank-order tournaments are usually implemented in organizations to provide incentives for eliciting employees' effort and/or to identify the agent with the higher ability, for example in promotion tournaments. We close a gap in the literature by experimentally analyzing a ceteris paribus variation of the prize spread - being the major design feature of tournaments - in a symmetric and an asymmetric setting. We find that effort significantly increases with the prize spread as predicted by standard theory. However, only for sufficiently large prize spreads weak players competing against strong players strain themselves all the more and sorting of agents is feasible. Copyright 2008 The Authors. Journal compilation Verein für Socialpolitik and Blackwell Publishing Ltd. 2008.

Arguing that consumers are the carriers of firms' reputations, we examine the role of consumer networks for trust in markets that suffer from moral hazard. When consumers are embedded in a network, they can exchange information with their neighbors about their private experiences with different sellers. We find that such information exchange fosters firms' incentives for reputation building and, thus, enhances trust and efficiency in markets.This efficiency-enhancing effect is already achieved with a rather low level of network density.