Decision making in environmental-related dilemmas

This project covers the lab experiments that were performed in Alice Ciccone’s PhD thesis, and consists of three papers.

The first is about the widespread skepticism towards tradable emission quotas that is apparent in surveys and political debates. One potential explanation is that opponents see markets as rigged and favoring "rich countries." Our experiment tests whether people willingly "leave money on the table" rather than trade at inequality increasing terms. We conclude that fairness concerns may affect outcomes in a fixed price trade setting, even when there are no strategic or retaliation motives present for restricting trade.

Bargaining is central to many economic applications and certainly a key to an international climate agreement. Experiments are designed to test the effect of earning either an outside option or earning a share of the pie, prior to alternating offer bargaining. The model prediction is that earning an outside option should not matter, unless the option is binding, while subjects who earned a larger share of the pie should also end up with a larger share. This latter prediction is contrary to most other models of bargaining, but supported by the experimental result.