Brief welcome by Johannes, Moritz & Jean-Robert.

The location can be found here.

Nondistortionary Belief Elicitation, with Marcin Peski

A researcher wants to ask a decision-maker about a belief related to a choice the decision-maker made. When can the researcher provide incentives for the decision-maker to report her belief truthfully without distorting her choice? We identify necessary conditions and sufficient conditions for non-distortionary elicitation and fully characterize which questions can be incentivized in this way in three canonical classes of problems. For these questions, we construct simple variants of the classic Becker-DeGroot-Marschak mechanism that can be used to elicit beliefs.

A draft can be found here.

See Colin's website for more.

Preference Hierarchies

See Georg's website for more.

Coffee time!

Attention, Information, and Human Behavior

See Marta's website for more.

Lunch time!

Deception Aversion, with Bela Elmshauser and YoonJoo Jo

Conveying private information to interested parties is central to many economic and social activities. In such interactions, the sender may lie by misreporting the truth, but may also deceive by inducing inaccurate beliefs about the payoff-relevant state. While a huge experimental literature documents aversion to lying,there is little evidence regarding aversion to deceiving others. Deception aversion is conceptually difficult to document because it depends on unobserved second-order beliefs: the sender’s belief over the receiver’s belief (over the payoff-relevant state). In this paper, we introduce a novel game and show theoretically how to identify deception aversion from choice data alone, with minimal assumptions on second-order beliefs. We run a laboratory experiment and find strong support for deception aversion that is robust to several natural variations of the game. Many subjects lie in order to avoid deception, and structural estimates imply that 30% of subjects are deception-averse.

A draft can be found here.

See Evan's website for more.

Rationality and Cooperation, with Ali Moghaddasi Kelishomi and Daniel Sgroi

How does rationality shape cooperation in strategic settings? We study this question in a laboratory experiment that links individual rationality, measured by consistency with the generalized axiom of revealed preference, to behaviour in an indefinitely repeated Prisoner’s Dilemma. Participants are grouped by pre-measured rationality before interacting repeatedly. We find that higher rationality substantially increases cooperation and payoffs. This effect operates through a novel mechanism: more rational individuals make fewer implementation errors when executing their intended strategies, thereby sustaining cooperative outcomes. By contrast, higher cognitive ability also promotes cooperation and higher payoffs, but through a distinct channel—reducing strategic errors in responding optimally to others’ actions. Our results provide the first experimental evidence linking rationality to cooperation via decision-making errors and clarify the distinct roles of rationality and intelligence in shaping strategic behaviour. Together, the findings offer a unified account of how cognitive constraints affect cooperation in repeated games.

See Andis' website for more.

Coffee time!

Ambiguity Arbitrage, with Saeed Badri and Bertrand Tavin

Classical finance assumes that investors assess all uncertainties equivalently across markets, so that identical risk exposures receive identical valuations. In practice, however, market segmentation and ambiguity attitudes imply otherwise. This paper develops a behavioral model of investors who combine narrow bracketing with source theory, thereby responding differently to ambiguity depending on its source. The model predicts systematic valuation gaps across markets, which can be exploited through what we call ambiguity arbitrage: trading strategies that buy and sell probabilistically-equivalent options across markets to exploit differences in ambiguity attitudes. We estimate the model for the US stock market, crude oil, and the EURUSD exchange rate. Our results reveal substantial heterogeneity across asset classes and we show that ambiguity arbitrage would have generated substantial cumulative profits over 2008-2025.

See Aurelien's website for more.

Lottery-Specific Effects and Heterogeneity: A Unified Framework, with Miguel Ballester and Angelo Gutierrez

This paper proposes a unified framework that bridges the literature on lottery-specific deviations from expected utility with that of preference heterogeneity. We begin by studying certainty equivalent valuations through a baseline structural model, one fully grounded in standard rationality, that incorporates heterogeneous risk attitudes. We theoretically analyze the model and test its performance using a comprehensive dataset. We find that while the baseline model effectively captures aggregate distributional features, there remains room for improvement. We then show that our framework is flexible enough to incorporate lottery-specific effects. We extend our framework in two directions, linking lottery-specific effects to the dispersion and location of risk attitudes, respectively, and we bring these extensions to the data.

See Jose's website for more.

Coffee time!

Blame It on the Coin Flip: Preferences for Randomization and Regret, with Johannes Hoelzemann

A growing literature documents that individuals delegate decisions to random devices such as coin flips, even when one option clearly dominates. We propose and formalize a novel explanation that can rationalize these puzzling findings: randomization allows for regret-hedging. We conduct experiments where participants choose mixtures over two lotteries, where one first order stochastically dominates the other. Holding the marginal distributions of payoffs fixed, we systematically vary their correlation. As predicted, randomization increases with more negative correlation and decreases when information about the forgone payoff is withheld. In a clustering exercise, regret-hedgers emerge as the most prominent behavioral type.

A draft can be found here.

See Moritz' website for more.

Drinks time!

For those who are interested in joining, we will likely go to Cafe Luxor, which is located next to the workshop and dinner locations.

Dinner time!

We will have dinner at Rebhuhn, a traditional Viennese restaurant.

Limited Belief Propagation and Contingent Thinking, with Ran Spiegler

See Andrew's website for more.

What’s in a u?, with Larbi Alaoui

We revisit the long-lasting debate about the meaning of the utility function used in the standard Expected Utility (EU) model. Despite the common view that EU forces risk aversion and diminishing marginal utility of wealth to be pegged to one another, here we show that this is not the case. Marginal utility for money is an input into risk attitude, but it is not its sole determinant. The attitude towards ‘pure risk’ is also a contributing factor, and it is independent from the former. We discuss several theoretical implications of this result, for the following topics: (i) non-neutral risk attitudes for profit maximizing firms; (ii) risk aversion over time lotteries in the presence of discounting, and convex time budget decisions; (iii) the equity premium puzzle. We also discuss matters of identification: (i) for firms; (ii) via proxies; (iii) via standard MLE methods under parametric restrictions; (iv) in intertemporal choice problems; and (v) cross-context elicitation in multi-dimensional settings, and its relationship with the methods and results from the psychology literature.

A draft can be found here.

See Antonio's website for more.

Coffee time!

Difficult Decisions: Imprecise Beliefs and Tastes

See Yoram's website for more.

Lunch time!

The Prospect Theory Formula

We provide a comprehensive treatment of the prospect theory (PT) formula and its application to general probability distributions (discrete, continuous, or neither). We give eight versions of the PT formula and relate them through elementary proofs. Each formula nests a different expected utility (EU) formula and offers different views on PT’s probability weighting, i.e., its use of distorted probabilities in place of objective ones. The shift in focus away from finite (“lottery”) distributions is not only more general, but arguably also more intuitive.

See Sebastian's website for more.

My Way or the Highway: Strategic Inattention in Coordination Problems, with Fabrizio Adriani and David Rojo-Arjona

We theoretically and experimentally investigate the strategic use of attention in environments where individuals must both match an imperfectly observed state of nature and coordinate with another agent. Agents may either commit to a course of action without observing their counterpart's signal (a rigid attitude) or wait to acquire that information at a cost (an open-minded attitude). We compare the predictions of three theoretical models: standard rational material payoff maximization (Realism), a preference for rigidity (Rigidity Love), and biased beliefs that overstate the informativeness of one's own signal relative to that of one's opponent (Egocentric Bias). Empirically, we find that agents' propensity to learn from others is inefficiently low, and we document a My Way or the Highway effect, whereby rigid agents induce their counterparts to coordinate on actions they recognize as suboptimal. Stronger incentives to coordinate reduce rigidity but do not generally increase investment in learning, nor do they produce more informed or efficient decision-making. Agents prove more interested in what others will do than in what others may know. Taken together, these findings support the Egocentric Bias model over the alternatives.

See Silvia's website for more.

Coffee time!

An Experimental Study of Decision Rules in General vs. Concrete Insurance Problems, with Rom Severin

Experimental work typically studies how individuals respond to particular, concrete decision problems. Yet many real-world choices are made at a more general level: decision makers often step back to determine how they would act across related situations with varying parameters. Such general strategies also appear in delegation and automation, where people provide guidelines for agents or algorithms to apply broadly. We introduce an incentive-compatible method to elicit free-text decision rules for general decision problems. Participants describe a rule to an automated system that applies it across concrete cases. A between-subject design compares choices under a General treatment to manual Case-by-case choices, while also collecting the written rules intended to replicate those choices. In an online experiment, participants made 20 incentivized binary insurance choices with varying loss probabilities and premiums. Insurance demand was lower under the abstract, rule-guided mode. When participants later reviewed the concrete outcomes of their rules, only half adjusted some choices, indicating overall endorsement of rule-based decision making. Revisions slightly increased insurance uptake, yet Case-by-case rates remained higher. These findings show that decision mode, abstract versus concrete, shapes behavior in ways consistent with construal-level theory (the impact of psychological distance). The methodology highlights distinctive procedural rules and provides a versatile tool for studying how individuals structure choices across contexts.

See Ayala's website for more.

Time Preferences Towards the End of Life

For various strategic, psychological, and cognitive reasons, social and economic behavior may change as people approach high age and the end of life. Using in-person and online surveys with embedded incentivized experiments, we study how time preferences of the elderly vary with age and subjective life expectancy. We observe decreasing patience of the elderly, and we also find anticipation of such declining patience (appearing like time-inconsistent “future bias”). The ability to bequeath future earnings in the event of an interim death leads to an increase in patience.

See Ben's website for more.