A central insight of agency theory is that when a principal offers a contract to a privately informed agent, the principal trades off ex post efficiency in the bad state of nature against a larger profit in the good state of nature. We report about an experiment with 508 participants designed to...

This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoullé and Kranton (2007). In particular, we are...

In the contract-theoretic literature, there is a vital debate about whether contracts can mitigate the hold-up problem when renegotiation cannot be prevented. Ultimately, the question has to be answered empirically. As a first step in that direction, we have conducted a laboratory experiment...

We analyse an experimental public goods game in which group members can endogenously determine whether they want to supplement a standard voluntary contribution mechanism with the possibility of rewarding or punishing other group members. We find a large and positive effect of endogenous...

The game-theoretic bargaining literature insists on non-cooperative bargaining procedure but allows 'cooperative' implementation of agreements. The effect of this is to allow free-reign of bargaining power with no check upon it. In reality, courts cannot implement agreements costlessly, and...

Principal-agent models in which the agent has access to private information before a contract is signed are a cornerstone of contract theory. We have conducted an experiment with 720 participants to explore whether the theoretical insights are reflected by the behavior of subjects in the...

The decision-making rules of the European Union (EU) are defined in an incomplete contract signed by 15 national governments. The design of the contract defines the set of policy issues where it applies – in decision-making rules i.e. the majority rules and the division of powers among the...

One of the few stylized facts in international relations is that democracies, unlike autocracies, very rarely fight each other. We examine the sustainability of international peace between democracies and autocracies, where the crucial difference between these two political regimes is whether or...

Why do people vote? This question received a lot of attention for more than thirty years, and yet remains unanswered. In this Paper, we take stock of existing empirical regularities and argue that we can use them to improve the model of instrumental voting. Once this is done, we show that purely...

This Paper develops a model of political consensus in order to explain the missing link between inequality and political redistribution. Political consensus is an implicit agreement not to vote for extreme policy proposals. We show that such an agreement may play an efficiency-enhancing role....