Experimental Social Science Laboratory (Xlab)

One's own emotions may influence others' behavior in a given social interaction. If one believes this, s/he has an incentive to game emotions - to strategically conceal a current emotion or display a non-experienced emotion - in an attempt to influence her/his counterpart. In a series of three experiments, we show that people deliberately conceal (experiment 1) or misrepresent (experiments 2 and 3) their emotional state in a negotiation setting. When given the opportunity to either hide or express their current emotions before playing an ultimatum game, receivers who have reported low (vs. high) level of anger are more likely to conceal their emotion right before the proposers decide on the division of the pie (experiment 1). When the procedure allows participants to change their previously reported emotion, receivers choose to inflate their reported level of anger prior to proposers' decision (experiment 2). Finally, this emotion gaming hypothesis generalizes to positive emotions as well. In a standard trust game, trustees inflate the level of happiness before trusters decide on passing vs. keeping a fixed amount of money to the trustees (experiment 3).

Anecdotal evidence suggests that in a gambling environment consumers may end up betting more than they had initially planned. We assess this phenomenon using sequential and fair gambles in a two-stage process (planned and actual bets). The results show that in the planning phase, people behave conservatively, betting on average less after an anticipated loss and the same amount after an anticipated gain. However, after an actual loss in the first gamble is experienced, individuals bet in a subsequent gamble significantly more than what they had initially planned, whereas on average no differences from the plan are perceived after a gain. We show that the reason for such asymmetry is in part due to people's tendency to underestimate, at the planning phase of the gamble, the impact of negative emotions in betting decisions during the actual phase of the gamble.

Other people's incidental feelings can influence one's decision in a strategic manner. In a sequential game where a proposer moves first by dividing a given pot of cash (to keep 50% [vs. 75%] of the pot) and a receiver responds by choosing the size of the pot (from $0 to $1), the proposer is more likely to make an unfair offer (i.e., to keep 75% of the pot) to a receiver who watched a funny sitcom (vs. “angry” movie clip) in an unrelated study prior to the game playing. However, when the receiver knows that the proposer has the affective information, and the proposer is aware of this knowledge, the effect dissipates. In other words, a proposer expects a happy (vs. angry) receiver to be more accommodating or cooperative as long as the happy receiver does not realize that the proposer is trying to benefit from receiver's current incidental feelings.

How can the hedonistic assumption (i.e., people's willingness to pursue pleasure and avoid pain) be reconciled with people choosing to expose themselves to experiences known to elicit negative feelings? We assess how (1) the intensity of the negative feelings, (2) positive feelings in the aftermath, and (3) the coactivation of positive and negative feelings contribute to our understanding of such behavior. In a series of 4 studies, consumers with either approach or avoidance tendencies (toward horror movies) were asked to report their positive and/or negative feelings either after (experiment 1) or while (experiments 2, 3A, and 3B) they were exposed to a horror movie. We demonstrate how a model incorporating coactivation principles and enriched with a protective frame moderator (via detachment) can provide a more parsimonious and viable description of the affective reactions that result from counter-hedonic behavior.

Abstract. The Metropolitan Water District of Southern California (MET) is a self-regulated, public cooperative that imports the majority of Southern California's water. MET delivers this water to its 26 member agencies through MET infrastructure. MET's members--through its Board of Directors--decide the price of water and allocation of infrastructure costs by majority vote. Although MET's self-regulated cooperative status was an efficient organizational form in the past, changing circumstances (reduced supply, increased demand)have made it less so. The response of MET and its member agencies--conflict over decisions and enactment of policies supported by the median-voter--does not deliver economic or political efficiency. MET could use internal auction markets to allocate water and costs more efficiently and equitably.

Anecdotal evidence suggests that in a gambling environment people might violate “pre-commitments,” and subsequently bet more than they had initially planned. In this paper, we investigate this phenomenon in a scenario where i) participants have full information about the gambles prior to the planning phase ii) the time period between the planning and actual phases of the gambles is very short, iii) participants believed that their plans will be executed, iv) and participants are reminded of their planned bets right before they make their actual bets. In a series of three experiments, we assess the presence, shape and potential processes underlying dynamic inconsistencies in a sequence of two fair gambles.

In many settings, including venture capital financing, mergers and acquisitions, and lease competition, the structure of the contracts (debt versus equity) over which firms compete differs. Furthermore, the structure of the contract affects the future incentives of the firm to engage in value-creating activities by potentially diluting effort or investment incentives. We study, both theoretically and in the lab, the performance of open outcry debt and equity auctions in the presence of both private information and hidden effort. We show that the revenues to sellers in debt and equity auctions differ systematically depending on the returns to entrepreneurial effort. We then test these revenue rankings and other predictions of the theory using controlled laboratory experiments where we vary the returns to effort. While the bidding behavior, particularly in equity auctions, differs from the dominant strategy prediction of the theory, the predicted revenue rankings are borne out in the lab.

To build systems shielding users from fraudulent (or phishing) websites, designers need to know which attack strategies work and why. This paper provides the first empirical evidence about which malicious strategies are successful at deceiving general users. We first analyzed a large set of captured phishing attacks and developed a set of hypotheses about why these strategies might work. We then assessed these hypotheses with a usability study in which 22 participants were shown 20 web sites and asked to determine which ones were fraudulent. We found that 23% of the participants did not look at browser-based cues such as the address bar, status bar and the security indicators, leading to incorrect choices 40% of the time. We also found that some visual deception attacks can fool even the most sophisticated users. These results illustrate that standard security indicators are not effective for a substantial fraction of users, and suggest that alternative approaches are needed.

Experimental economists believe (and enforce) that researchers should not employ deception in the design of experiments. The rule exists in order to protect a public good: the ability of other researchers to conduct experiments and have participants trust their instructions to be an accurate representation of the game being played. Yet other social sciences, particularly psychology, do not maintain such a rule. We examine whether such a public goods problem exists by purposefully deceiving some participants in one study, and then examining whether the deceived participants behave differently in a subsequent study. We find significant differences in both the selection of individuals who return to play after being deceived as well as (to a lesser extent) the behavior in the subsequent games, thus providing qualified support for the proscription of deception. We discuss policy implications for the maintenance of separate participant pools.

Does the memory of recently being punished deter criminals from committing crimes? Criminologists have long discussed the psychological effect that receiving a punishment can have on future criminal behavior. While it may exist anecdotally, this psychological deterrent effect is difficult to disentangle from classical deterrence in a real-world setting because of changes in information and incentives that typically occur when an individual is punished. In this paper, we test for punishment-induced deterrence in a controlled market where issues of changes in expected benefits and costs can be addressed: the video-rental market. We explore the effect of having to pay a late fee on customer behavior and find evidence of negative state dependence. Specifically, we find that paying a late fee reduces the probability of paying a late fee in the subsequent visit by 19% and that this deterrent effect decays quickly over time. We show that this behavior is not mitigated by experience and discuss the implications of these findings on consumer rationality, optimal crime policy, and marketing.