Matching with batches, April 2025 (with Pablo Guillen and Edward Wang).
We propose the use of batching to eliminate truncation and recover strategy-proofness in matching markets with large choice sets, thereby allowing the clearinghouse to provide simple advice. Batching is particularly useful when applied to algorithms that rely on cut-offs rather than quotas, such as the Universities Admissions Centre (UAC) in Australia. The current UAC mechanism uses a constrained list, giving applicants incentives to strategise. We test the efficiency of batching in an individual decision-making experiment, comparing the batched mechanism to the status quo, with and without advice. We find a significant and sizeable increase in realised payoffs in the batched treatments, which is driven by participants submitting preference lists that are closer to truth-telling.
A meta-analysis of quasi-hyperbolic discounting, April 2025 (with Agnieszka Tymula and Xueting Wang).
This paper reports a meta-analysis of 86 studies of the two parameters of quasi-hyperbolic (β-δ) discounting, the dominant model of self-control failures in behavioural economics. The central tenet of the model is that decision-makers have a “present-bias”, β, for immediate rewards, on top of standard exponential discounting of the future, δ. After correcting for selective reporting, we obtain a meta-analytic estimate of β for money of 0.938, with 95% confidence interval [0.905, 0.972]. For non-monetary rewards, our estimate of β is 0.750, with 95% confidence interval [0.643, 0.857], and there is no evidence of selective reporting. We find that present bias for real effort, while stronger than for money, is weaker than for other rewards such as real consumption.
Quasi-exponential discounting, July 2024 (with Kieran MacGibbon, Arquette Milin-Byrne, and Agnieszka Tymula).
Alternatives to the standard model of time preference typically relax the assumption of an exponential discount function while retaining the framework of discounted utility. We report novel behavioural data inconsistent with this approach. Illustrating this, we estimate highly significant "present bias", despite our data exhibiting stationarity. The paradox is resolved by relaxing discounted utility itself to allow discounting to be context dependent. We propose quasi-exponential discounting (QED), a fixed penalty applied to all episodes of delay, as a particularly simple model of this type and show that it provides an excellent approximation to the best fit to our data.
A meta-analysis of disposition effect experiments, March 2024.
This paper reports a meta-analysis of the disposition effect – the reluctance to liquidate losing investments – in three standard experimental environments in which this behaviour is normatively a mistake. Under baseline conditions, the literature finds that investors are around 10% more willing to sell winning compared to losing assets, despite optimal choice dictating the opposite. In treatment tests of interventions to debias the disposition effect, the meta-analytic effect size implies slightly over a one-half standard deviation reduction in the bias. There is little evidence of selective reporting of the baseline disposition effect, but stronger evidence of bias in reporting treatment effects.
Time preference Life Course Centre Working Paper 2024-05 (prepared for the Encyclopedia of Experimental Social Scence).
The study of time preference is concerned with decisions involving benefits and costs at different points in time. Many of the most consequential choices over the life course have this feature. This article was written to provide a high-level, non-technical overview of both conceptual and practical issues that arise in the measurement of time preference in experiments and surveys. While the basic structure of a time preference experiment is simple, there are many variables that must be specified by the researcher, and these will depend on the purpose of the measurement. They include the model of time preference applicable to a situation, the use of incentives, the choice of elicitation procedures and delay structures, and whether and how to control for non-linear valuation of outcomes. Where full-scale measurement is not feasible or desirable, a variety of qualitative survey-based measures have also been validated. In making design choices for a time preference study, researchers should consider among other things: whether time preference is a focal behaviour, key explanatory variable, or other covariate for the study at hand, whether the applicable time preference construct entails present bias and self-control problems, and the intended disciplinary audience. There is currently no methodological gold standard for the measurement of time preferences.
True overconfidence, revealed through actions: An experiment Journal of Risk and Uncertainty, 2025, in press (with Lachlan Johnstone).
We design an experiment to infer true overconfidence in relative ability through actions, as opposed to reported beliefs. Subjects choose how to invest earnings from a skill task where the returns depend either solely upon risk, or both risk and relative placement, enabling joint estimation of individual risk preferences and implied subjective beliefs of placing in the top half. We find evidence of aggregate overconfidence only in a treatment that receives minimal feedback on performance in a trial round. In treatments that receive more detailed feedback aggregate overconfidence is not observed, however identifiable segments of over- and underconfident individuals persist.
Anticipatory effects of competition on confidence and risk preference Journal of Behavioral and Experimental Economics, 2025, Volume 116, 102367 (with Vindesh Nadan).
We study anticipatory changes in confidence and risk preference aroused by the prospect of future competition. Participants in our treatment group are told they will later participate in a tournament, while those in the control group are told they will work for a piece rate. Beliefs over relative ability and risk attitudes are measured prior to this prospective task. We find no anticipatory effect on confidence in relative ability, but a significant effect on risk preference. Specifically, the treatment increases risk aversion in males, but not in females, such that the conventional gender difference in risk preference is neutralized.
Price expectations and reference-dependent preferences Journal of Economic Behavior and Organization, 2025, Volume 231, 106927 (with Robert M. Rutledge and Vinayak Alladi).
We test Kőszegi and Rabin's (2006, 2007) theory of reference-dependent preferences in the context of sellers’ price expectations. In a well-powered laboratory experiment, participants are endowed with a good and report their willingness to accept to sell it. We manipulate the price in an exogenous forced sale scenario, which is predicted to produce a “comparison effect”, moving WTA in the opposite direction to the forced sale price. We find a small (Cohen's d = 0.18) and marginally significant effect in the hypothesised direction for incentivised reservation prices. More unexpectedly, we find a larger (d = 0.32) and highly significant effect in the same direction on unincentivised estimates of the value of the good. Our results cannot be explained by anchoring or signalling effects of the forced sale price, but also highlight some challenges in identifying the effects of expectations manipulations using valuation designs.
Portfolio framing and diversification in a disposition effect experiment Journal of Behavioral and Experimental Finance, 2024, Volume 44, 100997 (with Nathan Rogut).
We experimentally test an intervention designed to reduce investors’ disposition effect by prompting them to identify their worst asset, from the standpoint of its impact on future portfolio performance. We find that this intervention is mildly effective, and significantly more so for participants who correctly identify their worst asset, and/or sell the asset they identify. We also find that participants who correctly understand diversification in a financial literacy questionnaire exhibit larger disposition effects in the experiment. The latter finding raises concerns over the external validity of standard experimental paradigms used to study the disposition effect.
Present bias for monetary and dietary rewards Experimental Economics, 2022, Volume 25, Issue 4, pp. 1202-1233 (with Agnieszka Tymula and Xueting Wang).
Economists model self-control problems through time-inconsistent preferences. Empirical tests of these preferences largely rely on experimental elicitation using monetary rewards, with several recent studies failing to find present bias for money. In this paper, we compare estimates of present bias for money with estimates for healthy and unhealthy foods. In a within-subjects longitudinal experiment with 697 low-income Chinese high school students, we find strong present bias for both money and food, and that individual measures of present bias are moderately correlated across reward types. Our experimental measures of time preferences over both money and foods predict field behaviors including alcohol consumption and academic performance. (Working Paper)
Eliciting utility curvature in time preference Experimental Economics, 2020, Volume 23, Issue 2, pp. 493-525.
This paper examines the effects of alternative assumptions regarding the curvature of utility upon estimated discount rates in experimental data. To do so, it introduces a novel design to elicit time preference building upon a translation of the Holt and Laury method for risk. The results demonstrate that utility elicited directly from choice over time is significantly concave, but far closer to linear than utility elicited under risk. As a result, the effect of adjusting discount rates for this curvature is modest compared to assuming linear utility, and considerably less than when utility from a risk preference task is imposed. (Working Paper)
The effect of conflict history on cooperation within and between groups: Evidence from a laboratory experiment Journal of Economic Psychology, 2017, Volume 63, pp. 168-183 (with Gonne Beekman and Ian Levely).
We study cooperation within and between groups in the laboratory, comparing treatments in which two groups have previously been in conflict with one another, in conflict with a different group, or not previously exposed to conflict. We model conflict using an inter-group Tullock contest, and measure its effects upon cooperation using a multi-level public good game. We find that conflict increases cooperation within groups, while decreasing cooperation between groups. Moreover, we find that an increase in the gains from cooperation only increases cooperation between groups when the two groups have not previously interacted. (Working Paper)
Recent developments in the experimental elicitation of time preference Journal of Behavioral and Experimental Finance, 2016, Volume 11, pp. 1-8.
This methodological survey reviews recent developments in the design of experiments to elicit individuals' time preferences, with a focus on the measurement or control for potentially non-linear utility. While the objective of a time preference experiment is usually to estimate parameters of a discount function, assumptions concerning the nature of utility may have an important influence upon these estimates. The survey classifies experiment designs on two dimensions: whether they assume an equivalence between utility under risk and over time, and whether they result in an estimate of the curvature of utility. (Working Paper)
Comment on “Risk preferences are not time preferences”: On the elicitation of time preference under conditions of risk American Economic Review, 2015, Volume 105, Issue 7, pp. 2242-2260.
Andreoni and Sprenger (2012) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of this result to the experimental design. I find that the effect disappears completely when a multiple price list instrument is used instead of a convex time budget design. Alternatively, the effect is reduced by half when sooner and later payment risks are realized using a single lottery instead of two independent lotteries. The result is thus at least partially driven by intertemporal diversification, supporting an explanation in terms of concavity of the intertemporal, and not only atemporal, utility function. (Working Paper)
Relative performance incentives and price bubbles in experimental asset markets Southern Economic Journal, 2014, Volume 81, Issue 2, pp. 345-363 (with Andrew Coleman).
We study experimental markets in which participants face incentives modeled upon those prevailing in markets for managed funds. Each participant’s portfolio is periodically evaluated at market value and ranked by their relative performance as measured by short-term paper returns. Those who rank highly attract a larger share of new fund inflows. In an environment in which prices are typically close to intrinsic value, the effect of these incentives is mild. However in an environment in which markets are prone to bubble, mispricing is greatly exacerbated by relative performance incentives, and even becomes more pronounced with experience. (Working Paper)
Savings and prize-linked savings accounts Journal of Economic Behavior and Organization, 2014, Volume 107, pp. 86-106 (with Kadir Atalay, Fayzan Bakhtiar, and Robert Slonim).
Many households have insufficient savings to handle moderate and routine consumption shocks. Many of these financially-fragile households also have the highest lottery expenditures as a proportion of income. This combination suggests that Prize-Linked Savings (PLS) accounts, combining security of principal with lottery-type jackpots, can increase savings among these at-risk households. Results from an online experiment show that the introduction of PLS accounts increase total savings and reduce lottery expenditures significantly, especially among individuals with the lowest levels of savings and income. The results imply that PLS accounts offer a plausible market-based solution to encourage individuals to increase savings. (Working Paper)
New insights into conditional cooperation and punishment from a strategy method experiment Experimental Economics, 2014, Volume 17, Issue 1, pp. 129-153.
This paper introduces new experimental designs to examine how conditional cooperation and punishment behaviours respond to the full range of variation in the contributions of others. It is shown that contributions become significantly more selfish-biased as others contribute more unequally, while punishment increases both with decreasing contributions by the target player and increasing contributions by a third player. Low contributors who punish antisocially do not direct their punishment specifically toward high contributors, while their beliefs indicate that they expect to themselves be punished. (Working Paper)
To see is to believe: Common expectations in experimental asset markets European Economic Review, 2014, Volume 66, pp. 84-96 (with Morten Hedegaard and Stefan Palan).
We experimentally manipulate agents' information regarding the rationality of others in a setting in which previous studies have found irrationality to be present, namely the asset market experiments introduced by Smith, Suchanek and Williams (1988). Recent studies suggest that mispricing in such markets may be an artefact of confusion, which can be reduced by training subjects to understand the diminishing fundamental value. We reconsider this view, and propose that when it is made public knowledge that training has occurred, this may also reduce uncertainty over the behavior of others and facilitate the formation of common expectations. Our design disentangles the direct effect of training from the indirect effect of its public knowledge, and our results demonstrate a distinct and statistically significant effect of public knowledge over and above that of training alone.
Two heads are less bubbly than one: Team decision-making in an experimental asset market Experimental Economics, 2012, Volume 15, Issue 3, pp. 373-397 (with Stefan Palan).
In the world of mutual funds management, responsibility for investment decisions is increasingly entrusted to small teams instead of individuals. Yet the effect of team decision-making in a market environment has never been studied in a controlled experiment. In this paper, we investigate the effect of team decision-making in an asset market experiment that has long been known to reliably generate price bubbles and crashes in markets populated by individuals. We find that this tendency is substantially reduced when each decision-making unit is instead a team of two. This holds across a broad spectrum of measures of the severity of mispricing, both under a continuous double-auction institution and in a call market. The result is not driven by reduced turnover due to time required for deliberation by teams, and continues to hold even when subjects are experienced. Our result also holds not only when our teams treatments are compared to the ‘narrow’ baseline provided by the corresponding individuals treatments, but also when compared more broadly to the results of the large body of previous research on markets of this kind. (Working Paper)
A test of employer learning in the labour market for young Australians Applied Economics Letters, 2009, Volume 17, Issue 1, pp. 93-98.
This paper reports a test of employer learning for a panel of young Australian men. The information contained in a test score is found to already be observed by employers at the time a worker enters the labour market. However the return to parental education is found to increase with experience, indicating that the attributes reflected in this variable are initially harder for employers to observe, and that learning occurs with respect to them. When the sample is partitioned by hiring channel, these effects are confined to workers who were recruited through less informative channels. (Working Paper)
Using mobile phone messaging as a response medium in classroom experiments Journal of Economic Education, 2008, Volume 39, Issue 1, pp. 51-67.
A major challenge in conducting classroom experiments for larger classes is the complexity of assembling responses and reporting feedback to students. The author demonstrates how mobile phone text messaging can be used to overcome the limitations of pencil-and-paper experiments without incurring the costs of full computerization. Students submit responses as text messages, which are down-loaded into a spreadsheet for automated analysis and by return messaging. The author presents examples of experiments that have been conducted successfully using text messaging as the response medium. These can be run in any room from which the instructor can access the internet and are designed to economize on both class time and effort of the instructor. (Working Paper)
A classroom entry and exit game of supply with price-taking firms Journal of Economic Education, 2005, Volume 36, Issue 4, pp. 358-367.
The author describes a classroom game demonstrating the process of adjustment to long-run equilibrium in a market consisting of price-taking firms. This game unites and extends key insights from several simpler games in a framework more consistent with the standard textbook model of a competitive industry. Because firms have increasing marginal costs and can offer multiple units for sale, they face a nontrivial supply decision. This is nested in an entry and exit game with price adjustment to capture long-run aspects of the standard model. Finally, by introducing heterogeneity in firms' fixed costs, the game demonstrates how the price mechanism not only establishes the equilibrium number of firms and the output of each but also the identities of the most efficient sellers. (Working Paper)