We develop a novel computerized real effort task, based on moving sliders across a screen, to test experimentally whether agents are disappointment averse when they compete in a real effort sequential-move tournament. We predict that a disappointment averse agent, who is loss averse around her endogenous choice-acclimating expectations-based reference point, responds negatively to her rival's effort. We find significant evidence for this discouragement effect, and use the Method of Simulated Moments to estimate the strength of disappointment aversion on average and the heterogeneity in disappointment aversion across the population. (JEL C91, D12, D81, D84)

We investigate how cognitive ability and character skills influence the evolution of play toward Nash equilibrium in repeated strategic interactions. We find that more cognitively able subjects choose numbers closer to equilibrium, earn more, and converge more frequently to equilibrium play. We estimate a structural model of learning based on level k reasoning and find a positive relationship between cognitive ability and levels. Furthermore, the average level of more cognitively able subjects responds positively to the cognitive ability of their opponents. More agreeable and emotionally stable subjects also learn faster, although the effect of cognitive ability is stronger than that of personality.

Will college students who set goals work harder and perform better? We report two field experiments that involved four thousand college students. One experiment asked treated students to set goals for performance in the course; the other asked treated students to set goals for a particular task (completing online practice exams). Task-based goals had robust positive effects on the level of task completion and marginally significant positive effects on course performance. Performance-based goals had positive but small and statistically insignificant effects on course performance. A theoretical framework that builds on present bias and loss aversion helps to interpret our results.

We investigate how childhood cognitive skills affect strategic sophistication and adult outcomes, and we emphasize the importance of childhood theory of mind. Experimental data show that (i) theory-of-mind ability and cognitive ability both predict level k behavior, (ii) older children respond to information about the cognitive ability of their opponent, and (iii) theory of mind (but not cognitive ability) predicts whether children respond to intentions. Using longitudinal data, we find that childhood theory of mind and cognitive ability are both associated with enhanced adult social skills, higher educational participation, better educational attainment, and lower fertility in young adulthood. Finally, we provide evidence that school spending improves theory of mind.