Negotiations frequently end in conflict after one party rejects a final offer. In a large-scale internet experiment, we investigate whether a 24-hour cooling-off period leads to fewer rejections in ultimatum bargaining. We conduct a standard cash treatment and a lottery treatment, where subjects...

We use a simple, three-item test for cognitive abilities to investigate whether established behavioral biases that play a prominent role in behavioral economics and finance are related to cognitive abilities. We find that higher test scores on the Cognitive Reflection Test of Frederick (2005)...

Majority rules are frequently used to decide whether or not a public good should be provided, but will typically fail to achieve an efficient provision. We provide a worst-case analysis of the majority rule with an optimally chosen majority threshold, assuming that voters have independent...

This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals can benefit from offering long-term contracts...

The fact that according to the celebrated Coase Theorem rational parties always try to exploit all gains from trade is usually taken as an argument against the necessity of government intervention through Pigouvian taxation in order to correct externalities. However, we show that the hold-up...

We consider second-price and first-price auctions in the symmetric independent private values framework. We modify the standard model by the assumption that the bidders have reference-based utility, where a publicly announced reserve price has some influence on the reference point. It turns out...

Consider an employer who wants her employee to work hard. As is well known from the e.ciency wage literature, the employer must pay the (wealth-constrained) employee a positive rent to provide incentives for exerting unobservable e.ort. Alternatively, the employer could make effort observable by...

Recent work in the field of mechanism design has led some researchers to propose institutional changes that would permit parties to enter into nonmodifiable contracts, which is not possible under current contract law. This paper demonstrates that it may well be socially desirable not to enforce...

This paper discusses the optimal organization of sequential agency problems with contractible control actions under limited liability. In each of two stages, a risk-neutral agent can choose an unobservable effort level. A success in the first stage makes e.ort in the second stage more effective....