We present experimental evidence that promises and threats mitigate the hold-up problem. While investors rely as much on their own threats as on their trading partner's promises, the latter are more credible. Building on recent work in psychology and behavioural economics, we then present a...

Concern exists that hypothetical willingness to pay questions overestimate real willingness to pay. In a field experiment, we compare two methods of removing hypothetical bias, a cheap talk approach and a certainty approach, with real purchases. We find evidence of hypothetical bias for...

<abstractinfo format="display"> We test if altruism is paternalistic with respect to health. Subjects can donate money or nicotine patches to a smoking diabetes patient whose willingness to pay for nicotine patches is positive but below the market price. In a between-subjects treatment, average donations are 40% greater in...</abstractinfo>

In a laboratory experiment, we create relationships between pairs of anonymous subjects through a Prisoners' dilemma game. Thereafter the same subjects play a private values bargaining game with or without communication. Communication substantially increases bargaining efficiency among subjects...