The strategic role of information in markets and games Essays in behavioral economics

This thesis consists of three essays that study how the public revelation of information affects strategic interaction across three different environments. Using laboratory experiments to test theoretical conjectures, the essays analyze how humans process information, reason about how others process information, and what their choices reveal about the information they privately hold.
The first chapter compares auction formats that differ in the degree of information revealed to bidders during the auction. Bidders in the laboratory are not able to learn about the value of the item for sale from revealed information, and popular open auction formats trigger behavioral biases, which increases the auctioneer’s revenues.
The second chapter studies how interacting in markets affects the participants’ concern about causing externalities. Markets overall decrease our concern for damages to third parties. However, markets that allow each participant to trade repeatedly while not being pivotal for aggregate outcomes most strongly erode such concerns.
The third chapter studies how to best persuade a strategically interacting audience by using public or private communication. Empirically, public communication is particularly effective. In line with theoretical predictions, senders also benefit from adjusting their persuasion to the presence of coordination motives in the strategic interaction of the audience.