Economists have traditionally treated preferences as exogenously given. Preferences are assumed to be influenced by neither beliefs nor the constraints people face. As a consequence, changes in behaviour are explained exclusively in terms of changes in the set of feasible alternatives. Here the...

In a wide variety of settings, spiteful preferences would constitute an obstacle to cooperation, trade, and thus economic development. This paper shows that spiteful preferences - the desire to reduce another's material payoff for the mere purpose of increasing one's relative payoff - are...

We use measures of neural activity provided by functional magnetic resonance imaging (fMRI) to test the "realization utility" theory of investor behavior, which posits that people derive utility directly from the act of realizing gains and losses. Subjects traded stocks in an experimental market...

We investigate the feasibility of inferring the choices people would make (if given the opportunity) based on their neural responses to the pertinent prospects when they are not engaged in actual decision making. The ability to make such inferences is of potential value when choice data are...

type="main" <title type="main">ABSTRACT</title> <p>We conduct a study in which subjects trade stocks in an experimental market while we measure their brain activity using functional magnetic resonance imaging. All of the subjects trade in a suboptimal way. We use the neural data to test a “realization utility”...</p>

One explanation for the apparent volatility of asset prices is that people overreact to trades that are uninformative, creating self-generated information "mirages." The authors test whether mirages occur in experimental asset markets. There are insiders in only half the periods, so traders...

Noncooperative game theory combines strategic thinking, best-response, and mutual consistency of beliefs and choices (equilibrium). Hundreds of experiments show that in actual behavior these three forces are limited, even when subjects are highly motivated and analytically skilled (Camerer,...

In economic analyses of asymmetric information, better-informed agents are assumed capable of reproducing the judgments of less-informed agents. The authors discuss a systematic violation of this assumption that they call the "curse of knowledge." Better-informed agents are unable to ignore...