We investigate, in an experimental setting, the effect of private information on the Coase theorem's predictions of efficiency and allocative neutrality. For a two-person bargaining game, we find significantly more inefficiency and allocative bias in the case of private information compared with...

This paper reports on an experimental study of the way in which individuals make inferences from publicly available information. We compare the predictions of a theoretical model of a common knowledge inference process with actual behavior. In the theoretical model, "perfect Bayesians," starting...

We study a voluntary contributions mechanism in which punishment may be allowed, depending on subjects' voted rules. We found that out of 160 group votes, even when groups had no prior experience with unrestricted punishment, no group ever voted to allow unrestricted punishment and no group ever...