We use a unique panel data set to analyse price setting in restaurants in Switzerland 1977-93, for items known to have sticky prices. The macroeconomic environment during this time period allows us to examine how firms adjust prices at low (0%) and fairly high (7%) inflation. Our results...

Spillovers of prosocial motivation are crucial for the formation of social capital. They facilitate interactions among individuals and create social multipliers that amplify the effects of policy interventions. We conducted a large-scale intervention study among dyads of blood donors to...

A key open question for theories of reference-dependent references is what determines the reference point. One candidate is expectations: what people expect could affect how they feel about what actually occurs. In a real-effort experiment, we manipulate the rational expectations of subjects and...

There is strong evidence that people exploit their bargaining power in competitive markets but not in bilateral bargaining situations. There is also strong evidence that people exploit free-riding opportunities in voluntary cooperation games. Yet, when they are given the opportunity to punish...

We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting...

Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differences in payoff representation cause pronounced differences in nominal price inertia indicating the...

This paper discusses recent neuroeconomic evidence related to other-regarding behaviours and the decision to trust in other people’s other-regarding behaviour. This evidence supports the view that people derive non-pecuniary utility (i) from mutual cooperation in social dilemma (SD) games and...

The most fundamental solution concepts in Game Theory – Nash equilibrium, backward induction, and iterated elimination of dominated strategies – are based on the assumption that people are capable of predicting others' actions. These concepts require people to be able to view the game from...

Employment contracts give a principal the authority to decide flexibly which task his agent should execute. However, there is a tradeoff, first pointed out by Simon (1951), between flexibility and employer moral hazard. An employment contract allows the principal to adjust the task quickly to...

Most economic models are based on the self-interest hypothesis that assumes that all people are exclusively motivated by their material self-interest. In recent years experimental economists have gathered overwhelming evidence that systematically refutes the self-interest hypothesis and suggests...