Translating the collective climate goal into a common commitment

Peter Cramton, Axel Ockenfels and Jean Tirole
Forthcoming. In: Review of Environmental Economics and Policy.

Moral values and increasing stakes in a dictator game

Uta Schier, Axel Ockenfels and Wilhelm Hofmann
2016. Journal of Economic Psychology Vol. 56, pp. 107-115.

Using data from a large representative US sample (N = 1519), we compare hypothetical moral fairness values from the Moral Foundations Sacredness Scale with actual fairness behavior in an incentivized dictator game with either low or high stakes. We find that people with high moral fairness values fail to live up to their high fairness standards, when stake size increases. This violates principles from consistency theories according to which moral values are supposedly aligned with moral behavior, but is in line with temptation theories that question the absoluteness of morality values.

Social interaction promotes risk taking in a stag hunt game

David J C MacKay, Peter Cramton, Axel Ockenfels and Steve Stoft

David J C MacKay, Peter Cramton, Axel Ockenfels and Steve Stoft

Gary Bolton, Christoph Feldhaus and Axel Ockenfels
2016. German Economic Review Vol. 17 (3), pp. 409-423.

Price Carbon - I will if You Will

David J C MacKay, Peter Cramton, Axel Ockenfels and Steve Stoft
2015. Nature (Comment), Vol. 526, pp. 315-316.

Was Volkswagen jetzt tun sollte

Peter Cramton and Axel Ockenfels
2015. Die Welt am Sonntag. 4 October, 32.

(K)ein Strommarkt für die Energiewende

Axel Ockenfels and Achim Wambach
2015. Die Welt. 24 August, 10.

Bonus Payments and Reference Point Violations

Axel Ockenfels, Dirk Sliwka and Peter Werner
2015. Management Science Vol. 61(7), pp. 1496-1513.

We investigate how bonus payments affect satisfaction and performance of managers in a large, multinational company. We find that falling behind a naturally occurring reference point for bonus comparisons reduces satisfaction and subsequent performance. The effects tend to be mitigated if information about one's relative standing towards the reference point is withheld.

Symposium on International Climate Negotiations

Peter Cramton, Axel Ockenfels and Steven Stoft
2015. Economics of Energy & Environmental Policy. Vol. 4 (2), pp. 1-4.

Once again there is hope that a strong international agreement will emerge from the annual—now the 21st annual—United Nations Conference of the Parties. Before Kyoto, we hoped that the new Protocol would eventually grow into a universal commitment similar to reducing emissions by some percent below 1990 levels, and this would translate into a uniform price on carbon. Instead, repeated negotiation failures led the world to abandon the ideas of having a common commitment and a uniform price after the Copenhagen conference. In the hope of finding a way to repair these failures, we invited renowned experts on climate policy and the economics of cooperation, not just to present their ideas, but to discuss and debate them as they wrote their papers. The continuing discussion has been lively. All authors agree that what was lost at Copenhagen needs to be rediscovered, and that carbon price coherence is not all that is needed, but it is an essential element.

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An International Carbon-Price Commitment Promotes Cooperation

Peter Cramton, Axel Ockenfels and Steven Stoft
2015. Economics of Energy & Environmental Policy. Vol. 4 (2), pp. 51-64.

To promote cooperation in international climate negotiations, negotiators should focus on a common commitment. Such commitments have the advantage of facilitating reciprocal “I will if you will” agreements in a group. Reciprocity is the basis for cooperation in repeated public goods games, and a uniform price would provide a natural focal point for a common international commitment. Such a price is also essential for efficient abatement. Countries would retain flexibility in how to implement the price—with cap-and-trade, a carbon tax, or a hybrid approach. Country risk is reduced relative to risk under international cap-and-trade since carbon revenues stay within the country. Price commitments also tend to equalize effort intensity and can facilitate enforcement. To encourage participation by less-developed countries, a green fund is needed to transfer money from richer to poorer countries. Transfers are smaller and more predictable with a uniform price commitment than with international cap and trade.

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The German 4G Spectrum Auction: Design and Behavior

Peter Cramton and Axel Ockenfels
Forthcoming. In: The Economic Journal.

The 2010 German 4G spectrum auction was an unusually large simultaneous ascending multi-band auction. The bidding was competitive, the final assignment was efficient and the revenue was close to expectations. However, our analysis suggests that, theoretically, independent and rational bidders had an opportunity to implicitly coordinate on a low-revenue outcome. Coordination was difficult, though, because of a multiplicity of focal points. One important focal point involved post-auction negotiations, posing risks to bidders and the auctioneer. We analyze different bidding scenarios and in particular how post-auction negotiations can affect values, bidding and efficiency. We also briefly discuss how the simultaneous ascending auction format can be augmented to mitigate the risks implied by the possibility of strategic play.

Wie du mir, so ich dir

Axel Ockenfels
2015. DFG Forschung 2, pp.10-13.

Spieltheorie für Anfänger

Axel Ockenfels
2015. Wirtschaftswoche 17 July, 59.

Surprising Gifts: Theory and Laboratory Evidence

Kiryl Khalmetski,  Axel Ockenfels and Peter Werner
2015. Journal of Economic Theory Vol. 159, pp. 163-208.

People do not only feel guilt from not living up to others' expectations (Battigalli and Dufwenberg (2007)), but may also like to exceed them. We propose a model that generalizes the guilt aversion model to capture the possibility of positive surprises when making gifts. A model extension allows decision makers to care about others' attribution of intentions behind surprises. We test the model in a series of dictator game experiments. We find a strong causal effect of recipients' expectations on dictators' transfers. Moreover, in line with our model, the correlation between transfers and expectations can be both positive and negative, obscuring the effect in the aggregate. Finally, we provide evidence that dictators care about what recipients know about the intentions behind surpris

Social responsibility promotes conservative risk behavior

Gary Bolton, Axel Ockenfels and Julia Stauf
2015. European Economic Review Vol. 74, pp. 109-127.

Previous studies show that group risk taking can be more conservative than individual risk taking.  Two common, but untested reasons for this greater caution are the influence of social responsibility and a tendency to conform to the preferences of of others. We study changes in risk taking in simple settings, where another's risk taking can sometimes be observed, and where decisions affect not only one's own payoffs but sometimes also affect those of a passive, second party. We find that social responsibility leads to more conservative risk behavior in group decision making. Conformism has a more symmetric effect: Observing the choice of another tends to lead both individual and social decisions towards whatever the other’s expressed risk preference is.  Direct tests fail to link the social behavior we observe to the social preference for distributional fairness common in decision-making under certainty.

More than words: the effects of cheap talk in a volunteer’s dilemma

Christoph Feldhaus and Julia Stauf
2016. Experimental Economics Vol. 19(2), pp. 342–359.

We theoretically and experimentally investigate a game in which exactly one person should make a costly effort to achieve a socially efficient outcome. This setting is commonly known as the volunteer’s dilemma. We implement one-way communication by allowing one player to send a message indicating whether she intends to volunteer and investigate the message’s effects on behavior and efficiency in the subsequent game. We theoretically demonstrate that there are asymmetric mixed-strategy equilibria in the volunteer’s dilemma and argue that one of these is likely to emerge through one-way communication. The experimental data support this notion. We find that the actions of both the sender and receiver of the message are crucially affected by the cheap talk stage and that efficiency in the volunteer’s dilemma increases with one-way communication.

Impulse Balance and Multiple-period Feedback in the Newsvendor Game

Axel Ockenfels and Reinhard Selten
2015. Production and Operations Management Vol. 24, pp. 1901–1906.

Human subjects in the newsvendor game place suboptimal orders: orders are typically between the expected profit maximizing quantity and mean demand ("pull-to-center bias"). In previous work we have shown that impulse balance equilibrium (IBE), which is based on a simple ex-post rationality principle along with an equilibrium condition, can predict ordering decisions in the laboratory. In this paper, we extend IBE to standing orders and multiple-period feedback and show that it predicts - in line with previous findings - that constraining newsvendors to make a standing ­­­­order for a sequence of periods moves the average of submitted orders toward the optimum.

Timing of Kindness - Evidence from a Field Experiment

Axel Ockenfels, Dirk Sliwka and Peter Werner
2015. Journal of Economic Behavior and Organization Vol. 111, pp. 79–87.

We conduct a field experiment in a naturally occurring labor environment and track whether the performance of workers responds to unexpected wage increases. Specifically, we investigate how the timing of wage increases affects efforts. We find that workers' performance is substantially higher for the same total wage when their wage is increased in two steps as opposed to a single increase at the outset. Moreover, workers are more honest and are more willing to do voluntary extra work after surprising wage increases compared to a baseline condition without increases.

Introduction to a Special Issue Honoring Werner Güth

Martin Dufwenberg and Axel Ockenfels
2014. Journal of Economic Behavior and Organization Vol. 108, pp. 290-291.

The Ultimatum Game and the Empirical Nature of Fair Choice

Gary E. Bolton and Axel Ockenfels
2014. Journal of Economic Behavior and Organization Vol. 108, pp. 300-302.
(This is a chapter in the paper "How Werner Güth’s ultimatum game shaped our understanding of social behavior" by Eric van Damme; Ken Binmore, Alvin E. Roth, Larry Samuelson; Eyal Winter; Gary E. Bolton, Axel Ockenfels; Martin Dufwenberg, Georg Kirchsteiger; Uri Gneezy; Martin G. Kocher, Matthias Sutter; Alan Sanfey; Hartmut Kliemt; Reinhard Selten, Rosemarie Nagel; and Ofer H. Azar.)

Impulse Balancing in the Newsvendor Game

Axel Ockenfels and Reinhard Selten
2014. Games and Economic Behavior, Vol. 86, pp. 237-247.

One striking behavioral phenomenon is the "pull-to-center" bias in the newsvendor game: facing stochastic demand, subjects tend to order quantities between the expected profit maximizing quantity and mean demand. We show that the impulse balance equilibrium, which is based on a simple ex-post rationality principle along with an equilibrium condition, predicts the pull-to-center bias and other, more subtle observations in the laboratory newsvendor game.

Beliefs and Ingroup Favoritism

Axel Ockenfels and Peter Werner
2014. Journal of Economic Behavior and Organization Vol. 108, pp. 453-462.

We report on two experiments designed to investigate the role of beliefs for ingroup favoritism. On average, dictators transfer substantially more to recipients who are publicly known to share the same group identity, compared to transfers given to recipients who are publicly known to be outgroup matches. However, there is substantially less ingroup favoritism if the dictator is informed that the recipient is unaware of the shared group membership. Moreover, dictators tend to ask less often for information about a recipient’s identity if disclosure would imply that the dictator’s identity is also disclosed to the recipient. The evidence supports the view that ingroup favoritism is partly belief-dependent, in addition to the notion that shared group identity per se changes charity preferences.

Does Laboratory Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on eBay

Gary E. Bolton and Axel Ockenfels
2014. Journal of Economic Behavior and Organization, Vol. 97, pp. 143-154.

We conducted a framed field experiment on eBay, and examined to what extent both social and competitive laboratory behavior are robust to institutionally complex real world markets with experienced traders, who selected themselves into these markets. For buyers, the data strongly confirm the dichotomy between equitable bargaining and competitive bidding predicted by social preference equilibrium and suggested by lab evidence. Importantly, reputation building on eBay cannot explain the social behavior. We also observe that the behavioral patterns in the field experiment mirror fully naturally occurring trading patterns in the market. In particular, some sellers fail to use their commitment power as predicted by theories of both selfish and social behavior, with the pattern of deviation reflecting traders’ market experience outside the experiment. These patterns further amplify the dichotomy between bilateral and competitive bidding.

Scale Manipulation in Dictator Games

Axel Ockenfels and Peter Werner
2014. Journal of Economic Behavior and Organization. Vol. 97, pp. 138-142.

We let subjects estimate behavior and expectations of others before they play dictator games, and only vary the quantitative scales for their estimates. Our data show that this manipulation may significantly affect economic decisions: dictators who are presented a scale with a higher midpoint transfer on average more than dictators who are presented a scale with a lower midpoint. The effect is stronger and significant in a treatment where dictators are asked to guess the average transfer expected by the recipients, compared to a treatment where they are asked to guess average transfers. Our experiment suggests that scale manipulation can be used in laboratory social interaction to systematically affect specific beliefs and to study their causal effects on behavior.

Ending Rules in Internet Auctions: Design and Behavior

Axel Ockenfels and Alvin E. Roth
2013. Z. Neeman, A. Roth, and N. Vulkan (eds), The Handbook of Market Design, Oxford University Press, 325-344.

Langfristige Steuerung der Versorgungssicherheit im Stromsektor

Academic Advisory Board at the Federal Ministry of Economics and Technology.
2012. Lead author.

Similarity increases altruistic punishment in humans

Thomas Mussweiler and Axel Ockenfels
2013. Proceedings of the National Academy of Sciences (PNAS). Vol. 110 (48), pp. 19318-19323.

Humans are attracted to similar others. As a consequence, social networks are homogeneous in sociodemographic, intrapersonal, and other characteristics—a principle called homophily. Despite abundant evidence showing the importance of interpersonal similarity and homophily for human relationships, their behavioral correlates and cognitive foundations are poorly understood. Here, we show that perceived similarity substantially increases altruistic punishment, a key mechanism underlying human cooperation. We induced (dis)similarity perception by manipulating basic cognitive mechanisms in an economic cooperation game that included a punishment phase. We found that similarity-focused participants were more willing to punish others’ uncooperative behavior. This influence of similarity is not explained by group identity, which has the opposite effect on altruistic punishment. Our findings demonstrate that pure similarity promotes reciprocity in ways known to encourage cooperation. At the same time, the increased willingness to punish norm violations among similarity-focused participants provides a rationale for why similar people are more likely to build stable social relationships. Finally, our findings show that altruistic punishment is differentially involved in encouraging cooperation under pure similarity vs. in-group conditions.