Realization of Hardy's thought experiment with photons.

We present an experimental realization of Hardy's thought experiment [Phys. Rev. Lett. 68, 2981 (1992)], using photons. The experiment consists of a pair of Mach-Zehnder interferometers that interact through photon bunching at a beam splitter. A striking contradiction is created between the predictions of quantum mechanics and local hidden variables. The contradiction relies on nonmaximally entangled position states of two particles. A Clauser-Horne-type inequality is derived and violated.