In this paper, we argue that important labor market phenomena can be better understood if one takes (i) the inherent incompleteness and relational nature of most employment contracts and (ii) the existence of reference-dependent fairness concerns among a substantial share of the population into...

In recent years, many social scientists have claimed that trust plays an important role in economic and social transactions. Despite its proposed importance, the measurement and the definition of trust seem to be not fully settled, and the identification of the exact role of trust in economic...

In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long term contracts and important aspects of the employment relation. However, so far there exists no direct evidence that supports these assumptions and, in particular, Hart and Moore's notion that...

There is abundant evidence that many individuals violate the rationality assumptions routinely made in economics. However, powerful evidence also indicates that violations of individual rationality do not necessarily refute the aggregate predictions of standard economic models that assume full...

In many markets, firms make their products complex through add-ons, thus making them difficult to evaluate and compare. How does this product obfuscation affect competition, sellers’ profits, and buyers’ welfare? We study these questions in a competitive experimental market in which sellers...

Are initial competitive advantages self-reinforcing, so that markets exhibit an endogenous tendency to be dominated by only a few firms? Although this question is of great economic importance, no systematic empirical study has yet addressed it. Therefore, we examine experimentally whether firms...

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...

Working memory capacity is thought to play an important role for a wide range of cognitive and noncognitive skills such as fluid intelligence, math, reading, the inhibition of pre-potent impulses or more general self-regulation abilities. Because these abilities substantially affect individuals'...

Working memory capacity is thought to play an important role for a wide range of cognitive and noncognitive skills such as fluid intelligence, math, reading, the inhibition of pre-potent impulses or more general self-regulation abilities. Because these abilities substantially affect individuals'...

The ability to uncover preferences from choices is fundamental for both positive economics and welfare analysis. Overwhelming evidence shows that choice is stochastic, which has given rise to random utility models as the dominant paradigm in applied microeconomics. However, as is well known, it...