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Advisors frequently have an interest in the decisions their advisees make, forcing advisees to distinguish their advisors' unbiased beliefs from their self-interested bias. This task is likely to be especially hard when psychological forces distort advisors' beliefs to make some of their bias sincerely held. In our first experiment, we show that advisors bias both their recommendations and their own actions toward their persuasion goal, and that advisees are better at distinguishing between the unbiased, sincerely biased, and insincerely biased parts of their advisor's recommendation when they meet face-to-face to discuss, compared with when they receive only a written recommendation. Our second experiment shows that advisees distinguish their advisor's bias from their advisor's unbiased beliefs more accurately when the advisors are asked to provide fact-based information about their own actions. Both experiments show that post-report interactions are more helpful for identifying insincere bias than sincere bias. Data Availability: All raw data (excluding identifiable information), data processing code for tabulated analyses, and full experimental materials are available from the authors.

We provide evidence that credit investors do not fully impound the implications of firms' cost structure (or operating leverage) when pricing credit default swaps. Information about firms' cost structure is not disclosed and needs to be estimated. Furthermore, the performance implications of firms' cost structure depend on the expected macroeconomic conditions. We focus on the debt market because of the strong emphasis of this market on downside risk. To measure expected aggregate macroeconomic conditions, we employ the change in the anxious index (AI), which is the probability of a decline in real GDP provided by the SPF—the survey of professional forecasters. We find that the interaction between the firm's cost structure and change in AI predicts one-quarter-ahead CDS spreads. Portfolio-level analysis confirms this result. JEL Classifications: G12; G14; G32.

We present 179 investment professionals with a scenario that manipulates whether a male or female analyst persists in pitching a stock pick after it has been voted down. Respondents evaluate analysts as less promotable when they do not persist, but only if the analyst is female. Results are consistent with categorization theory, which suggests that evaluators rely on stereotypes to interpret unexpected behaviors. In male-dominated settings, the same unexpected behavior may be perceived as evidence of a “lack of fit” in evaluations of women, but nondiagnostic in evaluations of men. Analysis of free-response questions confirm that the unexpected behavior was a predominant focus in performance evaluations of women, but not for men. Semi-structured interviews with 13 senior investment professionals provide additional support for the role of expectations and categorization heuristics on promotion decisions. Our findings shed light on factors that may contribute to the investment industry's “leaky pipeline” for women. JEL Classifications: M40; M41; M49; M51. Data Availability: Contact the authors.

Errors in estimated product costs often lead firms to win business that is unprofitable, because firms are more likely to win business when underestimated product costs lead them to bid below actual cost (Cooper et al. 1992; Stalk and Lachenauer 2004; Hilton 2005). Feedback from repeated competitive bidding markets can teach people to bid well above estimated costs to avoid this winners' curse (Kagel 1995; Kagel and Levin 2002). We present experimental evidence that such learning is substantially hampered by managers' sense of responsibility for the costs. We hypothesize and find that, compared to bidders who are assigned cost-management initiatives for the firms they control, bidders who select their own initiatives bid more aggressively, lose more money, and learn less from market experience than bidders who are not responsible for choosing cost-management initiatives. This effect is consistent with psychological evidence that people tend to attribute bad outcomes to environmental factors out of their control, such as cost estimation errors, and attribute good outcomes to their own skills, such as their ability to choose effective cost management initiatives (Miller and Ross 1975; Zuckerman 1979). The results suggest that there are benefits to separating responsibilities for cost management and pricing in firms where accurate cost estimation is difficult.

Greater disclosure quality leads to higher prices and greater liquidity in a laboratory financial market, and these effects are stronger when investors face the risk of unpredictable demand shocks. These results are consistent with a broad class of theoretical and empirical studies. Disclosure has larger effects on prices and liquidity at greater market depths. We conclude that archival studies looking only at quoted transaction prices and spreads (which typically pertain to small transactions) may underestimate the potential importance of disclosure on larger transactions that occur at greater market depths.

1. Introduction 2. The Uses and Limits of the Laboratory 3. What are Virtual Worlds? 4. Virtual World Economies 5. A Taxonomy of Experimental Methods in Virtual Worlds 6. Implementing Complex institutions in Virtual Worlds 7. Addressing the Challenges of Embedded Experiments in Virtual Worlds 8. Cost-Benefit Analysis. 9. Concluding Remarks. References