Dennie van Dolder

Prince: An Improved Method for Measuring Incentivized Preferences

This paper introduces the Prince incentive system for measuring preferences. Prince clarifies consequences of decisions and incentive compatibility of experimental choice questions to subjects. It combines the efficiency and precision of matching with the improved clarity and validity of choice questions. It helps distinguish between (a) genuine deviations from classical economic theories (such as the endowment effect) and (b) preference anomalies due to fallible measurements (such as preference reversals). Prince avoids the opaqueness in Becker-DeGroot Marschak and strategic behavior in adaptive experiments. It helps reducing violations of isolation in the random incentive system. Using Prince we shed new light on willingness to accept and the major components of decision making under uncertainty: utilities, subjective beliefs, and ambiguity attitudes.

Risky Choice in the Limelight

This paper examines how risk behavior in the limelight differs from that in anonymity. In two separate experiments, we find that subjects are more risk averse in the limelight. However, risky choices are similarly path dependent in the different treatments. Under both limelight and anonymous laboratory conditions, a simple prospect theory model with a path-dependent reference point provides a better explanation for subjects’ behavior than a flexible specification of expected utility theory. In addition, our findings suggest that ambiguity aversion depends on being in the limelight, that passive experience has little effect on risk taking, and that reference points are determined by imperfectly updated expectations.

Individual choices in dynamic networks: An experiment on social preferences

Game-theoretic models of network formation typically assume that people create relations so as to maximize their own outcome in the network. Recent experiments on network formation suggest that the assumption of self-interest might be unwarranted and that social preferences, such as altruism and inequality aversion, play a role in the formation of social networks. We developed an experiment to systematically investigate whether people show preferences for outcomes of others during network formation. We find that such preferences play a role when network decisions degenerate to simple two-person decision tasks. In more complex environments, however, we find little evidence for social preferences as a significant decision criterion. Furthermore, we find some evidence for farsighted behavior in network formation.

Number Preferences in Lotteries

We explore people’s preferences for numbers in large proprietary data sets from two different lottery games. We find that choice is far from uniform, and exhibits some familiar and some new tendencies and biases. Players favor personally meaningful and situationally available numbers, and are attracted towards numbers in the center of the choice form. Frequent players avoid winning numbers from recent draws, whereas infrequent players chase these. Combinations of numbers are formed with an eye for aesthetics, and players tend to spread their numbers relatively evenly across the possible range.

Social motives in network formation: An experiment

Literature on network formation typically assumes that people create and remove relations as to maximize their outcome in the network. It is mostly neglected that people might also care about the outcomes of others when creating and removing links. In the current paper, we develop an experiment to investigate whether people show preferences that involve the outcomes of others during network formation. We find varying evidence for effects of social motives in the settings we compare in the experiment. In the final part of the paper, we discuss some explanations for these findings.

Can the Market Divide and Multiply? A Case of 807 Percent Mispricing under Short-Selling Constraints

This paper documents a strong violation of the law of one price surrounding a large rights issue. If prices are right, the relation between the prices of shares and rights follows the outcome of a simple calculation. In the case of Royal Imtech N.V. in 2014, prices deviated sharply and persistently from the theoretical prediction. Throughout the term of the rights, investors were buying shares at prices that were many times what they should have been given the price of the rights. Short-selling constraints in the form of high recall risk and lacking stock lending supply are the most likely explanation for the failure of arbitrage as a safeguard of market efficiency. Still, it remains remarkable that investors were buying large volumes of shares at highly inflated prices in the presence of a cheap, perfect substitute.

Malleable Lies: Communication and Cooperation in a High Stakes TV Game Show

We investigate the credibility of non-binding pre-play statements about cooperative behavior, using data from a high-stakes TV game show in which contestants play a variant on the classic Prisoner’s Dilemma. We depart from the conventional binary approach of classifying statements as promises or not, and propose a more fine-grained two-by-two typology inspired by the idea that lying aversion leads defectors to prefer statements that are malleable to ex-post interpretation as truths. Our empirical analysis shows that statements that carry an element of conditionality or implicitness are associated with a lower likelihood of cooperation, and confirms that malleability is a good criterion for judging the credibility of cheap talk.