Each week, the Dutch Postcode Lottery (PCL) randomly selects a postal code, and distributes cash and a new BMWto lottery participants in that code. We study the effects of these shocks on lottery winners and their neighbors.Consistent with the life-cycle hypothesis, the effects on winners’...

Different theories of expectation formation and learning usually yield different outcomes for realized market prices in dynamic models. The purpose of this paper is to investigate expectation formation and learning in a controlled experimental environment. Subjects are asked to predict the next...

Price-level targeting (PLT) is optimal under the fully-informed rational expectations (FIRE) benchmark but lacks empirical support. Given the hurdles to the implementation of macroeconomic field experiments, we utilize a laboratory group experiment - where expectations are elicited from human...

We test whether markets are needed to mitigate the effects of anchoring on peoples' pref- erences. We anchor subjects by asking them if they are willing to sell a bottle of wine for a transparently uninformative random price. We elicit subjects' Willingness-To-Accept for the bottle before and...

Congestion levels have grown substantially in recent years, while the traditional economic response to congestion – road pricing – remains politically infeasible in most locations. Tradable permits are likely to be a more viable alternative, because they do not require a net financial flow...

We investigate experimentally whether emotions affect bidding behavior in a firstprice auction. To induce emotions, we confront subjects after a first auction series with apositive or negative random economic shock. We then explore the relation between emotions andbidding behavior in a second...

Expectations play a crucial role in modern macroeconomic models. We replace the common assumption of rational expectations in a New Keynesian framework by the assumption that expectations are formed according to a heuristics switching model that has performed well in earlier work. We show how...

We experimentally study the strategic transmission of information in a setting where both cheap talk and money can be used for communication purposes. Theoretically a large number of equilibria exist side by side, in which senders either use costless messages, money, or a combination of the two....