We investigate a noisy signaling game, in which nature adds random noise to the (costly) message chosen. Theoretically, with an unfavorable prior the separating equilibrium vanishes for low noise. It reappears for intermediate levels of noise, where messages increase with noise. A pooling equilibrium always exists. In our experiment, noise works as an empirical equilibrium selection device. When noise increases, the separating equilibrium loses ground to the pooling equilibrium. Subjects separate for low noise where no separating equilibrium exists. Conditional on aiming for separation, high-quality senders choose messages that increase monotonically with noise. A simple behavioral explanation organizes the data well.

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Because people disproportionally follow defaults, both libertarian paternalists and marketers try to present options they want to promote as the default. However, setting certain defaults and thereby influencing current decisions, may also affect choices in later, similar decisions. In this article, we explore experimentally whether the default bias can be reinforced by providing good defaults. We show that people who faced better defaults in the past are more likely to follow defaults than people who faced random defaults, hurting their later performance. This malleability of the default bias explains certain marketing practices and serves as an insight for libertarian paternalists.

In an experiment we identify a crucial factor that determines whether employers engage in statistical discrimination of ex ante equal groups. In the standard no‐competition setup of Coate and Loury (1993), we do not find systematic evidence for statistical discrimination. When we introduce competition between workers of different groups for the same job, the non‐discrimination equilibrium ceases to be stable. In line with this theoretical observation, we find systematic discrimination in the experimental treatment with competition. Nevertheless, a substantial minority of the employers refuses to discriminate even when it is in their best interest to do so.